Media releases

December 7, 2015

Medibank unveils plans to deliver improved transparency, affordability and value for private healthcare consumers

Medibank today recommended reforms to private healthcare that would deliver better patient care, save approximately $3 billion in health costs annually and help reduce future increases in private health insurance premiums by up to 16 per cent, making private healthcare more accessible and attractive for millions of Australians.

The reforms, outlined in Medibank’s submission to the Commonwealth Department of Health’s review into private health insurance, would deliver much needed transparency, affordability and value for consumers in the healthcare system.

They would lead to improvements in a system where premiums have been increasing by 6.5 per cent a year, leading to 500,000 Australians cancelling or downgrading their private health insurance cover in 2015.

Managing Director of Medibank, George Savvides, said: “Private healthcare has played an integral and critical role in the well-being of Australians for decades. However, if it is to remain a key part of a worldclass and sustainable health system, our customers are telling us that we’ll need to look much more closely at how we can improve transparency, the affordability of premiums and the overall value we provide. It’s clear that substantial reforms are now required.

“Medibank members have told us directly that transparency must be at the heart of any improved healthcare system. They want clearer and more accessible information regarding costs and quality that enables them to make better informed decisions and choices about their health care. For health insurers, hospitals and doctors, improved data access will enable better targeting of prevention programs and disease management, which in turn will result in better care and outcomes for patients.

“Members are also tell us that affordability is becoming critical. That means removing obstacles that artificially inflate costs to keep premiums at a level that encourages participation in private healthcare, keeping pressure off the public system. Our focus must also be on improving quality and reducing avoidable waste and inefficiency.

“The Minister for Health, Sussan Ley, has rightly made consumer value the core focus of this review. Our sensible measures would unlock as much as $3 billion in additional value for consumers annually – that’s good for Medibank customers and for the long-term sustainability of our world-class health system generally.”

Medibank has made seven key recommendations in its submission:

1. Improving information-sharing for consumers and insurers – empowering consumers to make informed decisions and better healthcare choices and allowing insurers and providers to better target healthcare delivery improving consumer health outcomes.

2. Standardising simpler products and terminology – reducing the incidence of misunderstanding and negative surprises for consumers. Designing products that reduce unnecessary variation in referrals to services such as rehabilitation which could deliver between $150 million and $330 million in benefit reduction annually.

3. Ending cost-shifting from public hospitals to privately insured consumers – removing the negative impact on premiums and potential of many consumers incurring additional out of pocket costs, potentially resulting in estimated savings of up to $1.05 billion annually.

4. Reducing the cost of prosthesis – private health patients currently pay inflated prices for items such as hip and knee replacements. A reference pricing system, which introduces domestic and international benchmarks, would save an estimated $800 million annually.

5. Reducing hospital default costs – adjusting the second tier default rate to 60 per cent would improve affordability of private health insurance, and protect accessibility for regional Australians where their choices are limited. It would also increase competiveness among hospitals with a potential cost saving of up to $610 million for consumers annually.

6. Improving competition and premium setting – creating greater competition and improving affordability through greater efficiencies, potentially saving consumers up to $200million annually.

7. Rewarding early uptake of health insurance – rewarding under 30’s for purchasing health insurance, leading to greater uptake of private health insurance and potential gains of up to $100million annually.

In addition to saving up to $3 billion per annum, Medibank’s recommendations would encourage more Australians to take up private health insurance, helping to reducing pressure on the public healthcare system and at the same time, improving the quality of patient care.

Medibank also suggested other longer-term reforms should be considered to improve the attractiveness of and greater participation in private health care, including a superannuation-style program that would pay premiums after retirement; insurance products that would provide rest-of-life coverage for an up-front payment; and tax incentives for employers that would encourage them to take out cover for their employees.

Medibank is a strong advocate of the community rating system that prevents discrimination against at risk groups and is not in favour of reducing or removing the rebate on general treatment cover, which would further add to the cost of private healthcare.

Ends

Notes:

Please see the Summary Position Statement which explains Medibank's key recommendations to the PHI Review in more detail


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