Is private health insurance really worth it?
YES
Private health insurance gives consumers the peace of mind to know exactly when they can be admitted for surgery and other essential medical treatments. Few people can afford the uncertainty of having to wait an unknown length of time to get a painful or disabling condition treated.
Whether it’s a sports injury that stops you driving your car or a child with an eating disorder, these are the types of medical conditions that can’t wait to be treated without causing real social and economic consequences. People choosing private health also cite the importance of having their own fully trained specialist looking after their care, someone who is responsible 24/7.
Research shows that more than 80% of people with private health insurance believe they get value for money. In addition to the timing of medical treatment, they cite choice of specialist and choice of hospital as the main reasons. However, affordability is their major concern.
More than 13.5 million Australians hold private health insurance and over half of those have disposable incomes under $50,000pa. Many are full pensioners and superannuants who make considerable sacrifices to maintain their cover.
Health funds are committed to improving affordability, and following government reforms to reduce the price of medical devices they were able to deliver the lowest average premium increase in 17 years at 3.95%.
Private health insurance is an integral part of Australia’s mixed public-private health care system. It pays for close to twothirds of non-emergency surgery, 56% of all mental health care type admissions, 61% of joint replacements, 59% of chemotherapy and 86% of retinal procedures. It also pays out more than $2.628 billion for dental care, substantially more than what is paid by the government.
A sustainable and affordable private health system benefits everyone by keeping pressure off public hospitals.
NO
If you are well advanced in years and believe you may want a hip or knee replacement in the not-too-distant future (after the 12-month pre-existing waiting period), private health insurance may be worth it.
But for everyone else it’s a poor deal when there is a high-quality public hospital system available. Yes, there are waiting times for many elective procedures but if you have the misfortune of an accident or a shock diagnosis with a life-threatening condition you will have prompt treatment. (Those waiting times have been worsened by private insurance, because far from “taking pressure off public hospitals” as the insurers claim, private insurance has enticed many specialists to shift to private hospitals. Where the money has gone, so too have the resources.)
It’s a poor deal because, like all insurance, it’s costly to administer. Of $1 spent on private insurance, only 84 cents goes to health care service, while of $1 in taxes and Medicare the amount is 96¢.
Private insurance is a particularly poor deal for the young. The insurers would love to have more young members but even with the incentives in place (such as the “lifetime rating” arrangements that raise the price for those who join when older than 30) only when one turns 55, on average, does one draw more than one claims.
It’s such a poor deal that the only way it can be sustained is for the government to entice people into buying it, through the Medicare levy surcharge. If your income is over $90,000 (single) or $180,000 (family) you are penalised between 1% and 1.5% of income if you don’t have private hospital cover.
How many other industries offer such poor value for money that only the threat of a fine sustains a customer base?