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scaremongering on health care « Previous | |Next »
May 20, 2008

There has been some debate in the media about the extent of the numbers dropping private health insurance as a result of the Rudd Government raising the threshold at which the Medicare surcharge levy cuts in ( now $100, 000 for singles and $150,000 for families). The threshold surcharge was introduced by the Howard government to push people into taking out private health insurance as they would have to pay the higher Medicare levy if they remained in the public system.

The private system has been supported by three policy props introduced in the 1990s by the Howard Government to stop the decline in private health insurance membership. These props were a tax surcharge of 1 per cent on top of the Medicare levy for those who do not have private health insurance, a 30 per cent government rebate of premiums for those who do, and age rating that progressively increases private health insurance premiums for those who enter the system after age 30.

The numbers leaving private health insurance would have been run by the computers in Finance, Treasury and Health and Ageing (in this case Treasury) as part of the budget process. That analysis is not for the public, or even opposition Senators, but the leaked figure from Treasury is 480,000 dropping out, with some projected government savings(estimated at $230 million) in terms of the 30 per cent government rebate. The leak from the work of Crosby-Textor to the Australian Health Insurance Association (AHIA) says that around 425,000 would leave. I don’t know any other modeling or references that have been done on this. These figures are much lower than the 900,000 quoted by the Australian Health Insurance Association based on the private work of Pricewaterhousecoopers.

I don’t buy the argument that dropping out of the private health insurance necessarily leads to increased queues at public hospitals causing collapse etc. Most of those dropping out ----cos it’s a bad and expensive product---are young and healthy and so it will not make much difference to the public health system. Those dropping out will turn to primary care practices in order to stay well and out of hospital.

Those arguing the big increase in public hospitals that are on their knees (the increased strain on the public health system will be a huge burden on the rest of the population, reducing our public health system to a third world one) reduce health to hospitals and ignore the significant role played by primary care in keeping people out of hospital. They cover this flaw with their talk about the ALP's ideology. Its all ideology for ideology's sake. No mention is made that it raising the threshold at which the Medicare surcharge levy cuts in is a tax cut that empowers consumers and enables them to decide how they spend their money on health.

Sure, private health premiums will rise (health funds will lose profits from drop in the numbers of fit and healthy singles). The estimate is around 5%. That means the private health funds need to find ways to increase their membership. They could, for instance, develop wellness packages (chiro, gym, nutritionist, physio, massage, psychologist) etc to entice consumer singles to buy their product, rather than relying on state coercion and big subsidies to keep them viable and profitable. This is the marketplace after all, and that means value for money.

What we are currently witnessing is scaremongering.---bully boys pressing the fear button etc----by the Australian Health Insurance Association. No doubt the private health industry will also try to get its hands on of the Rudd Government's flagship $10 billion health infrastructure fund, as these funds will go towards hospital wards as well as medical facilities, technology and projects. That money should be for public hospitals not private ones.

Update: 21 May
The conflict over numbers leaving the private health system as a result of the Rudd Government raising the threshold at which the Medicare surcharge levy cuts in continues with the AMA now weighing into the debate. A report commissioned by the Australian Medical Association (AMA) from Access Economics says that to achieve Treasury's projected savings of $230 million 800,000 people would have to abandon private cover by July. Why start there? Maybe Treasury's estimate of the savings is wrong?

The AMA is spelling out how people will leave---slowly----and it is warning of increased pressure on public hospital bringing them to their knees. The AMA can't argue that it is young people that will be pulling out of health insurance making it more expensive, and argue that those same people are the ones that will overburden our public hospitals.How come the singles won't be visiting their local friendly GP instead of going to the emergency department of the public hospital? Doesn't the GP provide high quality health care?

So the AMA is defending a public subsidy of private health insurance through a special tax on consumers. The specialists in the private hospital system (for whom the AMA speaks) want a special tax to keep their money rolling. Amazing. What ever happened to the principle of the Liberal and free market types that lower taxes are good and higher taxes are bad? Conveniently forgotten when it comes to the private health industry it would seem.

This is yet another indication that the AMA is opposing health reform that addresses equity issues.

| Posted by Gary Sauer-Thompson at 6:56 AM | | Comments (11)


I read somewhere yesterday that PwC have distanced themselves from the report. Wha?

The queues at public hospitals are long because people don't want to wait a week for an appointment with a GP. That's those with and without private insurance.

Time we admitted the push to privatise health has failed. As has often turned out to be the case, we are not Americans after all.

There is little point in trying to embrace the British model of a national health service, as many health reformers argue. That push will also fail cos of budget constraints, long queues and lack of choice.

Australia's health system is a mixture of public and private and it works reasonably well with room for improvement. The focus is usually on the public hospitals but the private health funds need to learn to contain their costs and do a lot more to make themselves more competitive.

If the federal government pumps more money into the public hospital system as promised then this will improve its competitiveness--- cut queues and increase the quality of services--and so put pressure on the private hospital sector and the private health insurance funds.

The Howard Govt failed to pressure the private health insurance and fee-for-service medicine to contain costs.

The Age carries this report.

An analysis commissioned by the Australian Medical Association says the health budget contained more than 150 spending and saving measures, generating $5.7 billion in new measures and $3.3 billion in savings.

