Today the Turnbull government announced its long awaited response to the challenges affecting the private health insurance (PHI) industry, anchored around affordability of policies and attracting younger Australians to take up private health insurance.

Health Minister Hunt has been doing the media rounds today talking on breakfast TV and widely quoted in the print media.  

The general response I've heard/read has been fairly positive but I fear this is tinkering at the edges of a broader health system that needs much more radical reform...

Private health insurance premiums have been rising well ahead of inflation with premium increases averaging close to 6% per annum over the last 7 or so years and Minister Hunt is adamant that he will be driving this year's premium increases down to closer to CPI at around the 3% mark through the next premium round of applications, which insurers have to make to the government very soon for approval ahead of 1 April 2018 annual increases.

But here's the thing...

The cost of health care is increasing at a rate much higher than CPI and we have an ageing population.  The private health industry is the middleman - there's a total cost of health cover that is borne either directly by government (either state or federal), via PHIs or directly by individuals.  If the cost of health care is rising at 6% and the government caps PHI premium increases at 3%, there's only one outcome that's going to happen.  Policy benefits will be stripped back.  Much of the industry is not-for-profit.  It's regulated by APRA and the funds need to meet strict solvency and capital adequacy requirements.  So "do the math" - funds costs going up more than their premium income is not sustainable for more than a very short period.

In my view, there is a broader question about streamlining the whole provision of health services.  The large private hospital groups continue to add beds that need filling, the GP to specialist to even more specialist shuffle for the patient adds layers of cost to the system (albeit that this doesn't impact the PHI side).  I don't have all the answers but finding a broader solution to the spiralling cost of health care as a whole would seem more important than tinkering around the edges of a single part of the system.

Just my 2 cents.  What would I know?  Feel free to comment and/or disagree.  I'm interested in others' perspective...