Weaknesses in Reliance on Private Health Insurance Based on Health Funding - Term Paper Example

Weaknesses in Reliance on Private ‘Health Insurance’ Based Health Funding Student’s Name Institution Tutor Course Date TABLE OF CONTENTS Cover Page........................................................................................................................... 1 Table of Contents ................................................................................................................ 2 1. INTRODUCTION .......................................................................................................... 3 1.1. Background to the Issue .............................................................................................. 3 1.1.1 Australian Examples................................................................................................... 4 1.1.2 Oversees Examples (The United States) .................................................................. 4 2. REASONS FOR PRIVATE HEALTH FUNDING SCHEMES IN AUSTRALI...... 5 3. KINDS OF PRIVATE HEALTH COVER IN AUSTRALIA .................................... 6 4. WEAKNESSES IN RELIANCE ON PRIVATE HEALTH INSURANCE.............. 7 6. CONCLUSION ............................................................................................................... 9 7. REFERENCES ............................................................................................................... 10-12 1. INTRODUCTION The aim of this report is to shed light on various aspects of private ‘health insurance’ based health funding in Australia. In particular, the report talks about the weaknesses associated with such private health insurance schemes. Before the emergence of private medical insurance based health funding, almost all Australian citizens relied on Medicare, the public health care scheme in the country. Although the scheme provides basic health care to Australian citizens, it comes with a number of restrictions, such as denying patients the chance to choose their preferred doctors. As a result of such constraints, private ‘health insurance’ based health funding emerged. The private health care insurance scheme also has a couple of weaknesses, such as the high costs incurred by those who rely on it. The main purpose of this report is to discuss the weaknesses resulting from the reliance on private ‘health insurance’ based health funding. The report begins by providing brief background information to the issue and listing examples of private health ‘insurance based’ health funding in Australia and overseas. Secondly, the report outlines the reasons for private health insurance schemes in Australia. Thirdly, the report describes the major health covers provided by the private health insurance schemes. Fourthly, the report discusses the positive side of private ‘health insurance’ based funding in Australia. Lastly, the report explains the weaknesses associated with dependence on private ‘health insurance’ based health funding in the country. 1.1. Background to the Issue Australia is one of the few countries in the world that have comprehensive public health care systems. Recent studies conducted by the World Health Organisation (WHO) placed Australia’s public health care system second after the Dutch medical scheme. Australia’s public health care system is said to provide comprehensive benefits and effective coverage to its beneficiaries (Australian Institute of Health and Welfare, 2012). Although the mandatory public health care scheme offers comprehensive coverage to Australian residents, they are allowed to take private health insurance plans whenever they find it necessary (Hally, 2008). The main reason that makes some residents take private health insurance plans is to enjoy the additional coverage benefits that are not provided for under Medicare (Willis, Reynoolds, & Keleher, 2012). Private health insurance plans have additional coverage, such as admittance to private hospitals and ambulance treatment. The private health insurance plans come with additional benefits as well as additional costs and weaknesses (Quaye, 2010). 1.1.1 Australian Examples All private health insurance funds operate under a collective organisation known as Private Healthcare Australia. The organisation comprises about 21 health funds and collectively covers close to 97% of all the residents with private insurance funding plans. The organisation provides health care benefits and coverage to more than 12 million Australian residents (Hally, 2008). The organisation was founded in April 21, 1971, to provide additional health benefits, which Medicare lacked. The organisation also issues its members with relevant information and advisory services relating to health financing (Australian Institute of Health and Welfare, 2012). 1.1.2 Oversees Examples (The United States) The United States has a number of private health insurance companies providing health care services and coverage to its residents. Some of these companies include Aflac, American Family Insurance, Ohio Mutual Insurance Group, and Mutual of Omaha. Private health insurance is the major source of health coverage in the United States. The private health funding covers more than 58% of all American residents (Healy, 2011). The funding is most suitable for residents, who are not covered by any publicly funded scheme and those with partial coverage from the government owned medical scheme (Patel & Rushefsky, 2008). Unlike in Australia where the public health care system (Medicare) is mandatory to all citizens, residents of the United States are not compelled by any law to take a public health care funding program. This explains why private ‘health insurance’ based health funding is more prevalent in the United States than in Australia (Brown & Finkelstein, 2009). 2. REASONS FOR PRIVATE HEALTH FUNDING SCHEMES IN AUSTRALIA As mentioned earlier, the private health insurance funding schemes emerged in Australia to provide services that Medicare does not provide. Firstly, Medicare does not give patients a chance to choose their preferred doctors, besides restricting treatment to public hospitals alone. It is for these reasons that some Australian citizens take private health insurance schemes (Willis, Reynoolds, & Keleher, 2012). Private insurance schemes allow their clients to select their hospitals of choice from the public or private sector, as well as their preferred physicians (Kongstvedt, 2013). This is beneficial to the patients since they get the opportunity to be treated at the hospitals they deem to be convenient and effective (Preker, Zweifel, & Schellekens, 2010). Secondly, Medicare does not provide for ambulance services. Although there is a misconception that the public funding scheme covers for ambulance fees, it omits this vital component. Ambulance services are extremely expensive, as it costs from $500 to 700$ for a single trip, depending on the location of the hospital (Connelly, Paopucci, Butler, & Collins, 2010). The cost of ambulance services is beyond reach for most Australians; however, the cost is made less expensive by the private health insurance schemes, which only charge $30 per annum in their plans. An individual is only expected to pay $30 as insurance to get ambulance cover for the whole year (Paolucci & Shmueli, 2011). Another reason