Health care spending- private health insurance in perspective Australian Health Insurance Association Conference, 2 November 2006

Authors: John Goss & Richard Webb Expenditure and Economics Unit Australian Institute of Health and Welfare

Australian Institute of Health and Welfare 3 Disclaimer The views expressed in this talk are the views of the authors and may not reflect the views of the Australian Institute of Health and Welfare or the Australian Government.

Australian Institute of Health and Welfare 4 Outline The health industry The private health insurance sector in relation to the health industry Prospects for the private health insurance sector

Australian Institute of Health and Welfare 5 The health industry

Australian Institute of Health and Welfare 6 Per cent Ratio of health expenditure to GDP, to (%) 9.8%

Australian Institute of Health and Welfare 7 Health industry growth has been high $8.1 billion dollar increase in last year Real health expenditure growth in last 10 years of 69% –- 5.3% per year. Real GDP growth - 3.7% per year.

Australian Institute of Health and Welfare 8 Hospitals are a very important sector 7 million admitted patients in % increase in last 9 years in admitted patients 2 million non admitted patient occasions of service $29 billion expenditure

Australian Institute of Health and Welfare 9 Medicare medical services 113 million services in million services in % increase 65 million GP services in million GP services in % increase

Australian Institute of Health and Welfare 10 Age-standardised death rates for major causes of death, 1922–2000

Australian Institute of Health and Welfare 11 Life expectancy changes from 1971 to 2002 At age 0 At age Females75 yrs83 yrs16.1 yrs21.0 yrs Males68 yrs78 yrs12.4 yrs17.6 yrs

Australian Institute of Health and Welfare 12 Expenditure on private health insurance and total recurrent health, constant prices, to $ billion

Australian Institute of Health and Welfare 13 Ratio of benefits paid by private health insurance to total recurrent health expenditure, to Per cent

Australian Institute of Health and Welfare 14 Proportion of the population covered by private health insurance, 1985–2005 %

Australian Institute of Health and Welfare 15 Annual real growth of expenditure on private health insurance and total recurrent health, to (%) Per cent

Australian Institute of Health and Welfare 16 Funding of recurrent health expenditure through private health insurance funds, by area of expenditure, current prices, 2004–05 Total funding: $8,670 million

Australian Institute of Health and Welfare 17 Gross and net funding of recurrent health expenditure through private health insurance funds, constant prices, 1994–95 to 2004–05 $ billion

Australian Institute of Health and Welfare 18 Expenditure on private hospitals $ billion 62.8% 60.7%

Australian Institute of Health and Welfare 19 Expenditure on public hospitals $ billion 5.1%2.5%

Australian Institute of Health and Welfare 20 Expenditure on all hospitals $ billion 12.5% 16.3%

Australian Institute of Health and Welfare 21 Private health insurance funding of hospitals % % % % % %

Australian Institute of Health and Welfare 22 Proportion of population with hospital insurance Difference %41.2%-5.1% %53.5%-5.4% %37.8%3.6% %32.5%-2.8% Total 45.4%43.0% -2.4%

Australian Institute of Health and Welfare 23 Private health insurance funding of hospitals On the basis of the 2.4 percentage points drop in membership share, one might expect a drop in private health insurance funding of hospitals of 2.4/45.4 which equals 5%

Australian Institute of Health and Welfare 24 Health expend per person by age & area of expenditure,

Australian Institute of Health and Welfare 25 Private health insurance funding of hospitals When hospital expenditure is weighted for age, the membership change between and would be expected to drop the proportion of hospital expenditure for the insured by only 1%. The age pattern of membership change is a more important determinant of funding than the absolute membership change

Australian Institute of Health and Welfare 26 Expenditure on medical services $ billion 0.0% 5.9%

Australian Institute of Health and Welfare 27 Expenditure on dental services $ billion 32.0% 21.1%

Australian Institute of Health and Welfare 28 Expenditure on other health practitioners $ billion 14.4% 21.5%

Australian Institute of Health and Welfare 29 Expenditure on aids and appliances $ billion 21.8% 10.4%

Australian Institute of Health and Welfare 30 Expenditure on non-benefit paid medications $ billion 5.1% 2.0 %

Australian Institute of Health and Welfare 31 Expenditure on health administration 37.2% 38.4% $ billion

Australian Institute of Health and Welfare 32 Areas where private health insurance funding zero or minimal Community health Public health Residential aged care

Australian Institute of Health and Welfare 33 Prospects for the future Will private health insurance funding as a proportion of the total ebb and flow as it has in the last 20 years?

Australian Institute of Health and Welfare 34 Ratio of benefits paid by private health insurance to total recurrent health expenditure, to Per cent

Australian Institute of Health and Welfare 35 Prospects for the future This depends on: Membership changes, especially by age group Which areas grow more rapidly Which new areas (if any) open up for private health insurance

Australian Institute of Health and Welfare 36 Annual average increase in expenditure, to , current prices Community health14% Aids & appliances13% Research11% Medications10% (5.8% in ) Ambulance10% Private hospitals9%

Australian Institute of Health and Welfare 37 Annual average increase in expenditure, to , current prices Dental services9% Public health9% Public hospitals7% High level residential care 7% Medical services7% (13% in ) Other health practitioners 6%

Australian Institute of Health and Welfare 38 Ratio of benefits paid by private health insurance to total recurrent health expenditure, to Per cent

Australian Institute of Health and Welfare 39 Which new areas might open up for private health insurance ?

Australian Institute of Health and Welfare 40 Future prospects ?

Australian Institute of Health and Welfare 41 Thank you

Australian Institute of Health and Welfare 42 Australian Institute of Health and Welfare Over 80 publications per year, available free online.

Australian Institute of Health and Welfare 43 Data sources Health expenditure Australia (AIHW 2006) AIHW health expenditure database Private Health Insurance Administration Council Australian Bureau of Statistics Other