PHA: PC inquiry should ensure retention of mixed system

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Private Healthcare Australia says healthcare inflation and general economic conditions are driving a downward spiral in participation in the sector that must be arrested before it gathers pace.

In its response to Labor's discussion paper on the proposed Productivity Commission into the private health sector, the association says it hopes the inquiry will focus on ensuring the sustainability of Australia's mixed model of public and private healthcare.

Labor has proposed the inquiry along with a two per cent cap on premium increases for two years.

Private Healthcare Australia has used its submission to restate the recommendations contained in its 2019-20 pre-Budget submission, including restoration of the Private Health Insurance Rebate to 30 per cent for low and middle-income earners or at least changes that arrest its decline and maintain it at current levels.

It says its recommendations could combine to almost halve healthcare inflation to 2.6 per cent by 2030.

It also points to some of the Productivity Commission's previous findings on the sector, including the challenge of existing regulations that prevent insurers from funding some interventions and inhibit their ability to restrain consumers costs.

"The result is healthcare inflation that is consistently two to three times higher than CPI and wage growth, with corresponding upward pressure on PHI premiums. With no systemic changes, healthcare costs will continue to rise above CPI for the next 5 to 10 years," it says.

It says the Private Health Insurance Rebate is one of three measures, along with Lifetime Health Cover and the Medicare Levy Surcharge, that combine to provide an incentive for Australians to invest in their own health through private health insurance and reduce the pressure on the public health system.

"These incentives address consumer affordability, which consumer research indicates is the largest driver of concern for consumers of PHI," it says.

However, it notes the reforms of successive governments that mean the contribution of the rebate to premiums declines annually, and proposes it should be restored to 30 per cent for low and middle-income earners or at very least frozen at current levels.

The association also argues against any change that would eliminate or limit the ability of insurers to contract with different providers and offer different benefit rates.

"Removing funds’ freedom to contract and requiring them to pay the same benefits for services provided by all providers would remove a critical point of difference between PHI and Medicare," it says.

"Not only would this be likely to have an inflationary effect, but it would undermine the rationale for the existence of private health as an alternative to Medicare in Australia’s mixed model healthcare system. A key benefit of PHI since its origin in Australia has been the ability of the funds to negotiate a better deal for the member, than they could achieve alone."