Health Reform News

Keeping Premiums Low: Towards a sustainable private healthcare system

Keeping Premiums Low: Towards a sustainable private healthcare system, a report commissioned by MTAA, was released this week.

“The medical device industry has already delivered $1.1 billion in savings to private health insurers – here’s four ways that another $1 billion can be saved,” Mr Burgess said.

According to APRA figures, MTAA’s Agreement with the Government has already saved insurers $314 million and is on track to exceed the $1.1 billion in expected savings.

APRA data shows that over the last three years, the average benefit paid per device has decreased by 15%, while health insurer profits have increased by 15%.

“MTAA welcomes Health Minister Greg Hunt’s commitment to work with industry to improve the viability of our private healthcare system through existing and new reforms,” said Ian Burgess, MTAA CEO today.

 “This report outlines a range of collaborative sector-wide measures that can be taken to ensure the ongoing sustainability of our private healthcare system.”

Insurers have collected 50% more profit from each of their members over the past five years, far outpacing the 21% growth in benefits paid out. Operational costs have also grown more quickly than benefit payouts, growing at 28%.

Direct constraint of premium growth by high performing health insurance funds, while still allowing continued profit growth, could save $210 million in premium increases for consumers.

Private health funds have not extracted sufficient economies of scale in the wake of significant revenue growth and many funds are well above the industry average of 9% in operational expenditure, this includes an estimated marketing spend of $400 million. Efficiencies in this area could save $210 million.

The need to address operating efficiency was recently acknowledged by Craig Drummond, CEO of Medibank Private.

“For both short and longer-term sustainability of the private healthcare system, optimising models of care will be critical,” said Mr Burgess.

Specific measures such as reducing readmissions, promoting care in the community and reducing overtreatment of patients could deliver $290 million worth of savings towards reducing premiums.

Another $250 million worth of savings could be found through reshaping the allied health offering to exclude therapies for which there is no clinical evidence base.

“In the longer-term, medical technology will be crucial to improving healthcare outcomes and system efficiency,” Mr Burgess said.

“Increased uptake and better funding pathways for emerging technologies such as telehealth, at-home patient monitoring apps and remote diagnosis will help drive better patient outcomes and lower costs.

“’This report proposes a sensible path to reform, with a range of short and longer-term savings and structural solutions.

“On one hand, insurers are patting themselves on the back for skyrocketing share prices, on the other they’re desperately looking to others for solutions, as recently called out by APRA, and even proposing to abolish Medicare.

“We have one of the best healthcare systems in the world, and it is up to all stakeholders to work together to continue to make it better,” Mr Burgess concluded.

The AlphaBeta report can be read here.

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