Australian Democrats additional comments
Inquiry into Private Health Insurance Bill
2006 [provisions] and related Bills
The
Private Health Insurance Bill 2006 (provisions) and related Bills represent
significant changes to private health insurance arrangements – changes that
have implications not only for the privately insured population but also for
the 56% of the population who are dependent on the public system.
The
Democrats start from the position that an individual's health care, and indeed
their health status, should not be determined by virtue of their financial
status or ability to buy and maintain health insurance. The Democrats are
not opposed to private health care and indeed see some value in a viable
private health care sector that complements the public health system. That
notwithstanding, we disagree with the extent of public funding for the private
sector and the escalating commitment by Government to subsidising private
health insurance.
Over
the last decade the Federal Government has introduced measures such as the 30%
premium rebate, coerced individuals into taking out private health insurance
through measures such as lifetime rating and provided tax-penalties for higher
income earners – the latter meaning that many people are actually paid for
taking up the product.
Ian
McAuley, from the University of Canberra, commented that ‘What we have had in
private health insurance when we count measures such as the rebate, the one per
cent tax penalty and the Lifetime Health Cover etcetera are five rounds of
increasing industry assistance now costing about $4 billion a year. That is $3
billion in direct outlays and at least $1 billion in forgone revenue because of
the one per cent incentive’[1].
The Democrats have commented on numerous occasions about the
inefficiency of the 30% private health insurance rebate and the
inappropriateness of spending billions of dollars of the health budget in a
manner which undermines the health system as a whole. There is ample evidence that private health insurance
is not only inflationary causing overall spending on health care to rise, but
is inefficient, misallocates resources and undermines equitable access to
health care.
Rather
than taking the challenge of considering the most appropriate forms of health
financing to meet the health needs of a wealthy developed country such as
Australia in the 21st century, the Government has chosen to provide
what is little more than industry protection for an inefficient intermediary in
health care. McAuley states that ‘there
are more efficient ways of providing consumer choice and supporting private
service providers than churning funds through a financial intermediary such as
private insurance’[2].
Substantial
evidence suggests that a single national public health insurer is the most
efficient and equitable way to fund health care. This is not the same
as saying that all health care should be free or delivered by public
organisations but simply that a single national insurer has the ability to
contain costs and unnecessary usage.
The
Government needs to delink the private health sector from the private insurance
industry. It is entirely feasible to
provide support for private health care and consumer choice by mechanisms other
than supporting the private health insurance industry. The Government subsidy
to private health insurance would be better spent through direct funding to
private hospitals and service providers.
As McAuley notes such an approach “relieves the government of the need to regulate the
insurance industry which....is very complex and difficult. It bypasses the
billion dollars in administration costs. It gives the government some control
over costs and usage, and it gives the government far more control over equity
in the system. It particularly would provide equity for that 57 per cent of the
population who do not have private health insurance but who meet these or
similar expenses from their own pockets. We would have more consumer choice,
more self-reliance and a reduction of the moral hazard which occurs,
particularly given that insurers and the government are pushing strongly for
100 per cent cover and zero deductible policies”[3].
It
is also noteworthy that these changes have been justified in part on the basis
that they will reduce costs and therefore reduce pressure on health insurance
premiums. It is difficult however to accept this premise. Providing services
to patients in the community is not necessarily less expensive, and
administration costs for managing these new processes may be substantial. MBF
itself noted that ‘any potential for health cost control through more
innovative models of care are unlikely to be reflected in premiums overs the
short term” and indeed suggested that the costs of covering [preventive
programs] will be upfront resulting in a potential upward pressure on prices in
the short to medium term’[4].
The
Democrats have long been advocates for a greater orientation towards prevention
and early intervention within Australia’s health system and are strongly supportive of the
principles that underlie moves in that direction. Similarly the Democrats
support broader access to non-hospital based care.
Health
care should be provided in the most appropriate and safe setting possible and
funding mechanisms should be designed to support this. Equally it is desirable
that processes should be in place to assist people to participate in
preventative programs that better assist them in managing chronic conditions.
The burgeoning rates of chronic diseases such as diabetes and their accompanying
long-term health consequences and financial costs make it imperative that we
look at earlier and more effective management of these conditions.
However
the Democrats are also concerned that the changes contained within
this legislation may contribute to the dismantling of the public health
insurance system. While it is not easy to predict the effect of changes to
health insurance, it is true to say that if public health insurance were
to play a lessor role in health care then the role of private health
insurance would need to expand to fill in any gap created by the withdrawal of
Medicare. This legislation appears to represent moves in that direction,
albeit presented as offering benefits to the quality of health care for the
privately insured.
As
noted in the Chair’s report while there are currently services covered by
private health insurance that are not included in Medicare, Broader Health
Cover will significantly expand the list of items covered by private health
insurance but not Medicare. This undermines the universal nature of the health
care system in Australia by providing access to services to those who have
private health insurance that are not available to those who do not have
private health insurance.
Given
the increasing amount of public funding directed to private health insurance, it is timely that we re-evaluate its nature, role and
degree of government support. However this re-evaluation must take place in
the context of the broader health system and any changes to private health
insurance must not be to the detriment of the system as a whole.
Indeed
it is time that we revisited the whole health system, including the system of
health financing. In designing a health care system that is equitable and
efficient and best adapted to meet 21st century health care needs,
the sanctity of private health insurance should not be above examination.
Senator Lyn Allison
AD, Victoria
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