Online version of the 2014-15 Department of Health Annual Report

Outcome 6: Private Health

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

Page last updated: 16 October 2015

Major Achievements

  • Supported the sale of Medibank Private by initial public offering on the Australian Stock Exchange on 25 November 2014. The level of demand from retail and institutional investors was very strong, and the sale raised $5.7 billion.
  • Supported the Government’s approach to fiscal responsibility and sustainability by implementing changes to income tier thresholds for the private health insurance rebate, which will remain at 2014-15 levels until 1 July 2018. This took effect from 1 July 2015.
  • Supported the Smaller Government Reform Agenda by transferring responsibilities of the Private Health Insurance Ombudsman to the Office of the Commonwealth Ombudsman and the Private Health Insurance Administration Council to the Australian Prudential Regulation Authority.

Challenges

  • Undertaking an extensive probity and due diligence process to ensure a fair and successful sale of Medibank Private. This required thorough understanding and analysis of the complex policy and regulatory frameworks for private health insurance.
  • Continuing to improve and further develop stakeholder management and satisfaction with the Prostheses List process.

Looking Ahead

In 2015-16, the Department will consult on short term and long term reforms to private health insurance, aiming to reduce and amend existing regulation that impedes the efficient operation of the private health insurance sector, and supporting the Government’s broader deregulation agenda.

The Department will also continue to encourage insurers to provide quality coverage at an affordable price, whilst supporting individuals and families to purchase private health insurance through the provision of the private health insurance rebate.

Programme Contributing to Outcome 6

Division Contributing to Outcome 6

In 2014-15, Outcome 6 was the responsibility of Medical Benefits Division.

Programme Performance

In 2014-15, the Department worked to achieve this Outcome by managing initiatives under the following programme.

Trends

The number of Australians with private health insurance continued to rise in 2014-15. Over 13.2 million Australians (55.7 per cent of the population) had some form of private health insurance. This has grown from 11.6 million Australians (53.5 per cent of the population) in 2009-10.

In 2014-15, the Government has spent $5.8 billion on the private health insurance rebate. This is an increase of three per cent on rebate expenditure from 2013-14, which had total expenditure of $5.6 billion.


Figure 6.1: Private health insurance rebate expenditure, 2009-10 to 2014-1527

This line graph shows Private health insurance rebate expenditure from 2009-10 to 2014-15. In 2014-15, the Government spent $5.8 billion on the private health insurance rebate.

Figure 6.2: Private health insurance rebate expenditure by month, 2009-10 to 2014-15

This line graph shows Private health insurance rebate expenditure by month, from 2009-10 to 2014-15.

Programme 6.1: Private Health Insurance

Programme 6.1 aims to promote an affordable and sustainable private health insurance sector, including through private health insurance rebates.

The private health insurance rebate

The private health insurance rebate helps make private health insurance more affordable, provides greater choice and accessibility for Australians to access private health care options, and reduces pressure on the public hospital system.

Qualitative Deliverable: Consultation with stakeholders on ways to ensure that the private health insurance rebate is communicated and delivered through private health insurance products.
2014-15 Reference Point: Ongoing stakeholder discussions to assist in the timeliness and streamlining of processes to enable consistent advice to consumers.
Result: Met
Industry was consulted on ways to ensure that the private health insurance rebate is communicated accurately for each product, through consultation sessions held in July 2014, and numerous bilateral and multilateral meetings with insurers and peak bodies.
Quantitative Deliverable: Percentage of insurers’ average premium increases publicly released in a timely manner.
2014-15 Target: 100%
2014-15 Actual: 100%
Result: Met
The Department announced the weighted average premium increase for 2015 premiums on 2 March 2015.
11-1212-1313-14
100%100%100%

Promote an affordable and sustainable private health insurance sector

The sale of Medibank Private on 25 November 2014 raised $5.7 billion for all Australians, and will ensure that there is greater competition in the Australian private health insurance market. The sale of Medibank Private removed the inherent conflict in place when the Government was both the market regulator and the owner of a large participant in the market.

From 1 July 2015, the private health insurance rebate will remain at 2014-15 levels until 1 July 2018. This measure supports the Government’s approach to fiscal responsibility and sustainability in the health system.

