Health insurance

The Medicare levy surcharge is, in my opinion, an stupid tax designed to force some people into getting private health insurance, whether they want it or not, by taxing them more than the cost of the premium if they don’t, all in order to subsidise the otherwise unprofitable private health industry.

I earn enough to be stung by it, but with the insurers bumping up premiums, it’s getting close to the point where the costs are comparable. My Medibank Private policy (covering myself and the kids, for hospital) jumps about 10% this month to $99.60 per month. By my rough calculations that’s now quite a bit more than the surcharge would cost me.

At the same time the premium jumps, the brochure says a bunch of services that were previously “Restricted” will no longer be covered at all — including major eye surgery, assisted reproductive services, renal dialysis, and hip and knee joint replacement surgery.

Not that I expect to need any of these anyway (in fact, I never, ever, claim anything). But they’ve got some cheek marketing it as giving me “more certainty about the benefits you can receive”.

Dental cover

Meanwhile, we’ve found that Jeremy’s going to need braces. Not that he’s delighted, but he understands that now is the best time to do it, while he’s growing.

I don’t know how much it may end up costing at this stage, but the Australian Society of Orthodontists says fees involved can vary between $4500 and $8000. Ouch. I should find out in a few weeks what I’m looking at, but even if I wanted to join a health fund, there’s a 12 month waiting period for orthodontic benefits.

How much would I get back if I did have major dental cover? Comparing a few of the policies on the government’s private health insurance comparison web site, it would seem that as is typical in this game, the benefits from the fund for orthodontic work are far, far out-weighed by the premiums.

If I wanted that cover, I’d be paying more than $1000 per year more to Medibank, for a maximum benefit of $300 per year (though it may rise a bit each year).

Now, I’m not expecting them to hand out so much money that they go broke. But surely for something for which there is a waiting period, which is a major dental expense, for which you pay a huge extra premium to be covered, and is likely to be once per lifetime for people (if it’s done properly), they could do better than a measly $300 per year? Surely that’s the sort of case where (in that year), the insurance company should pay out more than you’ve been paying in.

Even looking around at other companies’ plans, I could have been paying $2000 per year more than at present, and only be getting 75% of the cost back, which is also not a winning proposition given the cost of the braces is likely to be spread over several years.

Insurance is a little like gambling, but it seems incredibly unlikely that anything will happen other than the private health insurers making money hand over fist.

Perhaps I’m misreading all this information I’m looking at (it’s amazingly complicated; looking through iSelect as well helped a bit), but I come away with the impression that even if you make some claims, private health insurance in Australia is a ripoff, unless you’re chronically unwell and repeatedly claim for a wide range of different services (eg not too much of anything so you hit any annual limits).

And of course these premiums are after the 30% private health insurance rebate has been applied. The rebate is a massive subsidy of the private insurance companies, costing around $4 billion a year — apparently up from $2.6 billion back in 2003-04.

Jeez; I can think of better ways of spending that amount of dosh in the health sector without propping-up inherently unprofitable enterprises, but for all the talk of reform in health, that seems to be one Howard government policy Mr Rudd apparently doesn’t want to roll back.

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27 thoughts on “Health insurance

  1. Well if he gets rid of the private health cover rebate, that would be one more broken election promise. I guess it would be in character for Kev, though.

  2. I agree almost completely with you.

    Regarding iSelect, there was a 7:30 report episode a few weeks back that indicated that iSelect might not be as unbiased as they claim; it certainly seems to be the case that their results aren’t entirely comprehensive.

    That episode mentioned this site:
    http://www.privatehealth.gov.au/

    Which might be interesting.

  3. I think it’s likely that it’s just too hard to rollback with the current Senate make-up. While the Greens and likely Xenophon would back it, the Liberals certainly wouldn’t and Fielding would just be too unpredictable to deal with.

    If the Greens have the balance of power after the next election, I suspect that Labor (assuming they win) will probably get rid of it.

  4. Forget Extras, put what you’d pay into bank and dole out as YOU see fit (not insurance company). Also do a search (not iSelect but govt. site) on not-for-profit insureres. All the others serve shareholders, not you.

  5. What Kathy said. We’ve not earned enough so far to be hit with it, but this year we will, and I’m prepared. I’d rather support the public system (even if that’s only symbolic, all things considered) than prop up some company’s profits. And even non-profits, I’m not so sure about the usefulness of it.

    I didn’t grow up with health insurance, but my parents saved the money and paid for braces etc from their own resources. I’m putting away the equivalent (actually a bit more than you’re paying, Daniel, to cover premiums and gaps) to pay for things ourselves.

