Growing evidence of the need for independent Inquiry into PHI

17 July 2019

The ADA is backing calls from a Grattan Institute report for the Government to bring clarity to the overly complex private health insurance system which has seen many people dropping their cover due to poor value for money. 

Describing the current system as "riddled with inconsistencies and perverse incentives", the report observes that if the current trend of young people especially abandoning private health cover continues that the only people remaining will be older, expensive users, whose claims will force an increase in premiums, leading to a further exodus of consumers. 

Responding to the Grattan Insititute report, ADA President Dr Carmelo Bonanno said that while the report did not go into detail on the problems with “general treatment” or extras cover (which includes dentistry), it sheds critical light on a system no longer fit for purpose. 

“Many Australians take out ‘general treatment’ or ‘extras’ cover in addition to hospital cover, to help pay for their dental, physio or optometry treatment,” said Dr Bonanno. “But in reality, they’re not getting value for money as benefits paid are not keeping pace with inflation. 

“The ADA has repeatedly demonstrated that dental fees are being maintained well below CPI - yet benefits paid for treatment under some policies have not increased for years. Coupled with increasing premiums, the value from ‘extras’ cover is not realised.” 

The ADA will be lobbying key MPs with health portfolio responsibilities on these issues next week in Canberra, urging them, as it has done consistently for some time, to: 

- conduct a Productivity Commission Inquiry into private health insurance, 

- introduce legislation to end the discrimination that exists with differential rebates, and 

- require health funds to increase member benefits with every premium increase. 

The 2018 Senate Inquiry into the value and affordability of PHI made several recommendations related to extras cover which the Government has so far ignored. 

“These recommendations if implemented, would go a long way to restoring choice to consumers and potentially stem the exodus of people dropping their cover,” added Dr Bonanno. “The reforms introduced by the Morrison Government are not far-reaching enough.” 

Last year the ADA commissioned the Centre for International Economics to prepare a report "Saving for One’s Care" on the benefits of Health Savings Accounts, which “demonstrated that such bank accounts present an opportunity for consumers to overcome the limitations to ‘extras’ cover and introduce a reward-based proactive approach to health care. 

“The ADA suggests that consumers are better off putting their money into a savings account rather than ‘extras’ cover. The money in a savings account won’t expire every year if you don’t use it.”