The value of Private Health Insurance was highlighted today with the release of the Australian Medical Association’s 2017 Public Hospital Report Card. The report card found that waiting times for non-emergency surgery in Australia’s public hospitals have increased by 37%.

Private Healthcare Australia CEO, Dr Rachel David said people with private health insurance don’t wait for essential medical and dental procedures, or treatment for mental health conditions. Their contribution also means they don’t add to already-overburdened public hospital waiting lists.

“More than ever before people with private health insurance value the fact they can choose the time of their admission to hospital and their treating doctor,” she said.

“Economic conditions are tough out there, and people can’t afford to wait months to get failing sight, painful joints and essential checks for cancer scheduled.

“More than 13.5 million Australians have private health insurance and almost half of them have an annual income of less than $50,000. They are hard-working Australians who value the security and peace of mind they get from knowing they can have surgery when they need it.

“Private health insurance is a critical element of Australia’s health care system. PHI pays for close to two thirds of non-emergency surgery in Australia, 90% of day admissions for mental health care and 50% of all mental health admissions, 70% of joint replacements, 60% of chemotherapy and 88% of retinal procedures take place in the private health sector.

“In addition, under ancillary (extras) cover, health funds pay out more than $2.5 billion for dental care, more than the Federal Government. 90% of dental health services provided to low and middle income earners are subsidised by health funds.”

Dr David said recent research found that 84% of Australians with private health insurance value the product, want to keep it and make considerable sacrifices to do so but they are concerned about affordability. (IPSOS)

“Funds paid a record $19 billion in benefits in 2015-16 which will increase to $20 billion in 2016-17. 86.1c in every dollar of premium income is returned to members as benefits.

“Both public and private parts of the health system are under pressure from rising health costs, and an ageing population with more chronic health problems presenting to hospital more frequently.

“Keeping private health insurance sustainable and premiums affordable ultimately benefits all Australians by keeping pressure off the public hospital system,” she said.

Media contact: Jen Eddy 0439240755

Statements by the Australian Greens today about the Private Health Insurance Industry are factually incorrect. Private Healthcare Australia CEO Dr Rachel David said consumer complaints about private health insurance have dropped significantly, the PHI rebate is keeping pressure off public hospitals, and Australians deeply value their private health cover.

Far from a ‘spectacular failure of public policy’ private health insurance funds close to two thirds of essential non-emergency surgery, 90% of day admissions for mental health care and 50% of all mental health admissions, 60% of cancer chemotherapy and spends more on dental care benefits than the Federal Government.

The Greens’ statement contains a spectacular lack of detail about which public hospitals will be able to take on this additional work, how long patients will need to wait for services and how much taxes will need to go up without private health insurance. This is deeply disrespectful to the 13.5 million Australians with health insurance who are taking a huge burden off public services, and the thousands of medical specialists and allied health professionals who treat them.

“Complaints to the Private Health Insurance Ombudsman during the December 2016 quarter were down by 29% on the previous September 2016 quarter. The majority of the complaints pertained to IT issues that have since been addressed. The Ombudsman received 1504 complaints regarding health insurance in the September quarter dropping to 1067 complaints in the December quarter. This is a tiny percentage of the number of services provided and represents only 0.07% of PHI policies,” said Dr David.

The Greens statement regarding the PHI rebate is also wrong. There have been multiple changes to legislation governing the rebate in recent years. These include:

• Means testing introduced in the 2009-10 Budget, commenced 1 July 2012, saving $6.78B over four years;
• Indexation to CPI, uncoupling the rebate from premium increases legislated in 2012, commenced 1 July 2014, saving $700M over four years;
• Removal of the rebate from lifetime healthcover loadings, announced in 2009-10 Budget, commenced 1 July 2012, saving $386M over four years; and
• Freezing of the income thresholds for rebate eligibility and the MLS at 2014-15 levels through 2017-18, saving $370.9M from 2018-2021.

“The net effect of these measures is to slow the growth of PHI rebate outlays, and in fact, taking into account a decline in numbers of people with rebate-eligible policies, expenditure on the rebate is declining from its current peak of $5.8bn, not increasing with time.

Dr David said the latest Government statistics show that 13.5 million Australians have some form of private health insurance and almost half have an annual income of $50,000 or less. They are hard-working Australians who value their private health cover and their right to choose when and where they have medical care.

“Recent IPSOS research shows that 84 per cent of health fund members value their PHI because it gives them security and confidence they can access medical treatment when and where they need it,” she said.

Media contact: Jen Eddy 0439 240 755

Private Healthcare Australia has appointed industry expert and experienced CEO, Mr Rob Bransby as Chair of the PHA Board.

PHA Chief Executive Dr Rachel David said the industry was extremely fortunate to retain Mr Bransby’s skills and experience following his retirement from his long term position as Managing Director of WA’s largest health fund, HBF.

“Mr Bransby’s expertise in the industry is unparalleled and his continued involvement and contribution to the PHI reform process will be of great value to the Australian health system,” Dr David said.

Prior to his appointment Mr Bransby served as President and Vice President of Private Healthcare Australia. He recently retired as Chief Executive Officer/ Managing Director of HBF Western Australia, Australia’s fourth largest private health insurer, general insurance and financial services business and WA regional health fund, HealthGuard.

Mr Bransby is a highly regarded strategic leader and business developer, who has had a very successful career in financial services. He has 25 years of experience with financial services organisations in both Western Australia and New South Wales in addition to extensive high level experience in health.

His other Directorships include Director of Synergy, the Insurance Commission of WA, Australian Digital Health Agency, and Commonwealth Bank Advice Subsidiaries.

Dr David said the recently elected PHA Board will steer PHA through the challenges of private health sector reform. The PHA Board has great expertise and skills and represents a cross section of the industry of both profit and not for profit health funds from across the country.

The PHA Board comprises Deputy Chair Rhod McKensey (nib); Andrew Wilson (Medibank); Dwayne Crombie (Bupa); Mark Valena (GMHBA); Gerard Fogarty (Defence Health); Byron Gregory (Health Partners); and Rob Seljak (TUH).

Private Healthcare Australia represents Australia’s private health insurance industry. Our member funds provide health benefits to over 13 million Australians.

Private Healthcare Australia Chief Executive, Dr Rachel David said, “The Consumer Health Forum’s collection of articles on private health insurance released today rehashes the same comments from people who have been critical of the sector for decades, including a number of out of touch commentators and academics. There is nothing new and there are no coherent solutions on offer.

“As an industry, Australian health funds accept we can always do better and there is room for improvement. But a stream of commentary from the highly selective sample of the usual suspects is no use to consumers at all. Far from the impression you might get from hand-picked commentators in CHF’s magazine, the results from recent independent, representative, randomised surveys of 16,000 real consumers – the largest of its kind ever undertaken in Australia – reveals evidence to the contrary.

“Recent IPSOS research shows that 84 per cent of health fund members value their PHI because it gives them security and confidence they can access medical treatment when and where they need it. With pressure increasing on our public hospital system, more than ever before people with private health insurance value the fact they can choose the time of their admission to hospital and their treating doctor.

“The survey showed that consumers are highly sensitive about price and premium increases. Given that health funds are prevented by regulation to control most of their costs and are simply passive payers of costs largely generated by doctors and hospitals, we look forward to the CHF tackling the policy issues affecting the sector at their cause.

“More than 13.5 million Australians have some form of private health insurance and almost half have an annual income of $50,000 or less. They are hard-working Australians who value their private health cover and their right to choose when and where they have medical care. The number one aspect of health consumers most want addressed is improving the affordability of healthcare. Health funds have committed to doing their part to drive out those costs they can control, and identify regulatory reform opportunities to improve affordability for policy holders.

“The CHF is belatedly calling for change in the PHI sector after a major review process is already underway. Health funds and committed stakeholders have already been working cooperatively with government on implementing the findings of the current review. Health funds have made a considerable investment towards implementing the consumer transparency policies announced by the Coalition, including the Gold, Silver, Bronze product navigation proposal.

“Private health insurance remains a critical element of Australia’s health care system. PHI pays for close to two thirds of non-emergency surgery in Australia, 90% of day admissions for mental health care and 50% of all mental health admissions, 70% of joint replacements, 60% of chemotherapy and 88% of retinal procedures take place in the private health sector.

