Private health savings worth just 70c a week to young people, Labor says

The Australian Medical Association president says the Coalition’s private health reforms are ‘a start in the right direction’ but will not solve affordability. Photograph: Dan Himbrechts/AAP

The Australian Medical Association and some health funds have questioned the extent of consumer savings under the Coalition’s private health revamp, while one consumer group has suggested discounts for young people will entrench a “two-tier” health system earlier in life.

Labor’s shadow health minister, Catherine King, suggested savings could amount to as little as 70c a week for young people and leave vulnerable people with higher out-of-pocket costs when they make claims.

On Friday the health minister, Greg Hunt, unveiled changes that will allow private health funds to offer discounted private hospital cover to people under the age of 29 but increase hospital insurance excesses from $500 to $750 for singles and from $1,000 to $1,500 for couples or families.

In a statement on Friday the chief executive of Defence Health, Gerard Fogarty, said he was glad the government had started to address affordability but the reforms “are far from complete or sufficient to immediately reduce the pressure consumers are experiencing”.

“The headlines are simply wrong when they state that the changes will result in significant premium reductions,” he said.

Fogarty said the government needed to do more to stop “rorting in government regulated prostheses pricing” and cost-shifting to public hospitals’ emergency departments.

At a press conference in Melbourne, Hunt explained that for each year below 30 a person took out private healthcare they would get a 2% discount, up to a total of 10%, which would remain until they were 40.

Earlier, on ABC News Breakfast, the health minister said “the more young people you have in the system, the lower the average cost of premiums for everybody, because they are less likely to claim”.

One of the biggest savings in the package is an agreement with prostheses and medical device-makers to cut costs by $1bn a year in return for faster listing of devices for access to the market. Private health insurers had agreed in writing to pass that saving on in full, Hunt said.

The CEO of the Consumers Health Forum of Australia, Leanne Wells, praised clearer labelling of health policies and “ambitious” prostheses cost savings, which she said “appear likely to deliver not only lower premium increases in the medium term”.

But Wells warned that the plan to provide discounts for younger members “threatens to undermine the community rating principle fundamental to Australian health insurance, which is meant to treat everybody equally regardless of age or health status”.

“Health funds presumably are hoping that more young members will help subsidise the more costly demands of older members,” Wells said. “Given the cost burdens and modest wages many young people have, it would seem likely that this measure is only likely to be taken up by a minority of young adults who have the means, with the result that the two-tiered health system emerging in Australia is entrenched at an even earlier time of life.”

On Thursday the Australian Medical Association president, Michael Gannon, told Radio National the reforms were “a start in the right direction” but would not solve the affordability problem of private healthcare.

“The one thing the minister is up against … is the inevitable increase in the cost of healthcare,” he said. “Health [cost inflation] runs at 4, 5, 6% per year. We’re interested in some of the one-off savings that the minister is going to be able to achieve but it’s going to require ongoing work.”

Gannon applauded the attempt to “increase the size of the insurance pool” but said adding healthy people to the pool was not a “magic wand” to reduce prices. “We need serious reform which addresses the simple fact that the costs will continue to increase year on year.”

In a statement on Friday, Gannon said the AMA was concerned that an expert committee considering out-of-pocket costs would only consider doctors’ fees. He said it should also look at hospital costs, “inconsistent and tricky product definitions” and exclusions from health cover.

“Doctors’ fees are not the problem – 95% of services in Australia are currently provided at a no-gap or a known gap of less than $500,” he said.

The AMA has also criticised the government’s failure to abolish “junk” private health policies, such as those which only give cover in public hospitals. King welcomed the cost savings to come from the prostheses list and to remove the private health insurance subsidy from non-evidence-based natural therapies.

But King said young people paying the average $1,800 a year for private health insurance could save as little as 70c a week, while older Australians and families had paid an average of $900 a year more every year due to premium increases since the Liberals were elected in 2013.

“The people who pay the most for private health, and use the most private health, will continue to see their premiums increase next year,” she said. “The damage has already been done.”

King said trading off increases in excesses for “the prospect of slightly lower premiums” would leave vulnerable and low-income people facing “unexpected medical expenses” when they needed to claim.

The CEO of HCF, Sheena Jack, said the package was “good news for our members” and would help “make private health insurance fair and transparent for consumers”.

“The prosthesis list reforms signal that the government understands the cost pressures for health funds and this will represent real savings for consumers,” she said.