Members Health Fund Alliance, the peak body for Australia’s member-owned and not-for-profit health funds, has raised questions about the adequacy of the government’s groundwork after Senate Estimates hearings revealed officials were unable to answer basic questions about a planned reduction to private health insurance rebates for Australians over 65.
Senators heard that the Department of Health and Aged Care could not identify how many pensioners fall within the 2.8 million Australians on the base rebate tier, nor how many of those earn below $55,000 per year or receive a full versus part pension. The admissions came during questioning by Senator Anne Ruston. Members Health CEO Matthew Koce said the lack of data was difficult to reconcile with a policy that directly affects affordability for older Australians. “For a policy that affects affordability for older Australians, the absence of this information is extraordinary. It shows the work simply wasn’t done and this was a rushed decision,” Koce said.
Separately, officials confirmed the department did not carry out behavioural modelling before the policy was announced and gave no weight to the degree to which older Australians rely on private health insurance as a source of security. Koce described both omissions as indicators of flawed policy design. “Older Australians’ emotional reliance on private health insurance is real. Ignoring it means ignoring how people will behave,” Koce said.
The government has put the annual cost to affected individuals at $252. Members Health contests that figure, arguing that policyholders on higher-tier cover – which older Australians tend to hold – could face an annual increase of more than $400. Higher-tier policies typically include procedures such as cataract surgery and joint replacements, which are among the treatments most relevant to this age group. The drop-off in coverage is also a point of contention. A Finity model, prepared for the Department of Health and Aged Care, estimated that more than 1.1% of older Australians would exit the market under the changes. The government has since cited a figure of 0.4%. “The inconsistency raises serious questions about whether this policy was imposed on the department,” Koce said. The assumption that those who drop cover could fund their own treatment was also challenged. “A single joint replacement can cost more than $30,000. Lower income pensioners cannot absorb that cost. This reflects a serious disconnect from reality,” Koce said.
Members Health has outlined several areas of the health system it believes could come under pressure if older Australians leave the private health market in meaningful numbers. These include:
“The government is sailing in the dark. This policy puts the public system, private hospitals, aged care and the entire health system at risk,” Koce said. Members Health has also characterised the scale of the fiscal change as significant, estimating the rebate reduction draws around $3 billion out of the healthcare sector. “Labor is taking money out of private health and not providing any additional healthcare support for anyone, either young or old. This is a costly and painful recipe for older Australians who will be pushed away from cover for treatments they are most likely to need,” Koce said.
Read next: Private health rebate fears may be overblown
A review of the Medicare Levy Surcharge (MLS), the PHI rebate, and Lifetime Health Cover (LHC) – conducted by Finity on behalf of the Department of Health and Aged Care – offers a counterpoint to the direction the government has taken. That review found that private health insurance generates a net financial benefit for the health system, with the value of treatment funded through the private sector outweighing the cost of the rebate by more than $900 per person on average. The benefit was most pronounced for older Australians, given that group’s elevated likelihood of requiring hospital care.
Rather than a rebate reduction, the Finity review recommended increasing rebates for older Australians, with the higher rate conditional on holding Silver-tier cover or above – the tier most likely to include hospital procedures relevant to that cohort. The report also noted that removing the rebate for over-65s altogether would reduce private health insurance-funded hospital claims by around $2.3 billion, a figure that exceeds the total rebate currently paid to that group. Members Health has called on the government to address the evidential gaps identified at Senate Estimates before the policy proceeds.
