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Patients squeezed by Government and insurers

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The Federal Government is set to reap an extra $600 million from patients after legislation to freeze the income thresholds for the Medicare levy surcharge was passed by Parliament late last month.

Under the change, to take effect from 1 July next year, the Medicare levy surcharge thresholds will be held down rather than being indexed to inflation, meaning that as wages increase, many people will find themselves either becoming liable for the surcharge for the first time, or facing a surcharge increase as a result of moving into a higher income bracket.

The surcharge applies to singles who earn more than $88,000 a year, or couples with annual earnings above $176,000, who do not have what the Australian Taxation Office says is an “appropriate level of private patient hospital cover”.

In a double-whammy for taxpayers, rebates for private health insurance rebates will also be subject to a pause on indexation.

The Government expects to reap $599 million from the measure.

The changes come amid mounting evidence that policyholders are scaling back on their health insurance, including picking ‘junk’ policies that provide the bare minimum of hospital cover, as income growth slows, premiums increase and rebates stagnate.

A Private Health Insurance Administration Council report, obtained by The Australian under Freedom of Information legislation, shows there has been a significant increase in the proportion of policies taken out by consumers that are subject to exclusions, excess payments or other restrictions.

The Council found that almost 79 per cent of all policyholders in 2013 had policies that were subject to an excess or co-payment, up from 70 per cent in 2006.

And the share of hospital cover policies that have at least one exclusion or restriction grew from less than 37 per cent in 2003 to almost 46 per cent in 2012.

In a recent speech to the private health insurance industry’s peak body, AMA President Associate Professor Brian Owler bemoaned the proliferation of exclusions in health policies, which he said often left unsuspecting patients stranded.

A/Professor Owler told Private Health Australia that one of the big gripes of patients and doctors were policies with multiple exclusions.

The President, who works as a paediatric neurosurgeon, said he had personal experience of patients in need of surgery, only to find that it was not covered by their insurance policy.

“Too often, my members see patients who think they have cover, but don’t, because they purchased a cheaper product several years ago,” he said. “Sometimes treatment is planned and surgery is booked, only to be cancelled shortly beforehand because the hospital’s health fund check reveals that the patient is not covered. It is not an unusual scenario.”

In its report, PHIAC said the growth in policies with multiple exclusions “could, in part, be a response by health insurers to the constraining of premium increases by the Government. Health insurers may wish to add exclusions to products in order to maintain profitability”.

But the Council noted that the proliferation of policies with a wide variety of restrictions, exclusions, co-payment, excess and limitation periods made it “very difficult for consumers to compare products, and to choose the best value product for their particular circumstance”.

Adrian Rollins