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September 10, 2008
The Senate's Economics Committee has handed down its report into the Rudd Government's raising of the Medicare Levy Surcharge (MLS) Threshold for people without private health insurance.
The bill proposed to increase the Medicare levy surcharge threshold for individuals from $50 000 to $100 000 and for couples from $100 000 to $150 000. The increased thresholds will apply from the 2008–09 year of income and later years of income. The overriding consideration was the danger of forcing an ever larger number of low-income people to pay the MLS or to buy low value fund policies for which they have little use, due to the threshold being unindexed since 1997.
The points of contention are structured around the possible impact of the bill on membership of private health funds, subsequent premium increases and the consequent cost to public hospitals as a result of the proposed increase in the Medicare Levy Surcharge (MLS) thresholds.
The core argument of the private health insurance industry is that the bill upsets the delicate balance in the Australian health system between public and private health provision. The crux of this argument is the claim that without a strong private health insurance industry, the provision of private health services will falter and lead to a flood of demand into the public system which it would be unable to meet.
If there is to be a public subsidy to maintain the "delicate balance" then the funding should have been provided to the private hospitals themselves, rather than the funds. We are in effect subsidising the insurers-- the insurers’ administrative costs and surpluses when all but one of them are now large profit-making businesses.
In his op-ed in the AFR Terry Barnes, a former ministerial staffer and now a policy consultant, argues that Rudd's health policy is a basket case. He says:
Senior bureaucrats see inexperienced new governments coming. Treasury and Finance hate the non-means-tested PHI [private health insurance]. It is anathema for them--an open-ended appropriation, driven by demand. They consider its success a triumph of populism over prudence, even though it helped save the private health sector from collapse. But this year a new government with an ambivalent view of private health was preparing its first budget and looking desperately for savings. In opposition it had railed against the perceived injustice of the unindexed surcharge thresholds.Once again savings on the rebate were offered. This time to Wayne Swan not Peter Costello. This time they were accepted with alacrity.
Barnes adds that it was a measure that could be dressed up as a fiscally responsible tax break on the one hand, and keeping faith with Labor's anti-PHI constituency on the other, was a an added political bonus. Labor's health policy is a basket case because it faces defeat in the Senate and it is not sensible.
So there you have the Coalition's health policy--prop up the private insurance industry at all costs.
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The private health insurance industry should be told to Get Knotted. Health insurance is probably the only truly unique good/service in our economy. There is no public interest in propping up these companies.
There might be an argument that people should be allowed to receive the equivalent of a voucher to access non-government systems under special circumstances, but otherwise let's call their bluff.
As if there would a "flood" into the public system, as if all the sickest people have private health insurance! If there is a "flood" then we will just deal with it.