Illustration: Rocco Fazzari
IF THE next 10 years are like the past 10, changes to the private health insurance rebate means families with health cover will get about 30 per cent less in total rebates by 2022 than they would have under the previous model.
The rebate now increases in line with premiums but the half-year budget review, announced on Monday, revealed it will rise by no more than the inflation rate from April 2014.
Past trends suggest future growth in premiums will outpace inflation. For the past decade the consumer price index has increased by 2 per cent to 3 per cent a year but private health premiums have risen by 5 per cent to 7 per cent a year. As a result, private health insurance premiums have increased by about 80 per cent since 2002 while the consumer price index has risen by 28 per cent.
The nature of health services means increases in private health insurance premiums are likely to outstrip inflation.
Ian McAuley, a health economist from the University of Canberra, expects the cost of hospital and medical services, which drive changes in health insurance premiums, will keep rising faster than the consumer price index.
"Premiums have been significantly ahead [of] inflation because providing health services is a labour intensive activity and it's very skilled labour intensive activity," Mr McAuley said. "And we know that incomes are rising faster than inflation."
Bureau of Statistics figures show that over the past five years the price of hospital and medical services has been rising at an average of 5.9 per cent a year, which is more than double the overall rate of inflation in that period.
Inflation data released yesterday underscored this trend; the price of medical and hospital services rose 9.5 per cent in the year to September 30, while the overall consumer price index was up by just 2 per cent.
Analysis of the government's new health insurance rebate policy by Citigroup shows that if the historic gap between increases in premiums and inflation continues, the rebate as a proportion of the premium will decline from 30 per cent by 1 per cent each year.
"As an illustration, this will have the effect of making a 6 per cent increase in premiums have a 7.5 per cent increase from a consumer's point of view," the Citigroup report said.
In a separate report, Deutsche Bank calculated that if the government's new private health insurance rebate policy had been in force this year the affect on a typical health insurance consumer would have been a 6.7 per cent rise in premiums compared with the average premium increase of 5.1 per cent.
The government says the policy change will add $28 to the typical family private health cover next financial year and $14 for singles.
The Health Minister, Tanya Plibersek, said on Wednesday the private health insurance rebate had been the fastest growing area of health expenditure and needed to be contained: ''At the rate that it's been growing, the rebate is just unsustainable.''
Clarification: The headline on the original version of this story said the rebate "may shrink 30% a year". As the story made clear, the reduction of 30 per cent a year will be by 2022 if current price trends continue. Also, the Health Minister's comments were made on Wednesday, not Thursday, as in the previous version.