  6. Vas and Paul, you’re right of course. They said before the election they’d keep the rebate, and trying to remove it wouldn’t work with the senate makeup currently. But what I find really interesting is the SMH article I linked to said that the study into possible reforms was specifically barred from even considering it.

    The National Health and Hospitals Reform Commission, which this week proposed changes costing up to $5.7 billion a year, was barred from examining the rebate, which cuts family health insurance premiums by about $1000 a year.

  7. I’m with Kathy. I refuse to be bullied into getting private health insurance which is a total rip-off. I have been paying the surcharge for years. I’d be happy to pay even more taxes if I knew it was going to support the public health system (I know, I know, the surcharge doesn’t go directly to health funding, it goes into consolidated revenue).

    I also think if we want good public health care (which I do – health care should be the right of all citizens) we have to support it by using it, by using our middle class privilege to insist that the care offered in the public system be excellent. If we stop using it we end up with a two tiered system with the well off in private care being looked after and the poor getting minimal health care. You can see this has already happened in education. I say, don’t let it happen in health.

  8. Also, what Justine said. To the nth degree. (I speak as someone who could’ve used my middle class privilege / income level to opt out of public delivery of my three babies with complicated pregnancies, but did not, on both ethical and pragmatic grounds).

  9. Health insurance is a huge scam. It is not “insurance” at all. It is an abuse of the English language to call it insurance.

  10. The 7:30 Report that Simon mentioned had an interview with the CEO (?) of GMHBA who refused to pay iSelect for listings. GMHBA are not-for-profit, unlike Medibank who, if I recall correctly, have just announced a move to for-profit.

    If you are going to stick with private insurance, GMHBA might be worth a look.

  11. That used to be my position too, until I discovered pain — horrible, debilitating pain — does not count as needing emergency care on the public system. When I got a kidney stone a couple of years ago I had three months of excrutiating pain but because it wasn’t life threatening, I had to go on the public waiting list. I forked out $4000 of my own money to pay for one of the procedures I needed which probably shaved about two months of pain off but now I have private health insurance because I could not go through that again!!

  12. May I provide a different perspective here? I’ll cop it big time, but here goes!

    Daniel, when you said that insurance is like gambling- it is, when you think about it! What is the purpose of insurance? You’re paying into a fund for the purpose that a specific event MAY happen! You don’t go and buy car insurance and then hope you smash your car- you’re hoping that it doesn’t happen! Think about it- how can an insurance company survive if everyone ends up making claims? Think of it as the insurance company behaving like the house on a blackjack table. There are a certain number of players, and each has a certain chance of winning. The game is such that not everyone can win all the time- and this is how the house is able to make money. Similarly, a certain number of people take out insurance policies, and the insurance company is hoping that only a few will “win”. If everyone claims, and there is “not enough in the house”, then no one can get what they need! It is also about risk management- you’re not going to give cheap insurance to a car hoon right? Because his odds of “winning” are higher, it will cost him more, as it is likely that the company will have to pay out!

    You all seem to make it sound like insurance companies earning profits is such an evil thing. Daniel, what if your boss was to make you work for nothing, telling you that this would cut operating costs, and thus allow the company to sell its services at a cheaper price, so consumers were better off, would you stand for it? Not likely! So why should a health insurance company do the same? They’re a business, like others, and a business need to make profit to survive! And if a health insurance company has larger profits, then doesn’t that mean that they have more capital to provide, thus being more likely to pay out a claim? By no means am I saying they’re perfect, and they can scam the system like anyone else, but at least they are offering a service, and if you’re not happy, find another one, the beauty of a free market system.

    And why is it everyone trusts the public system so much? Our dependance on government is sickening, which brings rise to the nanny-state. Why is it everyone thinks that the government is responsible for their own health care? If the government is to provide health insurance, why don’t they provide us car or house insurance? If I’m not mistaken, it’s the public hospital system that has the problems, not the private. And think about this- the public system has it’s problems at the moment, what would happen if hundreds of thousands more people went into the system? The overall funding would be worse, as there is only a finite number of resources in the public system.

    Why is it such a stretch for individuals to be responsible for their own health insurance? Isn’t it just another thing like buying a house, or buying clothes? As someone who can afford it, I look at having private insurance as doing the public system a favour, as I am one less person they have to worry about! If more people has that sense of personal responsibility and national concern, there may be more resources freed up in the public system, thus allowing for the possibility to provide better care. I know full well that there are many people who cannot afford private insurance, and so there should be a safety net in the public system. But remember, this all costs money, and there are only a finite number of resources.

    I think the abhorrent part of entering the private system is the fact that you still have to pay the 1.5% Medicare levy. You’re paying into two systems, when you only use one. As a reward for alleviating the pressure on the public system, shouldn’t that levy be removed? But, once again, I can afford it, and if that’s my contribution to the public system so be it! I just find it funny that we’re trusting the same government for our health that installed all those dodgy pink batts, and all those useless school buildings!

