Private health insurance in rural and remote Australia

There are 1.3 million people living in outer regional and remote communities in Australia who are cross-subsidising the cost of private health insurance for people in metropolitan and inner regional Australia.

These are the people who pay for private health insurance but get very little back for what they pay. But by adding to the private insurance pool they help keep down the cost of insurance for metropolitan Australia.

The remaining 1.5 million people living in outer regional and remote Australia don’t bother.

Almost seven million people live outside Australia’s major cities and just over 60 per cent of those seven million people live in the inner regional centres. The remaining 40 per cent live in outer regional and remote communities.

The people who live outside Australia’s major cities generally experience poorer health outcomes than those living in the major cities.

They earn about 15 per cent less than those in major cities and generally die earlier too – and the further they live from a major city, the worse their health outcomes when they are ill.

Of those who live in Inner regional communities, 49.9 per cent do not have private health insurance, increasing to 52.3 per cent in outer regional and remote communities

And why should they when the most recent data for 2012-2013 from the Australian Institute of Health and Welfare shows that access to private hospitals outside the major cities is extremely limited, and approaching zero access once you reach outer regional communities1? Additionally, we know that access to allied health providers – whose services may be included under ‘extras cover’ – is also very poor.

With the latest private health insurance price rise on 1 April 2017, whether to continue holding private health insurance must be a question many residents of regional and remote communities are considering. Does private health insurance represent good value outside of major cities? Why should country people pay to keep down the cost of private health insurance for people in the cities?

In their 2005 “For debate” article in the Medical Journal of Australia, Lokuge, Denniss and Faunce presented evidence that led them to conclude that:

  • The key barriers to take up of private health insurance in regional Australia (by which they mean Inner and Outer regional and Remote and Very remote locations) were affordability and choice;
  • Regional Australia has lower levels of private health membership due to the limited availability of private inpatient facilities; and
  • There are structural failures in private health insurance as a vehicle for federal health financing that disadvantage regional Australians2.

Certainly between 2005 and the 2012-13 there has been little change in the access of people from rural and remote Australia to private hospital care. The Australian Institute of Health and Welfare published 2012-13 data on the number of private hospitals by location and hospital type and overwhelmingly, private hospitals are located in the major cities. That report found:

“Use of private hospitals in 2012–13 was highest for those residing in major cities (175 separations per 1,000 persons) and lowest for those residing in Very remote areas (67 separations per 1,000 persons).”

In rural and remote Australia, consumers would need to consider two key issues when determining if private health insurance is right for them – cost and value. With regard to cost, people living in rural and remote Australia are often less well off than those in the city and also face higher costs of living. This makes buying additional extras much more difficult, and also makes decisions on how to direct any additional disposable income more difficult.

In terms of value, many people in rural and remote Australia do not see the value in private health insurance. The value of private health insurance comes from being able to access a ‘private service’ with choice of doctor. In rural and remote areas, private hospitals are generally not available unless people are prepared to travel often significant distances, which is disruptive both socially and economically. In addition, there is often little choice of doctor – in rural areas there may be only one or a limited number of doctors and as such the idea of choice is meaningless. Further, there is dubious value in extras cover – there may be few if any providers in the local area thus making the product not usable in many rural and remote communities.

The one area of potential value in private health insurance for rural and remote residents is in being able to be treated as a private patient in a public hospital (albeit choice of doctor can still be quite limited). In this context, recent suggestions to remove the entitlement to be treated as a private patient in a public hospital would result in even further disadvantage for people who are already disadvantaged in the private health insurance arena.

The Alliance has been involved with the Private Health Ministerial Advisory Committee and its work to improve the value of private health insurance in rural and remote Australia. It is important to note that feedback from rural and remote consumers, communities and the workforce that serves them is to focus on improving the value of the product rather than reducing the cost. This offers an opportunity to consider how to make private health insurance products more attractive to people living in rural and remote Australia.

To become a product that is attractive to a greater number of people living in regional and remote Australia, private health insurance needs to deliver improved access outside the major cities and inner regional locations to a greater range of services. This may mean looking at how to support greater access to:

  • rehabilitation services;
  • mental health facilities and support services;
  • oral health;
  • mixed sub-acute and non-acute services;
  • prevention and early intervention; and
  • travel and accommodation when a patient needs to relocate for treatment.

Supporting such access may mean developing different models of service delivery for private health services outside the major cities and introducing modified private health insurance products for people living in rural and remote Australia.

Without a drive to innovate in private health service delivery outside the major cities, we will see increasingly smaller levels of uptake of insurance. Should there be a failure to innovate, the ongoing funding of health services in regional and remote Australia will rely on Federal and State governments at increasing cost to address the ever widening level of disadvantage in access to health services and the impact of that disadvantage on health outcomes.

Image credit: Arthur Mostead

1 AIHW – Australian hospital statistics
2012–13
– Table 2.2
2 MJA – For Debate – Private Health Insurance and regional Australia