In defending the government’s proposal to means-test private health insurance rebates in Crikey on Wednesday, Helen Keleher and her cadre of public health advocates in have fallen into the trap of perpetuating the “big lie” about this policy: that it will “release” billions of dollars to be used for public health services. In fact they specify the savings could be used “for health care and effective disease prevention and health promotion programs”.

Well they had better get in line, because depending on which minister you talk to, the yet to be realised savings have already been allocated, in full, at least three times. Firstly to pay for pension increases, then for e-health initiatives in addition to achieving a budget surplus. Nothing left for public health it would seem.

Of course, all this is predicated on the notion that the savings will actually be achieved. The most up-to-date and comprehensive analysis of the means-testing proposal, conducted by Deloitte in April this year, found that; “By the fifth year, total costs resulting from the policy change will exceed the projected savings.” In other words, it won’t take long for this proposal to actually be a net drain on government coffers.

I will address each of the simplistic and misguided arguments put forward by Keleher et al, but first we should remember this policy itself is based on another “big lie”. That is, four days before the 2007 election, Kevin Rudd promised in writing to maintain the rebates, only to break that promise in the 2009 budget.

To their credit, the cadre do not dispute that means-testing will lead to large numbers of people dropping and downgrading their cover, a deteriorating risk pool or much higher premiums. Rather, they make a number of bold assertions seemingly based on urban myth rather than data (indeed, they offer not one figure or data source to back up their statements) to state these negative impacts don’t matter.

For example, they assert any increase in private hospital activity is irrelevant because public hospitals deal with more complex cases than private hospitals. However, after analysing the data, the Productivity Commission concluded that “the overall casemix of public hospitals is slightly less complex than that of private hospitals” (the Commission also found that costs in private hospitals were 30% lower than public hospitals per casemix-adjusted separation and that private hospitals performed better on available safety and quality indicators).

Keleher et al assert that an 18% to 21% drop in ancillary cover that flows from means-testing is of no consequence for access to dental services, because this could be addressed with “public funding for universal access to dental services”. Sounds great, doesn’t it. The only problem is we don’t have a universal publicly funded dental scheme, no major political party is proposing to establish one and even if health insurance rebates were totally abolished, it would not cover the estimated $6 billion per annum cost of a public dental scheme!

In addition, they appear to misunderstand the significance of people downgrading their cover as a result of means-testing. Rather than having an impact on health funds, this will have an impact on public hospitals. When people downgrade their cover by taking a policy that excludes certain services, they are effectively reliant on the public system for those services.

For example, when the government’s 2008 changes to the Medicare Levy Surcharge threshold washed through the system, we saw a dramatic increase in exclusionary policies. In a 12-month period, the proportion of policies that excluded one or more types of treatment jumped from 13% to 24%. This has resulted in an 11% increase in insured patients being treated in public hospitals in the last six months. One wonders if our “overburdened” public system has managed to increase its private patient load at the expense of public patients.

Private hospitals treat 3.5 million Australians each year, which equates to 40% of all hospital admissions.

According to the Australian Institute of Health & Welfare, since the 30% rebate was introduced, admissions to public hospitals have grown at an average rate of 2.7% per annum, while private hospital admissions have grown at more than twice that rate or 5.5%.

If the current rate of growth in hospital admissions in Australia continues, private hospitals can expect to be treating 50% of all hospital patients by 2021. This represents 6.5 million patients. Imagine if the public sector alone had to undertake all this work.

Yet according to our cadre, no pressure has been taken off the public system. Perhaps that is because there are massive hidden waiting lists that we know have been manipulated by state health systems for years. Imagine how much longer these queues would be were it not for the increasing role of private hospitals, underpinned by the health insurance rebates.

Actually, you don’t have to imagine because we have calculated (using AIHW figures) that if the rebate hadn’t been in place, then 8 million additional episodes of care would have had to be undertaken in public hospitals over the last 10 years at a cost of around 26 billion dollars to the taxpayer. But in fact, over the same time period the rebate has helped to fund those 8 million additional episodes of care in private hospitals at a cost to the taxpayer of 14 billion dollars. That represents a significant saving to the public purse.

Of course, no dissertation from public health advocates opposing health insurance rebates would be complete without the predictable reference to inequity. In this case: “A system that has people who do not hold private health insurance subsidising those who do is simply inequitable and should be changed.”

What about education? We have a system where people without children subsidise services for those with children. Isn’t that also inequitable? And while on education, in Australia, government subsidises the cost of private schools and access to that subsidy is not means-tested.

The policy principle underpinning support for private health insurance is the same as that which underpins the policy in relation to government support for independent schools. That is, no government could afford to fund schools and teachers for the entire school-age population (at least, not without significant increases in tax revenue or spending cuts in other areas).

Therefore, governments provide funding to independent schools so their services become more accessible, in recognition of the fact that parents who choose private education for their children are taking pressure from the taxpayer funded government schools. In the same way, people who choose to insure their health care take pressure off the public hospital system, and off the taxpayer. The government has assisted those people with the cost of their private health insurance.

The only difference between the two policy areas is the delivery mechanism for the support. For health insurance, the price is reduced by providing a rebate direct to the consumer. For independent schools, the price is reduced by providing grants to the schools to offset their operating costs.

And let’s not forget that every person who takes out private health insurance and receives care in a private hospital, is forgoing their right to access a public hospital bed that they have paid for through their taxes. Surely a small rebate on the cost of insurance provides a degree of equity for people who have effectively paid twice for a single service.