Why seniors love to hate private health
A new survey of older Australians supports NSA’s call for a total review of private health – before it fails the seniors’ market.
The value of private health insurance (PHI) is being eroded by rising costs, reducing coverage, increasing hospital excess, and gap fees. But many are sticking with it as a necessity of ageing. That’s what you told us!
Our Social Survey of 4,500 people aged 50+ explored older Australians' experience with PHI – levels of coverage, reasons for having or not having it, problems with it, and what needs to change.
Unsurprisingly, most older people want and need private health insurance. But worryingly, those who do have it are paying more for less, with some making sacrifices just to hold onto it.
“There is a growing discourse about the unaffordability of private health. This must be addressed to preserve private health as an option for older people facing ever-rising living costs,” National Seniors Australia CEO, Chris Grice, urged.
That’s why NSA is calling for the Productivity Commission to conduct an independent inquiry into the private health system. More on this later.
NSA Social Survey on PHI – key facts
81% of respondents said they had some form of PHI cover
96% with cover said it is important to them, 76% said it was very important
95% said it was likely they would maintain their current level of cover over the next 12 months
53% said they needed cost-saving strategies to help maintain cover – a third of these (37%) chose shopping around as the main strategy but, worryingly, one-fifth (22%) said they would reduce other spending to keep PHI.
19% of respondents said they did not have PHI
45% of full pensioners had no PHI, compared to only 16% of respondents with other income
35% of older people with a mortgage or renting had no PHI, compared to only 14% of homeowners without a mortgage
People with poorer health were much less likely to have PHI.
The main reasons for having insurance ranged from covering major private hospital costs and reducing waiting times for elective surgery to emotional benefits such as peace of mind and stress reduction.
However, dissatisfaction with gap fees and charges came in for special mention, with many believing they are being ripped off.
Seventy-two per cent of respondents who don’t have current PHI have let it go. The reasons for not keeping it included: unaffordability (63%), lack of value (40%), costs adequately covered by the public system (23%), and it did not adequately cover specialist costs (9%) and procedures (9%).
Mr Grice said the results shed a light on a system that’s under pressure and risks failing a key market.
“Our research reveals while most older people want and need private health insurance, the rising cost of premiums and out-of-pocket costs for private health undermine its value. Those who do have it are paying more for less and make sacrifices in other areas to hold onto it,” Mr Grice said.
There are dangers to the public health system if older people keep leaving PHI, especially if those people have poorer health.
“If older people drop out of private health this will lower premiums. However, the impact on the public system is it will require more funding and taxes to support the influx of older, sicker patients. Good for private, bad for public,” he said.
“Despite several reviews, nothing has changed. Private health insurance holders continue to face premium increases, product limitations, and soaring out-of-pocket costs. The inquiry should identify ways to improve its value proposition to policy holders in general and older policy holders in particular.
“NSA is also calling for an increase in the Private Health Insurance Rebate for people on lower incomes to help them maintain cover,” Mr Grice said. “As our research confirms, these are the people who are most likely to consider dropping PHI.”
The federal government should direct the Productivity Commission to conduct a full review of the private health insurance system, with an emphasis on identifying ways to improve its value proposition to policy holders in general and older policy holders in particular.
The Productivity Commission could especially focus on the:
- Growth of private health insurance premiums and out-of-pocket expenses
- Value and scope of product offerings covered by private health insurance
- Importantly, reforms needed to minimise premiums and out-of-pocket costs.
More information about this policy recommendation is available here.
