Jane McCredie: Holiday subsidy

COMBINING a Thai beach holiday with a nose job or a bit of bridge work is nothing new, but it seems this kind of medical tourism could soon be covered under Australian private health insurance.

At least one Australian private health insurer is planning to offer customers offshore surgery packages covering cosmetic procedures and dentistry, according to media reports last week.

You might argue this is just the law of supply and demand in action — the customers want it, so the insurers provide it. But it really isn’t that simple.

The health insurance industry in Australia receives massive government subsidies through the private health insurance rebate, which in 2012–2013 cost taxpayers more than $5 billion.

We’re entitled to ask whether that money is being well spent.

The classic argument made in favour of the rebate is that it reduces public health costs by encouraging more people to take out private insurance and therefore, presumably, seek care from the private system.

And maybe it does, although the truth is we don’t really know either way as this 2011 summary from the Parliamentary Library made clear.

University of Melbourne health economist Dr Terence Cheng further challenged the rebate’s alleged benefits in a paper published earlier this year, arguing it was “fiscally unsustainable”.

His modelling suggests the savings that would come from reducing the level of the rebate would be around two and a half times greater than any additional costs the public system could expect to face.

Economic modelling is, of course, only as good as the assumptions it is based on, and the industry would, no doubt, dispute some or all of Dr Cheng’s assumptions. But this is still a welcome contribution to a debate that so far seems to draw more on emotion than evidence.

If we’re going to spend $5 billion or so a year on a health initiative, we really should have some idea of whether its achieving the goals we’ve set for it.

The issue of insurers offering offshore surgery packages might seem trivial in comparison, but it represents a potential further abandonment of financial rigour.

People may have all sorts of reasons for seeking health care offshore, but is subsidising such choices a good use of public funds?

The federal government is already reviewing the coverage private insurers offer for a raft of “natural” therapies including homeopathy, aromatherapy and iridology.

The purpose of that review is to ensure the publicly funded rebate only applies to therapies that can demonstrate clinical efficacy, cost-effectiveness and safety.

It’s a good initiative, but the debate over how we spend our health dollars should be much broader.

Dr Cheng argues that a reduction in the private insurance rebate and redirecting the money saved into the public system would provide a rare opportunity to improve health care without raising overall costs.

Surely that’s at least worth discussing.

Jane McCredie is a Sydney-based science and medicine writer.