• Tim Adair, Jeromey Temple
• National Seniors Productive Ageing Centre

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28 October 2011Healthy and productive ageing rests considerably upon timely and affordable access to health care. In the near future, expenditure on health care is expected to rise as population ageing places heavier demands on the public health care system. The Federal Treasury projects government expenditure on health care on those aged 65 and over is to increase seven-fold from 2010 to 2050 – and 12-fold for the over 85 age group over the same period (Commonwealth Treasury, 2010). To alleviate pressure from the public health care system, from the late 1990s the then Howard government introduced key reforms to the private health insurance sector, which sought to encourage Australians of all ages to purchase private health insurance.

These reforms are colloquially referred to as ‘carrots’ and ‘sticks’: those that provide incentives to purchase, and disincentives not to purchase, private health insurance. This intervention was considered necessary because over time there had been an ongoing decrease in the number of younger, healthier persons with health insurance relative to older persons and those with more complex needs – a process health economists term as an adverse selection spiral (Barret and Conlon, 2003). Since the implementation of these reforms, there has been an increase in the proportion of the Australian population covered by private health insurance from 32 per cent in 1997 to 45 per cent in 2011 (PHIAC, 2011a).

In the context of these ongoing reforms, it is important to understand changes in the numbers and proportions of older Australians that are insured, as they represent a population that is particularly pre-disposed to requiring surgery, hospital care and other health services. Knowledge of health insurance coverage of older persons is also important because international studies have shown those who lack appropriate insurance coverage are at greater risk of disability, are unable to access necessary drugs, pay high out-of-pocket health care expenses and are less likely to seek health care services (Landerman, Fillenbaum, et al., 1998; Federman, Adams, et al., 2001; Rogowski, Lillard, et al., 1997; Angel, Angel, et al., 2002). In Australia, private health insurance plays a different role than in other Organisation for Economic Development (OECD) countries, as the private health insurance market operates concurrently with the publically funded Medicare system.

Nonetheless, key advantages offered to older persons who are privately insured include shorter waiting times for surgical care, access to high technology treatments, access to private hospital rooms and better access to dentistry and ancillary services (Leeder, 2003; Stoelwinder, 2002; O’Hara and Brook, 1996; Buchmueller, 2007).

Surprisingly, only a handful of studies have examined the coverage of older Australians with private health insurance. Using 2001 data from the National Health Survey, Temple (2004a) found those with low levels of economic resources, those living alone or with low levels of education were less likely to hold health insurance. In another study, tracking health insurance coverage of older persons from 1997 to 2002, it was found that although health insurance coverage among persons aged 55 and over had increased over this period, it did so most rapidly among younger members of this age group (Temple, 2006a). Other research also suggests that the continuation of Lifetime Health Cover has the potential to preclude older uninsured people from purchasing health insurance because of affordability concerns, notwithstanding the increase in the 30% rebate for Australians aged over 65 (Temple, 2004b). Research on the broader Australian community also shows that factors measuring levels of risk aversion of individuals is also associated with the decision to purchase health insurance, in addition to a range of demographic and economic factors (Barret and Conlon, 2003; Industry Commission, 1997).

This report seeks to update earlier studies by answering the following questions in the context of the most recent reforms:

• What proportion and number of Australians aged over 50 are covered by private health insurance and how has this changed over a period of significant reform (1997 to 2011)?
• What are the reasons that older Australians give for purchasing or not purchasing private health insurance?
• What are the characteristics of older Australians with and without cover, and are there differences in the type of coverage?

Thus, the purpose of this paper is not to suggest policy prescriptions, but rather describe the patterns of health insurance purchase amongst older Australians in a recent period of considerable policy change.