Medibank Private's chief actuary Andrew Matthews has called for the federal government to subsidise older and sicker Australians' health insurance and let funds adjust their premiums based on risk, to reverse the decline in membership that has been described as a "death spiral".
Mr Matthews said a relaxation of the rules that prevent insurers from charging higher premiums to those with chronic health conditions - with the government to help fund the difference - would entice the young and healthy with cheaper premiums and increase access to services.
"As a country, we want great health outcomes with efficient costs," he said.
The proposal would be budget-neutral if the government diverted some of the $6 billion worth of health insurance premium subsidies it gives Australians based on their incomes.
Prime Minister Scott Morrison has said his government is prepared to listen to all suggestions to arrest the slide in private health insurance membership, including a proposal by health funds for tax exemptions to allow employers to offer free health insurance to employees.
"If we've got people with chronic health issues and we want to make sure they get services, then we need to fund those services - whether they're in public or private," Mr Matthews said.
"We think the funding should follow the need of the person. That would be better, because there is stronger integration between the public and private systems. In Australia, it's not very well integrated whereas in countries like Germany it is."
He gave the example of a patient who needs mental health treatment but struggles to access services.
"If a good way of dealing with it is to have the private system provide that service, then we have to fund that, whether through private health insurance or some other way, but not from the individual - because it's too costly."
Mr Matthews is the co-author of a paper published on Tuesday by the Actuaries Institute, outlining how Australia could draw from international experience to improve Australia's public-private hybrid healthcare system.
In a paper, the peak body for actuaries - who measure and manage risk and uncertainty for insurers - warns out-of-pocket costs are undermining Australia's healthcare system and limiting access to services.
"A significant level of out-of-pocket funding for health care is prone to produce a reactive rather than a preventative health care system," the report said.
"It also undermines care integration and cohesion, leaving many with gaps in accessing essential care."
Mr Matthews said better integration of public and private healthcare would help close the gaps.
"Our motivation with the paper was let's stop being social critics and start looking for ways to adapt our system towards good health outcomes and efficient costs," he said.
Grattan Institute health economist Stephen Duckett said the Actuaries Institute proposal was worth considering, but that any changes should not amount to "a disguised further subsidy for private health insurers".
Australian Council of Social Services chief executive Cassandra Goldie said the private health insurance rebate should be abolished and the $6 billion redirected into the public health system.
- SMH/The Age