Media releases

February 4, 2004

'Easing the Pressure' on Australia's health system

Australia’s largest private health insurer, Medibank Private, today released substantive economic research that reinforces the public economic value and long-term importance of maintaining health policies such as the 30% Private Health Insurance Rebate.

“Easing the Pressure: The Intergenerational Report and Private Health Insurance”, was unveiled at the National Press Club in Canberra, during a joint luncheon address featuring Medibank Private Managing Director, George Savvides, and Professor Ian Harper of the Melbourne Business School.

Amongst a host of findings, the Report concludes that for each $1 the Government currently spends on the 30% Rebate, it effectively spends $2 on the health needs of Australians without private health insurance. The Report also demonstrates that current policy arrangements are expected to sustain private health insurance coverage at viable levels for the next four decades.

The second in a series of commissioned research reports by the health fund to better understand the economic and consumer outcomes from recent private health policy reforms, the work examines in detail the role of private health insurance in Australia in managing future pressures on Government health outlays, in light of an ageing population and technological advances in health care.

‘Easing the Pressure’ was prepared by Canberra-based economic consultancy, Econtech Pty Ltd, headed by leading economist Chris Murphy, in association with Harper Associates (Professor Harper), and economic consultant Philip Hagan.

Mr Savvides said the basis for the ‘Easing the Pressure’ study was the Commonwealth’s Intergenerational Report released in 2002 by Federal Treasurer, Hon. Peter Costello MP, which projected a doubling of Commonwealth financial outlays on health services as a share of the economy over the next 40 years due to the multifaceted impacts of an ageing Australia.

“Our contribution to good health policy has been to commission this further research into the intergenerational aspects of private health, with a deliberate long-term perspective on sustainable public policy that underpins a quality mixed health system,” Mr Savvides told the National Press Club.

“Medibank Private supports health policy that will ensure the long-term sustainability of our world class health system. This is because our members have told us they strongly support a mixed public and private health care system as a way of ensuring the public system can fulfil its role.

“This detailed economic analysis of the role of private health care over the next 40 years highlights the clear need to maintain an excellent public hospital system, but importantly couple it with a strong private health sector to best tackle the funding implications that the seismic shift in ageing of Australia’s population will create,” Mr Savvides said.

Professor Harper‘s research last year into the benefits of the 30% Rebate estimated that the policy initiative could be saving Australian taxpayers $2 billion a year in health costs. One of the key findings of the ‘Easing the Pressure’ report is that if policy measures such as Lifetime Health Cover and the 30% Rebate were not introduced or were in future abolished, private health insurance coverage would eventually fall to potentially unviable levels.

“Without the 30% Rebate and Lifetime Health Cover policies, private hospital insurance coverage of the Australian population is projected to fall to only 18% by the year 2041-42. This would be an unprecedented low level if allowed to occur,” Professor Harper said.

“Under current policy arrangements, the outlook for private health insurance (PHI) coverage is, however, reasonably positive. This means that current policy arrangements will ensure the sustainability of PHI for at least the next four decades.”

Stuart Rodger, Leader of the Health Practice at Trowbridge Deloitte, undertook a high-level independent actuarial review of the methodology, assumptions and data sources used in the Report and concluded that these were reasonable. Trowbridge Deloitte verified that the approach was reasonable for:

 Projecting the impact of PHI on government spending over four decades; and
 The illustration of differing long term effects of policy settings contained in the Report.

Key findings of the ‘Easing the Pressure’ Report were:

 Under a purpose built Government Health Costs (GHC) model for the Report, private hospital coverage is projected to decline modestly from 43% in 2003 to 37% by 2041-42 under current policy arrangements;
 If the policy measures were not introduced or are reversed, PHI coverage (Hospital cover) would fall to unprecedented low levels (18% of the Australian population), making private health insurance potentially unviable;
 Without a private health insurance industry, Commonwealth and State Government health outlays would be even greater than projected in 40 years. Whilst the Government would save 0.4% of GDP from a future disappearance of the 30% Rebate, this would be significantly outweighed by additional health outlays of 0.9% of GDP by 2041-42;
 The 30% Rebate represents a modest contribution to the existing health costs of the insured. For every $1 the Commonwealth spends in rebate for an insured person, it spends $2 in meeting the health needs of an uninsured person that could otherwise be covered by PHI benefits.

Mr Savvides added that sustainability of our health system, and not ideology, must remain the main game for public policy makers when it comes to future health service delivery.

“We need to encourage public policy debate that avoids short-term thinking and quick-fix solutions - for there is nothing short-term about health policy,” Mr Savvides said.

Back to top