OPINION | Privilege overrides health policy

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Crispin Hull

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The Grattan Institute asked a pertinent question this week: why do we subsidise private health insurance? It offered a couple of sound poliy suggestions, but they completely missed the political mark.


Coalition Governments have offered incentives for people to take out private insurance and penalties if they do not.

But it is foolish to imagine that in creating these policy mixes, the Fraser and Howard Governments were interested in the greatest good for the greatest number or the most equitable and efficient health system achievable.

To the contrary. They have only been interested in a two-tier system. The Fraser Coalition Government wanted to reverse the Whitlam Government’s universal health insurance scheme and went a long way to doing so.

The Hawke Government reintroduced it and 11 years later even the dumbest voter realised Medicare was such a good thing that the Coalition could not abolish it, but it could undermine it.

Undermining universal health insurance is in the Coalition’s DNA. It is partly because of health-industry donations but mainly because it wants to appeal to those voters who want to feel superior, to jump the queue and to pay for special treatment which is denied the riff raff.

Undermining public education is in the Coalition’s DNA for the same reason.

A very cunning way to amplify this undermining is to subsidise the private provision of health and education, so that public money goes in to undermining the public system.

For example, $6 billion a year goes into tax rebates for people who take out private insurance. People are further blackmailed into taking out private insurance by the threat of a Medicare surcharge for people on high incomes and the threat of higher premiums for people turning 30 do not take out insurance.

Governments on both sides, but particularly the Coalition, have either frozen Medicare payments to doctors and specialists or failed to increase them in line with inflation or the wage index.

Health policy is such a hotch potch that both these policies have grievously backfired from a Coalition perspective. They were meant to bolster the private system. Instead, the payments squeeze has resulted in higher gap fees by specialists, making people wonder if private insurance is worthwhile.

Having paid premiums to get to the head of the queue they find another hurdle: a specialist demanding a gap fee so prohibitively large they cannot afford it and have to join the public queue anyway.

And people who failed to get insurance when they turned 30 have become now less likely to take it up later because they would face penalty premiums.

Further, Labor when in Government has been too scared of a voter backlash if it abolished private insurance or abolished subsidies for it or any public contribution to those using it. So we have a hotchpotch.

The Grattan Institute’s Stephen Duckett, a former head of the Federal Department of Health, and co-author Kristina Nemet quite correctly pointed out that successive governments have failed to decide whether private insurance should be a substitute for public insurance or complementary to it.

Of course they have not, for the reasons stated above.

But do not expect the Federal Government to do anything about it. Health is too much of a political hot potato.

Rather expect specialists to continue to charge exorbitantly. Expect insurers to continue to increase premiums at a rate higher than wage increases with the inevitable result that it becomes unaffordable for more people. Expect the funds to exclude more procedures (especially less urgent stuff) and to charge higher excesses. Expect more healthy people to opt out of private cover pressuring the funds to increase premiums still higher.

However, in a way this is fine. The more people opt out of the private system and rely on the public system, the more governments will be pressured to improve it. Indeed, if everyone opted out of private insurance tomorrow, overall we would be better off.

For a start, there would be $6 billion a year saved in tax rebates.

Most people are not aware of how small private premiums are in the overall cost of the health system – just 8.8 per cent. It is hardly worth having.

Further it is an extra con trick because those with private insurance pay the most out-of-pocket payments. Out-of-pocket expenses are nearly double the amount of premiums at 16.5 per cent of the cost of the health system.

So having been blackmailed, cajoled, scared and lured into paying private health insurance premiums, they get stung almost twice as much again in out-of-pocket expenses. Meanwhile, the shareholders and senior executives of private funds laugh all the way to the bank.

The Federal Government will sit idle. The states might help a bit, as they have been doing in other areas of federal impotence – global heating; electric vehicles; Indigenous recognition and so on. Thank heavens we have a federation.

But health is too big for the states.

We should answer the Grattan Institute’s question: should private health insurance be a substitute for or complementary to the public system?

The answer should be: neither.

Medicare should cover dental, optical, physio and so on so that there would be no need for complementary insurance. And Medicare should be so good that there would be no substitute for it.

It would mean respecting and properly rewarding the medical profession and culling the inefficient, bloated private insurance industry which spends money on administration, executive salaries and shareholder dividends that would be better spent more directly on health. Much the same can be said for education.

As the US experience shows higher private health expenditure does not translate into better national health. But, sadly, we are on that trajectory.


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