ABC Radio Perth interview with Dr Rachel David regarding Labor’s proposal to cap premium increases to 2 percent

Station: ABC Radio Perth
Program: Breakfast
Date: 27/06/2018
Time: 8:34 AM
Compere: Newsreader
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


PETER BELL: In recent weeks, we’ve heard from you about your struggles to meet the increasing costs of health insurance. So, will it become a major election issue? Where are you at with your private health insurance?…….Already, Paula, this text reads: Turnbull’s personal tax cuts will give the public the opportunity to take up private health insurance. Again, Bill Shorten’s biggest announcement so far has been the proposal to cap health insurance premium increases to 2 per cent.
PAULA KRUGER: Today, Private Health Australia has come out on the defensive against Labor’s proposal. The industry body has commissioned its own analysis on the sector and the potential impact of Labor’s proposed cap. It suggests some insurers would be in deficit, with eight running at a loss, and could lead to three and .
RACHEL DAVID: [Audio skip] … And of course both major political parties want to see health fund premiums come down. This is a major concern for consumers, particularly as wages growth has been flat for some time now. But what we need to be cautious of is simply slapping a cap on premiums, without really addressing the underlying costs that are driving health care up- the cost of health care up, and you’ll note that the public hospital system gets quite a very much bigger premium- bigger increase in funding of 6.5 per cent. And health care- the cost of health care is going up because of our ageing population, about 5 to 6 per cent per year. So, to put an arbitrary cap on premiums without addressing some of those input costs is a bit like trying to slam a lid down on a pot of boiling oil. It’s not going to work and it’s going to have some nasty unintended consequences if we’re not careful.
PAULA KRUGER: But I mean, something does need to be done, as you say, to keep those premiums under control. What else can they do? Can’t they do this and have those other measures as well?
RACHEL DAVID: Well look, I think one of the things that needs to happen is we need to work a lot more collaboratively with government to release some of the regulatory constraints on health funds actually beginning to reduce some of their costs. So that means looking much more proactively at things like fraud, waste and overservicing in the sector. It means looking at some more measures to ensure proper pricing and a proper regulatory system around the use of expensive medical devices in private health. And it means looking at some of the market failures in the system which have driven a large number of patients as private patients into the public hospital system as a revenue raising tool for public hospitals, when in fact they’re paying twice for those services, and in doing so driving up premiums.
PAULA KRUGER: Is the issue of value for money for customers? Like, you mentioned that wage growth isn’t there. Are customers, when they’re looking at what money they’ve got left at the end of the day, just not seeing value for money in the health insurance?
RACHEL DAVID: Well look, that’s particularly the case for people who have not actually had to use their private health insurance or in fact don’t have it. But overwhelmingly we see that people that have private health insurance and have had to use it because they can’t- they’ve got it. They’re in pain. They can’t afford to wait for more complex treatment, they do value the quick access to services that it brings and the continuity of care from having their own medical specialists, rather than someone who turns over every day, or a shift worker. But if that- if the cost of that is out of reach for average families, I think we’re going to see a lot of anger in the community. But we need to do some concrete measures to address it. It’s not just enough to wish that prices would stabilise or to believe that they will stabilise just because a minister or a shadow minister has said they will.
PAULA KRUGER: And looking at the impact on health funds – what impact would this proposed 2 per cent cap have on smaller funds?
RACHEL DAVID: Well look, I think some of the smaller regional employee-based not-for-profit funds will struggle. Many of these funds have served local communities over a number of years and traditionally they’ve paid out. They’ve had quite a high level of cover and they have not spread. They don’t have the spread of risk over a large population that some of the larger funds local communities over a number of years and traditionally they’ve paid out. They’ve had quite a high level of cover and they have not spread. They don’t have the spread of risk over a large population that some of the larger funds have. And of course, it’s much easier for a full profit fund to raise money if it gets into trouble than it is a small not-for-profit. So what we found by doing a simple analysis of publicly available data is the number of those funds that have served smaller communities for in some cases decades or even over a hundred years will struggle and may not even survive two years of a 2 per cent premium, which would be a tremendous shame for those people that have been members of those funds for most of their life.
PAULA KRUGER: Now you mentioned before that government needs to work with industry. Is that not happening at the moment in your view?
RACHEL DAVID: It is have an underlying rate of health inflation, including in the public hospital system of around 6 per cent. That’s driven largely by the baby boom population moving through the system and using more services, and the influx of much costlier technologies into the system. Now, we could start to ration care in the private sector as well, but that could really damage the value proposition as well. So what we’re looking to do is to work closely with regulators and the government to eliminate every dollar of waste that’s pushing up premiums in the private sector, and that way creating some stability for customers.
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