Dr Rachel David discusses the impact of inflation on hospitals and premiums on ABC Radio Brisbane

Station: ABC Radio Brisbane
Program: Mornings
Date: 6/3/2024
Time: 8:34 AM
Compere: Steve Austin
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


STEVE AUSTIN: Well, if you’re ready for your health insurance premiums to rise, you would be very well aware that it’s going to rise even further. The Federal Government has approved an average rise of around 3 per cent, the biggest increase in a number of years. It could equate to hundreds of dollars or more for certain health policies. And it comes at a tough time, obviously, inflation is causing a cost of living crunch. Everything is going up. Dr Rachel David is the chief executive officer of Private Healthcare Australia. They’re the private health insurers’ peak body. Rachel David, why did it need to go up? Because you were asking for twice as much as the government approved.
RACHEL DAVID: Well, look, Steve, the setting of health insurance premiums is a very controlled process. It’s not a decision that health funds make on their own. They submit data to not one, but two regulators, the prudential regulator and the Department of Health, before the health minister then makes a decision. And there are- and the negotiation takes some time. There are multiple- sometimes the funds have to submit multiple times. So everybody involved in that process was acutely aware of the impact of the cost of living crisis on health insurance members and the community. And every effort was made to keep that premium rise as low as possible. And in fact, we did come in significantly under health inflation for the previous year, which was about 6.2 per cent. And …
STEVE AUSTIN: [Interrupts] So half, you’re approved basically half, right? Yeah.
RACHEL DAVID: Yeah. So- but we’re very mindful. We don’t want to spend an extra- we don’t want to raise an extra dollar from premiums if we can avoid it. But our hospitals and medical practices have been as impacted by inflation as any other business. They’ve had to pay more for recruitment, power and food. And to ensure that health fund members have access to quality services, we’ve had to make allowances for that, which is why prices will go up this year.
STEVE AUSTIN: On average, how many Australians have some sort of private health insurance?
RACHEL DAVID: About 15 million. So it’s just over half the population.
STEVE AUSTIN: That’s a lot of people. What are the average cost per policy? Can you say at all?
RACHEL DAVID: Yeah. Look, it can vary considerably. And what a lot of people do is they vary the type of policy they have based on their life stage. So people who are younger might have a cheaper policy, which would be $200 to $300 a month, which covers them for a certain range of things. If they have an unexpected emergency, that means they need planned surgery, they can get access to a reasonable range of things that a younger person would expect to encounter. Then you get a- it goes right through different tiers up to top hospital cover, which can cost about $800 a month. And that covers you for everything, from weight loss surgery, to having a baby, to the very expensive joint replacement and spine surgery that, it can cost hundreds of thousands of dollars.
STEVE AUSTIN: Dr Rachel David is the chief executive officer of Private Healthcare Australia. Premiums are going to go up. What are the knock on effects for private hospitals? Because the CEO of Private Hospitals Association, Michael Roff, says there’s little evidence that private health insurance companies, your members, are increasing payments to private hospitals to cover their increases. Are you?
RACHEL DAVID: Well, look, this is part of the issue that the Federal Government and the health funds consider during the premium round process. So the private hospitals were invited to make submissions into that process about their own costs and the pressures that they were under during the pandemic, which we acknowledge. We acknowledge that the pandemic was tough on the private hospital sector. And then after the pandemic, they’ve had to contend with the inflationary pressures on wages, recruitment, power and food. And so that is acknowledged. There is a robust process by which health funds contract with hospitals to ensure that patients don’t have gaps on their hospitals …
STEVE AUSTIN: [Talks over] But are you increasing- are your members increasing your payments to the private hospitals, though, is my question?
RACHEL DAVID: In that contracting process, the funds will do everything they can to meet the needs of the hospitals without putting upward pressure on consumers because- and premiums. Because it is limited by what health fund members are able to pay. And that is the tightrope that we’re walking at the moment.
STEVE AUSTIN: Mr Roff also says he believes that junk health insurance policies are preventing people getting real value out of their private health cover. And I quote him, despite the fact that these junk policies provide little cover to Australians, insurers continue to provide them. Are your members providing junk policies?
RACHEL DAVID: Look, I think that represents a misunderstanding of the way that consumers use health insurance. So there are four tiers of policies. There’s a top hospital cover of gold, silver, bronze and basic, and only a small number of people at any one time have a basic policy, which I think is what he might be referring to, but they don’t stick with it for their lifetime. As their needs change, they’re able to upgrade to other policies and not pay the lifetime penalty because they’ve waited too long to join a health fund and not pay the Medicare levy surcharge, which is a fine that higher income people need to pay if they don’t have health insurance. So it basically is something that helps the younger person get a foothold in the market to avoid those penalties. And then when they need it, most of those people upgrade. So it’s not the same group of people that have those basic policies at any one time. And most people take them out and upgrade to something more. Now, if you have, for example, a serious mental health condition, you can actually upgrade from a basic policy to a gold policy on the day that you know that you need to be admitted to hospital without a waiting period. So that’s the way that most people use health insurance. And those- and there’s about 14 per cent of the market has a basic policy at any one time. Most of those people will upgrade to a more inclusive policy when their circumstances change.
STEVE AUSTIN: Okay. Thank you so much for your time. I appreciate your help this morning.
RACHEL DAVID: Pleasure, Steve.
STEVE AUSTIN: Doctor Rachel David is the chief executive officer of Private Healthcare Australia.
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