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The growing cost of health is a bane to all who have to pay for it. How should it be kept in check?

Compared to broader measures such as CPI, wage growth, GDP growth, what target should we set for
health cost growth? What changes would we have to make to consistently achieve that target?
- Growing cost (aging pop., chronic disease, longer life exp., technology, clinical frequency,
personal income)
- Different insurance companies assign different values to components in your risk profile
(applicant info, medical history)
- Depends on health spending
Challenge (perspective of an actuary in health insurance):
- Underwriting: BMI/Tobacco Use/Gender/Age/pre-exisitng medical conditions/family
history/profession/martial/zip code/previously uninsured
- Pricing is base on Historic data and extensive product research
- Insured will have different selection on health plans -> demographics and health characteristics of
existing health plans may change in unknown ways -> pricing risk -> prior experience may no
longer be credible -> cost of a health care plan
- Community rating, guaranteed issue and guarantee access increase health plan pricing uncertainty
and risk
- Health cost increases health insurance companies have to push up premiums in order to cover
the benefits products less appealing to insured number of insured participants decrease as
they either quit or choose cheaper options from other competitive companies profits of
insurance companies drop thats why healthcare cost has to be monitored difficulty in
defining the boundary between undercost and overcost
Problem to be solved: what is the margin of healthcare cost growth -> perhaps discuss about the
sustainability (rather than focus on Australia, compare to other countries like US and UK)

Data reference:

2016-2025 Projections of National Health Expenditures Data


Changes: investing in prevention, reducing operation and administration cost by enhancing collaboration
between public and private hosipitals (defragmentation) by facilitating sharing of medical data
real-world evidence (RWE)
Life science companies
Cost: hospitals, primary health care providers such as general practitioners (GPs), and other health
Government, Private health insurers, individual expenditures

Many factors contribute to increased health costs. Our population is growing and its
also aging. Health inflation is also rising faster than the Consumer Price Index.

But these factors account for less than a third of the increase the remainder is simply
due to the fact that people in every Australian age group are receiving more expensive
medical services per person and accessing them more frequently.

Quality of treatment in Australia has risen with advancements in technology, facilities

and medical training. In many cases patients are receiving treatments or medications
that didnt even exist ten or fifteen years ago.

For example, the average 50-year-old today visits a physician more frequently,
consumes more prescription drugs and has more tests and surgical procedures than a
typical 50-year-old did a decade ago.

The predominant reason were experiencing growing health costs is because were
accessing medical services more often and those services are improving in quality
(and price).

What Medibank did:

Healthcare costs and utilisation: rising healthcare costs affect product margins, erode the value
proposition and can result in members reducing cover. Medibank is addressing these issues with
various programs, including focusing on quality outcomes and long term affordability for
customers in its approach to provider negotiations.