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Private health insurance and private healthcare under challenge

This presentation explores the decline in private health insurance coverage and the increasing unaffordability of premiums. It also discusses the impact on people dropping out of coverage and reducing their level of cover. Additionally, it analyzes the rising share of benefits going to older people and presents potential solutions to address the challenges.

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Private health insurance and private healthcare under challenge

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  1. Private health insurance and private healthcare under challenge Stephen Duckett @stephenjduckett (with Kristina Nemet and Matt Cowgill) Presentation to State Library of Victoria Policy Pitch July 2019

  2. After relative stability in last two decades, health insurance coverage has started to decline • Proportion of the population with hospital treatment cover (per cent) • Notes: ‘MLS’ refers to Medicare Levy Surcharge; ‘PHIIS’ is the Private Health Insurance Incentive Scheme. There is a series discontinuity; prior to 1996 the figures refer to private insurance for public hospital care. • Source: APRA (2018) 1 July 2012: 30% rebate means testing 1 July 1975: Medibank introduced 1 July 1997: MLS and PHIIS introduced 1 January 1999: 30 per cent rebate introduced

  3. Premiums are becoming increasingly unaffordable • Cumulative real growth in average PHI premiums and weekly wages, since 2010-11, per cent • Notes: All series deflated using the Consumer Price Index. PHI increase is the industry weighted average per year. The effective premium payable by consumers would be even higher, because premiums are covering less today than a decade ago. Wages series is the average weekly ordinary time earnings of full-time adults in the year to the November quarter. Health expenditure is the average health expenditure per person. • Sources: Department of Health (2018b), ABS (2018), AIHW (2018), PHIAC (2013) and Grattan Institute analysis. Premiums

  4. … and so people are dropping out • Cumulative change in the number of people with private hospital cover, per cent • Source: APRA Membership Trends

  5. …and dropping their level of cover • Proportion of hospital treatment policies, per cent • Notes: Policies with an excess require a payment by the contributor towards their hospital admission. A policy with exclusions designates certain treatments or procedures which are not covered by the policy. • Sources: APRA Data and Grattan analysis. No excess or exclusions No excess, with exclusions Excess, no exclusions Excess and exclusions

  6. The share of PHI benefits that go to older people is rising rapidly • Cumulative change in age group’s share of hospital benefits paid out by private insurers, and share of total insured persons, per cent • Note: Includes hospital and hospital-substitute treatments. • Source: Australian Prudential Regulation Authority, 'Private Health Insurance Membership and Benefits', December 2018.

  7. Range of potential solutions Income Spending

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