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Health: the politics of fear « Previous | |Next »
February 17, 2004

Listening to Radio National this morning I was suprised at how the political topics of conversation had changed. It's health, education and work/family with terrorism, defence and the national security state now hovering in the background.

Health policy is going to become a key election issue. It's a strategy by the Howard Government to cut the ground from under the ALP; to claw back the traditional advantage of the ALP on this issue.

Now sitting behind the froth and bubble of the election sound bites is the Federal Treasury's Intergenerational Report (2002), which estimates a doubling of federal money on health over the next 40 years due to the aging of the population and new technology. That effect of the process of aging on health means big pressures continuing to build up on public funding of health care. That means health costs will have to be maintained once the election is out of the way.

My interpretation of the Intergenerational Report is that it is is going to be used to drive policy after the election. It begins to lay the groundwork for the 4th term policy agenda, and that goundwork has been carefully prepared in the name of fiscal sustainability. This is the prognosis: slower economic growth over the next four decades, lower productivity are forecasted; spending is projected to exceed revenue after 2014 largely because of health and ageing; and that means higher taxes or reductions in government spending.

It's an overload thesis. Sound management is required. So we have to cut health spending on Medicare and PBS (in small steps) over the next decade.

This raises the corollary issue of the public funding of private hospitals through private health insurance (rebate and lifetime cover). Why this mechanism? Should we not question this way of funding in the name of economic efficiency?

It seems to be an axiom of politics that a public subsidy ($2-$3.3 billion) of private health insurance must be maintained in order to sustain the private health system. Without the 30 per cent rebate and lifetime health cover private health insurance would fall to very low levels. The private health insurance industry would collapse, and federal government budgets would come under enormous pressure. So private health insurance shifts the burden of health service delivery from the public to the private sector.

It's the fear argument. Ignore the fear rhetoric and one can see that there are other ways to fund private hospitals. It is no longer the case that reducing subsidies for private health insurance is doing away with the private health system. That is the line of the private health insurance industry.

The private health insurance industry is a high cost financial intermediary protecting its corporate welfare.

Why not fund the private health hospitals directly--say through a bed subsidy? Why not cut out the private health insurance industry? Take its snout out of the public trough, and force it to stand on its own feet and embrace the discipline of the market.

The problem is not Medicare. It is the private health insurance industry. Subsidizing the insurance industry is a high cost way to fund the services provided by private hospitals. It sucks up a lot of the public subsidy to run itself.

The article on health policy, 'A healthy use of public funds', by Ian Harper and Chris Murphy in today's Australian Financial Review (subscription required, 17 02 04, p. 55) defends the public rebate of private health insurance. It amounts to a defense of corporate welfare for the public health insurance industry, under the guise of limiting the looming blowout in government health costs.

Defending the corporate snout in the trough is a rather strange line of argument for hard nosed neo-liberals who love the free market. Isn't the market meant to be about the survival of the fittest?

Maybe these hard nosed neo-liberals have gone all weak in the knees. Or maybe these economists don't know that much about health.

| Posted by Gary Sauer-Thompson at 10:02 AM | | Comments (9)
Comments

Comments

Why fund private hospitals at all? The funding of private hospitals (and education) is a joke and makes you wonder what the point of a Liberal government is.

I work in the public system (mental health) and every time I see another report of private hospitals getting funding, my blood just boils. In my small area we are struggling to stay afloat, we can't get funding for basic things like appropriate staffing levels or the tools with which to do the job properly, but see funding disappearing in other directions altogether. But its not just the funding of private hospitals which are taking away from the public health, its also whatever the premier or prime minister's latest Big Thing is. And I am *still* pissed at Bob Carr for swiping $40M out of the Y2K health budget to help fund those blasted olympics.

We have no "Tampa" or "Kids Over-board" for the media to play up and distract from the real issues. It's all rather refreshing.

Government funds hospitals that are called private in order to be able to decrease government funding of hospitals that are called public.

This is government by pig-headed ideologues or else government by crony capitalists.

Medibank Private paid them to do a report on why subsidising private health insurance is a good thing. Money trumps neo-liberal principles, every time.

Murphy has been described as the Howard government's "favourite economic modeller". His wife is a lawywer whoi works in John Howard's office.

And while we're at it why don't we nationalise the provision of the basics of life, like food, clothing and shelter, eh fellahs? It would take the profit out of it and we'd all get cheaper goodies and be better off wouldn't we? I've just had a flash! This might be the start of something really big.

Observa,
the post was about stopping corporate welfare re the private health insurance industry; not about the nationalization of private hospitals.

My argument is that the federal government funds the private hospitals direct.

How do get nationalization out of that?

Your reply illustrates the point I've been making:scare tactics are being employed to cover the corporate welfare to the private health insurance industry.

Consequently, you ignore the key point: there are more cost effective ways of funding private hospitals, than subsiding the private health insurance industry.

We do not have a private school insurance industry standing between you and the private school.The government subsidy to the private school is funded directly.

So why do you continue to argue in support of corporate welfare for the private health insurance industry?

Does not that handout stand in contradiction to your free market principles?

Alright, we should agree on the need for public provision for a public good. This is certainly the case with the other essentials of life like food, clothing and shelter, via social security payments.

Public hospitals will always play an important public good role as a health safety net and as teaching institutions. Private health provision can also be a useful adjunct in providing an avenue for those who can afford privately to pay more, in much the same way as private and public schools. In the absence of private provision(and their associated private subsidies), the per capita costs of health treatment(and schooling) would be higher overall for the public purse. As well private market supply supposedly provides a market guide to the price of efficient supply, by which public supply can be compared for its own efficiency. The question arises as to the appropriate mix or balance between the two types of supply. This mix will largely be determined by the price, the wealthier are expected to pay, which is where the level of some public subsidy comes into play. Raise the private price with less public subsidy and more private buyers will fall back on the public safety net(increasing queues where public supply is already inadequate)

The private market will be denuded of takers if a catastrophically high cost medical procedure is required, which is beyond their ability to pay. They would naturally retreat to the public provider of last resort. Hence the need for private insurance to eliminate this burden for the public system. Now it is true that such an insurance premiums need not be subsidised, merely a percentage rebate publicly paid for expenditure. However the result would be effectively the same to the consumer as a percentage tax rebate on premia.On the other hand, if you publicly subsidise hospital beds, you have to decide how many beds these private persons require. Too many is inefficient, while too few would be self defeating. The suppliers would naturally have an incentive to create beds under this scheme. Hence insurance rebates are like partially funded vouchers, with the market responding accordingly and presumably efficiently. Subsidised demand calling up the right amount of supply. Compare this with queueing for elective surgery in the public sphere, where the supplier is directly subsidised.

Observa,

If Treasury is serious about containing the costs of publicly delivered health care, then why not look at keeping people well so that they do not need to go into hospital.

Why not look at primary health care in the name of economic efficiency? Why not step away from all the focus on hospitals?

Would not preventing people from getting sick be one way of keeping health care costs down?