Budgeting for health means making the right choices
Key takeaways from this article:
It’s official – Health Minister Greg Hunt has confirmed that this year’s private health insurance premiums will rise by an average of 3.95% from 1 April, 2018.
This increase follows a number of government health reforms (announced in October 2017) that aim to reduce the strain on private health cover, address issues of affordability and make private health insurance policies easier to understand for consumers.
The good news is that this rise is the lowest in over 15 years. The bad news is that it’s still a rise, and puts additional stresses on already cash-strapped Australian families burdened by slow wage growth and rising prices on everything from education to childcare.
As always, these annual price hikes are based on an average. Each health insurer is different and individual policies vary considerably.
How these hikes will affect you depends on your insurer and the types of cover you’ve chosen. In 2018, your increase could end up being anywhere between 2.28% and 8.97%. This CHOICE table can tell you where your particular fund is positioned in relation to the 3.95% average.
At the same time, the government’s private health insurance rebate will be cut by around half a percentage point this year. If you put that cut together with the 3.95% average premium rise, your actual premium cost rise will average closer to 4.7%.
When you take yearly cuts to the government rebate into account, it means that the real cost of private health insurance in Australia has gone up 82% in the last ten years.[i]
While critics of these rises are prone to compare them with the country’s overall rate of inflation, Health Minister Ley insisted that comparing premium hikes to the general inflation rate was “not that useful” because health inflation rates were closer to eight per cent across Australia.
2018: A Year Of Change For Health
In many ways, 2018 will serve as a ‘guinea pig year’ in which we find out just how effective the recently introduced government health reforms will turn out to be in practical terms. These changes include:
- Alterations to Prostheses List pricing arrangements to reduce spiralling costs
- Discount for Lifetime health Cover (LHC), to encourage younger Aussies to join health funds
- Introduction of a mental health safety new for low-cost policy holders
- Standardising of clinical terminology to make it easier for consumers to compare health funds
- Introduction of a ‘rural health product’ to improve the value of private health insurance for Australians living in remote and rural areas
- Recognition of more mainstream natural therapies in ancillary policies
This article goes into more detail about the newly introduced health reforms. Only time will tell how they perform in the real world.
The Reasons Health Costs Are Rising
Health spending chews up an increasingly large chunk of state and federal budgets – it has grown 74 per cent over the past decade. Some spending categories cost more than others, especially hospitals, medical services/primary care (including Medicare) and pharmaceuticals.
Many factors contribute to increased health costs. Our population is growing and it’s also aging. Health inflation is also rising faster than the Consumer Price Index.
But these factors account for less than a third of the increase – the remainder is simply due to the fact that people in every Australian age group are receiving more expensive medical services per person and accessing them more frequently.
Quality of treatment in Australia has risen with advancements in technology, facilities and medical training. In many cases patients are receiving treatments or medications that didn’t even exist ten or fifteen years ago.
For example, the average 50-year-old today visits a physician more frequently, consumes more prescription drugs and has more tests and surgical procedures than a typical 50-year-old did a decade ago.
The predominant reason we’re experiencing growing health costs is because we’re accessing medical services more often and those services are improving in quality (and price)2
Spending more on health is to be expected in a prosperous, first-world economy – and it’s not necessarily a bad thing. With extra costs come extra benefits. Australia enjoys impressive life expectancy rates and a standard of health care that’s the envy of many other nations.
As medical technology progresses, we’ll enjoy better treatment in the future too. But these advancements don’t come cheap and someone has to pay for them.
Ways To Reduce Your Health Care Costs
Prevention is better than cure, so keeping yourself healthy is by far the easiest way to beat the rising costs of health care.
The less you need to access health services, the less you’ll spend from year to year. Many of the current burdens on our national health system are caused by diseases and conditions that could easily have been prevented by simply adopting healthier lifestyle choices.
These days, it’s not difficult to get screened for a variety of cancers and other health issues – you just have to take the time and effort to visit your doctor and get it done.
Whenever you encounter any kind of unusual symptoms, get them checked out sooner rather than later – you can potentially save a considerable sum in treatment costs by catching a problem early. In some cases, a rapid diagnosis might even save your life.
Of course, life comes with no guarantees. Even when you do your best to look after yourself, there’s no way to predict what the future might bring.
Unexpected illnesses and accidents can happen to anyone at any time, so you need to make sensible plans to deal with these events.
Private health insurance aims to alleviate the financial pressures associated with unexpected health calamities like a stay in hospital, inability to work due to injury and a range of other unpleasant surprises.
It can also help you maintain health by assisting with essential payments for specialist medical services like dentists, chiropractors, podiatrists, psychologists, physiotherapists, optometrists and so on.
Health Insurers Are Not All The Same
While there’s nothing much you can do about annual rises in average health fund premiums, there’s plenty you can do to trim your individual health insurance costs. Sometimes, all that’s needed is to shop around for an insurer that provides a level of cover more suited to your needs.
You can also look at the option of increasing your excess to reduce your premium.
If you already have private health cover, now is the time to check it over and reassess your requirements. Are you getting the cover you want? Are you possibly paying for cover you don’t need?
The health insurance industry is ultra-competitive at the moment – you’ll find all sorts of discounts for signing up online, policy add-ons, bonus deals, extra services, sign-up-a-friend deals and similar incentives.
When checking out different insurers, there are some important points to consider. How long have they been in business? What independent industry awards have they won?
What’s their complaints record like? How many testimonials from happy customers can you find?
An insurer’s online FAQs page is a good place to find general information on how they operate, and the Australian Private Health Insurance Ombudsman provides useful annual reports on providers.
Look for insurers with a track record of great customer service and attractive policy options that are affordable but don’t leave you underinsured.
And always read the Product Disclosure Statement thoroughly so you know what’s covered and what isn’t – this will prevent surprises when it’s time to make an insurance claim.