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PRIVATE HEALTH INSURANCE
What is the link between Medicare and private
health insurance?
Medicare provides substantial health cover for everyone.
Private health insurance is available for some things not covered by Medicare.
However, private health insurance is the major source of funds for private
hospitals, which provide about 27% of hospital in-patient bed days.
Federal funds provided to States and
Territories through the Health.
Care Agreements to help with the costs of public hospitals and
other public health care services are linked to the level of private health
insurance in each State. If the percentage of people with private health
insurance falls below specified levels, Federal funds to the States are
increased. If the percentage rises above specified levels, Federal funds to the
States and Territories decrease. This occurs even though there is no direct
relationship between the proportion of people insured and the use of public
hospitals by Medicare patients.
What does private health insurance cover?
Cover available through private health insurance includes:
People with private health insurance cover retain all their
Medicare entitlements and are able to use public hospitals either as Medicare
patients or private patients. However, privately insured patients gain quicker
access to elective surgery. They also benefit from the convenience of being able
to plan a hospital stay at a time that suits them and the choice of specialist
for in-patient care.
Health funds are allowed to negotiate special arrangements
through which all costs of a hospital in-patient stay are covered including
medical charges. This involves the private health funds having contracts with
private hospitals to pay fixed prices for specified elements of treatment.
Doctors would undertake not to charge fees over an agreed level. However, there
have been only a few such arrangements implemented to date.
There is no private insurance for out-of-hospital medical
services. Medicare covers these, although the patient may have to make a payment
from their own pocket if the doctor does not bulk bill.
What role does the Federal Government play in
private health insurance?
Because private health insurance supplements Medicare, the Federal Government
continues to regulate it. Recently the Federal Government has
provided a range of incentives for people to take out, or maintain membership in
private health insurance. These incentives are based on the premise that an
increased level of private health insurance will reduce pressures on public
hospitals.
The Federal Government determines the range and types of cover
that health funds may provide. It has required premiums to be
"community-rated". This has meant that everyone pays the same premium
for the same level of cover regardless of personal factors such as medical
history or age. However, this will change from July 2000 (see below). The
Government reviews proposals by health funds to increase premium levels or to
change their rules.
Since January 1999, the Federal Government has applied a
rebate of 30% on all
private health insurance premiums, regardless of the person's taxable income, at
an annual cost to the Federal Government of around $1.6 billion. In addition,
those with private health insurance are exempt from paying the extra 1% Medicare
Levy that applies to individuals with taxable incomes over $50 000 and families
with taxable incomes over $100,000. These initiatives have resulted in a small
increase in the proportion of Australians covered by private health insurance.
Concerns about private health insurance.
As Medicare provides substantial cover for health services,
many Australians consider that private health insurance is not good value for
money.
The price of private insurance premiums has risen at a rate
about 4 times that of inflation in recent years. Nevertheless high
"gap" costs persist, which leave many privately insured patients
substantially out-of-pocket.
Community rating is also said to have discouraged younger and
healthier people from taking out or keeping private health insurance because
they pay more than their risk level warrants. This causes insurers to increase
premiums for those who remain insured.
Some people only take out insurance when they know they will
need to use services (eg women planning a pregnancy) and drop it later. This
means they may be receiving more than they pay in premiums, adding to costs for
other members.
Emerging developments in private health
insurance.
The Government plans to introduce "Lifetime Health
Cover" from July 2000. Under this proposal premiums will increase according
to the age of the person taking out cover, full community rating will no longer
apply. People under 30 who take out and retain hospital cover will pay lower
premiums throughout their lifetime compared to those who choose to take up
private hospital cover when they are older.
This change will make private health insurance more complex
and make choices about private health insurance more complicated.
Mechanisms are being put in place to streamline billing
procedures, in order to reduce multiple billing following hospital treatment.
Further products will be developed which eliminate or at least specify in
advance out-of-pocket costs.
If the 30% rebate and other changes fail to produce a
substantial increase in the overall level of health insurance, more measures can
be expected.
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