Calls for the Medicare Levy to be increased for high-income earners

Station: 5AA
Program: Mornings
Date: 17/01/2018
Time: 10:09 AM
Compere: Matthew Pantelis
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


MATTHEW PANTELIS: Private health insurance. The insurance company Bupa wants the Medicare levy raised for high-income earners, and I suppose that would be because people are abandoning their health cover because it’s all getting that little bit much. Australians will have to pay more from April. The Health Minister is looking at the lowest rise in premiums in more than 15 years, but he will soon reveal what the 1 April increase will be, following last year’s average premium rise of 4.8 per cent, which is above inflation. Why can’t it at least be CPI, which would be about 1-odd per cent? That would be good.

Dr Rachel David is CEO Private Healthcare Australia. Rachel, good morning.

RACHEL DAVID: Good morning, Matthew.
MATTHEW PANTELIS: Where do you stand on this? Where’s the organisation sitting?
RACHEL DAVID: Well look, in terms of the premium increases, we understand that people are worried about this because household incomes haven’t really increased since about 2010. What it’s about is that we’re actually paying for more and more healthcare every year. So for example, in the last year, we paid for an extra 23,000 admissions for chemotherapy for cancer; for example, 4500 more cataracts, which are artificial lenses which are given to people going blind from cataracts. An extra 14,000 treatments for stroke, an extra 4500 treatments for mental health admissions. So, as a result of this, health costs do go up higher than CPI and that’s also something that’s felt by the public hospital system as well, as their funding goes up by about 6.5 to 8 per cent every year.
MATTHEW PANTELIS: So basically, we’re living longer and paying more for some of the stuff that otherwise- perhaps we couldn’t have got the cataract surgery 100 years ago even if it existed back then, because we just didn’t live long enough for that to be a problem. So, this is the way of the future though, isn’t it? We need a long-term solution to this.
RACHEL DAVID: Well look, this is absolutely right. I think, at the moment, Australians are actually benefiting from their mixed private and public health system. On every global ranking, our health system is in the top five, if not the top ten, of health systems around the world in terms of access, affordability and good outcomes for patients. But to future-proof it, we do need to understand what’s driving health costs and to make sure that we are paying for treatments that work and a fair price for medical technologies as well.
MATTHEW PANTELIS: Alright, so the Government is just going along this path. There’s no sign of the approach we’ve had over the last decade or so changing I’m assuming.
RACHEL DAVID: So look, the Government and our regulators take a very close- they monitor the premium rises very closely, so there is a process which takes place in the final six months of every year, where the Department of Health and our regulators, APRA, look into the books of health funds and work with them to determine what the price should be for the next year. That is an incredibly thorough process and that leads up to the announcement the minister makes at a single time every year about what prices will be, and it’s really based on the amount of healthcare we’ll need to pay for in the ensuing year.
MATTHEW PANTELIS: Do you have any statistics on how many people are overpaying for their healthcare – people that haven’t sat down to a review of people who might be says beyond the age of having babies but still are paying for pregnancy etcetera?
RACHEL DAVID: Look, I think it is important that people do review their health insurance based on their life stage. Increasingly because of affordability concerns, health funds are tailoring their products to meet certain life stage requirements. And it is important that people review that, particularly as they get older. And for example, younger people will need cover for mental health because that’s the biggest reason why young people need to go into hospital. People in mid-life are likely to need cover for pregnancy and child birth-related issues, and older people for issues like joint replacement, lens replacement and cancer. So it’s important that people do check that out to make sure they are not paying for things that perhaps they won’t need.
MATTHEW PANTELIS: And it’s fine for people to do that individually when they’ve got time and the inclination, which kind of never really comes up in busy lives. Should health funds be more proactive in that regard?
RACHEL DAVID: Look, absolutely, and we’re just working through the final stages of a very big project we’ve had with the Federal Government and other participants in private health, to make private health more understandable and easier to navigate at the consumer level. You may have heard that we’re talking about classifying the levels into gold, silver, bronze and basic. And as part of that there will also be some information given to consumers to ensure they understand what’s appropriate for their life stage under each of those categories.
MATTHEW PANTELIS: We’ve just had a text in that’s saying that some people- some funds, rather, merge odd things together like, for example, pregnancy and cataracts and it seems if you’re young enough to fall pregnant, you probably don’t need cataract surgery, and vice versa. If you’re getting cataracts you’re probably not likely to fall pregnant because that’s 30 years ago. So funds have got a real role to play here, don’t they? Your members have got to sharpen their pencils a bit and go through some of their policies.
RACHEL DAVID: Well, absolutely. And health funds are always looking at ways that they could be more efficient and deliver better value, particularly as we know that consumers are hurting from health costs. One of the complexities is that under our community rating system, where we can’t turn anyone away, we can’t make products completely bespoke, because we have to cover a certain range of conditions under each one, otherwise we would actually be breaking the law and breaching the community rating principles.
MATTHEW PANTELIS: So, charging people too much and not offering enough essentially, is that what you’re saying?
RACHEL DAVID: Yes but also we have to cover a certain range of things otherwise we’d actually be accused of risk rating our products and turning people away that might need healthcare.
MATTHEW PANTELIS: But surely – and even if that’s the law – surely that’s no excuse then for mixing things that don’t really match, like those two examples, together.
RACHEL DAVID: Look, it’s not ideal. However, it is- we do have to cover a certain range of things in each product to keep it meaningful under the community rating system. One thing that we’re hoping to do- or one thing that we will do as part of the government project that will be finalised this year, is really to make as much information as possible available to consumers about what they can purchase for a certain amount of money and that will make that decision a lot easier.
MATTHEW PANTELIS: Okay. So, for people at the moment who might be bracing for a rise, and obviously your members would be concerned that their numbers of customers are falling off. People are just ditching health insurance, private health, aren’t they, at the moment, and continuing not to see a value for money and a return?
RACHEL DAVID: Well, I think that that’s true of some age groups. That’s not the case for older people. We’re still seeing pretty strong growth in people aged over 55, who are likely to need their health insurance. And it shows that it really is value for money because the wait period for a number of procedures in public hospitals are unpredictable, and some things like certain mental health conditions and weight reduction, for example, are not treated in public hospitals. So, I think that it is important certainly for some sections of the community that understand the value.