“Irresponsible allegations regarding the removal of mental health cover are categorically untrue and have the potential to unduly alarm vulnerable consumers. Health funds pay for 80% of day stay mental health admissions, 50% of all mental health admissions to hospital overall, and a range of online and telephone based services aimed at improving the mental health and resilience of the community. Mental health is a key part of the value proposition for health funds and we are committed to developing more options for mental health coverage in the lower-priced products that are favoured by young Australians,” Dr David said.

Media contact: Jen Eddy 0439240755

Reform of medical device pricing is critical to affordability and sustainability of Australian health system.

Private Healthcare Australia Chief Executive, Dr Rachel David said the Coalition Government’s ongoing commitment to reform medical device pricing would make health insurance more accessible and affordable for all Australians.

“Today’s announcement that the Prostheses List Advisory Committee (PLAC), will commence targeted reviews of the hip, knee, cardiac and spinal categories, will deliver significant savings to health fund members and Government” said Dr David.

“IPSOS research shows that 84% of health fund members value their PHI but are concerned about ongoing affordability. This announcement demonstrates the Coalition Government is serious about reducing household costs.

“Health funds have given a rock solid commitment to pass on all savings from PL reform to members. This was demonstrated in the recent premium round with the average increase being the lowest in a decade. This next round of reviews will deliver further savings.

“Health funds will continue to work closely with the Government to ensure the sustainability of the PHI industry and funds will continue to introduce efficiencies to keep their internal costs down.

“More than 13 million Australians rely on private health insurance for security and peace of mind, so they can access healthcare when and where they need it. Premium affordability is the major issue for health fund members. Half of all Australians with PHI have an annual income of less than $50,000. They are not wealthy.

“Keeping private health insurance sustainable and premiums affordable ultimately benefits all Australians by keeping pressure off the public hospital system,” said Dr David.

Media contact: Jen Eddy 0439 240 755

The Turnbull Government’s 2017-18 PHI Budget measures acknowledge the high value the community places on health care and recognises the importance of the private health insurance rebate. The reintroduction of Medicare Benefits Schedule indexation and the retention of the PHI rebate will improve healthcare affordability for all Australians.

“The phased restoration of MBS indexation will reduce upward pressure on GP and specialist co-payments, which is a cost health fund members have been struggling with when they need a referral for treatment, or when they are billed by their chosen specialist. Out-of-pocket costs for medical specialist treatment are the biggest concern for health fund members when they need to access a health service,” said Private Healthcare Australia CEO, Dr Rachel David.

Dr David said the Government had also demonstrated its commitment to making quality healthcare more accessible and affordable by retaining the PHI rebate.

“The private health insurance rebate is a critical element of Australia’s mixed private – public health system. The private and public sectors are intrinsically interconnected and private health insurance is embedded in Australian culture. 84% of Australians with private health insurance value the product and want to keep it,” she said.

“Australian health funds are acutely aware of the need for budget repair and have identified practical and achievable policy adjustments that will ensure the sustainability of the Australian health system in to the future, among them prostheses pricing reforms.

“The Government’s recent announcement that the Prostheses List Advisory Committee (PLAC), will commence targeted reviews of the hip, knee, cardiac and spinal categories, will deliver significant savings to health fund members.

“Health funds have given a rock solid commitment to pass on all savings from PL reform to members. This was demonstrated in the recent premium round with the average increase being the lowest in a decade. This next round of reviews will deliver further savings.

“More than 13.5 million Australians have some form of private health insurance and almost half of them have an annual disposable income of less than $50,000. They value their PHI and right to choose where and when they have medical care, as well as a fully trained health professional to be responsible for their care.

“PHI pays for close to two thirds of non-emergency surgery in Australia, 90% of day admissions for mental health care and 50% of all mental health admissions, 70% of joint replacements, 60% of chemotherapy and 88% of retinal procedures take place in the private health sector. In addition, under ancillary (extras) cover, health funds pay out more than $2.5 billion for dental care, more than the Federal Government. 90% of dental health services provided to low and middle income earners are subsidised by health funds.

“Keeping private health sustainable and premiums affordable ultimately benefits all Australians by keeping pressure off the public hospital system,” said Dr David.

Private Healthcare Australia is the peak representative body for Australia’s private health insurance industry. PHA represents 20 Australian health funds with a combined membership of 12.9 million Australians, or 96% of the sector on membership. Promoting the value of private health insurance to consumers in the Australian economy and keeping premiums affordable for our members is the number one priority of PHA members.

PHA’s CEO Dr Rachel David and PHA Chair Rob Bransby are available for interview.

Media contact: Jen Eddy 0439240755

Private Healthcare Australia’s CEO, Dr Rachel David said the Senate Community Affairs Reference Committee has reaffirmed the industry’s long held position on prostheses pricing reform.

“The recommendations of the inquiry in to “Price regulation associated with the Prostheses List Framework” endorse the private health insurance industry’s independent advice and if adopted will deliver significant savings for consumers on PHI premiums,” she said.

Dr David said Recommendations 8 and 9 should be implemented as soon as possible to deliver savings to health fund members:

• The committee recommends that action is needed to reduce the prostheses costs and that savings should be delivered as soon as possible and have an evidence base; (Recommendation 8)
• The committee recommends that guidelines for targeted prostheses reviews be finalised at the earliest opportunity and published with a schedule of proposed targeted reviews to enable stakeholders sufficient time to prepare for the review. (Recommendation 9)

“In addition, Recommendation 16 calls for the nature and the cost of services associated with a medical device on the PL be disclosed separately to the cost of the device. This is important to ensure that additional services being paid for are clinically relevant,” said Dr David.

“Services of proven clinical relevance can then be priced and evaluated in a transparent way in contract negotiations with hospitals, rather than provided ‘under the counter’ as a consequence of inflated benefits.

“Private Healthcare Australia supports the action being taken by concerned Parliamentarians on behalf of consumers to improve healthcare affordability.

“The Government’s recent announcement that the Prostheses List Advisory Committee (PLAC), will commence targeted reviews of the hip, knee, cardiac and spinal categories, is encouraging. Inflated benefits identified as a result of this process should be urgently reduced to market value, to give consumers much needed relief from rising health fund premiums.

“More than 13.5 million Australians have some form of private health insurance and almost half of them have an annual disposable income of less than $50,000. They value their PHI and right to choose where and when they have medical care, as well as a fully trained health professional to be responsible for their care.

“Keeping private health sustainable and premiums affordable ultimately benefits all Australians by keeping pressure off the public hospital system. Health funds have guaranteed all savings made by reducing inflated prostheses list benefits will be passed on to consumers in the next premium round.”

Private Healthcare Australia is the peak representative body for Australia’s private health insurance industry. PHA represents 20 Australian health funds with a combined membership of 12.9 million Australians, or 96% of the sector on membership. Promoting the value of private health insurance to consumers in the Australian economy and keeping premiums affordable for our members is the number one priority of PHA members. PHA’s CEO Dr Rachel David and PHA Chair Rob Bransby are available for interview.

Media contact: Jen Eddy 0439240755

Click here to view or download the Senate Community Affairs Committee report on Price regulation associated with the Prostheses List Framework (May 2017).

The value of Private Healthcare Insurance, particularly for younger Australians, was highlighted today with the release of Private Healthcare Australia’s Annual Survey Report of High Claims. (Click here to download the PHA Annual High Claims Survey 2016 report)

Health funds paid more than $6.4 billion in benefits for individual claims (for which the benefit payment was over $10,000) during 2016, representing an increase of 6.7% compared to 2015. Nearly half of all payments for hospital treatment by Australian health funds (45%) are now for claims where the benefit payment for the episode of care was more than $10,000.

PHA’s Annual High Claims Survey analyses the nature and magnitude of high claims paid by health funds over the 12 months to December 2016 and is collated using survey data from 33 health funds representing 100% of the private health insurance industry. In total health funds paid out on behalf of members 311,692 claims where the benefit payment for the episode of care was more than $10,000, the highest benefit paid being $406,566 for pancreatic cancer treatment.

PHA Chief Executive Dr Rachel David said the report highlights the value of private health insurance to members who have needed to access services during periods of sudden illness or when surgery is required, and demonstrates the contribution private health insurance makes to the lives of individuals, as well as Australia’s broader healthcare system.

“The report emphasises the importance of health fund membership for young Australians, with more than 16,000 high claims (benefits exceeding $10,000) paid for members under the age of 30 during 2016.This was an increase on the previous year of 858 claims (+5.6%).

