Public versus private? An overview of the debate on private health insurance and pressure on public hospitals

Health Hospitals Australia
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The 7.96 per cent average increase in private health insurance premiums for 2005 marks the third year in a row in which private health premiums have increased on average by more than 7 per cent. Federal Health Minister Tony Abbott's announcement of the increases was greeted with criticism from the Opposition and health consumers, who argued that the premium rises were unnecessarily high. The government and the private health insurance industry argued, however, that 'increasing use of private hospitals as well as ... higher health costs' justify the increases in premiums. There is certainly evidence to support this claim: according to the Private Health Insurance Administration Council (PHIAC), in 2004 hospital benefits paid out by private health insurance companies increased by 9.6 per cent, gap payments to doctors increased by 19.2 per cent, and benefits paid for prosthetics increased by 18.7 per cent.

The more contentious point made by Mr Abbott in his announcement of the private health insurance premium increases, however, was the claim that 'every patient treated in a private hospital is one less patient on a public hospital waiting list'. In current debates about the Australian health care system, the relationship between private health insurance membership levels and public hospital waiting lists is one of the most hotly contested, and complex issues. In large part, this is because this issue is a focal point for a broader philosophical debate about the respective roles of the public and private sectors in the delivery of health care in general, and hospital care in particular.

This Research Note explores these issues by discussing the market for hospital care, and the available evidence on the relationship between private health insurance and public hospital waiting lists.

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