many Australian residents go for private health insurance schemes is the opportunity they have to redeem costs they incur in hospitals or as a result of the specialised health care they obtain oversees (Preker, Zweifel, & Schellekens, 2010). Although there is a provision in Medicare for arranging for specialised treatment abroad, it is not guaranteed like in private health insurance schemes (Koutoukidis, Stainton, & Hughson, 2013). The private health insurance funds make prompt arrangements for oversees specialist treatments for their clients (Quaye, 2010). Lastly, Medicare rarely gives private rooms for residents, even when their conditions require such treatment. However, sometimes Medicare allows residents, even those with private hospital cover, to be treated as public patients (Kongstvedt, 2013). With private health insurance funding scheme, patients can choose to be treated in private rooms in hospitals and by doctors of their choice, and still Medicare is supposed to compensate them three quarters of all cost they incur while receiving such treatment (Connelly, Paopucci, Butler, & Collins, 2010). In that case, private health insurance funding schemes are perceived to be more comprehensive than Medicare (Paolucci & Shmueli, 2011). 3. KINDS OF PRIVATE HEALTH COVER IN AUSTRALIA Australian private health insurance funding schemes mainly offer three kinds of policies: ambulance only, hospital cover, and hospital and extras cover. Ambulance only covers members for a single ambulance trip every year (Hunter, 2013). Ambulance cover is useful to Australian residents, especially those living in states, such as Victoria and New South Wales, where Medicare does not compensate residents for ambulance costs. In these states, a single ambulance trip costs between $500 and $800. For that reason, it is economical for the residents to take private health insurance plans, which only require them to pay an average of $30 per year for an ambulance trip (Penrith, 2008). The second policy, hospital cover, comprises hospital-only private patient cover and ambulance trips. The hospital-only private cover also gives patients an opportunity to choose their preferred doctors (Breen, 2010). Hospitals covers, as a result of the high competition among private health insurance firms, costs between $60 and $70, which is quite affordable compared to premiums paid in oversees countries, such the United States and the United Kingdom (Boychuk, 2008). Hospital and extras cover is the most comprehensive cover offered by Australian private health funds. The extras in this cover are tailored to the needs of an individual to ensure that members are not charged for services they are unlikely to consume (Penrith, 2008). Most private health insurance organisations charge premiums of between $80 and $100 for the hospital and extras cover policy (Kruger & Kuziemko, 2013). 4. WEAKNESSES IN RELIANCE IN PRIVATE HEALTH INSURANCE FUNDING Although private medical insurance has attractive benefits, such as access to private rooms, avoiding queues, peace of mind, and choice of preferred doctors and hospitals, it certainly has many shortcomings. Firstly, private health insurance does not cover all conditions as is the case in Medicare. The conditions covered in private health insurance funds are determined by the policy that a patient has and their previous medical conditions (Brunner, 2012). Most policies offered by private health insurance only cover injuries and other short-term illnesses. This may inconvenience most patients, especially those with long-term illnesses. The scheme is also risky since no one can predict illnesses and as a result, one may develop a medical condition that is not covered by the policy they have taken (Beik, 2013). Secondly, it can be difficult for residents to identify the policies that best suit them. Most private insurance companies require their financial advisors to talk only about specific policies. Consequently, the advisors normally work in favour of their companies’ interests and end up advising clients the wrong way. Consequently, one ends up purchasing a policy that may not be of use to them (Kruger & Kuziemko, 2013). Another problem that people who rely on private health insurance funding may experience is the ever rising costs of premiums. It is argued that private insurance companies tend to increase their premiums whenever their production costs increase. According to a study conducted by Mercer to investigate group health intermediaries, the costs of medical treatment increase by approximately 10% each year. The 10% increase is normally passed by private insurers to their clients in form of premiums. The costs are a great burden on citizens, some of whom are not in formal employment (Fierlbeck, 2011). The last shortcoming of private health insurance funding is the lack of expertise and time constraints among the available consultants. Some private hospitals, which private health insurance companies mostly work with, lack highly trained physicians like the ones found in public medical facilities (Wagstaff, 2009). This may be problematic to patients with private insurance policies, especially those suffering from multiple special conditions. Such patients may also have their treatments delayed for a long time, especially if their hospitals of choice rely on consultants working in public hospitals (Joumard, 2010). Thirdly, some treatments are never covered under private health insurance funding schemes. Most private health insurance policies do not cover specialist treatments, particularly the ones provided to long-term ailing patients (Browne & Hofmann, 2013). In addition, private medical insurance does not cover some of the medical appointments made by their clients. Patients with private medical insurance policies should call their respective companies to confirm if they will cover the costs every time they get referrals for specialist treatments and consultations (French & Jones, 2011). 6. CONCLUSION Private ‘health insurance’ based health funding programs emerged in Australia as a result of the incomprehensive nature of Medicare: a mandatory public health care plan in Australia. For instance, the public health care plan neither covers for ambulance costs, nor allows residents to select doctors and hospitals of their choice. These are some of the shortcomings that private health insurance schemes seek to level out. Private health insurance schemes provide their clients with an opportunity to choose their preferred doctors and hospitals and are also tailored to suit the needs of each client. Although private health insurance funding seems to suit most Australian residents, there are a number of weaknesses and challenges it poses to those who rely on it. Most private health insurance schemes do not cover some medical conditions, treatments, and appointments. The private insurance funding is also a bit expensive, especially for people taking out the Hospital and Extras Cover. The private insurance funding is also expensive and unpredictable as premium costs keep on increasing with insurers’ costs on an annual basis. 7. REFERENCES Australian Institute of Health and Welfare. (2012). Australia’s health 2012: The thirteenth biennial health report of the Australian Institute of Health and Welfare. 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