Transcript - ABC Radio 720 Perth - Private Health Insurance Change
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ABC Radio 720 Perth
13 March 2013
E&O Only
(Includes interview transcript of Graeme Gibson, managing director of HIF, which ran immediately before.)
Geoff Hutchison: Tomorrow Federal Parliament will debate further changes to private health insurance rebates. Primarily reducing the subsidy on what's called the Lifetime Health Cover loading. An extra cost put on people who take out private health insurance later in life. We'll be joined by Graeme Gibson, the managing director of HIF, one of three WA major health funds who've got together to fight the changes. In fact, we've managed to find Graeme Gibson. Graeme, welcome to the program.
No, just give me one moment. There we are. Graeme, welcome to the program.
Graeme Gibson: Thank you, Geoff. Good morning.
Geoff Hutchison: Graeme, tell me what are the concerns you have about these changes?
Graeme Gibson: Geoff, our obvious concern is that for our members here at HIF and we're talking about 600 - 450 of our members or 16.8 per cent of our population - they will be affected by the proposed changes to the Lifetime Health Cover loading arrangements that the Gillard Government now propose.
Geoff Hutchison: Okay. Can you explain exactly what this Lifetime Health Cover loading is?
Graeme Gibson: Alright. So the Government have legislated an arrangement whereby for persons above 30 years of age who don't have an appropriate level of hospital cover, will attract a two per cent loading. So for every year that they do not hold an appropriate level of hospital cover, they will attract a further two per cent loading. So the loading itself can go from two per cent right up to 70 per cent.
Geoff Hutchison: Now how much do you think that is going to cost your 450 members?
Graeme Gibson: Alright. So if we - maybe if we just take an example here, Geoff. We've got a 70 year old family cover. So 70-year-olds are caught by this one. So they would normally have a 40 per cent rebate. So if we look at a typical hospital cover at HIF which would have a $3380 premium per year, the 70 per cent loading would be $2366 and the amount of the rebate that applies to the loading that would be lost is $946. So that's $946 per year will be lost to that family which means it's $946 extra that have to be found to pay for private health insurance.
Geoff Hutchison: Tell me if you consider that to be a likely cross the board cost and not just the highest end.
Graeme Gibson: Okay, Geoff, the difficulty with that is that firstly it depends on the particular product that's patronised and secondly it also depends on the age involved. But the $946 relates to a family comprising 70-year-olds which is a 40 per cent rebate. If you are let's say a family, let's say that the imposition of the Lifetime Cover loading is for a 45-year-old which is 30 per cent. In that case, the extra pre... the extra cost out of the hip pocket per annum is $304 for the same product.
Geoff Hutchison: I'll talk to Tanya Plibersek in a moment but I guess the question is if people are making the choice not to adopt private health insurance until later in life, at what point should the taxpayer keep having to subsidise that?
Graeme Gibson: Well, I mean I think the issue if we come to it is that the Australian population has access to both public and private hospital arrangements and from our perspective the private health insurance industry provides excellent value proposition to consumers. There are in the order of 12.5 million people covered by private health insurance. And in Western Australia, the highest patronised state of all states and territories, our patronisation rates are 53.4 per cent as at December.
So there's 53 per cent of the population covered by private health insurance in Western Australia. And 47 per cent nationally so there's a significant number of people going to be affected by this. So...
Geoff Hutchison: So is your concern that the Federal Government's seeking to claw back some of its monies - is actually rolling back incentives for people to take out private health insurance. Is that the essence of your argument?
Graeme Gibson: Well, I think what it will do if we look - those people who are likely to be affected in our opinion are the more older or senior members of the community. So as I said, with our members who've got... [indistinct]
Geoff Hutchison: [Talks over] Who you would be charging a premium anyway I imagine.
Graeme Gibson: Correct. That is correct but these people are being hit over the back of the head by a stick known as the Lifetime Health Cover loading. So that is - what they're saying is that if we have to enter into private health insurance late in life, as a result of some of the big sticks that are being put at them, then they will invariably attract a Lifetime Health Cover loading. So as I said if you are a 70-year-old and you're confronting entering into Lifetime Health Cover loading late...
Geoff Hutchison: You're going to pay more.
Graeme Gibson: You're going to pay in excess of $946...
Geoff Hutchison: Can you just be clear by what you mean by some of these sticks that the Government is hitting people with?
Graeme Gibson: Well, a big stick is where there's a cost associated with not doing something. So the Lifetime Health Cover loading is a form of stick. It's not a carrot.
Geoff Hutchison: What do you think the impact of this will be. You say that for those people and for those members it's going to become more expensive. What impact do you think it's going to have on numbers of people who continue to have private health insurance. People tend not to drop it as far as I understand.
Graeme Gibson: I think the difficulty there, Geoff, is that what we might be confronting in the future as people come to the realisation - the significance of the change, is that health funds will ex... will prob... no doubt in our view at least will see the older demographic actually migrate down through the products because they're obviously now con... if we take that 70-year-old family, they're now looking at a $946 increase. So they will be on the hunt for a better price outcome.
