Dunne backs call for health insurance tax deductibility

Southern Cross Health Society has been forced to address claim cost inflation as use of the private health sector has seen average annual costs escalate by around 10% last year - up from an 8% rise in 2008.

Monday, June 21st 2010, 11:26AM 1 Comment

by Jenha White

Southern Cross chief executive Dr Ian McPherson has called for a fresh look at making health insurance premiums tax deductible and he was backed today by UnitedFuture leader Peter Dunne.

"Dr Ian McPherson is correct when he says the public health system cannot provide timely care for all New Zealanders today, and that demand will only increase as New Zealand's population ages."

Dunne says UnitedFuture had previously campaigned on tax concessions to recognise the savings created by those who choose to have private health insurance, or pay for private treatment for those over 65.

"This policy not only recognises the contribution made by that age group in our community that has the greatest need for our health services, but it also ensures that some of the pressure on our public system is relieved with patients able to access the private healthcare system."

Dunne says UnitedFuture's Confidence and Supply Agreement with the National-led Government also embraces the need for greater utilisation of the private healthcare sector to address these growing pressures.

"This is particularly with regard to elective surgery and incentivising people to continue to take up private health insurance is one way of meeting this demand.

"It is an approach I have been closely examining both in my capacity as minister of revenue and associate minister of health."

Data from Southern Cross which covers over 840,000 members, shows that claims for some of its most common procedures have significantly increased in the last two years.

In the last calendar year, members claimed for the removal of 39,455 skin lesions with $27.9 million in claims paid which is more than a 30% increase on the numbers claimed for in 2007.

There have also been significant increases in both surgery costs and utilisation rates for orthopaedic procedures.

In the period December 2007 to December 2009 the average cost for shoulder surgery increased from $7,931 to $9,126 with a huge 78% increase in the number of members claiming for this surgery.

Over the same period, the average cost for knee surgery has risen from $12,858 to $14,036 and with an over 20% increase in members undergoing this surgery, claims paid by Southern Cross have jumped from $27 million in 2007 to $36 million in 2009.

McPherson says the relentless demand coupled with higher healthcare costs is putting enormous pressure on premiums.

"Rising treatment costs and greater utilisation rates inevitably flow through to premium levels, and so we are working very hard to address this problem.

He says Southern Cross is paying 96 cents in claims to members for every dollar they pay in premiums.

"With healthy reserves we are able to absorb this cost and budget for a deficit in the current financial year. However, this can't continue year on year, so this escalation must reduce," he says.

One way the insurer is addressing claims cost inflation is by strengthening its Affiliated Provider network.

McPherson says the strengthening of this network is fairly critical to Southern Cross' ability to stabilise claims cost inflation and to keep its premiums as affordable as possible.

"As a result, we are looking to move some of our high volume procedures, such as colonoscopies, gastroscopies and cataract extractions, to be procedures covered by an Affiliated Provider only."

While these three examples are relatively low cost procedures, combined they accounted for over $50 million or around 10% of all elective surgical services claimed for by Southern Cross members in the last calendar year.

Making these procedures Affiliated Provider-only benefits, will provide long-term savings for the membership and with Southern Cross expanding its Affiliated Provider network, it believes members will still get a wide range of choice.

McPherson says the alternatives are to reduce access to these services or put premiums up.

"We believe these would prove to be less palatable options for members and healthcare providers in the long run.

"Our members also have a role to play in keeping their premiums as affordable as possible by seeking referral to an Affiliated Provider who is contracted to provide that service."

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

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