A year ago the Government promised to stem the exodus from private health insurance.
It offered incentives to low-income people to enter or stay in private cover and hit high-income earners with a penalty levy unless they entered or stayed in private cover. It budgeted $500 million for the low income people and expected $75 million in penalty levies.
What as been the result? As predicted, it was a total waste of money. The sums did not add up. This week’s figures show that for the 52nd consecutive quarter the percentage of people with private cover has fallen. Talk about a recession in private health cover. And the greatly heralded measures last Budget to stem the exodus have made no change.
The incentives have changed no-one’s behaviour and the penalties have done precious little. All the Government has done is give a subsidy to people who would have stayed in private cover anyway. Moreover, the cost of that subsidy has apparently risen from $500 million at budget time to $1.7 billion now. As to the penalty for high-income earners not taking private cover, on the Government’s own figures it will cajole only 60,000 to 70,000 into private cover, increasing the participation rate by a mere 1.5 per cent.
The Private Health Insurance Administration Council says 91,000 people dropped their private cover in the three months to June, on top of the 100,000 who left health funds between January and March.
Now 31.9 per cent of the population compared to 62.8 per cent in 1983.
And there was the Health Minister, Michael Wooldridge, bravely saying that the hemorrage from private cover is over.
“”So effectively what’s happened today draws a line under the sand of 10 to 15 years of inactivity in private health care,” he said. “”It’s all on from here.”
What an apt analogy the line in the sand is. After all, Saddam Hussein is still there.
So what has gone wrong?
The first point is that the Government has defined the wrong problem; small wonder it gets the wrong answer. The problem is not people opting out of private cover. The problem is fewer funds (public or private) goin gin to health care at a time when health costs are rising with increased medical technology and an aging population.
The shortfall is huge. The Commonwealth outlays about $20 billion for health and recovers only $4 billion from the Medicare levy. You cannot hope to fund a health system that costs 8 per cent of GDP (with GDP continually rising) on a levy of 1.5 per cent of income. Even allowing for large expenditures on pharamcueticals and other non-medicare non-hospital helath spending, the gap remains impossible.
It cannot be breached by pathetic subsidies for low-income earners or comparatively small penalties for high-income earners.
People will continue to desert private cover until the govenment addresses several fundamental defects in it.
The first is that Medicare is too good. At present anyone with a serious illness or catastrophic injury is better off in the public system. You get treated for nothing. There is no delay and there are no bills. If you opt to be a private patient you get the same treatment at the same time and yet you cop a bill at the end.
This farce must end. Medicare patients must get a means-tested bill and private patients must be able to insure for the gap so they get no bill. Otherwise why be a private patient. At present the only reason for being a private patient is to jump the queue for elective surgery.
In any event, the Medicare levy should match costs. Surely, this user-pays government should realise that. The levy should be about 3 per cent of income.
The second is that Medicare and private insurers should compete at an even level. At present everyone pays the Medicare levy. Privately insured people should not pay it, but the insurance company should pay the whole rebate of medical costs (in addition to hospital costs). It may be they insure for 100 per cent of costs or something less. And those in Medicare would get their whole rebate from Medicare. Provided coverage remains universal with some sort of annual cap on patients’ costs, this would work better than the present system.
It is likely that Medicare would do very well because present administration costs run at 3 per cent of premiums, whereas the private funds’ administration runs much higher.
Then something must be done about health costs. At present the funds have no control over costs; they are decided by doctors, hospitals, governments and marginally by patients. Moreover, four or five organisations pay for patient care in hospital: the fund, the Commonwealth (through the inter-government hospitals agreement), the state, the patient and Medicare. Typically, they all shift costs from one to the other without addressing the base line.
All the financial risk is borne by those who pay for the care (fund, patient, and govenrments), who pay up if anything goes wrong, and none of the risk is borne by the providers of the care (doctors and hospitals). So there is no financial incentive on the providers to contain costs, be efficieint and effective.
And there is no informed choice by patients. Most patients have no idea who is a good specialist, what is a good hospital, or what treatment regimes are most effective.
The funds should, on behalf of the patient, draw together and pay for full treatment options for entire maladies to get the best outcome for patients. The funds would have a vested interest in seeking out the best medical outcome, not just the best financial outcome in the short term. Some in the medical profession may not like this becuase it would show them up; others (the more competent) would welcome it.
In any event, Dr Wooldridge should stop playing in the sand and look at the fundamentals before the aging population makes the costs of the ideal of universal coverage impossible.