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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.
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Gary,
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.