‘Hit and run’ patients may be driving up record private health insurance numbers

Hip and knee replacements and weight loss surgeries conducted under private health insurance have soared during the COVID pandemic, as record numbers of people sign up to avoid the years-long wait for procedures at public hospitals.

The new memberships have brought the number of Australians with private health insurance to an all-time high of 14.37 million, up from 13.64 million at December 2019, according to Private Healthcare Australia.

Record numbers of Australians are turning to private health insurance during the coronavirus pandemic in a trend which has led to an explosion of common procedures such as joint replacements in private hospitals.Credit:Nicolas Walker

But one of Australia’s top health economists warns the boom in private health membership may be short-lived, suspecting the surge may be driven by people taking out short-term “hit-and-run” policies for one major procedure.

Analysis undertaken by the peak body for private health insurers for The Sunday Age and The Sun-Herald shows spikes in private health insurance claims for every common procedure across the country, compared to the same period in 2019, before the pandemic hit.

A snapshot of its national insurance claims data between October 2021 and August 2022 shows the highest number of claims nationally was for joint replacements – of knees and hips – which increased by 22 per cent.

Private health insurance claims for weight loss surgery in that period were up by 21 per cent, male reproductive system surgery (including vasectomies and procedures for prostate cancer) rose by 15 per cent, and claims for gastrointestinal endoscopies were also up by 15 per cent.

The analysis also showed private insurance claims for cataract surgery and medically necessary breast surgery (such as post-cancer reconstruction), increased by 8 per cent.

There was also a 6 per cent rise in gynaecology and plastic reconstructive surgery claims, while joint reconstruction claims have increased by 2 per cent.

About 758,000 Australians have signed up for private health insurance since September 2020, according to most recent data from the Australian Prudential Regulation Authority.

Pre-pandemic, the private health insurance sector was fighting to assert its relevance with numbers plummeting, especially among people aged 30-34.

Stephen Duckett, a health economist and honorary professor at the University of Melbourne, said many new private health insurance members were likely what he called “hit-and-run” patients, who sign up with a pre-existing condition, so they can have surgery as soon as they have waited out their obligatory 12-month notice period, which secures them hospital cover.

“They’ll have the operation in the second year and then drop their insurance in the third year,” Duckett said. ”It is what economists call adverse selection, meaning people who expect to use the service are joining up.“

Duckett warned such a trend could signal potential financial trouble for health insurers in the long term.

“This is not good for the private insurers because they are going to lose money on every one of the people in that boat, which may be a significant proportion of that growth in insurance,” he said.

Duckett said there had been a swing towards private health insurance off the back off tens of thousands of Australians awaiting surgery for painful conditions, such as hip and joint replacements.

He noted that signing up for private health insurance was a much faster alternative than waiting in agony for an uncertain number of years on a public hospital waiting list.

“It’s also cheaper to pay health insurance for two years then it is to pay upfront for an operation in the private hospital without being insured,” said Duckett, who is also a member of the Strengthening Medicare Taskforce.

Duckett said if a ‘hit-and-run’ membership trend is driving the rise in claims, it would worsen the financial situation of the health insurance industry, rather than improve it.

“The premium paid will be substantially less than the cost that the insurer will pay out for hip replacement, for example,” he said.

Private Healthcare Australia chief executive Dr Rachel David said it was too soon to determine exactly what was driving the surge in members.

“These people may have seen a short-term opportunity to join a health fund, wait 12 months and get some procedures done,” David said. “But we still don’t know the extent to which that’s a driver.”

She suspected the phenomena of rising private insurance claims was being fuelled by a combination of factors.

“The main one being a lack of confidence that timely access to surgery and mental health care is possible in the public system,” David said.

Private Healthcare Australia is polling members on why they are joining and investigating what procedures are being claimed, to get a greater understanding of what is fuelling the rise.

Some patients remained anxious about catching coronavirus while getting treatment in public hospitals, David said, which meant growing numbers of Australians were seeking insurance because they wanted more control over where they get their healthcare.

Australian Patients Association chief executive Stephen Mason said people aged over 50 had disproportionately postponed medical treatment and check-ups during the pandemic.

“This meant many people stopped getting treatment for crook knees and hips and various other things,” Mason said.

“We have done a lot of research that has found that older patients were very stoic and had an attitude of why go to a hospital or a GP clinic when there are people potentially dying of COVID that are more needy.”

Mason said this meant there were now a significant number of Australians who had delayed treatment for years while elective surgery wait times had dramatically increased, compelling more people to seek out private health insurance.

“The claims are going up, but it’s really just a catch-up,” Mason said.

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