Medibank Private Ltd (MPL) plunges on cost spike

Medibank Private (MPL) broke support at 3.20 and its rising trendline, warning of a decline to test primary support at 2.30. Closing of the gap at 2.90 would strengthen the signal.

Medibank Private (MPL)

We eliminated our exposure in July 2019 after the crisis facing Australian private health insurers was first highlighted. Rising costs force up premiums which in turn makes it difficult to attract new subscribers. A shrinking base of younger, healthier members — who subsidise older members with higher costs — threatens a self-reinforcing spiral.

Patrick Hatch at The Age reports on the latest cost spike:

Medibank Private chief executive Craig Drummond says an “alarming” and “curious” increase in surgeries involving prosthetic devices is driving up costs and threatening the stability of the private health sector….

Mr Drummond said claims were driven higher by the volume of prostheses — such as hip and knee replacements and other medical devices — which grew by 8.5 per cent last year, compared to 2 per cent and 4 per cent growth in the previous two years, respectively.

“We’ve got surgical volumes that are flat-ish, and we’ve got prostheses volumes that are close to double digits,” he told investors.

“We’re very curious about what’s going on. Something doesn’t feel right. It’s quite inverse to the situation that we’ve had over the last two or three years.”

A deal between government and medical device makers to put a cap on how much insurers had to pay for prostheses was supposed to deliver $200 million in savings last year. But Medibank said it only saved $13 million because of the rise in the number of devices being implanted.