Australian Lefty on Politics, Governance, Science and Info Management

Health funds admit they should not exist

Posted by Dave Bath on 2011-04-03

It’s good when an advertiser tells the unvarnished truth, sad when you realize that neither people mor government are prepared to join the dots… and the advertisers know this.

The ad in question was for a health fund.  The argument was "use us because we pay out 96 percent of what we collect in premiums, the average health fund returns 91 percent."

In other words, if the 5% difference makes it worthwhile switching to them from a more wasteful place to put your month, the extra 4% from putting your premium under the mattress is even more attractive, and you’d do much better putting it in a bank for another couple of percent.

In other words, they admit the nation is better off without a health fund, or that the best health fund is a bank, where you are guaranteed a few per cent more than you put in.

It would be bad enough if only stupid individuals were being sucked in, but that governments subsidize premiums, knowing they are throwing taxpayer funds down the drain – well, that is stupid, if not corrupt.

A nationalized insurer that simply paid for services rendered, out of a normal secure deposit at a bank, direct to doctors and hospitals, without the need for salesforces, systems to maintain membership registers, etc, would be at least 12% more efficient (the inefficiencies of the average fund versus the interest from a secure deposit in a giant consolidated account returning the cost of money).

It is worth noting that the old friendly societies paid out slightly more than they collected in premiums – they invested the pooled funds, and the return on those investments paid running costs and the payouts over premiums.

A government, leveraging all the infrastructure already in place for dealing with health records, with even less need for administration of sales forces, with greater pooled funds permitting investments with higher interest returns, would be naturally capable of much greater effeciences than the old friendlies, and certainly better than the corporatized health funds.

Hell, if there was a shortfall, a government can borrow money at a better interest rate than the 9% effectively charged by the average corporate health fund!

Even the minimal efficiency gains of 10% in delivering dollars to healthcare providers, by cutting out the middleman, shortening the supply chain of money to doctors, nurses and physios, would be a massive saving on the government budget, and private funds, given that health spending is such a big ticket item.

Of course, the Liberal Party fought even a miminal bit of means-testing for this waste, when KRudd wanted to cut out the rebate for those earning 120k.

So much for fiscal responsibility from the Libs!

Labor, in a second term, has no need to maintain the waste, especially as it leads to a greater rebate to the wealthiest with the most expensive plans.

So much for a commitment to fairness from the ALP.

So, how do the corporatized health funds justify their existence?

That justification, given to the public, is an obvious lie.  The justification the politicians accept is much, much worse.

See also:


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