The forthcoming round of private health insurance (PHI) premium increases — touted by the government as the lowest in a decade — will mean premiums have risen nearly 80% since 2008, far ahead of inflation and a good demonstration of why PHI companies have racked up big profit increases in recent years.
Health Minister Greg Hunt has been touting a likely premium rise of between 3.5% and 4%, around twice as much as recent consumer price index (CPI) growth. An increase of that magnitude will mean that, since 2008, PHI premiums across the industry have averaged 78% growth. It will translate into an increase of about $750 a year for family insurance policies, which cost on average $18,700 a year.
That sort of growth is more akin to energy price rises and the rise in urban house prices in Sydney and Melbourne than ordinary household goods and services.
For example, if bread and milk had risen at the same rate as PHI, you’d be paying $3.60 for a two-litre, supermarket-brand milk instead of $2, and $1.78 instead of a dollar for a supermarket loaf of bread. A basic train ticket around Melbourne would cost $53.60 a week rather than $43. Back in 2008, a decent 50-inch plasma TV cost $2850. If PHI-style inflation had applied, it’d cost over $5000 now. Instead, you can get the same model in LED with ultra high-definition for under $1100.
That’s a key aspect of PHI: over the last decade insurers have reduced the range of coverage they offer, and many took to offering “junk policies” that offered minimal claims payments to customers. In contrast, other major household budget items now offer radically more for less. In 2008, a new top of the line Mazda 3 cost just over $30,000. If car manufacturers had jacked up their prices by the same rate as PHI, the same model would cost nearly $55,000. Instead, you can get a top-tier Mazda 3 for $28,000 — and it’s significantly bigger, safer and more fuel efficient that its predecessor, not to mention with far more features. A Mazda 2, which is now around the same size as an older Mazda 3, costs around $23,000.
Ditto with phones. A new iPhone SE with 16GB in early 2009 cost around $750 to buy outright; now the base model iPhone with far more features costs $200 less — compared to $1330 in 2018 PHI terms. And the same with air travel. A trip to London on Qantas would have set you back $1800-$2000 in 2008, or $3600 in PHI 2018 terms; the same fare is currently on sale for $1300.
What all these products have that PHI doesn’t have, of course, is value. Particularly for young people, PHI offers literally nothing except an exemption from the Medicare surcharge, and is hardly value for money even for families. In fact, for young people, health insurance is a double drain on their wealth. If they are foolish enough to have PHI, they are effectively subsidising baby boomers’ and generation X’s healthcare in what is yet another example of the ongoing intergenerational economic leaching that older Australians (like me) are inflicting on young Australians — not to mention lining the pockets of PHI investors who have enjoyed a profit bonanza in recent years.
But worse, because PHI is propped up by taxpayers, it adds over $6 billion a year to the Commonwealth’s deficit via the private health insurance rebate — $6 billion a year plus interest that future generations of taxpayers will have to pay off to subsidise the healthcare of generations who had more affordable housing, little or no tertiary education debt and cheap coal-fired power.
It’s not quite intergenerational theft on the level of our climate inaction, but it’s a serious assault on the finances of all Australians.
A good story Bernard, however comparing goods to services is a tricky area. Almost all the goods you quoted were ones in a competitive market, where consumers can shop around, whereas private services in the health industry are not generally very competitive and should be left in public hands.
If the $6 billion dollar subsidy, combined with the billions in premiums were injected into public health, it would be a very well resourced service to all.
Totally agree, Sleuth…someone here needs to have a look at Canada where there is NO private health system, and from all reports they manage quite well.
We are becoming more American by the day…and suffering the obscene ‘gap’ payments as well!
CML there is private health care and PHI in Canada but it is far more equitable and nothing like here.
http://www.nejm.org/doi/full/10.1056/NEJMp068064#t=article
Cas…the link you provided is 12 years old (2006). I have friends and family in Alberta and Ontario…some have lived there for 50 years…and there is NO private system comparable with Oz. My cousin, who lives in Edmonton, and has worked in the health system there prior to retirement, was home on a visit 12 months ago and she says the same thing. They now have a left-wing (?NDP) government in Alberta, after 30+years of the conservatives. I doubt very much that this government will introduce private health insurance as we know it.
