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Stage Two reforms drive private health funding efficiency

The Federal Government will introduce a new range of reforms to make private health insurance more efficient, competitive and deliver better value for money for members.

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3 April 2003

Stage Two reforms drive private health fund efficiency

The Federal Government will introduce a new range of reforms to make private health insurance more efficient, competitive and deliver better value for money for members.

The Minister for Health and Ageing, Senator Kay Patterson, said the new measures would improve the regulatory framework and introduce greater competition into the private health insurance industry.

"We want to drive the private health industry to become more efficient and ensure it provides better value for money for its members," she said.

"These reforms are the second stage and build on the range of measures I announced last year. In the first stage, we introduced greater accountability and transparency for fund members.

"The Private Health Insurance Ombudsman was given an enhanced role to allow fund members access to information on the comparative performance of their fund. If their fund does not perform adequately, we encourage members to consider looking at other funds which may meet the needs.

"We are now introducing further reforms, such as requiring funds to disclose additional information on their management expenses to allow consumers greater transparency and give them the ability to compare the funds' performance. This will put pressure on funds to become more efficient in the management of their operations."

Senator Patterson said changes would be made to reinsurance arrangements to encourage funds to become more efficient and innovative.

New measures would be designed to give funds' incentives to seek more cost effective options for their members. Changes to reinsurance would reward funds that are more efficient and allow them to retain cost savings and pass them on to members.

Senator Patterson said: "Funds will be given incentives to manage disease prevention and health promotion programs.

"For too long prevention initiatives have been the poor cousin of the health system. We need to focus on prevention activities, which stop people getting sick.

"As a result of the changes I expect to see more funds introducing comprehensive health promotion and disease management programs which will help to improve the health of their members and reduce the need for admission to hospital care."

Stage two of the private health insurance reforms will tackle supply costs, which are placing pressure on premiums.

The reform package will seek to rein in the costs of prostheses, which grew by 46% to $425 million in 2001-02.

Senator Patterson said such cost blowouts placed huge pressure on premiums.

Under the reforms, funds would be required to provide a full range of safe and cost-effective prostheses at no out-of-pocket cost to members. They will also be able to offer products providing cover for more expensive prostheses.

The Government has also decided to introduce a rural and regional default benefit arrangement for rural and regional private hospitals where these hospitals provide the only services available in their communities. This will replace the little used "second tier" default benefit currently available to hospitals unable to negotiate a contract with a health fund.

"The combined effect of the changes the Government has announced will be to improve the private health insurance regulatory framework. They will provide protection to consumers, while encouraging a more efficient and competitive private health insurance industry."

Media inquiries, contact Randal Markey, Media Adviser, Senator Patterson's office, 02 6277 7220.