Medibank chief George Savvides warns against cutting rebate

Medibank chief George Savvides has warned against changes to the private­ health insurance rebate­ or the rating system.

Medibank chief executive George Savvides at the release of the company’s half-year results yesterday.

Medibank chief George Savvides has warned the federal government against changes to the private­ health insurance rebate­ or a shift to a risk-rated system, arguing that the number of people insured­ would significantly drop.

The head of Australia’s largest health insurer, which report­ed a 58 per cent jump in half-year profit yesterday to $227 million, said he did not understand why there was a conversation around changes to the rebate. “You don’t start with the removal­ of a subsidy before you have made the offsets,” Mr Savvides said.

Federal Health Minister Sussan Ley is overseeing six different reviews of the healthcare system, including one on private health insura­nce, which has raised the prospect of tweaks to the rebate.

The 30 per cent private health insurance rebate was introduced in 1999, with costs rising from $1.4 billion in 1999-2000 to more than $6bn last year.

The idea of scrapping the rebate­ was raised in the federation white paper released late last year, which identified a list of options for sector reform.

Mr Savvides said the government’s dialogue around healthcare reform was focused on making health insurance affordable, which he said would not be the case if the subsidy was removed­.

“The conversation about taking the rebate off, or reducing it, is a sweet-and-sour mix with the positive things being listed around health reform,” he said.

He added that another hit to the sector would be a move to a risk-rated system. Mr Savvides said that 50 per cent of Australians had private health cover but in Britain, which has a risk-rated system, only 11 per cent of people had health insur­ance. “The benefit of the community rated system in Australia is that it has one of the most extraordin­arily high participation rates in priv­ate cover,” he said.

“If we really want to take pressure off the public system we need to, through the rebate and measures around regulation, make private health attractive and affordable. The way people co-contribute to that is through premiums, which significantly takes the economic pressure off the public system.”

Medibank outlined in its half-year results yesterday that it had not been an easy market for health insurers given affordabil­ity was a concern for most Australians. Industry-wide health insurance policy growth of just more than 1 per cent was the lowest level in a decade.

Insurers are hoping that a review­ of the Prostheses List will help drive policy growth by removing high costs from their business, which would help drive down insurance premiums.

Mr Savvides said Medibank paid $500m each year for items on that list and an overhaul of the significant price gap between what public and private hospitals paid for each item would “mat­erially” impact upon the insurer. “A material reduction in that anomaly (between public and private prices) will flow through to our claims book and members, but until we see that saving we can’t pass that on,” he said.