Home page iconHOME |   Contents page iconCONTENTS |   Search iconSEARCH |  Previous Years  PREVIOUS YEARS |
Table of contents

  You are in:

Outcome 9 - Private Health

Improved choice in health services by supporting affordable quality private health care, including through private health insurance rebates and a regulatory framework.

 | TOC | next page


Outcome Summary

Outcome 9 aims to promote the sustainability of private health insurance and support consumer choice in health care. The department worked to achieve this outcome by managing initiatives under the program outlined below.

This chapter reports on the major activities undertaken by the department during the year, reporting against each of the key strategic directions and performance indicators published in the Outcome 9 chapters of the 2009-10 Health and Ageing Portfolio Budget Statements and 2009-10 Health and Ageing Portfolio Additional Estimates Statements. It also includes a table summarising the estimated and actual expenditure for this outcome.

At the end of 2009-10, primary responsibility for the management of Outcome 9 transferred from the Acute Care Division to the Medical Benefits Division.

Program Administered under Outcome 9 and 2009-10 Objectives

Program 9.1: Private Health Insurance
  • Support the sustainability of the private health insurance rebate by ensuring that payments by Government are targeted at those people who need them most.
  • Promote the affordability of private health insurance and the sustainability of the private health insurance sector by ensuring that premium costs are the minimum necessary to maintain insurer solvency and prudential requirements, and support benefit outlays.
  • Encourage insurers and providers of private health services to provide better value-for-money to consumers, through improvements in the regulatory framework.
  • Improve information for consumers of private health services, enabling informed decision-making.

Major Achievements

  • Contributed to keeping private health insurance premium increases in 2010 to a minimum for more than 11 million privately insured Australians. In a period when insurer benefit outlays increased by more than 9 per cent per annum, the average premium increase was kept to 5.78 per cent.
  • Improved the Prostheses List by streamlining application processes for about 162 suppliers of prostheses to ensure timely access to safe and effective medical devices for privately insured patients. About 1.3 million devices were provided to privately insured patients under the Prostheses List in the 12 months to October 2009.

Program 9.1: Private Health Insurance

Program 9.1 aims to deliver sustainable, high quality private health care, including hospital and general treatment services, by providing private health insurance rebates, improved customer information, and a regulatory framework that encourages improved value for consumers.

Key Strategic Directions for 2009-10

In 2009-10, the department’s strategies to achieve this aim were to:
  • support the sustainability of privately insured services, through rebalanced private health insurance rebates and the assessment of proposed private health insurance premium increases;
  • improve the regulatory framework for private health insurance, to encourage insurers and providers of private health goods and services to provide better value for money to consumers; and
  • improve information provided to consumers of private health services to allow them to make more informed choices when purchasing services and to encourage greater competition in the private health industry.

Major Activities

Measures to Support Sustainability

Means Testing the Private Health Insurance Rebate
The Australian Government announced in the 2009-10 Budget that it would make the private health insurance rebate more sustainable by rebalancing the current policies supporting private health insurance. All privately insured Australians who are eligible for Medicare currently receive a rebate of 30 per cent of the cost of their private health insurance premium (35 per cent for people 65 to 69 years of age and 40 per cent for people 70 years of age and over). The planned means testing would mean higher income earners receive lower or no rebates in future. This will ensure those with a greater capacity to pay for their health insurance do, reducing the cost of the private health insurance rebate to taxpayers.

In addition to means testing the private health insurance rebate, it is planned that Medicare Levy Surcharge rates will be raised for higher income earners who do not have private hospital insurance. The Medicare Levy Surcharge is a surcharge on taxable income (currently one per cent) paid by Australian residents without appropriate private hospital insurance.

Lifetime Health Cover, another component of the private health insurance incentive structure will remain. Lifetime Health Cover increases the premiums for hospital cover for people who do not take out private hospital insurance until later in life by two per cent for each year a person is over 30 years of age.

