Further government reforms enabling the the private health insurance system, including third-party payors and providers, were needed “to remove unnecessary costs” and ensure the future sustainability of Australia’s health system, Medibank CEO Craig Drummond said on the release of the company’s 1H20 results, dented by rising claims costs.

“While the government has taken progressive steps in implementing reforms, which have had some positive impact on the system, there must be recognition that additional meaningful industry cost savings and enhanced industry participation can only be realised through new government reforms (Insurance Review, February 19),” he said.

Medicare reported a 21% drop in group operating profit on 1H19, to $254.6m, while revenue was up 2.7% to $3.4bn. Group net profit after tax was down 9% to $178.6m.

Drummond said the main driver of claims growth was a 6.4% increase in prostheses cost, responsible for 69% of the rise in hospital claims. “This is extraordinary given a subdued 1.1% increase in hospital (use) for the half,” he said.

Net claims increased by 5.9% to $2.8bn because of a $151.9m rise in claims expense and a $6.8m reduction in risk equalisation receipts. Hospital claims were 6% higher, driven mainly by the prostheses growth.

By contrast, premium revenue was up 2.3% to $3.3bn, reflecting a 0.7% net increase in resident policyholders, to 11,700, and improvements in the acquisition and retention rates. Medibank retention continued to improve as did Ahm brand growth, recording a 4.2% policyholder growth.