The costs of health
Have you ever wondered why the cost of hospital cover creeps up each year? Here, we explain the reasons for industry-wide price increases.
Every year, health funds across Australia review their covers and adjust their prices.
The yearly price review is due, in large part, to ever-increasing hospital costs — with factors such as more advanced (and expensive!) medical treatment and equipment, plus staff salary changes and doctors' charges impacting hospital costs. Australia's ageing population has also contributed to an increased incidence of complex and costly procedures.
Between 2008/09 and 2012/13, public hospital expenditure increased by an average of 4.7 percent per year, while during the periods 2008/09 and 2011/12, private hospitals spent around 8.4 percent more per year (after adjusting for inflation)1. While all insurers maintain reserves to cover unexpected increases in benefit costs, this only provides a temporary solution. If they experience or expect an ongoing escalation in the amount they pay out to members in benefits, then they must raise the price of your cover to remain financially viable.
Inevitably, when prices rise, people tend to question whether hospital cover is worth the expense. Here, we explore the options.
Public vs private healthcare
Medicare provides free treatment and accommodation for all Australians, as public patients in public hospitals. Patients are appointed a doctor and, for some procedures, may have to join a waiting list that can be upwards of a year depending on demand and on the basis of clinical needs. While this isn't always a problem, in cases where treatment is time sensitive, delays can worsen a condition or impact quality of life.
With private health insurance, on the other hand, you can choose to be treated as a private patient in a public or private hospital. This means that you may be able to choose the doctor and hospital you are treated in at a time that suits you. Whether or not you have any out-of-pocket expenses will depend on your level of cover; however, you can find out about any gaps from your doctor, health fund and hospital in advance, and choose a scenario that best suits your needs.
Comparing the costs
According to Private Healthcare Australia, hip and knee replacements are the big-ticket items when it comes to surgical procedures in the private health sector. In Victoria, where hip and knee replacement surgery is more expensive than anywhere else in the country, the average cost of such procedures, without complications, is more than $25,0002.
As a public patient, if you need a hip or knee replacement, you could either choose to join a waiting list or pay for the procedure yourself. But unless you have a spare $25,000 lying around, this isn't always an option.
With hospital costs likely to continually increase over time, it's now more important than ever — for financial reasons, as well as peace of mind — to keep your hospital cover.
Mind the gap
Did you know that you can reduce — or eliminate — any out-of-pocket costs you might incur with hospital treatment? The Australian Government sets a schedule of fees for all medical treatments called the Medicare Benefits Schedule (MBS). As a privately insured patient in hospital, Medicare pays 75% of the MBS fee and Australian Unity pays the remaining 25%.
Sometimes, your doctor or specialist charges are more than the MBS. The difference is known as the 'gap' and it's an out-of-pocket expense you have to pay.
By using a doctor who participates in Australian Unity's Gap Cover Scheme*, you can reduce or even avoid the gap (referred to as Gap Cover), giving you more certainty and less out-of-pocket expenses.
Learn more about Australian Unity's Gap Cover Scheme.
* Gap Cover is available to most Australian Unity members as part of their hospital cover. It is not available on any of our Overseas Visitors Health Covers or Basic Hospital Cover (B1). Gap Cover only applies to the treatment of illnesses or conditions available under your health cover. You should always ask your doctor if they will be participating in the Australian Unity Gap Cover Scheme before undergoing any treatment.
- Australian Institute of Health and Welfare, Australian hospital statistics 2012-13
- Private Healthcare Australia 'Variations in Care—Hip and Knee Replacement' 7 February 2014
Information provided in this article is not medical advice and you should consult with your healthcare practitioner. Australian Unity accepts no responsibility for the accuracy of any of the opinions, advice, representations or information contained in this publication. Readers should rely on their own advice and enquiries in making decisions affecting their own health, wellbeing or interest.