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The Forum > Article Comments > Road map for Australian health care reform - Part II > Comments

Road map for Australian health care reform - Part II : Comments

By Fred Hansen, published 12/8/2008

Private health funds have to insure everybody at the same rate which means there is no space for competition and no incentive for efficiency.

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Medicare is not broken, as the author says 80% of private health cover is with 6 funds, 3 are not for profit. If the author was honest he would state that Medibank Private is the largest health insurer with over 30% of the market. The average Australian with health insurance is on a low income and wants to be insured with Medibank Private, these pensioners can barely afford their premiums now and they would be forced to drop health insurance if premiums rose.

The american health care system delivers worse health outcomes for most people. A survey of 65 year old Americans and 65 year old Britons showed that Britons in the lowest quintile had better health than Americans in the upper quintile.
The american health system is also very expensive.

In fact Cubans enjoy better health than americans. Eurpoeans seem to enjoy reasonable health provided by universal health schemes.

Does the author want deregulation which would wipe out the smaller funds or does he want Medibank sold off to overseas for profit interests?
Posted by billie, Tuesday, 12 August 2008 9:22:03 AM
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It should be noted that, private firms that deal in for example 'pathology' are positioning themselves to take advantage of the increased health expenditure of the baby boomers.

80-90% of pathology tests conducted in a persons life time occur within the last few years of their life.

There is no doubt that life style choices can have a large influence on a persons health, case in point is smoking. Some people may have quit before permanent damage is done, others the damage is already permanent.

Changes in life style such decreasing rates of smoking will not show up in significant numbers for a generation or two.

The current problems with our health care system are a result of governments listening to the wrong advisers.

Suddenly after a decade or more of squeezng every penny possible from public hospitals, such as closure or downsizing, Australia's increasing population is showing that the razor gang cutting has gone too far.
Posted by JamesH, Tuesday, 12 August 2008 9:38:54 AM
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Part 1 of this piece was too superficial to bother with. But this one provides such a warped and inaccurate view of the problems facing the healthcare industry, that it cries out for a response.

My first impression of this article was that it typifies the “management consultant” approach. My second was that it typifies a lazy management consultant's approach, complete with half-understood concepts and poor research.

Before addressing the conclusions, there are some obvious errors to get out of the way:

>>This has only recently been slightly modified by Lifetime Community Rating meaning that people who take out health insurance before they get to 30 years pay 2 per cent lower premiums.<<

This is a process that adds 2% per year to your premium if you don't start cover until after your 31st birthday. So if you don't take out cover until after your 35th birthday, that's 10% on top. And it goes right up to a 70% uplift. This was in fact one of the most significant steps the government took to make private health insurance attractive to the young, and to some small extent offset the “all pay the same” disincentive inherent in community rating.

>>Australian private insurance tends to be cheap by international comparison ($300 - $3,000 per year<<

For $300 p.a., let me assure you, you do not get much cover, and you will have to agree to pay the first few hundred bucks each time you use it.

But that's not really the point – the comparison itself is meaningless. As the author points out, our system is a combination of Medicare and Private Cover and these do not overlap. It is like comparing petrol prices in Australia ($1.50 a litre) with those in Iran ($0.10 a litre) – the product is identical, but we tax, they subsidise.

An additional fudge factor ignored in the comparison is the presence of ancilliary benefits (“Extras”) that the vast majority of policyholders include with their hospital cover. This covers “known” expenses, such as dentistry and contact lenses, and is primarily a form of savings fund.

...continues
Posted by Pericles, Tuesday, 12 August 2008 9:46:05 AM
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...continued

>>Among the 37 Australian health funds... just three are for profit. <<

The comparison here - “for profit” vs “not for profit” - seems designed to suggest that this is a bad thing. I would suggest the exact opposite.

Private health funds draw income from premiums, and top it up with dividends from their investment of the surplus. If you subtract from that surplus the need to pay external shareholders, you reduce the pool of funds available to pay benefits. This is an essentially simplistic view, but when you are dealing with a commodity as sensitive as health, it is an important one.

To add to the author's misleading picture, there is in fact only one fully “for profit” private health fund in Australia, in the sense of requiring a shareholder dividend to prop up its share price. The confusion might be that there is also one that provides income to bondholders, which is equivalent to debt funding, and one that acts within a member-owned group.

>>One answer is de-mutualisation - underway at Medibank with other big health funds following suit<<

I am sure that this is news to Medibank.

They were at one stage working towards privatization, it is true, but were told by the incoming Rudd government that this would not happen in the short term. Meanwhile, the only fund that did make it to market – NIB – saw its share price savaged after the Roxon budget proposal to increase the Medicare Levy Surcharge. The combination of these two factors effectively takes demutualization off the agenda for the time being.

The problems facing our healthcare system are too important and too complex to allow simplistic solutions. Unfortunately, addressing the article's inaccuracies has left little room to critique the paragraphs of management-speak that the author puts forward as proposals for change.

But one thing is certain, Medicare will continue to form the fundamental underpinning of any future combination of open-to-all care and commercially-operated care structures. Leaving it to the private sector to fight over is simply an ideologically-driven cop-out.
Posted by Pericles, Tuesday, 12 August 2008 9:48:16 AM
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This author makes the suggestion that private health funds need to be competitive and that if a consumer fails to look after their health, that the funds increase the cost of insurance to that consumer.

The American private health care system, people who have the likelihood of a inherited genetic condition or pre existing conditions, pay higher premiums putting the cost of health insurance out of the reach of many people unless they are really wealthy.

In the program aired on SBS on health care around the world, the american correspondent asked the question in countries like Japan, UK and Thialand, "has the cost of health care sent anybody bankrupt."

The answer in these countries was NO!
Posted by JamesH, Sunday, 17 August 2008 8:12:19 AM
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The American health care system is by far and away the most expensive. Americans rank 38th on health outcomes.
Posted by billie, Sunday, 17 August 2008 10:26:32 PM
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