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Health insurance rebates justified by both world trends and hidden savings.



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Health Group Strategies Pty Limited (INC. IN NSW) ABN: 16003 974 507

AND

INSTITUTE OF HEALTH ECONOMICS AND TECHNOLOGY ASSESSMENT

ST CHRISTOPHE EN BRIONNAIS, SAONE ET LOIRE, FRANCE

PO BOX 1095 DEE WHY NSW 2099 AUSTRALIA Phone: 61 2 9948 0011 Fax: 61 2 9907 6115 Email: iheta@ ozemail.com.au Website: http://www.hgs.aust.com

RELEASE DATE: 9 am MONDAY 12 July 2004

MEDIA RELEASE

HEALTH INSURANCE REBATES JUSTIFIED BY BOTH WORLD TRENDS AND HIDDEN SAVINGS

There is mounting evidence that governments of all political persuasions are moving away from reliance on tax-funded health systems towards private insurance, and that hidden cost savings justify Australia’s 30% health insurance rebate.

In a paper to be delivered at the Australian Health Insurance Association annual meeting in Sydney tomorrow, Mr. Paul Gross, formerly a senior adviser to both Labor and Coalition governments, argues that in the 1990’s both out-of-pocket payments and private health insurance grew fastest in nations that had tax-funded health systems.

“In the tax-financed health systems of Sweden, Italy, the Czech Republic and UK, new surveys show the new awareness of their citizens that they will have to dip into their pockets for better health care”. He said that over 10 percent of EU health care funding now involves private insurance, about the same as Australia.

“Politicians in those nations recognised that raising taxes was not a sustainable way to finance a health system.” He noted that Australia’s estimated shortfall in public funding was at least $ 6 billion (about 8 per cent of today’s total health expenditures), requiring a doubling of the Medicare levy just to catch up.

“What is more significant is that over the past 25 years, Australia’s mixed system of tax-based funding and private health insurance restrained growth rates in per capita health expenditures more successfully than either tax-funded systems or the heavily privatised US health system”, he said. “ We should not weaken our mixed system”.

Noting some recent calls by some academics to move to a single payer system where the Medicare levy was increased and private and public hospitals were both paid directly

by government, Mr Gross said that neither equity of access to modern treatments nor better patient outcomes were guaranteed by such a system.

“Canada has long hospital queues, patients with heart disease and cancer have relatively poor outcomes, and two Indian tribes are planning to build private hospitals on their land so as to be free from Ottawa’s prohibition of private hospital care for interventions covered by its Medicare system”.

“Germany, the UK and the USA are now using private sector expertise to guide management strategies for chronic illnesses. These governments concluded that the public sector could not do the job. In Australia many recent reports and consumer surveys are telling us that our management of chronic conditions is unduly expensive, inappropriate to patient needs, and inferior to world best practice”.

Mr Gross presented the preliminary findings from a new review of the value of the 30% private health insurance rebate in Australia. “It is often forgotten that for every tax dollar raised, we lose at least 20 cents in national output because we change the behaviour of those who are taxed. That “deadweight loss” is a hidden cost of relying on tax funding”, he said.

“The average management expense of private health insurers is about 11 per cent of all premiums paid. We hear claims that a single government payer would generate less than half this burden. However, if we financed Medicare by a higher Medicare levy or higher general taxes, the true cost of this “single-payer” model would be in excess of 24% of the taxes raised.”

“And we would lose five hidden benefits of private insurance. It reduces long waiting times at public hospitals, the resultant productivity losses of patients and their carers, and the demand on government budgets. It increases household savings behaviour, and it underwrites the development of innovative treatments that keep us vertical”.

“We need a restructured Medicare system in which private health insurance is viewed as essential in creating future access to innovative hospitals, nursing homes and less costly home care, and where we see better management of many chronic conditions because our health funds educate us to be informed consumers of quality care”.

FOR INTERVIEWS WITH MR GROSS on Monday 12 July:

Office in Sydney: 02-99480011 Mobile: 0414 628 243 Email: iheta@ozemail.com.au.