| Publication: | The Wall Street Journal |
|---|---|
| Date: | 12 May 2009 |
| Section: | Business |
CANBERRA (Dow Jones)--The Australian government Tuesday unveiled a string of changes to the nation's health care system designed to foster competition and trim concessions to wealthy Australians, as it tries to rein in a ballooning fiscal deficit.
The measures - including plans to tighten eligibility criteria for private insurance health rebates - may reignite industry concerns the government is removing key incentives for using the private health care system.
That could weigh on the share prices of Australia's only listed health insurer, NIB Holdings Ltd. (NHF.AU), and the two biggest private hospital operators Ramsay Health Care Ltd. (RHC.AU) and Healthscope Ltd. (HSP.AU).
In a bid to stem any significant shift from the private to the public health system, however, the government said it will raise the surcharge it levies of wealthy Australians who don't have private health insurance to 1.5% from 1% currently.
From July 1, 2010, no private health insurance rebate will be paid to those on incomes over A$120,000 a year. Rebates for those earning between A$90,001 and A$120,000 will range between 15% and 20% depending on age, and between 20% and 30% for those earning between A$75,000 and A$90,000.
The government also said that health insurer Medibank Private will be converted to a for-profit government-owned business, from a not-for-profit government entity, putting it on equal footing with major competitors in the market.
"This is an important change as it will ensure competitive neutrality in the private health insurance industry," Finance Minister Lindsay Tanner said in a statement accompanying the Labor government's second annual budget.
"For the first time, Medibank Private will pay tax on profits and return dividends to the government," he said.
The changes to private health rebates were leaked to the market ahead of the budget.
NIB Holdings Chief Executive Mark Fitzgibbon said last week the proposals run the risk of lower private health participation, and may increase public health outlays and hospital waiting times.
But he noted the impact would be "significantly mitigated" by the proposed increase to the Medicare levy surcharge.
In other changes, the government said it will remove current restrictions on the number of pathology centers any one pathology provider can operate.
A review of current arrangements found that restricting center numbers inhibits the growth of smaller providers, while aiding the growth of larger ones, creating an uneven playing field, Tanner said.
Healthscope Ltd. (HSP.AU), Primary Health Care Ltd. (PRY.AU) and Sonic Healthcare Ltd. (SHL.AU) are Australia's largest pathology providers.
The government also said it will cut collection and test fees per pathology episode to A$66.26 from A$69.17, reflecting the benefits to pathology providers from increasing automation of pathology tests.
And in a measure that may hurt drug makers such as Sigma Pharmaceuticals Ltd. (SIP.AU), the government will amend the pricing policy of its publicly-subsidized drug program, the pharmaceutical benefits scheme, to ensure taxpayers pay for drugs on the basis of the lowest priced medicine - where a group of drugs are of a similar safety and effectiveness.
The government is Sigma's largest single customer.
-By Rachel Pannett; Dow Jones Newswires