“Many of these episodes involved hospital stays of more than 100 days for young Australians suffering from mental health issues, cancer and other conditions. Young people often think they’re invincible, but this data shows private health insurance is as important for those aged under 30 as it is for older Australians. It can be very difficult to get long-term treatment for conditions like PTSD and eating disorders in the public hospital system. Younger people who develop these conditions, or their families, can find themselves out of pocket by thousands of dollars if they don’t have private health insurance.”

Private health insurance is a critical element of Australia’s health care system. PHI pays for close to two thirds of non-emergency surgery in Australia, 90% of day admissions for mental health care and 50% of all mental health admissions, 70% of joint replacements, 60% of chemotherapy and 88% of retinal procedures take place in the private health sector.

More than 13.5 million Australians hold PHI and over half of those have disposable incomes under $50,000 per annum. 84% of people believe that they get value for money from their private health insurance. One of the main reasons for this is peace of mind as well as choice of doctor, choice of hospital, and timing of medical treatment.

Funds paid a record $19 billion in benefits in 2015-16, which will increase to $20 billion in 2016-17. For every dollar paid towards health insurance premiums, funds on average return 86 cents to the consumer in the form of healthcare benefit payments or claims reimbursements in 2015-16.This compares with 66c for general insurance in 2015-16.

Click here to download the PHA Annual High Claims Survey 2016 report.

Media contact: Jen Eddy 0439240755

Private Healthcare Australia’s CEO Dr Rachel David said health funds were committed to making it easier for their members to choose and use their health insurance and recognised that complexities had developed in the sector over time.

“Private Healthcare Australia is working with the government and stakeholders through the PHI Reform process to improve specific features of the PHI system including standardised clinical terminology for all health funds to define exclusions, improvements to the privatehealth.gov.au website to help consumers navigate the system, and using a system of labelling products in tiers according to the level of value provided. This will require additional investment by the funds, but it is necessary to improve the customer experience.

“More also needs to be done to improve health literacy in the community, so consumers are better able to assess their own health needs and make the right choices. Many of the health funds have useful information on their websites to help consumers with this, and it’s an area member funds are always looking to invest in,” she said.

Dr David said a Choice survey reporting that Extras cover was not providing consumers with value was nonsense, as it was actually in increasingly valuable component of PHI.

“Health funds are currently paying more in claims for Extras than ever before at $2.9bn for dental claims, and close to $5bn for Extras in total. Extras claims have been growing every year, including as a percentage of the total cost of services.

Funds do need to be careful about chasing rising provider fees, particularly since household income growth in Australia has been flat since 2011. This would be highly inflationary on premiums. (see graph)

“Many health funds have gone down the path of contractual arrangements with dental and allied health providers to help address the issue of variable out-of-pocket costs for consumers. This enables them to provide consumers with access to services like no-gap preventive dental care, which is very important in terms of individual and public health.”

Dr David said PHA had surveyed 16 000 consumers in the last 18 months and found that 84% of people with PHI value the product and want to keep it. Most are likely to become very resentful if they are forced to drop or downgrade their cover for any reason. This is particularly true of people aged over 55.

“Premium affordability is their main concern and this is followed by concerns about medical co-payment and out-of-pocket costs, and the complexity of the health system, all issues the industry is working with Government and stakeholders to address.

“Health funds are particularly concerned about medical out-of-pocket as we believe all patients should be able to access informed financial consent and be able to compare costs prior to treatment. This has historically been beyond our control due to the regulatory system in Australia, but increasingly member funds are investing in comparator websites, which will assist consumers and their GPs in accessing this information prior to referral. We are also working with Government on regulatory changes that could possibly make consumer access to this information easier in future.”

Total Allied Health Fund Benefits Paid as a proportion of Total Allied Health Benefits Cost has been growing steadily over the past few years as PHI continues to pay out record levels each year in terms of general treatment services to its PHI members based on growing utilisation across the different modalities (dental, chiropractors, physiotherapy, optical, etc).

Private Healthcare Australia is the peak representative body for Australia’s private health insurance industry. PHA represents 20 Australian health funds with a combined membership of 12.9 million Australians, or 96% of the sector on membership. Promoting the value of private health insurance to consumers in the Australian economy and keeping premiums affordable for our members is the number one priority of PHA members.

Media contact: Steven Fanner 0402 913 603 or steven.fanner@pha.org.au

State Governments are increasingly urging public hospitals to raise funds by using Private Health Insurance (PHI) funds as a cash cow, driving up the cost of premiums for all health fund members.

Private Healthcare Australia CEO, Dr Rachel David, said the Department of Health discussion paper on private patients in public hospitals confirmed industry figures about the extent of the practice of cost-shifting by State Governments.

“At a State level, a tacit encouragement of public hospital cost shifting has been growing. Some States have reduced funding for public hospitals and set quotas for “own-source revenue”, which is sought from a combination of PHI, veteran’s affairs, and other non-State Government funding,” said Dr David.

“There has always been a stable number of private patients treated on an elective basis in public hospitals because of the nature of their condition, or because it is where their specialist works.  What we are talking about here however, is the aggressive trawling of public emergency departments to try and convert as many patients as possible to private status.

“For example, the Queensland State Government brought in quotas in 2010 and annual growth in public hospital stays for private patients changed from 7% per annum before 2010, to 12% per annum after 2010. Figures in the Department of Health discussion paper show that the percentage of public hospital separations funded by PHI in Queensland has increased by a massive 114% since 2010-11.

“Public hospitals are pressuring patients who present to a public hospital emergency department to use their private health insurance rather than the Medicare system. In fact, many patients who intended to be treated as a public patient are signed up after they are admitted. The end result is PHI policyholders are now subsidising the costs of public hospitals, despite having already contributed to these through their taxes.

“Cost-shifting obviously disadvantages health fund members, but people without private health insurance also lose out as they risk getting bumped down public hospital waiting lists if they need treatment.  The Australian Institute of Health and Welfare (AIHW) has reported a median waiting time of 42 days for public patients vs 20 days for private patients.

“This practice is adding about $1 billion to the cost of premiums but it’s also growing at an average of 12% per annum. This drives up the cost of premiums and sometimes it puts pressure on the consumer when they present to the hospital unwell and are put in a position where they have to make a quick decision that can also lead to them incurring unexpected out-of-pocket costs.

“State and Territory Governments received a 6.5% increase in their annual funding from 2016.  They should be held accountable not only for how this is spent, but for how Medicare-eligible consumers presenting to public hospitals are treated.

“No-one should be pressured to make a financial decision if they or a family member is acutely unwell or in distress.  Any patient who chooses to use their private health insurance in a public hospital should always be provided informed financial consent, so they understand the implications of their decision,” said Dr David.

A recent Catholic Health Australia report, “UPSETTING THE BALANCE, How the Growth of Private Patients in Public Hospitals is Impacting Australia’s Health System” also validates the findings in the discussion paper.

Key findings in the CHA report included:

• Growth of private patients in public hospitals is outstripping rates of growth of public patients in public hospitals and private patients in private hospitals.
• The cost of treating private patients in public hospitals has more than doubled over the period from $2 billion in 2008–09 to $4.6 billion in 2015–16.
• The growth of private patients in public hospitals is also cost shifting from the States to private health insurers, with flow on impacts to consumers. Private health insurers spent $1.1 billion on benefits for private patients in public hospitals in 2014–15, which is putting upward pressure on premiums.
• The key driver of the growth of private patients in public hospitals may be attributed to the practices of some public hospitals in encouraging patients to declare and use their private health insurance product.

The issue of private patients in public hospitals is one of the key issues PHA is working to address in conjunction with the Federal Government as part of the PHI reform process.

“Clearly we need an auditable referral pathway for people coming through public hospital emergency departments if they are being pressured to use their private health insurance,” said Dr David.

“There are a number of regulatory reform options which could improve the relationship between PHI and public hospitals including the removal of quotas and increase monitoring of private patient flows through public hospitals, and greater transparency on care being provided.

“Consumers should also be provided with informed financial consent to avoid unexpected out of pocket costs; public hospitals should be required to share an appropriate level of data with health funds; and the practice of hospitals offering public patients financial incentives to use their PHI is inappropriate and should be banned.