In 2009-10, the department established the Private Health Insurance Rebate Tiers Implementation Working Group to consider and respond to challenges that might arise from the implementation of means testing of the rebate. This group included representatives of insurers, private hospitals, consumers, actuaries and brokers. The department also worked closely with Medicare Australia and the Australian Taxation Office regarding necessary system changes.

The enabling legislation for these measures was introduced into the House of Representatives on 27 May 2009. On 5 August 2009, the Senate Community Affairs Committee released its report on the enabling legislation, with the majority report recommending passage of the legislation. The legislation was rejected twice by the Senate and as a result, the implementation date for this measure has been delayed.
Premium Approval Process
In 2009-10, the department worked closely with private health insurers, the Private Health Insurance Administration Council and the Australian Government Actuary, to provide advice to the Minister for Health and Ageing about premium increases sought by private health insurers in 2010. This advice supported the Minister in exercising her powers under section 66-10 of the Private Health Insurance Act 2007, and contributed to ensuring that premium increases were the minimum necessary, while taking into account insurer solvency and prudential requirements, forecast benefit payments, and ensuring the value of private health insurance for the Australian community.

The Minister approved an average private health insurance premium increase of 5.78 per cent from 1 April 2010. The need for this premium increase is attributable to increasing insurance benefits paid to patients and rising health service costs. In the 12 months from 1 April 2010, private health insurance benefit payments are forecast to increase by a further 7.94 per cent, above the average premium rate increase.

In 2009-10, the department improved transparency in the premium approval process to provide consumers and insurers with greater information. The department announced average increases for each insurer through a Ministerial media release. The department also conducted a series of debriefing information sessions with insurers during May and June 2010 in Sydney, Brisbane, Melbourne, Perth, Adelaide and Launceston, to explain the role of the Minister, the department, the Private Health Insurance Administration Council and the Australian Government Actuary in the premium assessment process, and to provide feedback about how insurers could improve their premium applications in future.
Monitoring Participation
Private health insurance data is collected by the Private Health Insurance Administration Council and supplied to the department quarterly. In 2009-10, the department closely analysed this data to monitor participation trends and the effect of policy initiatives on private health insurance coverage, to ensure health insurers comply with their legislative obligations and to improve data quality. The department also monitored and reported on risk equalisation and Broader Health Cover initiatives, such as chronic disease management programs and hospital-substitute episodes. The data analysis underpinned modelling, policy development and compliance work undertaken by the department. Figure 9.1 illustrates the number of people with private hospital cover in Australia from 1971 to 2010 and identifies key milestones in health insurance policy.
Figure 9.1: Number of People with Private Hospital Cover 1971-2010

Figure 9.1: Number of People with Private Hospital Cover 1971-2010

Improving the Regulatory Framework

Prostheses Arrangements
Under the Private Health Insurance Act 2007, private health insurers must pay minimum benefits for medical treatment, accommodation and prostheses when their members go to hospital. The Prostheses List forms part of this regulation of minimum benefits. If a prosthesis is on the Prostheses List, the insurer must pay the listed benefit where that prosthesis is provided to a member as part of an insured visit to hospital. In 2009-10, the department commenced implementing recommendations of the Review of Health Technology Assessment in Australia (HTA Review). This will ensure the Prostheses List continues to include quality, cost-effective devices, and that new technology has been assessed as comparatively clinically effective and cost-effective. Implementing the recommendations will also ensure prostheses are available to privately insured patients in a timely way.

In 2009-10, the department consulted with key stakeholders to restructure the Prostheses and Devices Committee, which makes recommendations to the Minister for Health and Ageing about the Prostheses List. Work has progressed on the establishment of the new committee including new terms of reference that are consistent with the recommendations of the HTA Review in a range of areas, such as referral of safety concerns to the Therapeutic Goods Administration and managing conflicts of interest. The new committee is designed to have a balanced membership comprising clinical experts, health economists and representatives of consumers, health insurers, private hospitals, the medical devices industry, and the Department of Veterans’ Affairs.

