Health funds hit pockets

HEALTH fund members are paying 20 per cent more than they should, as they foot $400 million a year for marketing costs and exorbitant administrative charges, a damning report shows.

And insurer profits are set to get even bigger unless radical changes are made, warns report author Dr Andrew Charlton, economic adviser to former prime minister Kevin Rudd.

He reveals in the report, commissioned by medical device manufacturers, that soaring profits of health funds, up 50 per cent in the past five years, have outpaced the 21 per cent increase in benefit payouts.

This comes as new data released this week shows health fund membership has plunged to its lowest level in more than a decade despite major reforms introduced in April.

In June, just 44.2 per cent of the population was covered by a health fund after more than 28,500 people dumped their cover. But health fund premiums could be slashed by $1 billion, saving members hundreds of dollars a year, if insurers cut administration costs, moderated their profit take, reduced preventable hospitalisations, tightened payouts for extras care and smaller funds merged, the new report says.

Under a business as usual scenario, health fund profits are set to rise even further with the most profitable 10 funds enjoying average margins of 10.2 per cent (increasing from 8 per cent today), the report said.

The recipe is burning a hole in members’ pockets forcing them to pay 20 per cent too much for their cover.

Private Healthcare Australia CEO Dr Rachel David said a key reason health fund costs were rising was that the medical device industry had not delivered on $250 million savings agreed with the government. Foxtel marks used under licence by Foxtel Management Pty Ltd.