So the motivation will be price as distinct from the associated benefits that come with the payment of that price. And typically what health funds have done in terms of their product offerings is they will offer cheaper products for the younger demographic who don't need some of the support in terms of the heart, the hips and those sorts of services. So we can offer those products cheaper. So I think what'll happen we - in amongst all that confusion is the older demographic will chase the price down and they'll end up on inappropriate products. And that's dangerous.
Geoff Hutchison: Tell me what an inappropriate product is before I let you go.
Graeme Gibson: Well, so an inappropriate product might be in the case of a 70-year-old patronised an entry level product that doesn't cover them for heart, hips, knee replacements and that type of thing.
Geoff Hutchison: Graeme Gibson, thank you. He's the managing director of HIF, one of three WA health funds unhappy with these changes.
I'm joined by the Health Minister, Tanya Plibersek.
Good morning to you.
Tanya Plibersek: Good morning.
Geoff Hutchison: Can you just give me some perspective on what you've just heard and also why the Federal Government is seeking to make these changes?
Tanya Plibersek: Yeah, I will give you some perspective. Look, I think the example that your previous guest was talking about was the - a couple who have the most expensive health insurance, who have delayed the longest, and who are older members of our community. So he's talking about a very extreme example.
The average health fund holder who has delayed taking up private health insurance and has, because of that, had this essentially what's a fine attached to them - will pay about $116 a year. But the increase is as little as three dollars a year depending on the age of the health fund holder, how long they've delayed, and how expensive their private health insurance is.
I should explain that this Lifetime Health Cover loading, this fine, was introduced in the year 2000 to try and increase the number of younger people taking up private health insurance. The reason that's a good idea is because if you've got more younger generally healthier members with health insurance, they're able to subsidise the health costs of older people who are often sicker and making greater calls on health insurance.
So the health insurance industry love this Lifetime Health Cover loading because it drives younger, healthier people to take out private health insurance. So there is a stick attached, but it's a very deliberate stick. There's also, obviously, the carrot as a 30 per cent rebate or the rebate depending on your income.
The reason that it's very important for us to look at how we're spending on this Lifetime Health Cover as a government is what we've essentially been doing is we've been saying we're going to fine you for delaying taking out private health insurance but when we give you that fine we're going to pay a third of it, or 40 per cent of it in the case of these older people. So it really undermines the incentive for people to take out private health insurance when they're younger, when they're healthier.
And the other thing, obviously, to say is Lifetime Health Cover has been in place since the year 2000. People have had well over ten years to get used to the idea that there's a penalty attached to leaving, taking out your private health insurance until you're older or sicker.
Geoff Hutchison: How much money do you think will be saved by these changes?
Tanya Plibersek: This will save about $400 million. Just under $400 million.
Geoff Hutchison: And is this part of a continual examination of private health insurance rebates? Have you been sending a pretty strong message to the private health insurers that you're not going to give them as much money as they want to have from you?
Tanya Plibersek: Well, I've got to say this government's been very supporting of private health insurance. We've got higher coverage than ever before and the funds are making bigger profits than they've ever made. So it's a very healthy industry in Australia because there has been a carrot with the rebates and a stick, which is this Lifetime Health Cover loading. They're in a very healthy position.
What I'm saying to them is that there are a lot of calls on the health dollar in Australia. We want to be making sure that we're subsidising the great new medicines, great, terrific new procedures, building new buildings like the $255 million that we've put into the Fiona Stanley Hospital at Murdoch to build the new rehab unit and so on. There are huge calls on the health dollar and one of the fastest growing areas of expenditure has been government subsidies to private health insurers.
So yeah, we have to keep examining whether every dollar that we spend on subsiding private health insurance is the best way to spend that dollar. Here we're saying look, you don't get - if you get a speeding ticket, the government doesn't pick up a third of your speeding ticket or a third of your parking fine. If we've got an incentive in place, a stick in place, to get people to take up private health insurance earlier so that they can pay their share, make sure that they are helping to pay for the greater health expenses of older or sicker people, then we shouldn't be picking up part of the cost of that fine for not, you know, having private health insurance.
Geoff Hutchison: And finally, Minister, whenever these things are discussed, the private health insurers always say the same things; you're hitting us too hard, people will leave private health insurance, they will be part of an overcrowded public health system. Has the evidence suggested that the trends have gone that way?
Tanya Plibersek: No. There's been no evidence. I mean, we - as you say, every time there's a change the insurers say that means testing, for example, would see masses of people - we heard wild claims of a million people dropping out of private health insurance. In fact, the numbers continue to increase strongly. We've got a very strong industry here. Their numbers are better than ever and their profits are better than ever.
Geoff Hutchison: It goes before parliament tomorrow. What's the process now whereby it will become legislatively approved?
Tanya Plibersek: We'll begin the debate. I expect that people will want to have a say on it. We're not in a hurry to vote on it yet but there'll be a number of Members of Parliament who'll want to have their say on this legislation.
Geoff Hutchison: Thank you for talking to us today.
Tanya Plibersek: It's a pleasure. Thank you.
Geoff Hutchison: Tanya Plibersek is the Federal Health Minister.
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