Numbers and more numbers. Now Access Economic claims that 800 000 people will leave or not take up private health insurance. This research, like the last lot of numbers tossed around, was commissioned by an organisation with a vested interest - in this case the AMA. The Opposition immediately translates this into “longer waiting lists”.
This is all bulldust.
A few points:
(1) As one of the Medicare scheme’s architects, John Deeble points out:
SABRA LANE: Emeritus fellow at the Australian National University and one of the architects of Medicare, John Deeble, dismisses the private health industry’s concerns that membership will drop below the 40 per cent threshold.
JOHN DEEBLE: Yeah, well they would say that, wouldn’t they? But I don’t think there is any level of viability as such. Look, I was a director of Medibank Private for 17 years so I know something about this.
Private health insurance is not particularly price sensitive. People who buy it, buy it because they want that extra cover or they believe in that particular method of getting their health services. Price doesn’t matter a great deal. The switch that people are talking about cannot be predicted.
Economic modelling is an exercise in prediction based on assumptions. it’s not an exact science.
(2) Kevin Rudd must have been reading the Fin Review - one of the last remaining redoubts of actual news, which ran a long story disclosing that many of the (fairly worthless in terms of coverage) policies that some funds offer are specifically marketed to avoiding paying the levy and coming out in front. Of course, they don’t actually help you if you need hospitalisation in many instances as the level of exclusion of conditions is so huge. It’s a financial product that’s being sold, not a health insurance product. How many of the younger healthier customers would be on one of these policies? Does the modelling factor that in?
SABRA LANE: In answering questions about private health insurance this morning, the Prime Minister said lifting the threshold wouldn’t place additional pressure on the public health system.
He quoted a health fund chief executive’s recent comments about some of the health insurance policies offered to those affected by the threshold increase.
KEVIN RUDD: They are a tax dodge product. These products do not take any pressure off the public hospital system. I would simply draw your attention to his comments referring to the particular services being offered by, I presume, various private health insurance funds to those who are seeking to avoid paying that particular surcharge.
(3) How many times does it have to be pointed out that many with private cover already use public health services, and that in fact it’s impossible to completely “opt out” of the public system? And how often does it have to be stated that the government is increasing funding to the public system, and that this fact and this assumption needs to be taken into account in any narrative of “more pressure on the public system”?
(4) How about all the people who pay the levy and don’t take out cover? What they’re being deprived of by the Liberals is a tax cut!
Update: More from Gary Sauer-Thompson and Tim Dunlop.
If thats true then how reliable is the treasury modelling of 400,000 people dropping health insurance? Regardless we’ll find out for sure in a year or two…. although if numbers drop sharply I’m sure Labor will try to spin that as happening because the public health system has got so much better.
I think you’re pretty much right there. Although there are some doctors (obstetricians is the latest I’ve encountered) who will refuse to take you on as a patient unless you have private health insurance - even if you have a private stash of cash in reserve.
I think its a valid question why we have the surcharge or levy at all. Neither really bear any resemblance to the true health costs and they can actually be quite misleading (eg “I paid my medicare levy it should be enough to cover my health costs”). Perhaps they should just be incorporated into the tax rates, or if not needed now because of the boom just removed.
I wonder if they deregulated the system more (eg let health funds charge older or sick people as much as they want or younger healthier people less, perhaps rewarding those who have stuck with them for a long time with continued cheaper insurance if they want to) and removed all the subsidies (30% rebate) whether we’d see a more sustainable system. Or we’d just see it die out (and everyone has the public health system).
It is a hopeless business that needs government to force consumers to buy its product.
That’s basically what this levy does.
People will not automatically abandon private health insurance en masse. Each to their own will asses their own circumstances and needs.
If you sell a product that is either too expensive, or one no one wants, then you must fail. Isn’t that capitalism 101 ?
dammit, I love the Ruddster. I never again expected to hear an Australian PM ever speak truth to vested interests like “They are a tax dodge product”.
*salutes*
Exactly.
Since it’s been “released”, I went looking for it - could find nothing at Treasury, or at Swan’s or Roxon’s websites. But I strongly suspect it’s based on the same pretty crude behavioural assumptions that the other studies are. It seems to me axiomatic that if a product is being sold which only has any real relevance because it allows one to avoid paying more tax, and the tax stick disappears… We don’t even get basic figures that might inform us in this “debate” - for instance, the number of people who are in the relevant brackets but only have partial hospital cover - let alone any actual research into what people’s decision making is swayed by.
It’s a financial product that’s being sold, not a health insurance product. How many of the younger healthier customers would be on one of these policies?
So the health insurance policies which will be deserted in droves are ones which were designed specifically to minimise tax and don’t really cover the customer for real medical procedures? In that case bring it on, I reckon.
Is that the reason behind those ridiculous ads where an ambulance speeds to a semi-conscious guy lying on a nature strip - and then a Chinese doctor jumps out and proceeds to give him acupuncture and a massage?
Chris (a different one) said:
There are no age-based restrictions on premium levels in New Zealand. Old people (like my Mum) slowly pare back what their private insurance will cover in order to keep the premium from rising too fast.
