AMA's Budget Warning To Old, Sick: Insurance Premiums Will Rise, Australia

Main Category: Health Insurance / Medical Insurance
Article Date: 22 May 2008 - 5:00 PST

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AMA President, Dr Rosanna Capolingua, warned that private health insurance premiums are likely to rise by about five per cent as a result of measures in the Rudd Government's first Budget.

An Access Economics analysis of the Budget commissioned by the AMA, Health and the 2008-09 Federal Budget, found that changes in the private health insurance rebate and increases in the Medicare Levy surcharge threshold would spark an exodus of young, healthy people from private health insurance.

That would leave health funds short by around $500 million in the medium term, the report found.

"That implies that health funds will have to increase premiums by five per cent as the Budget fall-out occurs - over and above any usual annual premium increase," Dr Capolingua said.

"People with private health insurance are likely to be slugged with a total annual increase in their premiums of closer to 10 per cent than the five or six per cent they've been used to.

"This Budget decision will start a vicious cycle of unaffordable private health insurance.

"It clearly puts at risk the community rating for private health insurance, because the elderly and sick will have to wear the cost of the young and the well fleeing their responsibility.

"The comfort and security that elderly and chronically-ill Australians had through affordable health insurance is at serious risk."

In a further hit to the elderly, the increased premium pressure would come on top of the loss of the Seniors Card for self-funded retirees.

"This is a hard blow for those who have taken some of the strain away from public health services through taking financial responsibility for their own health," Dr Capolingua said.

Substantial numbers of people were likely to continue to abandon private health cover as premiums rose over the next few years, putting a hugely increased load on the already over-strained public health system, she said.

"There's insufficient capacity in public hospitals to deal with existing needs. There's no way public hospitals can deal with any fall-out even from the young and healthy abandoning private health insurance," Dr Capolingua said.

"The effect on premiums from the loss of younger members will also over time broaden the base of people who can no longer afford private health insurance, and put even more pressure on the public system.

"Ultimately, this measure is poor public policy."

The greater strain on the public and private health systems would come on top of rising health costs generally, the Access Economics report found.

"Health spending is not budgeted to grow relative to GDP," Dr Capolingua said.

"This is a recipe for worsening health inequities and outcomes, and the AMA fears that rationing of services and compromise of care will occur."

Other worrying health Budget omissions included rural and regional health, and training for the medical workforce of the future.

"It would seem that rural health has been put in the too-hard basket," Dr Capolingua said.

"And, for a government that says it's strongly committed to investment in education, the lack of response on training medical graduates is worrying, to say the least.

"Although the Budget has been reasonably kind to health, the overall effect is going to make adequate health care more difficult to access for many Australians."

AMA's Access Economics Health and the 2008-09 Federal Budget - negative and positive points at a glance:

XX Medicare levy surcharge thresholds
XX Missed opportunities to encourage greater private sector capacity
X General Practice
X Rural and regional health
X Failure to get moving on post-graduate medical training
X Financing through inefficient, inequitable RDT taxation measures
Overall commitment to health
Something to tide over public hospitals for the next year
A kick-start for Indigenous health
Cancer initiatives
Dental initiatives
More focus on health prevention
Aged care transitional care
PBS spending initiatives
Some workforce initiatives
Health and Hospitals Fund

Health and the 2008-09 Federal Budget is available in full here.

Australian Medical Association