Government’s Health Insurance Policy Unravelling – 26 August 1997

“Today’s announcement that one of Australia’s health funds MBF will seek approval from the Federal Government to increase its premiums by 5% per annum and introduce a $50 per night in-hospital co-payment (max $250) in some of its products is startling evidence that the Federal Governments push toward 100% hospital cover is not financially achievable”, the Australian Doctors’ Fund spokesman, Mr Stephen Milgate said today.

“The Federal Health Minister and the Australian Health Insurance Association (AHIA) (of which MBF is not a member) have vigorously advocated that funds adopt a 100% hospital and medical cover in the belief that this perceived benefit would stem the flow of departures from the funds and also attract new members.

“The policy direction has backfired. Rather than stay in the funds, the misguided drive to 100% hospital cover has driven up premiums and raised the level of claims substantially increasing cost pressures on contributors” Mr Milgate said.

“Furthermore, the Government’s policy of providing rebates to people who take out private health insurance has been rendered largely ineffective because of this failed policy direction.”

The recent announcement in South Australia that the National Mutual Group (51% owned by French based insurance group, AXA) trading as Mutual Community has not renewed 100% cover for 21 hospitals and day surgery centres in South Australia, is yet a further example that the dream of 100% hospital cover is unsustainable.

In the last 3 months 91,000 left the health funds despite being able to insure for 100% hospital cover.

“The financial realities are that despite strong consumer preference, 100% NO GAPS hospital cover is a mirage for many people who can’t afford it. 100% medical cover will be a more expensive mirage for all but the highest income earners” Mr Milgate said.

“With better advice the Government’s health insurance incentives could have provided a far greater incentive to stay in health funds particularly if they were targeted to health insurance policies with a substantial excess or front end deductible” Mr Milgate said.

“The AHIA and the Federal Minister for Health must now admit this policy failure. Until this is done there is very little likelihood of a change in direction toward more affordable private health insurance premiums which deliver catastrophe insurance cover” Mr Milgate said.