2GB The Steve Price Show program interview with Dr Rachel David on calls on companies to give tax incentives to pay for their employees’ health insurance

Station: 2GB
Program: The Steve Price Show
Date: 4/10/2019
Time: 12:15 PM
Compere: Steve Price
Interviewees: Dr Rachel David, CEO, Private Healthcare Australia


STEVE PRICE: Private health insurance is in the news again. The industry’s peak body has today called on companies to give tax incentives to pay for their employees’ health insurance. It’s hoped that that scheme will stop the number of young people abandoning private health insurance and it will help limit premium rises. Forty per cent of people aged between 20 and 39 had hospital cover in 2014; that figure is now down to 34 per cent.

We’ve spoken to Dr Rachel David CEO of Private Healthcare Australia before; she’s on the line again. Doctor, thanks for your time.

RACHEL DAVID: Good day, Steve.
STEVE PRICE: How will it work?
RACHEL DAVID: Well look, basically, what we we’re asking the Federal Government to do is to give employers a fringe benefits tax exemption to help people aged under 40 pay for their private health insurance. So it would be paid for by pre-tax dollars through their salary and that would provide them with more of an incentive to get a foot in the door in the system and not just so that they could benefit by accessing some of the essential mental health services and elective surgery that’s pretty much mainly paid for by private healthcare. But that will also help bring premiums down for older people because it brings more people into the risk pool for private health. If we only have older and sick people left in private health, we get into a nasty premium increase spiral which could begin to price even older people out of the system.
STEVE PRICE: Am I right to remember that private insurance contributions used to be tax deductable?
RACHEL DAVID: Yes, back prior to Medicare in the 70s, that was the case.
STEVE PRICE: I’m ageing myself then now, but I mean that did encourage you to- you made a decision; I need private health insurance; I want to have it; I’m not going to be covered by Medicare and I can then claim it back on my tax. That system seemed to work very well.
RACHEL DAVID: Well yes, it did. I mean one of the challenges with it is that for people that- for people that aren’t working and for retirees, for example, that it becomes quite inequitable, that’s why we’re looking at a number of things, and that’s why there are a number of incentives in place to help people take out private health insurance like the rebate. And the rebate on premiums helps low and middle income earners take it out regardless of whether they have a job or not and we’ve also asked that that be restored to 30 per cent for younger people as well; it’s been frozen at 25 per cent for some years. And for younger people that’s been a significant contribution as to why they found it hard to get a foot in the door in the system and why that a number of them have given it up.
STEVE PRICE: Have you costed what this would cost the taxpayer?
RACHEL DAVID: Yes, we have. There is about a $560 million cost for the fringe benefits part and a $260 million cost for the increasing of the rebate. But that pales in significance…
STEVE PRICE: [Interrupts] Is that a year?
RACHEL DAVID: A year. Look, that is a significant investment but bear in mind, the Federal Government is currently spending $60 million on the public hospital system which is growing at 6.5 per cent every year. And we have demonstrated that this matter will help reduce the pressure and the likely expenditure on public hospitals.

If private health insurance participation continues to fall and we end up back where we were in the 90s, our modelling suggests that wait times for common procedures will double. So basically, it’s important that the Government takes some steps to address it now before we get into that very difficult situation again.

STEVE PRICE: You’ve set the upper limit at 40. Do you- are you not concerned that that would then see 41 year-olds just drop off once that tax deduction ceased for their employer?
RACHEL DAVID: Look, it might but by that stage, most people’s earning capacity is significantly improved and they also begin to start on the claim side; they’re much closer to the time when they’re going to begin to need the health insurance for hospital claims. So the likelihood that they’ll drop out at that point is much reduced and memberships are a lot stickier at that point.
STEVE PRICE: Had any feedback from the Government yet?
RACHEL DAVID: Look, we- the Coalition Government’s been acutely aware of the very significant demographic problems that we face in the health sector. Particularly, is that very large baby boom population; the average age is now 72 and they’re actually making record levels of claims for elective surgery. So the challenge of funding that generation’s health is very important to the Coalition. They’ve actually called on the sector to present new ideas and proposals as to how to manage that and we’ve responded and we’re in ongoing discussions with them about – you know, about what a possible set of reforms might look like.
STEVE PRICE: To get this up it will save people like me a few bobbers still paying for their children’s private health insurance.
RACHEL DAVID: Indeed, yes.
STEVE PRICE: Thank you, Rachel. Always good to talk to you.
STEVE PRICE: Thanks a lot.
RACHEL DAVID: Cheers, Steve.
STEVE PRICE: Dr Rachel David, CEO of Private Healthcare Australia.
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