Transcript
Station: Radio National
Program: Breakfast
Date: 31/01/2018
Time: 8:37 AM
Compere: Fran Kelly
Interviewees: Bill Shorten, Federal Opposition Leader; Dr Rachel David, CEO, Private Healthcare Australia

 

FRAN KELLY: Well, Labor leader Bill Shorten’s speech to the National Press Club yesterday has certainly grabbed him some headlines. Aside from promising to establish a federal anti-corruption watchdog and boost the minimum wage, Bill Shorten also launched a fresh attack on the private health insurance industry over rising annual premiums.

[Excerpt]
BILL SHORTEN: Prices are up; profits are up, quality and value – down. Australians are paying a lot more for their health insurance policies and getting a lot less. Ten years ago only 8.6 per cent of health insurance policies contained exclusions, now it’s 40 per cent. These exclusions, often hidden in the fine print, mean that people are paying for insurance without being covered. It’s turning health insurance into a con.

[End of excerpt]
FRAN KELLY: That’s Opposition Leader Bill Shorten, describing the health insurance industry as a con.

Rachel David is the chief executive of Private Healthcare Australia, the industry’s peak lobby group. Rachel David, welcome to RN Breakfast.

RACHEL DAVID: Morning, Fran.
FRAN KELLY: So Bill Shorten said yesterday: families are paying on average, $1000 a year more for their health insurance than they were just back in 2013. We know the proportion of Australians with private health insurance has started to fall over the last two years. I think it’s at its lowest level in four years. Consumers seem to be agreeing with Bill Shorten that private health insurance is a con.
RACHEL DAVID: Well I think the reality is that most consumers that have health insurance do value what they get from it, and the research is quite clear on that.
FRAN KELLY: [Interrupts] Well then why are they dropping out?
RACHEL DAVID: They share the frustration that the leader of the opposition has stated, and that is when household incomes are flat, some household costs are continuing to rise above inflation or CPI and health costs are one of those things. However, I would reiterate that the only reason, the sole reason that health fund premiums are going up is because health funds are paying for more health care. And by way of example: just last year, the funds paid for 23,000 more admissions for chemotherapy, close to 5000 more admissions for artificial lenses for blindness, 5000 extra admissions for mental health conditions and the list goes on and on.
FRAN KELLY: Well, can I just interrupt you there, Rachel David? Because Bill Shorten had a bit of a different list at the Press Club yesterday. He said Australia – this is a quote – are paying a lot more for their health insurance policies and getting a lot less. Ten years ago, only 8.6 per cent of health insurance policies contained exclusions, now it’s 40 per cent.
RACHEL DAVID: Look, that’s a slightly different issue, in that there are more products out there with exclusions and that’s really been driven by consumer demand for more affordable products which better meet the needs of their life stage. So, for example, we were getting a lot of enquiries from older people who didn’t want to pay for pregnancy and IVF, and younger people who wanted an affordable, entry level product into the health insurance market, who didn’t want to pay for a lot of conditions that are really associated with aging. So that’s how the exclusions came into the market. It’s an important part of the system to maintain affordability of health fund products. However, it has made the system more complex for consumers to navigate, and that’s why the funds have been engaged in a detailed process over the last two years to better help consumers choose and use their health insurance, which is the government’s gold, silver, bronze, basic tiering mechanism, which is going to be announced shortly.
FRAN KELLY: Sure. And that’s going to help us all understand what we get and what we’re signing up for and it is hard to understand. But affordability is the key issue. The latest private health insurance price hike is being hailed by the Government as a success because it was an average of 3.95 per cent. That’s still double – twice the rate of inflation and CHOICE says that the cost of the average policy’s actually going to go up by 4.7 per cent. It’s about the cost of it. Bill Shorten says some of the biggest health insurance companies get a return on equity of more than 20 per cent – that’s well above banks and other listed companies and he says your industry is holding more than the legal capital requirement. Will the industry consider primping profits just a touch, just to support the sustainability of the health care sector and bring down those premiums?
RACHEL DAVID: Well, I think there are a few issues there and one thing I would take issue with is the use of return on equity as a metric of how health funds are performing. It’s a useful statistic, but because health funds don’t hold a lot of capital assets, it really doesn’t indicate that health funds are holding onto excess profits. In fact the margins made by health funds are very closely scrutinised by a number of regulator, including the Minister for Health, and they’ve been on average dead stable over the last 15 years, and there’s actually no evidence at all that health funds are retaining excess profits.

Really it comes down to the fact that costs are going up because people are demanding more health care as a result of our aging population. Over the last 100 years, we’ve gained an extra 30 years of life, and to maintain good quality of life; this is what is costing money as people access the health system more. And bear in mind that in Australia under our system, most elective surgery, hospital admissions for mental health and dental care is funded by the health funds.

FRAN KELLY: You’re listening to RN Breakfast, it’s 08.43. Our guest is Rachel David. She’s the chief executive of the private health insurance peak body, Private Healthcare Australia, defending the private health insurers from some of the criticisms. Primarily, the key criticism Bill Shorten that the rise in premiums and the high premiums are simply a con and what people are getting in return for that.

In terms of the Private Health Insurance Rebate, the fact is more than $6 billion a year of taxpayer’s money goes in rebates for private health insurance, but many Australians – in fact most Australians – don’t get anything for that, because they’re not covered by private health insurance. Nevertheless, Bill Shorten has said this morning on Channel 9: a Labor government would not be abolishing the health rebate – the Private Health Insurance Rebate. Are you reassured by that?

RACHEL DAVID: Yes, I am. And we do work very closely with all the major political parties and we share data with them; including the fact that the Private Health Insurance Rebate is a very efficient way of providing access to low and middle income earners to elective medical procedures. So we think the ALP does recognise that. All Australians benefits from the Private Health Insurance Rebate for low and middle income earners, because we’ve actually been able to demonstrate it does take the pressure off public hospital waiting lists for those people with absolutely no money, so that they do have an opportunity to have timely access to medical procedures in the public system.
FRAN KELLY: You’ve called for stronger penalties for high income earners who don’t have private health insurance. You’ve suggested a higher Medicare levy surcharge as one measure. But we have universal health care in this country. Why should people sign up for a private company if they don’t want to?
RACHEL DAVID: Well look, I think we’re talking about a very small number of people on high incomes, who are choosing not to have private health insurance and it’s really a mechanism to ensure that those people are aware of the costs of health care and that they’re paying their fair share.
FRAN KELLY: [Interrupts] Well, they’re going to pay their own bills, presumably. They’re not going to come to the health insurance company. They can do that because they’re wealthy.
RACHEL DAVID: Well look, I think that a lot of people in that category actually dramatically underestimate what the cost of timely access to health care would be if anything did happen. In private you are probably looking at about $28,000 just for a stock standard simple hip replacement. And the wait for that in the public system could be anything between one and three years depending on where you live. So it is actually something that is a sensible measure, just to be a lever so that people understand what it is that they need to contribute to.
FRAN KELLY: Rachel David, thank you very much for joining us.
RACHEL DAVID: Thanks, Fran.
FRAN KELLY: Rachel David is the chief executive of the private health insurance peak body, Private Healthcare Australia.
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