New study reaffirms value of PHI rebate to Australia’s health system

The Private Health Insurance (PHI) rebate is delivering value to Australia’s health system, both in economic costs and welfare gains, according to a new study.

The study, conducted by social policy research firm, Evaluate, concluded that at current settings, a dollar spent by the Government on the PHI rebate is up to 15% more efficient than a dollar directed to the public system.

While reaffirming the economic benefits of the PHI rebate, it also confirmed that importance of the private sector and the PHI rebate in contributing to Australia’s highly successful ‘mixed’ health care system.

The relative efficiency of the Private Health Insurance Rebate v. direct public health expenditure” study, commissioned by Private Healthcare Australia, examined three issues:

  • The history of the Australian health system and the role of private health insurance (PHI) to look at how the current arrangements evolved;
  • The total economic cost of funding procedures via PHI or direct expenditure on public hospitals; and
  • The broader welfare gains associated with alternative methods of health finance.

Teachers Health CEO, Mr Brad Joyce, says the outcomes of the study confirm what is well known within the industry, the PHI rebate is a key factor in addressing the issue of affordability.

“We know that one of the major issues that our members are facing, along with the broader Australian population, is affordability.”

“Further erosion of the private health insurance rebate will only exacerbate this issue, so it’s vital that the Federal Government recognises the findings of this study which reaffirm the value of the rebate,” Mr Joyce said.

The Government's contribution to an individual's private health insurance rebate is indexed annually by the lesser of the Consumer Price Index (CPI) or the actual average increase in the premium charged by insurers.

“At the very least, a floor amount under the rebate, say 25%, will not only improve affordability, it will remove uncertainty and confusion among consumers around how much they will pay when their premiums go up each year,” said Mr Joyce.

This sentiment is echoed by Private Healthcare Australia CEO, Dr Rachel David, who says the current mix of expenditure is hitting the mark and delivering a world-class health system. Australia’s mixed private – public health system is providing the right balance of healthcare for consumers.

“This study confirms that further change to the current mix of expenditure would have a detrimental impact across the Australian health system.”

“The PHI rebate allows a greater proportion of the population to access private health care, which benefits the wider community by reducing waiting times in public hospitals. A healthy private sector is essential to the sustainability of Australia’s health system and the Private Health Insurance rebate is a key component of this,” said Dr David.