There may be some small areas which can be covered by insurance, but basically the whole system is public universal healthcare…Medicare.
Interestingly, I was working in Toronto as an RN decades ago when Medicare was first introduced in Canada…late 1960s, early 1970s.
Of course there may be differences between provinces, just as we have between states…but my opinion remains that in Canada they have mostly public hospitals and health systems.
It is comforting to hear people speak as you have. Medicare could be so much more than it is. PHI is a rort and nothing else. Even when people crow about having the choice of doctors, I tell them, that, as a PUBLIC patient and a human being there are a whole raft of rights that allow them to refuse care from a doctor and ask for another. The food and environment are about all you get in a private hospital and even then, you could probably set up a bank account and contribute the equivalent of a monthly PHI premium. If you don’t use it; you can roll it over to next year or do what you like with it. Just an idea. We’re giving our PHI the flick.
Hmmm. I belong to a not for profit and have for 40 years. I did not cost it much over the years, but my wife’s knees did eventually. To get that done under medicare in regional Australia might take 2 or three tears. I am getting pretty concerned about it as I near retirement age though, I doubt I will be able to keep paying it.
I hear this a lot. I live in a rural area, yet in my experience people I know that needed surgery, got it in a very timely manner. My own soccer playing son has, over the years, had 2 ACL operations. Both on medicare, both within a couple of months of diagnosis, followed by extensive rehab immediately afterward. I’m sure there are people who have waited longer for procedures than was comfortable or reasonable, but in my experience (touch wood) its not the norm.
What about the retired person who scrapes together enough to pay for private health, but after an expensive procedure, finds him or herself hit with an enormous gap payment.
Why call it intergenerational theft? That implies older people agree with it. I’d bet that may not be the case. It’s corporate theft supported by the two major parties.
‘$6 billion a year plus interest that future generations of taxpayers will have to pay off’
I agree that this is another form of Corporate Welfare that our Governments seem happy to keep paying whilst they cut Social Welfare, Education, Health payments but I am surprised Bernard that you continue with the neoliberal furphy that money spent now is a burden on future tax payers.
This is not as it has ever been with government spending but you would not know it to listen to commentators/journalists who keep using the concepts around Household budgets to inform their economic language.
I’m 63 years old and the only benefit I get from private health insurance is the exemption from the high income surcharge.
I hated it when Howard brought in the surcharge. It’s not to support private hospitals and take the pressure off public hospitals. I can still go to a public hospital as a public patient. It’s to support private health insurance companies.
I would have been much better off over the years if I’d self-insured paying for health care out of my pocket as needed.
Wayne – I’m with you – you’d be better off most years and might even be able to use some of the money for something else if not used on healthcare. Your money for you. What irks me is that no ALP government has ever tried repealing it and changing the Medicare contribution.
Wouldn’t need to change the medicare contribution if we stopped subsidising PHI. $6B!
The increased costs go largely into the pockets of the management and somewhat into those of the shareholders (shareholders come before customers but AFTER management of course), but rebates paid to the medical profession have not kept pace. Consequently in order to be paid anything like a similar professional would be paid in any other profession, the so called “gap” (which should be called “gist” or gross insurance shortfall tariff) goes up. However, it is nothing compared to what it would be if most medical specialist did NOT discount their fees against the recommended AMA rates.
This is not to excuse the grotesque gaps that some people are faced with and the fact, often overlooked, is that many medical specialists work very long hours and see a great many people, thus some do make very very good money. That is not overcharging, just overworking!
However as already mentioned, at the end of the day, so called free markets set the price for their product which the government forces people to buy or face tax penalties. Hospital margins are squeezed but the company do very nicely Thank You .. Good old Neoliberal theory.