Dr Rachel David says health funds can and should do more to help Australian families manage their health throughout life, but the regulatory regime for private health insurance is not fit for purpose.
It’s a tough time to be a Federal Treasurer. Treasurer Frydenberg’s task is to manage a slow economy, an uncertain international environment, and the legacy of more than a decade of spending more than we earn. In addition, the Treasurer has to respond to long term challenges in policy areas such as aged care and mental health and manage high cost and risky projects such as a new submarine fleet. Then comes the unexpected impact of bushfires and more recently the threat of the Coronavirus.
Then there’s the perennial challenge of health funding. Intergenerational Reports and a range of other studies demonstrate there will be rapid growth in health and hospital services; well ahead of inflation. To ensure the Commonwealth Budget is not crippled by health costs into the future, the Government must take the most cost-effective path to manage growth; supporting private health insurance (PHI) and thus leveraging the community’s desire for choice and control of their own care.
Providing subsidies to PHI is the most cost-effective way for the Australian Government to support the growth in hospital and health services over the coming decades. Subsidies for private health insurance-funded services cost around 30 cents in the dollar. The alternative, providing more services in public hospitals, costs the Commonwealth Budget 45 cents in the dollar.
However, increasing subsidies alone is not the answer. It won’t provide the best results for the community or the Australian Government. There must be a greater focus on reducing the costs of inefficient care, including reforming the regulation that forces funds to pay for poor performing medical devices and health services.
The Australian Government needs to promote the least disruptive care for the community. This means reducing reliance on in-hospital care and invasive, unnecessary procedures. Each decision, each regulatory choice, and each discussion must be ‘how can we make it easier for the patient?’
Australian health funds can and should do more to help Australian families manage their health throughout life, but Australia’s regulatory regime for PHI is not fit for purpose. The regulatory approach is based on acute, hospital-based care while the demand in the community is for integrated services to address chronic health conditions.
The alternative to supporting PHI is to allow the private health sector to decline, as happened in the 1980s and 1990s. If coverage falls to 40% in the next five years, another 1.5 million Australians will be wholly reliant on the public hospital system. If in a decade after that coverage falls to 30%, then the Commonwealth will have to provide an additional $19 billion a year for public hospitals – more than the current spend for every public hospital in Victoria and South Australia.
If the Australian Government does nothing, these scenarios will become the reality. Without private health there is no sustainable future for Medicare. There is no doubt that hospital and health care demand will continue to rise, and that demand will fall to the public system. A strong investment in PHI is the most effective means of meeting future demand. Over time, these recommendations will provide a strong, balanced and competitive health care system to help all Australians participate in the community.
There are too many policy priorities that have been kicked down the road over the last decade or so, and our community and our Budget has suffered from the distractions. Taming the beast of health care spending will help Treasurer Frydenberg create the space necessary to address the many economic and social challenges facing our nation.
PHA’s Budget submission is available online.