The department commenced implementation of the HTA Review recommendations to ensure the Prostheses List is supported by more efficient application and assessment processes that are sustainable, transparent, fit for purpose, flexible and informed by sound evidence. In particular, prostheses which are assessed as having similar clinical outcomes will receive the same benefit, andgap payments for private patients will be progressively removed from the Prostheses List. The department will continue to work with stakeholders to finalise the implementation of the HTA Review recommendations, and review the outcomes of the changes to prostheses listing arrangements within three years.

In 2010, the department commenced development of a new database to support the Prostheses List, which will support online application and assessment, and allow more effective matching of prostheses supplied to a patient with billing codes under the Prostheses List. The new database is expected to be completed in 2012.

The department updated the Prostheses List in August 2009 and February 2010. Seven hundred new prostheses were listed and amendments were made to about 5,600 existing billing codes. Amendments to existing billing codes involved changes to one or more of the following: benefits; product information; or product groups/subgroups. The amendments resulted from sponsor requests and reviews of listings. The updated lists provide private patients with access to new prostheses that have been assessed to be clinically and cost-effective. They also ensure that benefits paid by insurers for prostheses are relative to their clinical effectiveness.
Regulatory Reform
In 2009-10, the department worked to recover Australian Government costs of funding the National Joint Replacement Registry from suppliers of joint replacement prostheses listed on the Prostheses List. The registry is operated by the Australian Orthopaedic Association under a funding agreement with the department, and collects and disseminates information about the outcomes of joint replacement surgeries, in order to improve the safety and quality of these surgeries. During the year, the department consulted with the medical devices industry, the National Joint Replacement Registry and the Australian Orthopaedic Association about implementation of cost recovery, and developed legislation to recover $1.6 million in 2009-10. The department released exposure draft rules for comment and prepared a cost recovery impact statement to support the new arrangements.

The new National Joint Replacement Registry Consultative Committee was established in January 2010 as a forum for industry, government and consumer representatives to provide guidance on the overall strategic direction of the registry. The consultative committee replaces the former advisory committee and meets four times a year by teleconference. The department provides secretariat support and the chair for the committee.

The department worked closely with the Private Health Insurance Administration Council to ensure a number of insurers previously operating as unincorporated associations converted to companies under the Corporations Act 2001, in order to meet new registration requirements under the Private Health Insurance Act 2007 and new governance standards which commenced on 1 January 2010. This places all insurers within a corporate governance framework that better reflects current industry practice and standards.

The Health Legislation Amendment (Australian Community Pharmacy Authority and Private Health Insurance) Act 2010 became law in June 2010. The department developed provisions in this Act to amend the lifetime health cover rules in the Private Health Insurance Act 2007 to ensure new migrants to Australia are treated consistently and fairly. Lifetime health cover is intended to encourage people to take up private health insurance hospital cover earlier in life and to maintain cover throughout their lives. People who do not have hospital cover may be required to pay an age-based financial loading on their health insurance premiums. The amendments clarify that new migrants must take out hospital cover by 1 July following their 31st birthday or the first anniversary of registering for Medicare in order to avoid a lifetime health cover loading. The amendments do not affect Australian citizens, or any migrants who had a private health cover or a Lifetime Health Cover loading liability before 30 June 2010.

The department developed the Private Health Insurance Legislation Amendment Act 2010, which amended the Private Health Insurance Act 2007, to allow for conditional listing of prostheses on the Prostheses List, and the establishment of additional criteria in relation to the listing of prostheses on the Prostheses List. The legislation became law in April 2010. The ability to conditionally list will enable a benefit to be paid for a prostheses only when supplied to a particular type of patient, such as one approved for an organ transplant.
Image of dentist and patient

Improving information for consumers

In 2009-10, the department worked collaboratively with the Australian Dental Association, the Consumers Health Forum, private health insurers and the Private Health Insurance Ombudsman to select and publish the average charges for the 21 most common private dental services.1

Consumers can use this information to make more informed choices when purchasing dental services. The publication of this data also aims to encourage greater competition in the private health industry. The department will analyse and update the information about these dental charges annually.