“This will encourage Commonwealth and State Governments to increase transparency and reduce cost-shifting by highlighting the impact on health fund premiums and out-of-pocket costs for consumers. Public hospital cost-shifting to health funds adds more to premium costs than the average year’s premium increase,” Dr David said.

Media contact: Jen Eddy 0439240755

The value of the Private Health Insurance Rebate has been reaffirmed by an independent study into the financing of Australia’s health system.

The study, conducted by social policy research firm, Evaluate, concluded that at current settings, a dollar spent by the Government on the PHI Rebate is up to 15% more efficient than a dollar directed to the public system.

This confirms that Federal Government expenditure on healthcare via the PHI rebate is an economically efficient method of spending, both in terms of direct economic costs and in overall welfare gains. It also shows that the Private sector and the PHI rebate are essential components or Australia’s highly successful ‘mixed’ health care system.

Commissioned by the industry’s peak body Private Healthcare Australia, the study “The relative efficiency of the Private Health Insurance Rebate v. direct public health expenditure” examined three issues:

• The history of the Australian health system and the role of private health insurance (PHI) to look at how the current arrangements evolved;
• The total economic cost of funding procedures via PHI or direct expenditure on public hospitals; and
• The broader welfare gains associated with alternative methods of health finance

Private Healthcare Australia CEO, Dr Rachel David said the current mix of expenditure is hitting the mark and delivering a world-class health system. Australia’s mixed private – public health system is providing the right balance of healthcare for consumers.

Health policy experts across the political spectrum understand that the PHI rebate is critical to maintaining this balance and is an efficient and effective use of government money.

“The volume of incorrect information being circulated by people with a vested interest or a particular philosophical barrow to push against the PHI rebate needs to be challenged.  This study confirms that further change to the current mix of expenditure would have a detrimental impact across the Australian health system.

“In the interests of maintaining affordability of PHI for low and middle income earners, no further reductions should be made to the rebate on PHI premiums for either hospital or ‘extras’.  Doing so will not benefit public hospitals or Medicare.

“The PHI Rebate allows a greater proportion of the population to access private health care, which benefits the wider community by reducing waiting times in public hospitals. A healthy private sector is essential to the sustainability of Australia’s health system and the Private Health Insurance rebate is a key component of this,” said Dr David.

Private Healthcare Australia is the peak representative body for Australia’s private health insurance industry.  PHA represents 20 Australian health funds with a combined membership of 12.9 million Australians, or 96% of the sector on membership. Promoting the value of private health insurance to consumers in the Australian economy and keeping premiums affordable for our members is the number one priority of PHA members.  PHA’s CEO Dr Rachel David is available for interview.

Media contact: Jen Eddy 0439240755

BRIEFING NOTE: PHI rebate delivers value to health system

Economic analysis of the relative efficiency of the Private Health Insurance Rebate versus direct public health expenditure

The value of the Private Health Insurance Rebate has been reaffirmed by an independent study into the financing of Australia’s health system. The specific question studied was “is a dollar spent by Government via private health insurance (PHI) more or less efficient than a dollar spent directly in the public system?”

The study, conducted by social policy research firm, Evaluate, concluded that – at current settings – a dollar spent by the Government on the PHI Rebate is up to 15% more efficient than a dollar directed to the public system.

It demonstrates that Federal Government expenditure on healthcare via the PHI Rebate is an economically efficient method of spending, both in terms of direct economic costs and in overall welfare gains.

Commissioned by the industry’s peak body Private Healthcare Australia, the study “The relative efficiency of the Private Health Insurance Rebate v. direct public health expenditure” examined three issues:

• The history of the Australian health system and the role of private health insurance (PHI) to look at how the current arrangements evolved;
• The total economic cost of funding procedures via PHI or direct expenditure on public hospitals; and
• The broader welfare gains associated with alternative methods of health finance.

Role of Private Health Insurance in Australia

The paper describes the function of PHI, and distinguishes between the benefits received by health fund members and the public benefits shared by the broader Australian population.

In summary, these are:

• The Government is able to balance the community’s expectation of access to necessary healthcare within acceptable levels of taxation;
• Consumers with PHI are able to access health care sooner than they would be able to in the public system; and
• The removal of consumers with PHI from public healthcare reduces pressure on public system and benefits health consumers without PHI.

The PHI Rebate allows a greater proportion of the population to access private health care, which in turn benefits the wider community by reducing waiting times in the public hospital system.

History of Private Health Insurance in Australia

Australian Governments have long supported PHI, demonstrating the value that Governments have placed on the sector and its contributions to the health system.  The National Health Act 1953 introduced a system by which existing insurers received subsidies from the Commonwealth for the claims of chronically ill.  The Act also established Australia’s system of community rating.

In 1970, PHI coverage reached a national peak of 80%.  The introduction of Medicare in 1983 coincided with the end of PHI subsidies and PHI coverage dropped sharply to 50% and continued to fall gradually over the next decade. The 1990s economic downturn saw PHI become increasing unaffordable as unemployment rose and real wages stagnated. The downward spiral this created resulted in only about 30% of the population holding hospital cover by 1997.

Recognising the system was in crisis, the Howard Coalition Government introduced a number of measures to support PHI.  These included the Private Health Insurance Rebate; the Medicare Levy Surcharge (MLS); and Lifetime Health Cover. The impact of the reform measures was significant and immediate. From March to September 2000, private hospital insurance coverage rose from 32% to 46%.

Since then, various changes have been made which have eroded the value of the PHI rebate, many announced in the 2009-10 Budget.  These included means testing the rebate; changing the Medicare Levy Surcharge; and indexing the rebate to the CPI. They have slowed the growth of Commonwealth expenditure on the PHI rebate and this decline is forecast to continue.

The ACCC’s annual report to the Australian Senate regarding PHI in July 2017 confirmed that affordability is a major concern for consumers with 61% of people who had allowed their health cover to lapse citing the cost of premiums. Australian Prudential Regulation Authority (APRA) figures show that PHI coverage has fallen from 47.4% in June 2015 to 46.5% in March 2017.

Economic efficiency of PHI Rebate

The paper considers the overall economic cost of the PHI Rebate compared to the overall economic cost of direct healthcare purchase by governments, comparing the efficiency of expenditure on a dollar for dollar basis.

Two critical factors were considered: the first is the marginal excess benefit of taxation, or the deadweight loss, for which the paper uses an income tax rate of 33c per dollar of tax raised.  This is smaller for PHI as a smaller amount of tax is required for the rebate v. full purchase of services in the public system.  The second factor the paper considers in this section is administrative costs: estimated to be higher for private insurances at 8.4% v. 2.4% in the public system.

Taking these figures into account, the paper finds that a dollar spent by the Government on the PHI Rebate is up to 15% more efficient than a dollar directed to the public system.

Expenditure efficiency: welfare effects of PHI

A key benefit of public expenditure via the PHI rebate is to address public hospital waiting lists and support the public hospital sector.  It is argued that the PHI rebate supports those who might not otherwise purchase PHI to do so, therefore relieving pressure on the public system for those who are less able to fund their own care. The paper builds on previous work done in the UK market that looks at comparative welfare gains from a choice between:

• A marginal dollar added to the public system; and
• A marginal dollar added to the PHI rebate.

The outcome measure is based on the value placed by the community on waiting times.

The results show that there is currently a greater welfare gain from the PHI rebate than from marginal investment in public care and that redirecting expenditure from the PHI rebate to public hospitals would reduce efficiency.  This would inevitably result in a more expensive health system that reduces patients’ access to essential non-emergency care.

In summary the PHI rebate helps to keep premiums affordable, encourages Australians to take out private health cover and eases pressure on the public hospital system. A healthy private sector is essential to the sustainability of Australia’s health system and the Private Health Insurance rebate is a critical component.

The Government’s response to the Senate Community Affairs Reference Committee Report Pricing Regulation Associated with the Prostheses List Framework reaffirms its commitment to implement sensible reforms to make private health insurance more affordable for all Australians.

Private Healthcare Australia CEO Dr Rachel David said by endorsing the recommendations of the inquiry the Government will enable the industry to realise its commitment to deliver significant savings for consumers on PHI premiums.

“PHA particularly welcomes Government support for Recommendation 16 “The Committee recommends that the nature and cost of services associated with a medical device on the prostheses list be disclosed separately to the cost of the device.”