On 1 July 2015, the government achieved part of its smaller government reform agenda by transferring responsibilities of the Private Health Insurance Ombudsman to the Office of the Commonwealth Ombudsman and the Private Health Insurance Administration Council to the Australian Prudential Regulation Authority.

The Australian Government promotes an affordable and sustainable private health insurance industry by supporting consumers’ choice. The Department promotes competition by publishing information about the premium process annually, including average premium increases for individual insurers. The Department also supports the Private Health website, which provides detailed information to consumers about the range of private health insurance products available.

The Australian Government will also develop options for improvements in the regulation of the private health insurance industry, with the aims of reducing red tape and driving competition while delivering strong consumer protections.

Quantitative KPI: Increase the number of people covered by private health insurance hospital treatment cover.
2014-15 Target: 10.5m
2014-15 Actual: 11.2m
Result: Met
During 2014-15, over 13.2 million Australians (55.6 per cent of the population) had some form of private health insurance. 11.2 million Australians (47.3 per cent) have some form of hospital cover, an increase of 1.2 million since 2009-10.
11-1212-1313-14
10.6m10.8m11.1m

Improve access to surgically implanted prostheses through private health insurance

In 2014-15, the Department continued to identify opportunities to refine pathways for assessment of new products for inclusion on the Prostheses List. A successful trial of an online submission and processing system provided valuable data to refine and improve the development of a Prostheses List Management System. Currently, stakeholder knowledge and expectations of the process and requirements varies. As such, Phase 1 of the Prostheses List Management System will incorporate improved information for stakeholders. This will be rolled out in the latter half of 2015.

Qualitative Deliverable: Ensure consumers have access to cost-effective surgically implanted prostheses under the prostheses list.
2014-15 Reference Point: Prostheses listing arrangements are streamlined for all stakeholders and consumers have access to clinically appropriate and cost-effective surgically implanted prostheses with a group benefit.28
Result: Met
There are over 10,000 items on the Prostheses list, providing surgeons with choice to select the most appropriate prosthesis for their patients. Improved processes have also led to improved stakeholder satisfaction with the management of the Prostheses List.
Quantitative KPI: Percentage of applications to list devices on the Prostheses List completed29 within 22 weeks.
2014-15 Target: 85%
2014-15 Actual: 88.89%
Result: Met
The refined process saw a completion rate of 88.89% in 2014-15.

Ensure the Australian Government rebate on private health insurance covers clinically proven treatments

The Department has continued the evidence-based review of natural therapies, which aims to determine whether or not these therapies should continue to attract the Australian Government rebate on private health insurance. This review commenced on 1 July 2012.

The Office of the National Health and Medical Research (NHMRC) has assisted the Department with the review in the assessment of submissions and also by supervising the evidence reviews of the in-scope natural therapies, which have been undertaken by independent and external expert organisations.

The Government is currently considering the findings of the review and will announce its decisions in due course.

Outcome 6 – Financial Resource Summary

Budget
Estimate
2014-15
$’000
(A)
Actual
2014-15
$’000
(B)
Variation
$’000
(B) - (A)
Programme 6.1: Private Health Insurance
Administered expenses
Ordinary annual services (Appropriation Act No. 1)2,2472,243(4)
Special appropriations
Private Health Insurance Act 2007
- Private Health Insurance Rebate5,913,2935,804,467(108,826)
- Risk Equalisation Trust Fund454,107440,874(13,233)
- Council Administration levy4,5194,664145
Departmental expenses
Departmental appropriation112,96512,688(277)
Expenses not requiring appropriation in the budget year 2 551697146
Total for Programme 6.16,387,6826,265,633(122,049)
Outcome 6 Totals by appropriation type
Administered expenses
Ordinary annual services (Appropriation Act No. 1)2,2472,243(4)
Special appropriations6,371,9196,250,005(121,914)
Departmental expenses
Departmental appropriation 1 12,96512,688(277)
Expenses not requiring appropriation in the budget year 2 551697146
Total expenses for Outcome 66,387,6826,265,633(122,049)
Average staffing level (number)6259(3)
  1. Departmental appropriation combines ‘Ordinary annual services (Appropriation Act No. 1)’ and ‘Revenue from independent sources (s74)’.
  2. ‘Expenses not requiring appropriation in the budget year’ is made up of depreciation expense, amortisation, make good expense and audit fees.