The department supported the Private Health Insurance Ombudsman to make other improvements to the website2, including new, simpler comparison features to allow consumers to search for and compare private health insurance policies. Updates to the Lifetime Health Cover calculator were also made on the website to reflect changes in legislation. The department gave funding to the Ombudsman for these website improvements, and participated in three meetings of the Private Health Website Reference Group during the year.

1 Accessible at www.privatehealth.gov.au/healthinsurance/whatiscovered/averagedental.htm.

2 Accessible at www.privatehealth.gov.au.




Top of page

Performance Information for Outcome 9

Program 9.1: Deliverables

Qualitative Deliverables

Measures to Support Sustainability
Qualitative Deliverable: Timely production of evidence-based policy research:
The department will provide quality and timely advice underpinned by evidence-based research to the Minister for Health and Ageing, to allow her to exercise her statutory functions having regard to the need to keep private health insurance affordable for consumers.
Result: Deliverable met.
Research and analysis were used to make improvements to private health insurance policy and legislation. This included an analysis of the Lifetime Health Cover mail out and the decision to implement fee for service arrangements due to the positive impact of the mail out on coverage. The provisions relating to lifetime health cover for migrants were reviewed and amendments were made to the Private Health Insurance Act 2007 so that provisions apply equally to all migrants. Specifically, it removed anomalies that unintentionally disadvantaged people who had temporarily visited Australia prior to emigrating or who obtained permanent residence status prior to arrival. These changes also removed anomalies which unintentionally gave certain migrants, once they registered for Medicare, four years rather than one year to obtain private health insurance and avoid a lifetime health cover loading.
Qualitative Deliverable: Timely production and advice of legislative amendments:
The department will provide quality and timely advice to the Minister about legislative proposals to improve the private health regulatory framework.
Result: Deliverable met.
Improvements to the private health regulatory framework were made to update minimum hospital and second tier benefits; publish two Prostheses Lists including new prostheses and changes resulting from reviews; allow for conditional listing on the Prostheses List and the establishment of new criteria for listing; make Lifetime Health Cover provisions consistent and fair for all new migrants; and to introduce cost recovery for the National Joint Replacement Registry.
Improving the Regulatory Framework
Qualitative Deliverable: Timely advice and implementation of Doyle recommendations about prostheses arrangements:
The department will provide quality and timely advice to the Minister for Health and Ageing about the implementation of the recommendations of the Doyle review of Prostheses Listing Arrangements that have been agreed by the Government. This will be consistent with the implementation plan developed in consultation with affected stakeholders, including the Prostheses and Devices Committee.
Result: Deliverable met.
Work has continued on the development of grouping schemes and clinically appropriate comparator groups. This involves allocation of prostheses into an appropriate grouping scheme and ensuring other prostheses within the grouping scheme have similar clinical and/or technical characteristics. Items that do not meet listing criteria have been progressively removed from the list. A review of Human Tissue items is underway; better access and use of electronic versions of the list was implemented; and a protocol to raise safety concerns with the Therapeutic Goods Administration has been developed. Some recommendations made by the Doyle Review have now been subsumed by the recommendations of the Health Technology Assessment Review.
Improving Information for Consumers
Qualitative Deliverable: In 2009-10, the department will prepare and introduce legislation to amend the Private Health Insurance Act 2007 and Private Health Insurance Rules.
Result: Deliverable met.
The department developed amendments to the Private Health Insurance Act 2007 to clarify existing Lifetime Health Cover arrangements for new migrants to Australia and to ensure that the policy is applied fairly and consistently. These amendments commenced on 28 June 2010.

The department developed amendments to the Private Health Insurance Ac t 2007 to allow conditional listing of prostheses on the Prostheses List and to allow new criteria for listing devices on the Prostheses List. These amendments will allow insured people to better access potentially life-saving devices through private health funding. These amendments commenced on 13 April 2010.