An estimated $445 million over five years had been cut from funding for services by general practitioners, according to the analysis by the consulting firm Access Economics.

"While the Government is talking up its focus on health prevention, it is winding back spending on GP services, which is the front line for preventive health care," the Access report said.

Alan Wood in The Australian says the effect of reducing the tax is this:

Those who remain will comprise a higher proportion of the elderly and seriously ill, who have the strongest incentive to buy private health insurance. These are the highest cost members for a health insurance fund, and as the mix of fund members shifts towards them, premiums must inevitably increase. The rising cost of insurance then drives more people out of the fund, and a vicious circle can emerge.

Why not provide better products? Isn't that the best way out of the vicious circle.

yes I read the Wood piece. He says that a crucial part of improving the operation of public health system (he means hospitals) is competition, and co-operation, with private sector health providers. The private system (hospitals) provides choice and acts as a shock absorber for the public (hospital) system.

Trouble is the private sector can only provide competition through extensive public subsidy--which Wood acknowledges. He says that raising the threshold of the Medicare surcharge levy will cause a further pressure on premiums and more adverse selection, with the young and healthy getting a free ride at the expense of the elderly and ill. He adds:

I am not suggesting this will lead to a collapse of the system because the 30 per cent tax rebate and the age rating of health insurance are still in place to attract people into private health insurance. But it is an undermining of the private element of a mixed public-private system that will have significant costs for the elderly and the ill, and in terms of the increased pressure on the public system.

That means the private system needs to lift its game to provide quality services for the price charged. Wood then says that:
The Government's answer - that it plans to throw a lot of taxpayers' money at the public system - isn't persuasive. It can never satisfy the demand for more and better health care and will have to tackle the hard issues, such as hospital closures, that were swept aside in the election campaign last year.There is no doubt the more competitive the private system is, the better all round for Australia's future healthcare provision.

Like the others, Wood ignores the investment in primary care that helps to prevent people from going into public hospital to receive acute care. He seem to think that public hospitals provide all forms of health care for some reason.

So where does that leave Wood---I suggest tacitly supporting more public subsidies for the private health industry to help it become better and provide competition to the public sector? Is protection and corporate welfare what this neo-liberal or free market economist is suggesting?

Gary, the corporate welfare bit is as unsustainable as leaving the funds to look after themselves altogether it seems to me, but I find Peter's point about GPs interesting. They are supposed to be the front line but we seem to be headed to an erosion of that dispersed service model towards more centralised services like super clinics.

Apparently the Gold Coast (fastest growing region in Australia dontcha know) won't be getting a superclinic, so we'd have struggling GPs and more pressure on the public hospital, which doesn't provide a lot of specialist treatments. They have a shuttle bus service to Brisbane at the moment. Wouldn't it make more sense to prop up more widely dispersed GPs?

I see that Brendon Nelson has jumped on the AMA/private health insurance scaremongering bandwagon. Only to be expected.

Nelson says that there is mounting evidence the changes will lead to droves of people burdening the public health system:

What we're now looking at is about a half-a-billion dollar hole in the government budget as a result of it trying to attack people's private health insurance.We're going to have almost 1 million more Australians lining up in our overloaded public hospitals and those pensioners, retirees and families that stay in private health insurance will pay even higher premiums.

Nelson says the report is further proof the Government is wrong to lift the Medicare surcharge threshold.
What we've now got is a report from PricewaterhouseCoopers, we've got a report from Access Economics which shows not only can the Government not add up and get its Budget right, it's also hell bent on pushing [people] out of private health insurance onto public hospital queues.That's not the kind of Australia that we want.

there are corporate GP clinics with their six minute medicine and the GP Superclinics which are more multiprofessional and offer more integrated health care. The latter is the path to the future and a counter to the former.

There are also allied health clinics--not everyone needs to see a GP to get drugs. I only see one occasionally, when I have to---mostly for referrals to a specialist or for antibiotics. We see chiros, physios, masseuers, nutritionists, dieticians, naturopaths etc more often.

Are there actually 480,000 people earning between $100-$150K in Australia to fall out of the system?

BTW - to those that bag the American system you should have a close look at what it actually achieves - the best health outcomes in the world. It's clearly the model to follow but, like Europe, we have too many nanny-staters who don't understand what it means to have government provided healthcare.

odd for you, as a free market man opposed to the nanny state etc, to say 'fall out' of the system of private health insurance.

Should you not be saying these rational individuals have calculated that it is in their self interest to avoid paying their money for this health product (commodity).

We are talking about a market based on consumer sovereignty are we not? Hence rational calculation and instrumental reason rules.

Surely you should be saying that free markets allow us to live the way we want to live --giving most people maximum buying power and allowing consumers to act with their negative freedom.

Surely the ALP has increased consumers negative freedom by removing a tax (and a subsidy of an inefficient industry protection seeking industry) and, as a result, has given consumers more money in their pocket. This enables them to make their choices about health care. How then is that the action of a nanny state?

The Liberal Party is becoming ever more explicit. Nelson is now saying that the ALP doesn't "like people with private health insurance, in the same way they don't like private education". Turnbull is saying that:

the changes to the Medicare levy surcharge are the most misguided and potentially the most dangerous in this budget. This is a Government that hates private health ... and that is seeking to undermine it. There are no winners from that.