“Health funds are of course willing to pay for additional services when they are clinically relevant to the patient, however funds are concerned that their members are being charged more so some medical device company sales reps can attend surgical procedures to promote the device,” said Dr David.

“This seriousness of this issue was highlighted recently in the Community Affairs References Committee Inquiry into Transvaginal mesh implants and related matters. The unregulated use of reps in routine cases is at best a costly waste of money and at worse, unsafe. When additional services are clinically relevant they should be costed separately in the interests of transparency,” said Dr David.

“The report ‘Costing an arm and a leg’ commissioned by health funds in 2015 showed private patients are paying $800 million per year too much for medical devices.  Recent data released by the Federal Government from the Independent Hospitals Pricing Authority showed the dollars wasted are closer to $1 billion. Claiming the costs of sales representatives under Prostheses List benefits is a waste of members’ money and should be stopped, and benefits discounted accordingly in line with real market prices.

“Current ‘Prostheses List’ regulations have forced health funds to pay benefits for medical devices 2-5 times higher than the price charged for the same device to public patients, and in equivalent countries around the world. This has put direct upward pressure on heath fund premiums. For example, a member fund recently reported that the insertion of a cardiac defibrillator (without complication) in a private hospital setting cost $55,000 for the prostheses component while an identical procedure (without complication) in a public hospital setting cost $15,000 using the same prostheses.

“Keeping private health sustainable and premiums affordable ultimately benefits all Australians by keeping pressure off the public hospital system. Health funds have guaranteed all savings made by reducing inflated prostheses list benefits will be passed on to consumers by way of lower premiums and we urge the Government to continue the process of reform.”

Private Healthcare Australia is the peak representative body for Australia’s private health insurance industry.  PHA represents 20 Australian health funds with a combined membership of 12.9 million Australians, or 96% of the sector on membership. Promoting the value of private health insurance to consumers in the Australian economy and keeping premiums affordable for our members is the number one priority of PHA members. Dr Rachel David is available for interview.

Media contact: Jen Eddy 0439 240 755

Australian health funds have demonstrated their commitment to improving the affordability and value of private health insurance for their members.  Health funds have worked together with the Federal Government and private health stakeholders for close to two years to deliver a package of reforms aimed at putting downward pressure on premiums, and making it easier for consumers to choose and use their health insurance.

Prostheses List benefits reductions $300m over two years

PHA Chief Executive, Dr Rachel David said the Government’s decision to further reform Prostheses List pricing arrangements guaranteed consumers would benefit. Health funds have pledged all savings made by reducing inflated prostheses list benefits will be passed on to consumers in the next premium rounds announced April 2018 and April 2019. This process started last year, with an average premium increase of 4.8%, the lowest in a decade. PL reform is the most effective short term measure to achieve downward pressure on premiums.

“Current ‘Prostheses List’ regulations have forced health funds to pay benefits for medical devices 2-5 times higher than the price charged for the same device to public patients, and in equivalent countries around the world. This has put direct upward pressure on heath fund premiums, as the cost of this area has been growing exponentially. For example, a PHA member fund recently reported that the insertion of a cardiac defibrillator (without complication) in a private hospital setting cost $55,000 for the prostheses component while an identical procedure (without complication) in a public hospital setting cost $15,000 using the same prostheses,” she said.

 “Addressing market failures in the medical device supply chain has been a major priority for health funds on behalf of their members. The Federal Government should be commended for tackling the corruption, rorts and kickbacks that over time became a feature of this system, leading to poor outcomes for consumers in terms of both cost and safety.”

Lifetime Health Cover discount

Dr David said the Government’s agreement to adopt a “reverse Lifetime Health Cover” policy would be a major factor in addressing membership rates, and improving participation and affordability.

“Health funds want to offer customers discounted premiums as an incentive to take out cover in their 20s. Premiums will be reduced by 2 per cent a year, capped at 10 per cent after five years. Health funds need to attract Health funds need to do more to attract younger members and offering discounts to young Australians would be acceptable to the broader community. Young, healthy Australians who have lower cost claims often cross subsidise the sick and elderly who make claims more frequently. Under our system of community rating, this helps to keep premiums lower for everyone and can also reduce pressure on the public health system.

“Market research undertaken in September 2017 (IPSOS n= 1700) has shown there is pent-up demand for private health insurance in people aged under 30, however this is also the age group most likely to be dealing with housing affordability, education and energy costs at the same time. The LHC discount will help put private health cover in the reach of younger people. People aged under 30 are particularly conscious of the need for preventative dental care, treatment of sports injuries and cover for mental health problems treated in hospital. These are all things which are difficult to access without private health insurance,” said Dr David.

Gold/Silver/Bronze/Basic + mental health safety net, standardised clinical terminology, PHIO website

“Health funds have invested a considerable amount of time and money in ensuring new policies are effective in helping people choose and use their health insurance.  PHA has worked with the Government on its product classification to ‘Gold/Silver/Bronze/Basic’ with a focus on reducing complexity and simplifying consumer choice, and keep pressure off premiums.

“The retention of the ‘Basic’ level of cover recognises there has always been a group of people who have selected this affordable level of cover because they have a particular specialist who treats them for a chronic condition in a public hospital.  It would be unfair and inappropriate to expect these people to pay at least 16% more for services and treatments they will never use.  There is also a younger group of people who are at low risk of hospital care, who select low-cost products as an entry-level option to avoid the Medicare Levy Surcharge and the Lifetime Health Cover loading which starts after age 30.  Most of these people upgrade their cover when their personal circumstances change, and it would also be unfair to force them to pay for more services than they need.

“The most important thing is consumers know what they are buying, and that their policy of choice is not only affordable, but meets their health and life stage needs.  This is the core objective of this PHI reform package.

“In recognition of the fact many people find it difficult to assess their own risk of developing a mental health problem, health funds will introduce a mental health safety net for people with low-cost policies who are unexpectedly admitted to hospital for a serious mental health condition.  This will give them a one-off opportunity to upgrade their cover, and have their hospital stay fully covered without a waiting period on lower benefits.

“PHA supports the introduction of standard clinical terminology so consumers can compare ‘apples with apples’ and better navigate the system at the point of purchasing a health insurance policy.  We also welcome the proposed upgrade of the Private Health Insurance Ombudsman’s website www.privatehealth.gov.au to provide consumers with an independent source of advice about choosing an appropriate policy.”

Dr David said other reform measures including the introduction of a “rural health product” permitting health funds to offer travel and accommodation benefits under hospital cover would enhance the value proposition of private health insurance for people living in rural and remote areas. Likewise, policy measures to lift the cap on the excess available from $500/$1000 to $750/$1500 and recognise more mainstream natural therapies in general treatment policies will enhance consumer choice and improve value for money.

She said health funds recognised that complexities had developed in the sector over time and have been committed to working with government and stakeholders through the PHI reform process to improve the customer experience.

“Today’s announcement is a major step in ensuring the sustainability of Australia’s highly regarded mixed private-public health system, by improving the value proposition for people at all stages of life. 84% of Australians with private health insurance value the product and want to keep it, however their main concern is affordability.

“There are 13.5 million Australians with private health insurance and almost half of them have an annual income of less than $50 000. The measures announced by the Government with cooperation from industry and other stakeholders will go a long way towards addressing consumer concerns. Other central policy measures such as the PHI rebate allow a greater proportion of the population to access private health care, which benefits the wider community by reducing waiting times in public hospitals, which would be significantly higher without it.

“Keeping private health sustainable and premiums affordable ultimately benefits all Australians by keeping pressure off the public hospital system,” said Dr David.

I am here on behalf of Private Healthcare Australia, the peak representative body for the private health insurance industry. We represent 20 health funds, both for-profit and not-for-profit. This covers over 96 per cent of Australians who hold private health insurance.

This inquiry is important because 13.5 million Australians rely on private health insurance and more than half of them have disposable incomes under $50,000 per year.  This is not a luxury market in Australia. We know that 84% of people believe that they get value for money from their private health insurance and cite peace of mind, choice of specialist for continuity of care, choice of hospital, and timing of medical treatment as the main reasons.

Private health insurance pays for close to two thirds of non-emergency surgery in Australia.  90% of day admissions for mental health care and 50% of all mental health admissions; 70% of joint replacements, 60% of chemotherapy, and 88% of retinal procedures take place in the private health sector. In addition, under Extras cover, health funds pay out more than $2.59 billion for dental care per year, which is more than dental care expenditure by the Federal Government.