Quantitative Deliverables

Quantitative Deliverable: Percentage of variance between actual and budgeted expenses.
2009-10 Target: ≤0.5% 2009-10 Actual: 0.5%
Result: Deliverable met.
The actual Administered expenses for Outcome 9 were 0.49% greater than budgeted expenses.
Improving Information for Consumers
Quantitative Deliverable: Private hospitals participating in national hospital reporting arrangements.
2009-10 Target: 75% 2009-10 Actual: 83%
Result: Deliverable met.
The department has consulted with private hospital and day hospital associations, to increase the transparency and accountability in the delivery of hospital services and to simplify the data submission process. This work has assisted in improving completeness, timeliness and quality of data submissions.
Improving Information for Consumers
Quantitative Deliverable: Private health insurers participating in average dental charges reporting arrangements.
2009-10 Target: 100% 2009-10 Actual: 100%
Result: Deliverable met.
On 1 July 2010, average charges for 21 commonly used dental services were published online for 100 per cent of private health insurers.3 Average charges for each state and territory are displayed based on the consumer’s place of residence. This information was published using de-identified claims data provided by insurers for the period July-December 2009.


3 Accessible at www.privatehealth.gov.au.



Top of page

Program 9.1: Key Performance Indicators

Quantitative Key Performance Indicator

Measures to Support Sustainability
Quantitative Indicator: Maintain the number of people covered by private health insurance hospital treatment cover
2009-10 Target: 9.7 million 2009-10 Actual: 9.9 million
Result: Indicator met.
In June 2010, 9.9 million people had private health insurance for hospital treatment compared with 9.7 million in June 2009. This is an increase of 228,622 people since June 2009. This indicator has been met for each of the previous three years.

Top of page

Outcome 9 – Financial Resources Summary


  (A)
Budget
Estimate
2009-10
$’000
(B)
Actual
2009-10
$’000
Variation
(Column
B minus
Column A)
$’000
Budget
Estimate
2010-11
$’000
Program 9.1: Private Health Insurance
Administered Expenses
Ordinary Annual Services (Annual Appropriation Bill 1)  1,747  1,608 ( 139)  14,624
Special appropriations
Private Health Insurance Act 2007  4,310,420  4,331,787  21,367  4,426,001
Private Health Insurance Act 2007 – Risk Equalisation Trust Fund1 275,000 301,922 26,922 290,000
Private Health Insurance Act 2007 – Council Administration levy1 5,085 5,085 - 5,235
Departmental Expenses
Ordinary Annual Services (Annual Appropriation Bill 1)  12,658  12,871  213  11,346
Revenues from other sources  4,513  4,502 ( 11)  4,524
Unfunded depreciation expense2  -  -  -  272
Operating loss / (surplus)  -  7  7  -
Total for Program 9.1  4,609,423  4,657,782  48,359  4,752,002
Outcome 9 Totals by appropriation type
Administered Expenses
Ordinary Annual Services (Annual Appropriation Bill 1)  1,747  1,608 ( 139)  14,624
Special appropriations  4,590,505  4,638,794  48,289  4,721,236
Departmental Expenses
Ordinary Annual Services (Annual Appropriation Bill 1)  12,658  12,871  213  11,346
Revenues from other sources  4,513  4,502 ( 11)  4,524
Unfunded depreciation expense2  -  -  -  272
Operating loss / (surplus)  -  7  7  -
Total Expenses for Outcome 9  4,609,423  4,657,782  48,359  4,752,002
Average Staffing Level (Number)  97  95 ( 2)  89


1Payments under the Private Health Insurance Act 2007 – Risk Equalisation Trust Fund and the Council Administration Levy have been disclosed in the 2010-11 Portfolio Budget Statements in Table 1.2.1 Department Resource Statement. This represents a change in accounting treatment.

2 Reflects the change to net cash appropriation framework implemented from 2010-11.




Top of page


 | TOC | next page


Produced by the Portfolio Strategies Division, Australian Government Department of Health and Ageing.
URL: http://www.health.gov.au/internet/annrpt/publishing.nsf/Content/annual-report-0910-toc~0910-2~0910-2-3~0910-2-3-9
If you would like to know more or give us your comments contact: annrep@health.gov.au