Last week, Health Minister Mark Butler told the ABC that the government would be moving forward with its proposal to change private health insurance rebates for older Australians.
The change would remove the extra age-based rebate for people aged 65 and over, and bring their rebate into line with younger Australians on the same income. The government says the savings will be redirected to aged care, including more aged care beds.
The estimated impact on premiums is in the order of a few hundred dollars a year for many policyholders, though higher for some couples with expensive cover.
The proposed change has prompted the usual warning: if people over 65 pay more for cover, they will drop their insurance and flood public hospitals.
That sounds plausible. But the claim is overstated.
While some people will no doubt drop or downgrade their cover, the more important question is whether that will meaningfully increase pressure on public hospitals.
The change will lead an estimated 44,000 people to drop cover across the whole country, the effect of which would be almost negligible.
Three facts undermine the scare campaign.
Private health insurance does not buy access to emergency departments. Private health insurance only kicks in once someone is admitted to hospital.
The up-front charge to be seen in a private emergency department can be hundreds of dollars plus tests and imaging regardless of insurance status. This means that most insured people who are experiencing a medical emergency will go to a public emergency department.
If someone cancels their private health insurance – even if they were planning on having an elective procedure – it doesn’t automatically mean they will end up in a public hospital instead.
Public hospitals apply different thresholds, prioritise by clinical need, and are less likely to provide marginal or low-value procedures. They won’t, all of a sudden, start performing the kinds of nice-to-have elective surgery that someone might only get if their insurance will pick up the bill.
The savings made from changing the rebate will be used to instead fund something that does reduce hospital pressure: aged care capacity. Thousands of hospital beds are occupied by older patients who don’t need acute care but cannot be discharged safely because aged care or community supports are unavailable.
The suggestion that reduced private cover will lead to public hospital chaos is simplistic and insincere. Public money is far better spent on easing one of the most obvious blockages in the hospital system rather than, as I’ve argued, subsidising private insurance premiums.
Luke Slawomirski is a Senior Postdoctoral Research Fellow at The Australia Institute
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