Private Health Insurance May Be Broken But It Can Be Fixed - by Shaun Gath

The three day moral panic that passes for serious debate around our private health insurance system has come and gone again. Premium increases can do that to you. And obviously getting hit up for an extra 5, 6, or 7 per cent is ­nobody’s idea of fun.

Most of the media advice, by design, has a short shelf life. The issue will be back next year and the same games will play all over again. So, here’s a crazy idea … what if we actually did something to try and fix the problem?

But before rushing off, let’s at least give private health insurance its due. It’s been a pillar of our health system for over 150 years. Over that time lot of people in real need have been helped. That remains true today.

So far so good.

Now there’s a harder question: Are those services best value for money? The answer, resoundingly, must be “no”.

There are two burning reasons for this. The first is a failure of regulation; the second is a failure of competition.

With regulatory failure, don’t be too quick to condemn the government (the current one or its predecessors).

Our Constitution is the real villain here. In the 1946 referendum we gave the parliament power to make a range of social security payments, including hospital and medical benefits. But the section also stops the parliament from controlling what doctors charge.

So, one step in that direction and it’s off to the High Court …

Competition failure, however, is another story. There’s plenty of blame to go around. Private health insurance is riddled with failed markets that hurt consumers and damage our economy.

It is no coincidence that ATO statistics show that six out of the 10 highest earning groups in Australia are medical proceduralists.

Competition in the referred medicine area is hopelessly weak. Most patients have neither the opportunity nor the inclination to challenge their GP on choice of specialist nor the venue for treatment. And even if they wanted to, the information they need is just not readily available.

So here are some suggestions:

Stop labelling compliant private health insurance products “junk”. Ever since Health Minister Sussan Ley used this term at the Press Club last year, you’d be hard pressed to find a private health insurance product that someone somewhere hasn’t “junked”.

This language not only degrades legitimate products, it also corrodes competition. And worst of all, it has opened the door to the medical industry to run a clever displacement strategy proffering their own views on which products are “junk”, judged — no surprises here — by whether doctors get paid enough.

Meantime, who is asking the equally pertinent question: “Why are doctors charging so darn much in the first place?”.

If the government believes that insurers are deceiving consumers, then don’t just complain, change the rul es.

Stop referring disparagingly to “churn” and catastrophising the consequences of ordinary competition. Consumers should be allowed to move from one product to another (including downsizing) without that event being the cause of national alarm.

Indeed, the portability rules that allow policy holders to change funds without having to re-serve waiting periods are designed to encourage that very conduct. It’s called competition. It’s the activity that actually does put downward pressure on prices. Australia has over 30 insurers that are all very keen to have your business. You should shop around.

Which brings us to this:

●Publicise and use the one website that is independent and provides reliable whole-of-industry information. You may have your issues with Tony Abbott, but you should not deny him the role he played in setting up the website privatehealth.gov.au. This website, which is the envy of the world (trust me, I have asked), is an amazing consumer resource.

Unlike any other comparison website, it contains information about all the products of all the funds. If you are prepared to do 30 minutes research, you are likely to save a bundle. (And a bit of money to promote the site would do wonders too!)

Let the private health insurance funds become involved at an earlier stage in the selection of post-primary medical pathways. Unlike their members, insurers know a lot about doctors and hospitals and can provide great information about where to get good, value-for-money treatment. Their presence would transform this torpid market.

At present, however, this is a strict no-go. Medical industry lobbyists have been spooking politicians with the spectre of “managed care” for years. We hear dark comparisons to the “American system” with little regard to the basic differences that exist between the two countries. (Medicare anyone?)

Australians should reject this self-serving nonsense and let some competitive daylight into this crucial area. Private health insurance funds could really help their members and the winners would be individual members … and the long-suffering premium-paying public.

Perhaps we could change next year’s headlines. Or have they ­already been written?

Shaun Gath was the former chief executive of the Private Health Insurance Administration Council.