Government proposals to apply a means test to private health insurance subsidies have re-ignited the debate about the role of private insurance.
The proposals have the benefit of removing a glaring inequity in our present arrangements, which direct subsidies disproportionately to the well-off. The worst such inequity relates to dental care.
They would alleviate the inequities imposed on country people who, while being poorly provided with private hospitals, subsidise high-income metropolitan dwellers who have access to private hospitals.
The proposals have shortcomings, however, because they don’t go far enough.
They would have hardly any impact on membership of private insurance, they would sustain a separation of private and public hospitals, and they would sustain a social division with one hospital network for the well-off, and another for the other 45% of Australians. This division is at odds with the government’s social inclusion policy.
Private health insurance is an expensive and clumsy way to do what the tax system and Medicare do so much better — that is to distribute funds to those who need health care.
In itself it is an expensive financial overhead — a $3 billion annual burden on the health care system. Its even greater economic impost is its general impact on the cost of health care. International experience shows that private health insurance buys more expensive health care than tax-funded health insurance, but it doesn’t buy better health care.
Nor has the increased uptake of private insurance succeeded in its claimed purpose of easing pressure on private hospitals. That was an impossible task, because while demand has indeed shifted to private hospitals, so too have health care staff. The main result has simply been a reshuffling of the queues for limited resources, and that reshuffling has put private insurance membership ahead of clinical needs.
In our criticism of private insurance we are not accusing the insurers of inefficiency, greed or profiteering. Rather, their failure is an inevitable feature of private insurance.
We are not advocating what some may call “socialised medicine”. Private hospitals serve an important function: they should be funded by means other than through private Insurance.
Nor are we calling for universal “free” health care — there are many sound arguments in favour of those with means paying more from their own resources, without private or public insurance.
Our main message is that to the extent we choose to share our health care costs, a single national insurer provides the most efficient and equitable means of doing so.
*John Menadue is the former secretary of the Commonwealth Department of Prime Minister and Cabinet and a member of the Board of the Centre for Policy Development. Ian McAuley is an adjunct lecturer in public sector finance at the University of Canberra and a fellow of the Centre for Policy Development. This is a summary of their 18-page report Private health insurance: high in cost and low in equity.
Private health insurance is the means by which those who can afford to pay buy their way to the head of the medical queue do so, by paying a premium for private health care whilst their tax dollars go into the general health system.
What the authors of this document fail to acknowledge is for everybody receiving private healthcare there is a consequential space in the publicly funded(so-called free) system.
Furthermore a 30% rebate is effectively a refund of tax paid by the majority of health fund members, taking it back to the days when health insurance was tax-deductible and one’s income for tax purposes was only calculated after deductions such as medical costs were deducted.
Socialists always want to put their hands of someone else’s pockets. The 3 billion referenced would be the amount of tax forgone if health insurance was tax-deductible. The 30% rebate on is an inducement for the 70% co-payment contribution to aggregate health expenditure. However I do accept that private health service providers are probably rorting the system.
As for universal free healthcare, we already have it (in principle) through Medicare, and as a free good demand massively outstrips supply. Those with means to fund health insurance are already paying more from their own resources, through the net 70% premium charge for health insurance, the substantial co – payments extracted at the point of service delivery which are not covered by insurance, and their contribution to the Medicare health pool which they are not using.
As for a single national insurer providing the most efficient and equitable means of doing so, all this would mean would be an expanded Medicare system (manipulated by corrupt politicians), even, higher levels of taxation to sustain the massive blowout in demand, and consequentially substantial queues.
@ WHISTLEBLOWER – I agree with the authors of this article (mostly).
However, some of your comments are not correct. People using private
healthcare facilities do not make “more space” in the public system. This
has been demonstrated many times by various researchers, but basically
the $3+ billion dollars going into the private system reduces funding to
the public system by the same amount – in other words, it all comes out
of the same bucket of money. Whilst the private system demand is reasonably
stable over time (it only caters to those who have private health insurance),
the public system demand continues to grow because of increasing population,
new technologies (some of which are only affordable by government),
and increasing need for services which cannot be offered in the private
system (they don’t have the facillities or specially trained staff).
It is also not correct to say that because a person pays PHI and the Medicare
levy, they do not use the latter. Everytime anyone in this country consults
a doctor, they use Medicare. Also there are some highly speciallised services
which are only available in the public system – the most obvious of these
is major trauma following vehicular or work related accidents. But there
are many other examples.
Universal health systems such as Medicare are the most efficient way
of providing care for all. Just take a look around the world at those countries
which don’t have one – their healthcare costs/head of population are very
much higher, and in many cases (USA, for example) a large percentage
of their population have no access to any kind of healthcare. That is simply
not acceptable in a civilised society in the 21st century.
Further, your comments on tax refunds for the privileged is also not on,
in my opinion. And an expanded Medicare would not create more demand,
because patients don’t decide the amount or type of care they receive,
doctors do. There’s lots of research on that as well!
The Private Health Insurance Rebate is the same as government subsidies to private schools-
an absurd and unsustainable form of middle-class welfare.
CML
You agree with the author of this article because you start from a preconceived situation of bias which is more obvious with @negativegearmiddleclasswelfarenow.
For every $.30 in rebate, there is an additional $.70 contribution to the total medical pool. Leaving aside the relative qualitative components arising from this additional funding, it is obvious that the total funds available for medical care in the community is funded from three sources namely general taxation including the Medicare levy, funds derived from private medical insurance, and the additional margin generally extracted from private medical clients to cover the so-called gap.
I accept that individuals taking out private health insurance use the public hospital and medical systems, but all things being equal to also pay an additional amount in to the aggregate funding for medical care in the countryin relation to elective medical care.
The same applies to private school education which seems to be concerning @negativegearmiddleclasswelfarenow. Whilst one is entitled to one’s ideological preconceptions, the same argument applies.
I understand that notwithstanding the fact that parents contribute a significant proportion of private school costs, the cost per capita to support of private school students is less than the cost per capita of providing the cost of a student in a State school, and consequently the demand on state and federal budgets is lower. The decision as to how much to allocate to public school students is entirely a decision of politicians, which is quite independent of whether parents choose to co fund their children’s education. I would however question that the allocation methods used to determine grants to private schools, as I understand this is seriously affected by the fact that a number of high income individuals disguise the true income through tax effective structures, and the reliance on ATO declared income should not be the basis for allocating support.The number of children of dentists, lawyers and chartered accountants receiving Austudy because their parents receive no taxable income is legendary.
I do however agree with the argument that if politicians were compelled compelled to send their children to state schools, the level of per capita funding would increase substantially.
Uh, what ?
Your maths is broken. For every $0.30 in rebate, that’s $0.30 not going into the “total medical pool”, because without the rebate, it would be $1.00 going in, not $0.70.