Private Healthcare Australia: Time to restore the rebate

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Private Healthcare Australia CEO Dr Rachel David says the forecast reduction in government support for private health insurance must be reversed and the rebate restored to 30 per cent.

Australia’s mixed private and public health system has long been the envy of the world in terms of the superior health outcomes it achieves. The COVID-19 pandemic has shown our combined system can provide extra surge capacity while maintaining high quality, which was a critical safety net for Australian governments as they navigated the response.

All this is however at imminent risk. As a result of the pandemic and the needs of a large baby-boom population coinciding, public wait times for essential non-emergency surgery are exploding around Australia. Demand for inpatient mental health services, most of which are provided in private, is also rapidly increasing.

You would think this is the time for Australian governments to do everything possible to support private health, which is above and away the most efficient way to provide these services and take pressure off the public system.

Perplexingly, this has not occurred.

The October Budget removed $710 million out of the forward estimates for private health insurance, while dramatically increasing spending on public hospitals, medical benefits and pharmaceutical benefits. This continues a trend – over the last six Budgets, more than $3.4 billion has been stripped out of private health insurance rebates.

The Australian Government spent less money supporting private health care in 2019-20 than they did five years earlier ($6372 million in 2014-15 and $6052 million in 2019-20). While premiums are going up, the government has consistently eroded the value of the private health rebate for low and middle-income earners. It used to be a 30% rebate, now it is less than 25%.

It is not clear if this is an ideological shift by the Coalition, or an ideological drift while no one is paying attention. However, the lack of support for private health is not only doing damage to the 13 million Australians with private health insurance, but all Australians.

Supporting private health care is the cheapest and most effective way government can supply health care. Simply put, with a rebate the government can leverage billions of dollars of extra health care services. The alternative is for governments to spend billions more on public services.

Not only is supporting private health the most efficient way for government to provide health care, it is the most effective. Private health care provides two in three elective surgeries across Australia, in most cases at a lower cost and higher quality than the public sector (despite some obvious examples of low value care occurring across the board). Private health care is providing more mental health care than ever before. Private health care allows for choice of doctor, no waiting lists, and peace of mind.

Historically, when there are fewer people with private health insurance, public waiting lists increase. We have already seen waiting lists expand rapidly in 2019, and now with the pandemic, we are likely to see more and more people waiting years for basic surgery. There is no way the public system will be able to catch up on the shortfall without the support of private health care. The costs of long waiting lists for public outpatient services and elective surgery include significant pain and suffering, more hospital complications, less employment and community participation, and economic loss.

Outside of the hard left, people across the political spectrum understand the importance of Australia’s mixed system of public and private health care, emergency care and urgent surgical care.

That is why it is so puzzling and disappointing that the current government has reduced support for private health care. Funding for public hospitals, for Medicare and the Pharmaceutical Benefits Scheme (PBS) have increased by 34-43% over the last six years, while support for people with private health insurance has fallen.

What could $710 million do for the 13 million people with private health insurance? It could reduce premiums by about three per cent. It could fund 60,000 additional operations with no wait times. It could divert tens of thousands of people from public waiting lists to the private system. It could expand out of hospital care and mental health care.

There are many calls on the public purse, but pulling money out of the pockets of millions of Australian families with private health insurance is not only bad for those families, but poor public policy that will increase pressure on our health system – both public and private.

If the government was willing to put back the $3.4 billion that they have pulled out of private health insurance support, then we could have no premium increases for the next five years.

It is a big ask, but we cannot continue to put pressure on our public health systems by neglecting private health care. Private Healthcare Australia has put a four-step plan to government to take pressure off families and public health:

  • Stop eroding the Private Health Insurance Rebate - Use the additional capacity in the forward estimates to halt the erosion of the Private Health Insurance Rebate for 2021;
  • Increase the rebate in the 2021 Federal Budget - By replacing a proportion of the $710 million removed from this year’s Budget, the next Budget due in May should increase the rebate by one percentage point to 26 per cent; and,
  • Over the next four Budgets, increase the rebate to 30 per cent - The rebate should be increased by one percentage point each year until it is back to 30 per cent.

Combined with initiatives already put to government to reduce regulation, cut the cost of medical devices, and reduce low value care, this program would ensure that the average premium increase over the next five years would be about one per cent per annum.

While this would not make up for the $3.4 billion the Coalition Government has cut from family budgets for Australians with private health insurance, it would stop the rot and begin the process of rebalancing Australia’s health system.