PHA is a research-based policy and advocacy organisation.  Over the past 18 months, PHA has commissioned research with 20,000 consumers for accurate, real-world information to provide evidence for into policy proposals.

We know that Health Fund members value their Private Health Insurance but their main concern is affordability of both premiums, and out-of-pocket costs.

Our research shows there is concern among Australians about the issue of health system sustainability and costs, driven by the fact that the inflation of health input costs has risen at a rate much higher than CPI and household wages.  Therefore, keeping private health insurance sustainable and premiums affordable ultimately benefits all Australians by keeping pressure off the public hospital system, particularly in elective surgery.

Funds have been working with the Federal Government to improve the affordability and value of Private Health Insurance for members. We have been working to bend the cost curve down, reduce waste and address a perceived lack of competition and transparency in our sector. PHA member funds have already made a considerable investment in this process to benefit their members, and will continue to do so as the reforms roll out.

The results of this were demonstrated through the Government’s recently announced Private Health Insurance reform package. An important measure to address participation in Private Health Insurance is the Lifetime Health Cover discount, which will allow health funds to offer customers discounted premiums as an incentive to take out cover in their 20s. Young, healthy Australians who hold insurance and who have lower-cost claims cross-subsidise costs for the sick and elderly who make claims more frequently. Under Australia’s universal health system of community rating, this helps to keep premiums lower for everyone and can also reduce pressure on the public health system.

The most recent market research we commissioned in September 2017, indicates there is pent-up demand for Private Health Insurance in people aged under 30. This however, is also the age group most likely to also be challenged by housing affordability, education and rising energy costs. The Lifetime Health Cover discount will help put private health cover in the reach of younger people. People aged under 30 are particularly conscious of the need for preventive dental care, treatment of sports injuries and other accidents, and cover for mental health problems treated in hospital. These are all things which are difficult to access without private health insurance.

As this Committee is well aware and as our testimony at your previous Inquiry demonstrated, the fastest growing area of health fund costs is that of medical devices or prostheses. The Private Health Reform reform package goes some way to addressing the obscene mark-ups health fund members are paying for medical devices in Australia compared to the rest of the world. We thank you for your contribution to this outcome.

Health funds have pledged that all savings made from reducing inflated prostheses list benefits will be passed on to consumers in the next premium rounds, announced in April 2018 and April 2019. This process started last year, with an average premium increase of 4.8%, the lowest in a decade. Prosthesis List reform is the most effective short-term measure to achieve downward pressure on premiums.

The Private Health Insurance reform package addresses the issues of participation, affordability, and the value of Private Health Insurance.  PHA worked with the Government on a simpler product classification to ‘Gold/Silver/Bronze/Basic’ with a focus on reducing complexity and simplifying consumer choice. It is vital that consumers know what they are buying, what they are not buying, and that their policy of choice is not only affordable, but meets their health and life-stage needs.

Health funds will introduce a new mental health safety net for people on low-cost policies to recognise that many people find it difficult to assess their own risk of developing a mental health problem. If they are unexpectedly admitted to hospital for a serious mental health condition, this will give them a one-off opportunity to upgrade their cover, and have their hospital stay fully covered without a waiting period on lower benefits.

Other features of the reform package include the introduction of standard clinical terminology; increased capacity for the Private Health Insurance Ombudsman; the introduction of a “rural health product” and lifting the cap on excess to improve consumer choice. These are all measures supported by PHA and its member funds to improve the customer experience and affordability of Private Health Insurance.

After premium affordability, out-of-pocket costs are the major area of concern for health fund members.  While there are more ‘no-gap’ services provided than ever before, out-of-pocket costs are rising for those which do attract a gap.

Health fund data shows there is a market for specialist fees; it’s just that consumers either don’t have access to this information or have great difficulty accessing it.  Health funds have made considerable investments in directory services like Whitecoat (supported by HBF, Bupa and nib) and Healthshare (supported by Medibank and HCF), which aim to provide consumers and their GPs with quick access to information about specialists including scope of practice, location and likely fees and charges.  We do however need a whole-of-sector commitment to transparency for these initiatives to be truly effective, and to bring the private health sector up to speed with the rest of the economy and consumer expectations.

In addition, as health technology improves it will be increasingly important to reconsider the legislative prohibition on health funds contributing to medical treatment provided out of hospital where a Medicare benefit is payable.  This is currently acting as a perverse incentive encouraging unnecessary admissions to hospital in some key treatment areas, and needs to be addressed.

Health funds remain committed to working with stakeholders and the Parliament to foster greater transparency on medical-specialist and allied-health quality and out-of-pocket costs, and the industry has received strong support from across the political spectrum for this measure.

Private Healthcare Australia remains fully committed to a sensible reform plan to improve affordability, participation and value in the private health sector.  We welcome this Senate inquiry into the value and affordability of private health insurance and hope it will have the equivalent, positive impact the Committee’s other inquiries have delivered for Australian consumers.

If it pleases the Chair, I would now like to hand over to my colleagues. Thank you.

Private Healthcare Australia will bring together healthcare industry experts from across Australia to discuss the affordability, participation and value of private health insurance at a one day conference on 23 November, 2017.

PHA Chief Executive Dr Rachel David said the conference coincided with the Government’s major PHI reform announcement, which many speakers had made a significant contribution to, and would set the agenda for stakeholder consultation during the coming twelve months.

“Securing the Future of Private Health: Affordability, Participation, Value, will showcase the best of the Australian healthcare industry and promote discussions on concepts and solutions to ensure the sustainability of private healthcare in Australia,” said Dr David.

The conference will comprise a number of panel sessions chaired by senior health journalists and address key PHI reform issues:

• Affordability – bending the input cost curve. 84% of Australians with PHI value the product and want to keep it, however their main concern is affordability. There are 13.5 million Australians with private health insurance and almost half of them have an annual income of less than $50 000. Dr Jeff Harmer, chair of PHMAC and former Secretary of two Commonwealth Government Departments will be joined by health fund representatives, and health economists to explore the impact of the PHI reforms on affordability.
• Participation – winning the hearts and minds of Millennials. Younger Australians will be joined by market research and health fund experts to discuss their experiences with PHI and the effect the Government’s new Lifetime Health Cover discount could have on young Australians trying to balance PHI with cost of living pressures.
• Value – maximising value through transparency and customer focus. Co-Chair of the National Mental Health Commission Lucy Brogden, industry experts and specialists will discuss the value proposition of PHI, and recent reforms including the mental health safety net for people with low-cost policies who are unexpectedly admitted to hospital for a serious mental health condition.
• Industry panel – Workingtogether to deliver affordability, participation and value. Key stakeholders including the AMA, Ramsay Healthcare, along with the Member for Goldstein, Tim Wilson MP will discuss consumer expectations and how sectors can cooperate to keep private health sustainable and keep pressure off the public hospital system.

 Further information on the conference, speakers, and last chance registration is available at: http://www.privatehealthcareaustralia.org.au/all-events/

Private Healthcare Australia is the peak representative body for Australia’s private health insurance industry.  PHA represents 20 Australian health funds with a combined membership of 12.9 million Australians, or 96% of the sector on membership. Promoting is the number one priority of PHA members.  PHA’s CEO Dr Rachel David is available for interview.

Media contact: Jen Eddy   0439240755

Private Healthcare Australia has appointed highly respected and experienced Board Chair and Director, Julie-Anne Schafer as Chair of the PHA Board.

PHA Chief Executive Dr Rachel David said the industry was fortunate to secure the skills and expertise of Ms Schafer who was extremely qualified to help guide the private health insurance sector through the implementation phase of the Government’s recently announced PHI reforms.

“Ms Schafer is an experienced Chair and Non-Executive Director of diverse and highly regulated sectors such as financial services, infrastructure, member service, health and transport, including RACQ; National Competition Council; National Injury Insurance Agency QLD; QLD Law Society; and the Advisory Council to Energy and Water Ombudsman QLD,” said Dr David.

“She has a passion for the healthcare sector and understands the importance of the role of private health insurance in Australia’s health system. She has served on the Boards of large private hospitals, overseeing the operation of hospitals, aged care and nursing homes in States and Territories across Australia.

“Ms Schafer will replace Mr Rob Bransby who will retire from the position later this year. Mr Bransby has been instrumental in delivering the best possible outcome for Australia’s 13.5 million health fund members during the PHI reform negotiation,” said Dr David.

