Face of Nation : The Grattan Institute report paints a bleak picture of the private health system, saying it has become “riddled with inconsistencies and perverse incentives”.
It said if current trends continue, Australia will find itself in a “death spiral”, where young and healthy people abandon private health cover, leaving a larger proportion of unhealthier, older and expensive users.
That will keep forcing premiums up, leading to a further exodus of healthy users, and placing insurers under immense pressure to contain costs.
The Grattan Institute’s Health program director, Stephen Duckett, said inevitably, the Government would be faced with the question of how to manage such a crisis.
He said government subsidies and financial penalties to encourage people to take out private insurance were already becoming less effective, and the government needed to ask itself whether subsidising private health care was justified.
“The [Government] is going to have to step in sometime, probably in the next 18 months or so, and it’s going to have to confront the issue about its very policies, its red tape, needs to be addressed and how is it going to do that, and what is the future of the industry,” he said.
“Just supporting the private health insurance rebate is not enough, the industry needs reform, it needs reform in terms of the way it’s regulated, it needs reform in the way the various parts of the industry react to each other.
The Consumers Health Forum chief executive Leanne Wells said the report should spur the Government into establishing a wide-ranging inquiry into the sector.
“The deep-seated questions to be asked about private health insurance and its value to both individuals and the system given the long-term challenges it faces are not new,” she said.
“The current arrangements are eroding that, and we need to turn that around.”
In a statement, a spokesman for Health Minister Greg Hunt said the Government was already delivering the most significant reforms to private health insurance in over a decade, which will make insurance simpler and more affordable for Australia.
“Work has already commenced with the healthcare sector to identify and implement the next wave of positive reforms for private healthcare to continue to improve the affordability and value for consumers and ensure the system remains sustainable,” he said.
“Australia has one of the best health systems in the world which is underpinned by private and public healthcare.”
