Private health insurance poor value.

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FED

Value for money from private health insurance has declined substantially, according to the July CHOICE magazine.

The Australian Consumers Association, which publishes CHOICE, said increasing premiums and tighter conditions have eroded benefits over the last three years.

'Since a flood of new customers signed up in response to Government carrot-and-stick policies three years ago, premiums have risen sharply and what you get for your money has gradually been eroded,' CHOICE magazine reported.

'Many people feel disillusioned with health insurance products, but they feel trapped. Lifetime health cover - which increases premiums by 2% for every year of your life past 30 that you're not insured - deters people from leaving, but also seems to be discouraging new customers from joining,' CHOICE said.

'The money we spend on private health insurance is money we can't spend on other areas of health care. So are we spending that money wisely? Overall, CHOICE thinks not. First, there are administration costs: health funds cream off around 12% of your premium in management costs, compared with only 3% for Medicare.

'More importantly, private funds have little or no control over costs in private hospitals. Public hospitals control costs too tightly, private hospitals not tightly enough.'

CHOICE argues that it is easy for private hospitals to pass on increasing costs to the health funds, so premiums go up.

'The Government's stance on private health insurance - and the $2.3 billion it pumps into the 30% subsidy it pays every year as a rebate to those who take it out - has a major impact on the whole health system, and on all health consumers.'

CHOICER view is that using the rebate better is the key to producing a more equitable and more efficient health system for everyone.

'Governments have the responsibility to use limited resources in ways that will deliver the best health outcomes for the most people. Eventually, this grossly inefficient subsidy must go. How that's handled will be crucial to consumers.'

CHOICE surveyed 133 hospital policies with over 1600 different premium options.