  13. I’m happy to keep paying the surcharge and go public.
    Case in point, I just had an MRI and paid nothing for it, yet my friend who has private health insurance was slugged $800 for hers. Ridiculous.
    Sure the public system is slow and tedious. However as a ‘single’ I have had most of the operations they cover and because I have existing conditions, no insurance company would cover me for what I need anyway.

  14. Umm Yasmin, have you checked how much your health cover would actually pay out for that procedure? As I discovered with the braces, it’s nowhere near what you might think.

    Andrew V, so you’re basically opposed to the Medicare principle of everybody pays so everybody’s covered? Not surprised.

    But my problem with the private insurance gamble is, as I say in the post, that I’m in a demographic where I can’t possibly “win”. So why am I (almost) forced to play?

    I’ll consider some other thoughts stemming from the comments here and do a followup post soon.

  15. Did I say that I wanted to abolish Medicare:
    “I know full well that there are many people who cannot afford private insurance, and so there should be a safety net in the public system.”

    Yes, there are many people who can’t afford private insurance- let Medicare cover them! But if we ditched private insurance all together, and everyone went on the public system, it would disintegrate altogether, as it just couldn’t cope- it’s struggling as it is! So why shouldn’t people who can afford it buy it, and do the responsible thing! I’ve got private insurance- do you see me whining and complaining?As I said, I think it’s unfair that I still have to pay the levy, as I’ve done the right thing by the government, but if that’s what I have to pay to help other Australians, so be it! I’m fine with that! I want this country to prosper, and it can’t with an overburdened system. I frankly don’t care if it costs me more than sucking on the government’s teat, it’s a matter of principle for me!

    You say that premiums go up just to line the pockets of evil insurance executives. But have you thought that maybe premiums go up because the cost of health care goes up? It’s only natural- inflation, new equipment, testing, malpractice suits, doctor and nurse salary rises all contribute to the rising cost of health care. That has to be covered some how. The government can’t just print money willy-nilly (though they seem to be at the moment)- that creates hyper-inflation, which makes everything worthless- in pre-Nazi Weimar Germany, they did this, and had the result that a wheelbarrow full of marks was needed to buy a loaf of bread! So the rise in cost can be covered in a few ways- premium hikes, Medicare levy hikes, or denial of coverage for far gone cases- take your pick!

    Ever since Gough Whitlam introduced Medibank, it has changed the way Australians think about health care. Instead of it being a personal responsibility, which it should be, we have become so lazy as a society that we just expect the government to foot the bill. Hell, we hardly even pay for GP visits! Surely we can afford a GP consultation- think about that, if we at least paid our GP visits, there’d be far more money in Medicare, and that might help the system somewhat!

    So once again I have to put qualifiers on this, as everyone seems to misunderstand me, because I’m the evil, idiot, warmongering conservative around here! I’m trying to get people to look at it in a different way! Someone here said health care should be a right. Who dictates that? Man? It’s a precarious philosophical issue! Having said that, I don’t want people dying in the streets? No! I want to make sure everyone is covered! But that won’t happen if those who can afford to go private stay public! You might think you’re getting the better deal but think about the fact that the public resources you’re utilizing could be accessed by someone with a greater need! We have become a selfish society- me me me, what about me, that we forget that others are affected. A stronger private system ensures a stronger public system, as resources are freed up to assist it!

    As I said before, we’ve become too dependant on government in our daily lives. We expect them to take care of us, nurture us, wipe our bottom- that’s not their function! They are supposed to provide infrastructure and security, and not meddle in the details of our lives. And there are people who need to access these services, and I understand that- but those with the means to should wise up! Just bear this in mind- if you’re dependant on government, you’ll only be as good as they allow you to be!

  16. daniel
    didn’t the Rudd govt try to abolish the 30% priv hosital rebate for wealthy people, but the senate rejected it?
    The Rudd govt raised the level when you start to pay the medicare surcharge from $50k where it was for almost 10 years under Howard to $75k. They tried to make it $100k but the senate rejected it!

  17. Andrew V, briefly: Always up for reading contrary views, but seriously, have you considered getting your own blog? :-)

    “Did I say that I wanted to abolish Medicare” – sorry maybe I read too much into what you said, but my view is that if all those with private insurance no longer pay the levy, that destroys the concept. It has to be universal to work.

    “You say that premiums go up just to line the pockets of evil insurance executives.” – I never said that. Not sure if anybody here did.