Kim - just one other thought - if John Deeble is correct and private health insurance is not that price sensitive and so private insurance numbers won’t change that much - then why would the insurance companies and the AMA complain so much? If nothing much is going to change for them, then why do they care?
What I found most amusing about the private health insurance company bleating, was their claim that “premiums would rise 10%”.
They’ve been going up that much, per year, anyway give or take a few points. MBF’s rise last year was the straw that broke our particular back and I’d doubt very much we were alone in dropping cover last year.
Access is saying 5%, so maybe they’re trying to go easy on the doomsaying now!
Chris, I don’t know. Possibly they believe their own propaganda, but obviously the “partial cover” designed as a tax dodge would no longer have a rationale, so maybe it’s that which would lose them bucks. I suppose also “not that price sensitive” means “to a degree price sensitive”.
In addition, this whole thing shines a spotlight on what people exactly do get by paying for private cover, and it may not be in their interest to have people thinking about that.
Mike Stecketee takes a look at the extraordinary level of subsidy private health insurance attracts:
[link]
Its a given that those with vested intrests would talk up any downside to the changes. However it is a concern that full modelling of the impact apparently wasnt done. You dont do to many of them without coming unstuck.
Doctora aqnd private health funds have been against a public health cover at leasr since before 1949.Chifley tried to bring it in, but for reasons which escape my memory, failed. The topic wasn’t even considered again until we got Whitlam back in in 1972. After Medibank, the Libs and the doctors were knackered. Whether they liked it or not they had a national health system. But Howard, in his sneaky way, tried to dismantle Medicare by FORCING people into private health funds, being well aware the only way private health funds can actually flourish is if there is no national health system. But, thanks to Rudd, they’ve failed.But I suppose I’m stating the obvious.
What would be interesting to find out is if the proportion of money that funds return to members in services compared to the amount that they receive in premiums is changing. I’ve heard numbers of around 80-90% return rates, but I don’t know if that has changed much over the last few years.
The fact that private insurance health premiums are rising much faster than CPI is no surprise - health costs in general are doing the same, and the public health system needs just as much an increase in funding if it is going to keep up (and they have been getting greater than CPI funding increases).
“then why would the insurance companies and the AMA complain so much? If nothing much is going to change for them, then why do they care?”
Chris (a different one) ,they are just playing politics as usual. Rosanna Capolingua is likely to follow Nelson and stand for the Liberals in the future. It was pretty clear which party she personally supported in the lead up to the election. These mobs just can’t get it through their heads that their preferred income support provider has been given the sack. It is as plain as that.
Update: More from Gary Sauer-Thompson and Tim Dunlop.
Chris (a different one) said:
Sure they did, as soon as the J-Ho mob decided they were going to subsidise private health insurance, our health system suddenly caught US health system disease (i.e. spiralling costs). It’s no coincidence. Pushing the bias a little more toward public health will put downwards pressure on costs, the mechanism being a little less free money begging to be spent.
There’s already a lot of pressure on the public health system - I really don’t see how the private health system is causing per-patient/procedure costs in the public system to go up. I think its more to do with people expecting a higher level of care - new and better treatments become available which are very expensive. Fixing the patent system would probably go a long way to reducing health costs and signing the free trade agreement certainly didn’t help.
Comparing health insurance premium rises against CPI is fundamentally flawed - if you look at the rate of medical inflation in this country over the past several years, it comes in at something like 8 or 9%.
The average increase in private health insurance premiums over the same period is less than this. If memory serves me correctly it’s been between 4 & 7% for the same period.
Slightly off topic, but relevant is Mike Seketee’s piece in the Australian, today.
I reckon Rudd and co have been very light on the private health companies.
The punters who opt out, after the recent changes, are the most likely to head to public hospitals, whatever the case. Anything vaguely serious would surely bring out their immediate fears of forking out ‘gap money’, for instance.
I cannot understand why private health funds are not just billed for any services, provided to their members, who end up within the public health system.
Well I think that fundamentally there is a big con going on by governments - current and previous. That the private system exists and has short or no queues for procedures demonstrates that the shortage of infrastructure (doctors or hospital beds) is not nearly as bad as described. The private system clearly has spare capacity. If the government wanted to, they could pay for public patients to be treated in private hospitals (as was partially suggested by the medicare gold proposal).
Governments are just unwilling (perhaps believing its economically the wrong decision) to pay to shorten the queues because they want to spend the money in other areas. In a way, by having long waiting lists, they get people who can afford it, to partially fund their own treatment (be it through private insurance or self-insurance) rather than having 100% of it paid by the government. A warped kind of means test!
Costs are about 14% higher in private hospitals, Chris. That’s why the spare capacity isn’t taken up. They’re less efficient.
And I’m not sure where you get governments being “unwilling” to shorten the queues. It’s a lot more complex than it appears. Rudd’s recognition that even 2 billion mightn’t fix it and we might have to have a big rethink is evidence of that.
Well yes - they can’t get enough people to work for them at the wages and conditions they’re offering (especially nurses).
Well there is spare capacity. Its not a problem of having to build up infrastructure by enlarging hospitals and training doctors/nurses which takes time a long time. The capacity is available in the private system or with some types of staff just deciding not to work. The government is just unwilling to pay for it.