“His expertise in the industry is unparalleled. His involvement and contribution to the PHI reform process has been invaluable. Mr Bransby served as President and Vice President of PHA prior to taking on the role of Chair, and as CEO/Managing Director of HBF Western Australia. He leaves the private health insurance sector in a strong position to continue to advocate for affordable and sustainable healthcare.”

Dr David said the industry was entering an exciting and challenging period aimed at improving affordability, participation and the value of PHI for health fund members and delivering positive outcomes across Australia’s mixed public-private health system.

“The appointment of Ms Schafer will ensure the professional commitment to reform, demonstrated by the experienced PHA Board under the guidance of Rob Bransby, will be ongoing. The PHA Board has great expertise and skills and represents a cross section of the industry of both profit and not for profit health funds from across the country.

The PHA Board comprises Deputy Chair Rhod McKensey (nib); Andrew Wilson (Medibank); Dwayne Crombie (Bupa); Mark Valena (GMHBA); Gerard Fogarty (Defence Health); Byron Gregory (Health Partners); and Rob Seljak (TUH). The PHI Industry is looking forward to working with Ms Schafer who will take up the position on 24 November 2017.

Private Healthcare Australia is the peak representative body for Australia’s private health insurance industry.  PHA represents 20 Australian health funds with a combined membership of 12.9 million Australians, or 96% of the sector on membership. Promoting the value of private health insurance to consumers in the Australian economy and keeping premiums affordable for our members is the number one priority of PHA members.  PHA’s CEO Dr Rachel David is available for interview.                       

Media contact: Jen Eddy 0439240755

APRA’s 2016-17 Private Health Insurance Annual Report confirms that health funds are delivering value for 13.5 million Australian consumers.

Funds paid a record $19.83 billion in benefits on behalf of their members ($14.75 billion for hospital treatment, $4.87 billion for general treatment and $220 million for State levies) in 2016-17. Health fund premium revenue increased by 4.6% in 2016-17 while fund benefits increased by 4.5%, demonstrating that the PHI claims ratio continues to outstrip comparable industries.

PHA Chief Executive Dr Rachel David said health funds are consistently paying out the highest percentage of the premium back to customers of all insurance types – an average of 86c in the dollar (it has been above 85% for 15 years). This compares with 67c for property insurance and 62c for general insurance (2016).

“The APRA Report demonstrates that health funds are operating successfully and efficiently and the industry is in good shape. Whether run as a for-profit or a not-for-profit, health funds must operate as successful businesses to be able to deliver benefits for their members. The worst outcome for consumers is a badly operated fund that falls over.

“Health fund profit margins have remained stable over the last decade running between 4.5 and 6%.  This is a modest return when compared with other forms of insurance.  It is also significantly below the returns made by private hospital groups and medical specialist practices. Net investment income increased from $290 million in 2015-16 to $544 million in 2016-17 and health funds net margin (profit margin) has gone down -0.27% from 5.45% in 2015-16 to 5.18% in 2016-17.

“There is no pot of gold hidden in health funds, and the majority of premium income is passed back to members.  Health funds are committed to keeping private health insurance premiums affordable for members and recognise the importance of working with hospitals, specialist health professionals and medical suppliers to establish premiums at a level which ensures members’ care can be funded if and when it is needed.

“PHA market research shows that while more than 84% of people are satisfied with their private health insurance and want to keep it, premium affordability is a major issue for health fund members. This is due to input costs, utilisation and health inflation.

“Private health insurance is embedded in Australian culture and is an indispensable part of our health system. PHI pays for close to two thirds of non-emergency surgery; 90% of day admissions for mental health care and 50% of all mental health admissions; 70% of joint replacements, 60% of chemotherapy, and 88% of retinal procedures take place in the private health sector. In addition, under Extras cover, health funds pay out more than $2.59 billion for dental care per year, which is more than dental care expenditure by the Federal Government. Keeping health insurance sustainable benefits all Australians by keeping the pressure off the public hospital system,” said Dr David.

Private Healthcare Australia is the peak representative body for Australia’s private health insurance industry.  PHA represents 20 Australian health funds with a combined membership of 12.9 million Australians, or 96% of the sector on membership. Promoting the value of private health insurance to consumers in the Australian economy and keeping premiums affordable for our members is the number one priority of PHA members. PHA’s CEO Dr Rachel David is available for interview.                                                                                    

Media contact: Jen Eddy   0439 240 755

Private Healthcare Australia is urging a whole-of-sector commitment to transparency around issues such as specialist fees to bring the private health sector up to speed with the rest of the economy and consumer expectations.

PHA Chief Executive Dr Rachel David said the latest APRA quarterly statistics (September 2017) highlighted an increase in out-of-pocket costs for consumers, which was contributing to a decline in private health insurance membership.

Out-of-pocket payments for hospital episodes increased by 5.0% compared to the same quarter for the previous year (from $284.20 per episode to $298.55 per episode).  Out-of-pocket payments for medical services was $154 (where an out-of-pocket payment was payable) for September 2017 quarter. This has increased 19.3% compared to same quarter last year (where average gap payment where gap was paid was $129). This is due largely to increases in the proportion of gap payments relative to medical charges across both the ENT and plastic/reconstructive specialty groups.

The increase in out-of-pocket payments for medical services (across all medical services) for September 2017 quarter was only 2.8% compared to the same period last year. The proportion of services with no gap has increased to 88.1% for September 2017 quarter compared to 86.2% for the same period last year.

“Of the 13.5 million Australians who rely on PHI, more than half of them have disposable incomes under $50,000 per year.  84% of members believe that they get value for money and cite peace of mind, choice of specialist, choice of hospital, and control over timing of medical treatment as the main reasons they want to keep their health cover. Their main concern is unsurprisingly premium affordability, followed by out-of-pocket medical costs,” said Dr David.

“Health funds are restricted by law from controlling what doctors’ charge, and from providing cover for medical services provided out of hospital. The minority of private health services attract a gap payment and this is great news, however gaps charged tend to be in critical and highly emotive areas like cancer treatment, reconstructive surgery, childbirth and anaesthesia.  Gap payments charged for services are increasing on average at a rate higher than CPI.

“Health funds understand the MBS freeze has impacted the ability of doctors to offer no-gap services, but health fund gap cover simply cannot chase rapidly increasing fees without putting premiums up for everyone.  There is a critical need for GPs and their patients to be given access to likely out-of-pocket charges before referral takes place, to give price-sensitive consumers the ability to choose the most cost-effective option between specialists with equivalent qualifications.  There is also an urgent need to relax restrictions placed on health funds from negotiating with specialists to cover the gap for some essential services provided out-of-hospital, like cancer treatment. Failure to do so will lead more consumers to desert private health, for fear of being left out-of-pocket.

“Without ongoing reforms to reign in input costs, health inflation will continue to spiral, putting pressure on premiums, putting private health insurance out of reach of many Australians, and pressure back on the public health system. We need a whole-of-sector commitment to transparency around issues including hospital and specialist fees.

“There has been some progress on medical device pricing, the fastest growing area of health fund costs. Health funds have pledged that all savings made from reducing inflated prostheses list benefits will be passed on to consumers in the next premium rounds.

“Health funds invested millions of dollars towards improving transparency during the reform process, to develop policies such as the Gold/Silver/Bronze/Basic model with a focus on reducing complexity and simplifying consumer choice. It is vital that consumers know what they are buying, what they are not buying, and that their policy of choice is not only affordable, but meets their health and life-stage needs.

“It’s time to extend the reach of transparency across the whole sector, so hospitals, medical device suppliers and medical specialists are all held accountable for reducing waste and low value care in private health, and keeping the lid on rising premiums and out-of-pocket costs.

“APRA’s 2016-17 Private Health Insurance Annual Report confirmed that health funds are delivering value for their members. Funds paid a record $19.83 billion in benefits on behalf of their members ($14.75 billion for hospital treatment, $4.87 billion for general treatment and $220 million for State levies) in 2016-17.  While health fund premium revenue increased by 4.6% in 2016-17, benefits paid by funds increased by 4.5%, demonstrating that the PHI claims ratio continues to outstrip comparable industries.

“Health funds are consistently paying out the highest percentage of the premium back to customers of all insurance types – an average of 86c in the dollar (it has been above 85% for 15 years). This compares with 67c for property insurance and 62c for general insurance (2016).

