Shadow Minister.

>>If you had bothered to read my first post, I have never claimed that less people are covered, but that people are cutting back dramatically on their health cover.<<

“Dramatically”, Shadow Minister?

>>The proof of the pudding is that the means testing of this rebate has lead [sic] to a huge drop in private health cover<<

"Huge"?

Emotive stuff. And totally without foundation. Which is why I called you on it.

Here are some stats provided by the PHA, the industry body for health insurers:

"743,732 policies have been downgraded or discontinued since February 2012, representing 12.5% of all private health insurance policies (includes hospital and general treatment). A downgrade refers to a member changing their health insurance product to one with an excess or exclusions where these were not part of their previous policy, or to a less expensive alternative product. A discontinued policy is one which has been terminated."

http://www.privatehealthcareaustralia.org.au/news/stats_and_data/privately-insured-downgrade-their-cover/

The devil is, as always, in the detail. First, let's separate out discontinuances that are the result of natural attrition, so that we can remove the implcation that these are caused by messing about with the rebate

Natural attrition runs at an annual rate of around 5%. So the figure you might normally expect for policy discontinuances between February 2012 and August 2013 (when the article was written) is 7.5%.

So normal-rate lapses alone represent a full sixty percent of the 743,732 "downgrades or discontinuances". That leaves fewer than 300,000 "downgrades and discontinuances" potentially caused by the rebate changes.

Note also that by lumping together excess and exclusions, PHA has conflated two different types of change: one is a reduction in cover, which you focus on, the other an increase in excess, which is a voluntary out-of-pocket per-incident payment that reduces the monthly premium. Same cover, note, so no increased burden on the state system.

Oh yes. The stats also include downgrades to “general treatment”. Which, if you look at it closely, is more a savings-scheme for visits to the dentist than risk-based insurance cover.

Let's at least keep some perspective, eh?

Pericles,

You can't be selective in your maths. For the 5% attrition, there is a roughly 5% or greater uptake in policies, and the article shows that the growth in policies is almost exclusively made up of policies with high restrictions and excesses (ie just enough to avoid the tax hit) this adds more than 400 000 to your figure. In addition, these figures do not take into account many people are slow to change and this is far from the final number.

As the rebate was targeted to about 1 million policies to save about $600m p.a. a reduction in spend per month of $70 per policy (of the 700k) wipes out all the government savings.

That's voodoo maths, Shadow Minister.

>>Pericles, You can't be selective in your maths. For the 5% attrition, there is a roughly 5% or greater uptake in policies<<

Agreed. That's why the total covered population continues to grow - more people join than leave.

>>...the growth in policies is almost exclusively made up of policies with high restrictions and excesses (ie just enough to avoid the tax hit) this adds more than 400 000 to your figure.<<

Whether or not the first part of this is true (and the article does not use the word "exclusively"), where do these extra 400,000 people come from? The total figure is 743,732 "downgrades or discontinuances", from which I abstracted the normal level of discontinuances, simply to point out that these people would have gone anyway. Quite a lot of them having fallen off the twig, actually.

So please explain again where you found these additional 400,000 policies. Otherwise, folk might think you're being "seelective in your maths".

P,

Pity you don't have the horse power to do the maths without someone helping you join the dots.

Look at ratio of policies to people covered

Look at increase in policies with exclusions and without exclusions and extrapolate the difference between the previous ratio.

Et voilà, you get the answer. As this is not exact, I used the term "about"

You are still missing the entire point, Shadow Minister. The only question is whether you are doing so on purpose, or are doing it unwittingly.

We have already established that there are fewer than 300,000 policies, over a period of eighteen months, that come under the heading "downgrades or unexpected discontinuances".

What we don't know from these numbers is how many there are in each of these categories.

What we also don't know from these numbers is how many refer to an increase in excess payment, rather than a reduction in cover, since they are lumped together.

What we also don't know from these numbers is how many refer to a reduction in cover for general treatment (which most people know as "Extras"), rather than hospital cover, since they are also lumped into the PHA statistics.

So, for all we know, the entire "downgrade" category could consist of policyholders increasing their excess payment from $250 to $500 (without affecting their cover in any way), and/or reducing the benefit they receive on Remedial Massage from $500 p.a. to $250 p.a.

It was for this reason that I questioned your conclusion that people are "cutting back dramatically", and that there has been a "huge drop in private health cover" as a consequence of means-testing.

Careless use of statistics does direct damage to the insurers, by undermining the credibility of their product in the eyes of the consumer.

The PHA bears some of the blame for your mistakes, though, as they are guilty of the fudging of those statistics, by conflating a number of highly disparate categories.

You may possibly be ignorant of the features of a health insurance policy, of course, in which case you may be excused some of the overheated language. But the reality is that there is little evidence yet that "people are cutting back dramatically on their health cover", or that "this rebate has lead [sic] to a huge drop in private health cover"

Until there is, for your credibility's sake, keep your powder dry.

Pericles,

Your figure of 300 000 policies is not "established" as it hinges entirely on an attrition rate of 5% to remove most of the downgrades for which you have not offered one iota of evidence.

Secondly, as the removal of the rebate only covered about 1m policies, and only kicked in in July 2012, the reduction of 30% of the affected policies in only 13 months is dramatic. If you combine this with the fact that almost all new policies being taken out are reduced, the message is getting through.

As for amounts trimmed per policy, the 1m affected are most likely to be established earners with families, for whom a high level policy jumped from about $400 p.m. to $$650 p.m. Many of them would have reviewed the policies and trimmed out the fat, and options we were no longer likely to use, and (like I did) reduce the value of the policy by about $2500 p.a. While this is unlikely to be the norm, it is far more tenable than the $250 p.a. reduction that you laughably proffered.

The 300 000 policies reduced plus virtually all new policies being reduced means that what has occurred in the first 13 months of the policy being introduced is not the end of it. By August 2013 the likely loss of PHI premiums most likely well exceeded 50% of the "savings" and by world wide trends is likely to exceed them in the short term.

The private health system estimated based on Australian and other countries take ups of subsidized health care that a reduction of $600m p.a. in subsidies would reduce contributions by about $950m p.a. Much of which would then fall on the public hospitals to provide.

At the time the savings would accrue to the federal labor government, and the costs to the state liberal governments.