    My issue is that in the field of health insurance, it appears the private system is less efficient than the public system. The extreme case is the US, where medical spending is through the roof, yet crucial indicators like infant mortality are much worse than other western countries with universal healthcare: look at slides two and three at the bottom of http://news.bbc.co.uk/2/hi/8579322.stm

    (Perhaps in terms of private models that work, Singapore is the one to look at, though I have no idea how it does on other key indicators.)

  18. “I think the abhorrent part of entering the private system is the fact that you still have to pay the 1.5% Medicare levy. You’re paying into two systems, when you only use one.”

    actually you ARE using Medicare whenever you make a private health insurance claim. something like 75% of your bill is paid by govt. Medicare and your health insurance pays remainder of scheduled fee (you pay “the gap” if your doctor charged above the scheduled fee.

    @David: first kidney stone I didn’t have health insurance so the $4000 was as a self-pay trying desperately to get rid of the darned thing because the thought of being in pain on the waiting list was dreadful (turned out I needed another procedure as well as the kidney stone was so large and embedded so I still had to suffer on the public waiting list. Hell, pure hell. Second kidney stone two years later, this time round I had insurance. Was smaller and easier stone (probably fragment from first one the doc said) had it out on private with a couple of weeks of pain (instead of months) and about $1000 out of pocket for the gap.

  19. “Case in point, I just had an MRI and paid nothing for it, yet my friend who has private health insurance was slugged $800 for hers. Ridiculous.”

    there’s nothing requiring your friend to use her health insurance. If she didn’t mind waiting she should have told her doctor she wanted to
    be referred as a public patient rather than private and paying $800.

    The way I see it, health insurance is to cover you for non-life
    threatening procedures that you need ASAP. If you can wait, go public even if you have insurance.

  20. @Andrew V,

    Your position is fair enough, but there are two things I have issue with.

    1. The private insurers have a nasty habit of shirking their responsibilities, either by policy wording or by legal trickery. Indeed, Daniel’s post talks about this extensively (the $300 limit on dental expenses, eye surgery not covered at all, etc). That means you’ll wind up paying three times.

    2. You still have to use the public health system: there are no private emergency departments in Australia to my knowledge, and that’s why you still pay 1.5%.

    Nick.

  21. Umm Yasmin, that sounds awful, but I guess one could argue that over years of paying private you would have actually paid more than the $4000 you shelled out for the surgery.

    My family have no private health. We’d be slugged a fortune for waiting so long to have it, and I’ve heard countless cases where people didn’t end up covered for what they needed or ended up in public despite having private insurance. If the worst comes to it and we have to pay for something ourselves so be it – we still feel that in the long run we’ll be ahead.

    Although I do admit that for people with chronic illnesses the health system is very problematic indeed.

  22. Yep, some private hospitals do provide emergency departments, but I believe there’s normally exceptions to what they’ll handle; the Cabrini web site mentions that. Most private hospitals simply won’t have the range of facilities the big public ones do.

    I know from past experience one incident where a family member with insurance was going to be taken to a cushy private hospital, but the ambos considered the problem was better handled at Monash Med Centre.

  23. I’m a natural therapies practitioner, and I can tell you that how health funds treat extras differ very much. Medibank has for a long time made the cost of having extras packages exorbitant and for a long while our professional association wasn’t having much to do with them. I believe other health funds are more genrous. HBA is pretty good. I’ve also heard good reports about Australian Unity.

  24. I think Andrew V makes an excellent case as to why health insurance should not be run by a profit oriented business… there is a HUGE difference between my personal wellbeing (health insurance), and financially protecting my property (car + home insurance).

    I would prefer the money pumped into private health insurance were directed towards the public health system, but people are always going to want to have an option for “different” care. Perhaps if the public system covered more, and the private system were a little more regulated (dirty word!) it would be more to my liking…

    Having said that, I have done quite well out of the private system, mainly due to 2 incidents.

    1) I was planning my first ever ski trip, and specifically got health insurance to start the day before I went away (mostly just in case I incurred ambulance, ie helicopter, fees). As it turns out, I busted my ACL and needed a knee reconstruction. Sure, I could have gone on the waitlist and had it done under the private system, but having unsurance meant that I got a doctor I wanted, when I wanted it, plus contributed to my physio fees

    2) we suspended our health insurance when we went o/s for a year. My wife had a belly fully of arms and legs on our return (obviously so) and yet the health insurer still offered obstetrics and waived the waiting period… We had no intention of going private (had intended to us a public midwife-run birthing centre), but as it turned out we ended up in hospital anyway, and flicking the private patient switch meant we could get our own room.

    as mentioned, neither of theses scenarios REQUIRE private health insurance, but it did give us other options… I just wish the public system was a little more comprehensive, and a little better funded.

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