“Health funds are committed to working with the Federal Government and other participants in the sector to improve the affordability and value of private health insurance, to reduce waste and address transparency across the sector”, said Dr David.

Private Healthcare Australia is the peak representative body for Australia’s private health insurance industry.  PHA represents 20 Australian health funds with a combined membership of 12.9 million Australians, or 96% of the sector on membership. Promoting the value of private health insurance to consumers in the Australian economy and keeping premiums affordable for our members is the number one priority of PHA members.  PHA’s CEO Dr Rachel David is available for interview.                    

Media contact: Jen Eddy   0439 240 755

The value of private health insurance has been verified by the Health Care Complaints Commission 2016-17 Annual Report, which found that a patient in a public hospital is six times more likely to complain to the Commission than a patient in a private hospital.

This is consistent with IPSOS research, which shows that 80% of Australians with private health insurance believe they get value for their money, and want to keep it.

PHA Chief Executive Dr Rachel David said a Morgan Stanley report claiming the public hospital system was capable of handling all Australia’s medical needs was wrong and had failed to consider a range of factors involved in the health care experience.

‘There is no doubt if you have experienced a catastrophic health event and are brought in on a stretcher, Australia’s world-class public hospital system is the best place to be. There are however a number of less acute, but highly debilitating conditions for which access to care is much less certain, which is why people choose private health, said Dr David.

“There are many conditions which can seriously impact younger people, limiting their ability to get and hold down a job, or form a relationship. These include disabling sporting injuries and other accidents which are not life-threatening but limit the capacity to work, mental health admissions for eating disorders and chronic anxiety/depression and dental surgery.

“Timely access to public hospital treatment for these conditions is patchy at best, and in some outer suburban and regional areas, access to common types of non-emergency surgery may take years. One of the problems is consumers have little or no information about how long wait times are for a particular condition in public hospitals in their area, and without private health insurance, they can be in for a nasty surprise.

“People with private health insurance have chosen it because it gives them control over the timing of medical treatment, and also access to fully trained specialists who take responsibility for their care. In contrast to the claims in the Morgan Stanley report, State Government data shows in many areas public hospitals are already overwhelmed and under stress,” said Dr David.

In 2015-16, there were 3,122,333 separations from NSW hospitals. 1,861,163 (59.6%) were from public hospitals. There were 1,261,170 (40.4%) separations from private hospitals.
In the same year the Health Care Complaints Commission received 1137 complaints about hospitals. 1016 (89.4%) were about public hospitals. 121 (10.6%) were about private hospitals.
When you compare public and private hospitals, the contrast is stark. A patient in a NSW public hospital is nearly 6 times more likely to complain to the HCCC than a patient in a private hospital. (HCCC Annual Report 2016-17).

Private Healthcare Australia is the peak representative body for Australia’s private health insurance industry. PHA represents 20 Australian health funds with a combined membership of 12.9 million Australians, or 96% of the sector on membership. Promoting the value of private health insurance to consumers in the Australian economy and keeping premiums affordable for our members is the number one priority of PHA members. PHA’s CEO Dr Rachel David is available for interview.

Media contact: Jen Eddy 0439 240 755

Private Healthcare Australia’s CEO Dr Rachel David says the recommendations of the Senate Committee Report into the value and affordability of private health insurance and out-pocket-costs, are consistent with the reforms already being implemented under the Federal Government’s private health insurance (PHI) reform agenda.

“It is encouraging to see that decision makers across the political spectrum have a genuine understanding of the importance of PHI in the Australian healthcare system and acknowledge that rising input costs, over which health funds have limited control, are the key drivers affecting affordability of premiums and out-of-pocket medical costs,” said Dr David.

“Health funds also welcome the recommendations seeking greater transparency across the private health sector of both the drivers of consumer out-of-pocket costs, and input costs driving up health fund premiums”.

“PHA member funds have already informed the Senate they support calls for greater transparency on executive remuneration and benefits across the private health supply chain.”

“Health funds are consistently paying out the highest percentage of the premium back to customers of all insurance types – an average of 86c in the dollar (it has been above 85% for 15 years). This compares with 67c for property insurance and 64c for general insurance.”

“Profit margins have remained stable over the last decade running between 4.5 and 6%.  This is a modest return when compared with other forms of insurance and significantly below the returns made by private hospital groups and medical specialist practices. Health funds are not hiding a pot of gold, they are committed to keeping premiums affordable for members and recognise the importance of working with hospitals, specialist health professionals and medical suppliers to establish premiums at a level which ensures members’ care can be funded if and when it is needed.”

“Premium affordability is the main reason deterring people from PHI and premium increases the main driver behind dropouts and downgrades. Health funds take the responsibility of keeping premiums affordable very seriously. Our research shows there is concern among Australians about the issue of health system sustainability and costs, driven by the fact that the inflation of health input costs has risen at a rate much higher than CPI and household wages.”

“While the transparency measures outlined in the Senate recommendations are welcomed in principle, it is critical implementation does not introduce additional red tape which in itself will increase health fund input costs and put upward pressure on premiums”.

“A detailed legislative and regulatory framework, overseen by at least five regulators, governs private health insurance.  There is simply no need to introduce any more.”

“The introduction of a simpler product classification to ‘Gold/Silver/Bronze/Basic’ will reduce complexity and simplify consumer choice. It is vital that consumers know what they are buying, what they are not buying, and that their policy of choice is not only affordable, but meets their health and life-stage needs.   There has always been a ‘basic table’ health fund product range, which is both affordable, and permits patients living in regional areas and with special health needs requiring treatment in a public hospital, to access their choice of doctor and continuity of care.  We strongly recommend this tier be retained to avoid unfairly penalising these consumers.”

“Under Australian law health funds are unable to control what doctors charge, and furthermore, are restricted from covering out-of-pocket costs for services provided out-of-hospital where a Medicare benefit is also payable.   Unexpected medical costs can cause serious pain to consumers who are already dealing with the burden of illness.  Of the services provided in hospital, only 12-15% attract a gap, but these gaps are growing at 4% per annum, which is above CPI.”

“Health funds recognise the urgent need for consumers and their GPs to have easy access to information enabling them to compare medical specialist skills and costs, including the costs of anaesthetists and assistant surgeons.  The health sector is lagging behind other sectors in the economy as a result of its inability to achieve this level of transparency for consumers, and health funds are investing in new ways to make this easier.”

“Government support is needed however to ensure a number of regulatory barriers to achieving an appropriate level of consumer information are addressed.  There is also the need for health system regulators to consider sanctions against providers who repeatedly fail to give consumers informed financial consent in advance of medical treatment, who have charged excessive or inappropriate fees.”

“Health fund members have also expressed concern about out-of-pocket costs in Extras cover and funds have responded. Vertical integration into dental care by health funds and preferential rebates for contracted dentists has been driven entirely by consumer demand for access to high quality and affordable dental care.  Many consumers fail to access preventive dental care because of uncertainty about wildly variable out-of-pocket costs, and end up presenting with serious dental problems as a result. Differential rebates are used across all specialist health providers to ensure those who enter into contracts with health funds to cover the gap are appropriately remunerated.”

“Health funds strongly support the continuation of differential rebates, as undermining this approach risks dramatically increasing consumer out-of-pocket costs for essential services like dental care.”

“PHI is an integral part of Australia’s mixed public-private health system.”

“Consumer research shows that more than 80% of members believe that they get value for money from their private health insurance and cite peace of mind, choice of specialist for continuity of care, choice of hospital, and timing of medical treatment as the main reasons.”

“Private Healthcare Australia remains fully committed to working with stakeholders and the Parliament to improve affordability, participation and value in the private health sector. PHA welcomes this Senate Committee report and hopes it will have a long term positive impact on Australia’s healthcare system.  Keeping private health insurance sustainable and premiums affordable ultimately benefits all Australians by keeping pressure off the public hospital system, particularly in elective surgery and mental health,” said Dr David.

Private Healthcare Australia is the peak representative body for Australia’s private health insurance industry.  PHA represents 20 Australian health funds with a combined membership of 12.9 million Australians, or 96% of the sector on membership. Promoting the value of private health insurance to consumers in the Australian economy and keeping premiums affordable for our members is the number one priority of PHA members.  PHA’s CEO Dr Rachel David is available for interview.

Media contact:  Celia Moore  0432 344 069