Who pays for what when it comes to your medical bills?
A simple guide on who's responsible for healthcare costs
Health Minister Greg Hunt’s latest proposals on private health insurance are unquestionably good news for consumers.
His commitment to lower medical-device prices will especially allow health insurers to trim future premium increases.
Changes associated with making consumers more familiar with the level of cover they purchase, increased claims excess levels and removing restrictions on psychiatric treatment are similarly consumer friendly and sensible.
Perhaps the most interesting and bold of all the initiatives is allowing insurers to discount premiums for people under the age of 30 (I’ll call them the millennials).
Perhaps the most bold incentive is allowing insurers to discount premiums for people under 30
That’s because it’s a modification to the long and valued tradition of “community rating” premiums.
Under community rating, insurers must charge the same premium for a product irrespective of age — the policy intention being to ensure premiums are affordable for older, typically more costly, people.
This happens because, overwhelmingly, younger people effectively cross subsidise the oldies.
So while millennials will get discounted premiums and older people won’t, attracting more of them into private insurance will lower the pressure on future premium increases for everyone, including the oldies.
It’s a smart and overdue move.
Still, an inconvenient truth is no matter how efficient health insurers and the entire health system becomes, future premiums are going to increase simply because we’re spending more and more on our healthcare.
For more than 50 years our spending has grown at a rate of GDP growth plus two per cent propelled by ageing, rising chronic disease, the cost of new technology and increasing wealth (as we become richer we tend to spend more on our health).
Now, we can’t do much about ageing and we sure don’t want to stifle technological and economic growth. But beyond striving for cost efficiency we can enhance the “value” people get out of their health insurance.
Beyond striving for cost efficiency, we can enhance the “value” people get out of their health insurance
Affordability is a relative concept with “bang for the buck” for consumers every bit as crucial as price. Health insurers need to work harder on how we can deliver more value to people, especially by harnessing the power of the internet and the digital age.
So, for example, we well know how problematic it can be for people to assess treatment options, choose a doctor, manage chronic conditions and pay for out-of pocket expenses.
Health insurers have multiple opportunities to redress these problems. We can put at people’s fingertips reliable information on doctor fees and performance as well as the latest research relevant to their personal health and wellbeing.
We can help people better connect with the healthcare system and co-ordinate activity. We can provide people with new financial products to meet out-of-pocket expenses such as medical gaps or even an Uber ride between clinical appointments.