| 06.11,19. 05:28 PM |
Medibank blames $21m blowout on prosthesis claims, warns of higher payouts in 2020
Photo: Medibank Private says it is getting more expensive to pay out claims. (AAP)
Medibank Private has revealed a $21 million cost blowout for the insurance claims it paid out last year, a trend likely to continue into 2020.
Higher private hospital payments and prosthesis costs were the main reasons behind its "under provision", the private health insurer said in a statement.
But Medibank chief executive Craig Drummond seemed not entirely sure why replacement body parts, in particular, led to sharp rise in the cost of doing business.
"You have to sit back and wonder when surgical volumes are flat .... and we've got prosthesis volumes are close to double digits," he told an investor briefing.
"We're very curious as to what's going on because there's something [that] doesn't feel right."
Mr Drummond also believes there are certain types of prosthetics that people should not be allowed to claim on insurance.
"We've had a look at our own business and seen some things on the prosthesis list that we're not sure should be there ... and that's something the Government is very interested in."
"It goes to the sustainability of the health system in general — it's just simply not possible ... the maths do not work."
Insurance getting pricier — even for providers
Medibank shares plunged by as much as 11.8 per cent, to a five-and-a-half month low, after the company announced its revised outlook for the current financial year.
However, it was narrowed to an 8.7 per cent slump (at $3.11 per share) by 1:40pm (AEDT).
The insurer also said it was getting more expensive to pay out claims — in particular, "underlying claims growth per policy unit" had risen to 2.4 per cent in the last financial year.
This is a significant increase from the 2 per cent that Medibank previously reported in August.
"This, when combined with our October claims payments, indicates a trend," the company said.
That was despite the company trying to reassure investors by saying: "There are no changes to other outlook comments provided at the FY19 financial results."
In August, Medibank reported a 3 per cent rise in full-year profit to $458 million.
It was a trend-defying performance as market analysts were expecting a sharp fall for the industry.
Furthermore, affordability concerns have led to more people opting to go without private health insurance — with premiums rising at a faster pace than Australian salaries.
Private health cover has dropped to its lowest level in 12 years, with 30,000 Australians dumping their policies in the first three months of the year.
That situation, along with the insurance cost blowout, had led to Medibank calling out for help from the Federal Government.
"Our recent claims experience highlights the need for further government reform, as private health insurers remain focused on managing the affordability challenge, while costs continue to rise within the health system," it said.