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In what is fast becoming one of the rituals of Australian health debate, new quarterly data on private health insurance was published yesterday by the regulator, APRA.

Now the private health insurance industry and its allies, bemoaning how people don’t want its product, are demanding incentives and punishments to encourage people to purchase it.

A net total of more than 28,000 people abandoned private health insurance (PHI) in the June quarter. More than 90,000 dumped their hospital coverage in the year to June, and another 16,000 dumped their general coverage. The pandemic has only continued a trend of Australians working out that unless you’re a routine user of complex medical services PHI is a scam.

Of course, although there were falls in the June quarter across almost every age group, PHI is an intergenerational scam most of all, and younger Australians continue to work that out. About 16,000 people in their 20s dumped their insurance in the June quarter. Since 2017 more than 100,000 people in their 20s have ditched hospital cover; about 85,000 have ditched general cover.

The private health insurance industry and the Australian Medical Association — worried about the nation’s wealthiest doctors losing patients to the public hospital system — have called for changes to either force people into private health insurance or make it less of a scam for younger people.

The AMA wants higher taxpayer subsidies for insurance, a more punitive Medicare levy surcharge, and discounts for young people. Private hospitals want the age at which people start being punished for not taking out PHI — currently 30 — lifted to 35, because the penalties that increase each year are deterring 30-somethings from buying a product they wouldn’t otherwise buy.

That prescription contradicts the evidence from APRA’s numbers: the problem with the 30- to 34-year-old cohort isn’t that it’s not taking out insurance, but that it’s dumping it.

More than 23,000 30- to 34-year-olds dumped their insurance in the year to June, despite that cohort also being the group with the highest uptake due to the 30 years threshold. That is, you can force people to take out insurance with the threat of punishment — but you can’t stop them realising it’s a rip-off.

And it’s not clear why shifting the threshold to 35 won’t simply transfer any deterrence effect to people five years older.

The private health insurance rebate costs more than $6 billion a year and will be nearly $7 billion a year in 2022.

The AMA wants to add more than $1 billion a year to this in order to generate $1.5 billion extra revenue for PHI providers.

It is also peddling the claim that a “Ponzi scheme” exists that allows older people to avoid the 30 years penalties by not taking out PHI until they are in a position to obtain value from it in their 60s, a situation more correctly described as a rational choice reflecting the poor value of PHI, rather than an illegal pyramid investment scheme.

“Ponzi scheme” is much more apt for a system in which older Australians rely on unwitting younger people to fund their healthcare. For an economy that systematically sacrifices the interests of young people for older voters, that’s appropriate indeed.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey

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