Australian Health funds accused of hospital rort

Private health insurers in Australia have been accused of using private hospital costs as a ruse to put up premiums, while not passing on cost increases to hospitals .

Private health insurers are believed to have again asked Federal Health Minister Tony Abbott last week to approve an annual premium increase of between 5 per cent and 7 per cent from April. If approved it would be their fifth successive rise at double the inflation rate.

The nation's biggest health insurer, Medibank Private, confirmed yesterday that it had lodged a submission to increase premiums as the Howard Government prepares to consider a shake-up of private health next year.

An independent evaluation of the Government's sale options for the publicly owned Medicare Private has been finalised by investment bank Carnegie, Wylie & Co, and will be considered by ministers next year.

Health Minister Tony Abbott is considering a range of reforms to make private health insurance more attractive, including a frequent flyer-style scheme that rewards members for going to the gym and offers at-home care, including chemotherapy.

Health funds have lobbied with Mr. Abbott to abandon the legislative restrictions on offering services outside the hospital system, including psychiatric care, pregnancy support and step-down care allowing patients to recuperate at home after surgery.

Mr. Abbott yesterday defended the right of health funds to increase their premiums for the fifth consecutive year. Under changes introducing by the Government, funds no longer have to obtain commonwealth permission to increase premiums unless they are seeking a price rise beyond inflation.

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An Australian Private Hospital Association spokesman said despite health funds securing substantial premium increases year after year and citing hospital cost as a reason for those increases, 'the reality is they are not passing those increases on to the hospitals'.

'Private hospitals share the frustration of health insurers being able to put their premiums up by 7 per cent a year with nothing to be shown for it by the end of the year,' the spokesman said.

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'When premiums for consumers go up 7-8 per cent, hospitals get about 2 per cent from health funds. This is in an environment of health CPI (consumer price index) running at 2.5 times the average CPI.'

In the past year, the two biggest funds, Medibank Private and MBF, both delivered profits of more $120 million.

Medibank spokeswoman Trish Hyde said the $120 million, put into perspective, represented 'about three weeks worth of claims'. 'We're not talking about large margins,' she said.

Mr. Abbott said no one liked to see health premiums go up. 'The funds are only allowed to increase premiums to the extent strictly necessary to maintain services and preserve capital adequacy,' he said.

Opposition health spokeswoman Julia Gillard said the Government's approval of the latest request to increase premiums would mean a 40 per cent increase over the past five years. 'These increases, in dollar terms, wipe out the contribution of the Government's rebate, even at the higher levels now provided for older Australians,' Ms Gillard said.

Australian Health Insurance Association chief executive Michael Armitage said an increase of 5-7 per cent was a figure 'that I've heard my stakeholders discussing'. 'I'm aware that the cost pressures are continually escalating. Everybody knows that the technology that is available for sick people today is 20 times better than it was not very long ago, and it's more expensive,' Dr Armitage said.

Dr Armitage said there was unlikely to be a big impact on membership levels as a result of the premium rises, with more than 10 million Australians now holding some form of health insurance cover.