Federal budget 2021: Health reforms could save Aussies millions

From improving the cost of major surgery to closing an insurance loophole, private health insurance is about to get a lot cheaper for many Australians.

The 2021 federal budget unveiled by Treasurer Josh Frydenberg promises to make private health insurance more affordable for Australians.

Key private health reforms revealed in the budget, which includes closing a loophole that dissuades people earning more than $90,000 a year from taking out private health insurance, slashing the cost of medical devices and reviewing tax rebates, could dramatically cut the cost of premiums.

Here we break down what each one means for you.

Review of the Medicare Levy Surcharge

Currently, workers who earn more than $90,000 as singles or more than $180,000 as families have to pay a higher Medicare levy if they don’t have health cover.

However, the penalty is no longer working because for many it’s cheaper to pay the penalty than buy health cover.

The government will review this measure and one possible outcome could be an increase in tax, although no announcement about this will be made until after the next election.

Changes to medical device pricing

The government has also committed to fast-track change to medical device pricing in Australia in a move that’s hoped will reduce the cost of hip and knee replacements, cardiac and other devices.

Private Health Australia CEO Dr Rachel David says the government’s decision would also help guarantee the affordability of top (gold) hospital cover for the millions of Australians who rely on private health insurance.

Health funds claim the move could save $500 million and slash premiums by around one per cent a year.

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“The cost of medical devices is one of the largest drivers of premium increases in Australia,” states Dr David.

“Currently, the price of medical devices in Australia is at least 30 per cent higher than in countries such as New Zealand, France and the UK. For example, the exact same stem item used in hip replacements costs more than $4,000 in Australia, while in New Zealand and the UK is costs just $1,800. In some cases, such as cardiac stents, private health insurers pay up to 5 times as much for the exact same medical device.

“Australia shouldn’t have to pay 30 per cent more than other countries for the same medical devices. The current medical device regime keeps premiums high and ensures that big multinational medical device companies make much larger profits in Australia compared to other countries.”

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Review of the private health insurance rebate

The government will also review the current private health insurance rebate.

While it used to cover almost 30 per cent of the cost of private health cover, which applies to families earning less than $180,000 and individuals earning less than $90,000, this year it is worth less than 25 per cent of the premium.

Without the proposed policy reviews, the rebate is on track to slide to just 16 per cent by 2030, forecasts Private Health Australia.

“The government’s decision to review the current policy setting for the private health insurance Rebate, Medicare Levy surcharge and default benefits signals further commitment to improving the affordability of private health care,” says Dr David.

“Private Health Australia has long argued for the restoration of the rebate to 30 per cent for low and middle Australians to make premiums more affordable for people who are paying for the cost of their own healthcare.

“Australia’s healthcare system is something that we can all be proud of. A strong private healthcare system will reduce pressure on public hospitals so they can provide the level of care needed for those without health insurance. These measures will ensure the sustainability of our health system by keeping private healthcare affordable.”

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