For younger people is where we are seeing a slowing of the growth. But we also need to be clear that mental health conditions and admission to hospital for things like knee reconstruction are important in the younger age groups. It may be a very long wait before something like a knee reconstruction or an eating disorder can be treated in the public system.

MATTHEW PANTELIS: So, as far as high-income earners go, you’re supportive of Bupa’s position, and is it your own position as well that high-income earners should pay more for Medicare?
RACHEL DAVID: Yeah look, it is. And this is something that’s been a feature of the system since about the year 2000 when it was brought in by the Howard Government. And there are a small number of people on high-incomes who don’t have private health insurance and they do pay a slightly higher Medicare levy. It is not designed as being an extra tax. It’s designed as being a penalty to make sure that people on high-incomes pay their fair share for access to elective surgery. We think it’s probably time for a review of that to ensure that the penalty is actually more that it keeps ahead of health fund costs and the premium costs. There are only a small number of people affected, and they are in a position to be able to pay something towards their healthcare.
MATTHEW PANTELIS: Yeah, okay. Look, I’m not a high-income earner, I think we’re talking about over 180, so I’m not within- I can’t even see it on the horizon. But it would seem to me if I was there and had surplus money, I wouldn’t worry about health insurance, given the fact that you so rarely use it if you’re healthy obviously, and if you need elective surgery or if something was to happen and you need an operation, you could probably say: well, I’ve saved the money, I’ll pay for the operation out of the fact I am a high-income earner. Nothing wrong with that is there?
RACHEL DAVID: No, but I think the one thing that we see in Australia, particularly, is people dramatically underestimate the cost of actually paying for surgery in the private sector, and very rarely save enough money for what it would likely cost. The average cost of getting a hip replacement for example – which is happening at younger and younger ages – is about $28,000 …
RACHEL DAVID: …And the most that we see people saving really, to put toward their healthcare, is about 800.
RACHEL DAVID: So look, because of our culture in Australia around healthcare and the cost structure, we tend to offer the very best that the world has to offer with the latest technology. Most people dramatically underestimate what they have to save – even high-income earners – to put towards their healthcare.
MATTHEW PANTELIS: That’s a good point. Alright. Thanks for your time this morning, Rachel. Really fascinating discussion, thank you.
RACHEL DAVID: Thanks, Matthew. I appreciate it.
MATTHEW PANTELIS: Dr Rachel David there, who’s CEO of Private Healthcare Australia, echoing the call by Bupa and probably other private providers as well, saying that the high-income earners should pay more through Medicare if they don’t take out private health insurance.
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