Last week I was asked by someone on a very modest income whether it was worthwhile keeping private health insurance.

I replied that, for someone in their circumstances, almost certainly not. The starting point is that what we have in Australia is not private “health” insurance, but rather private “hospital” insurance. It does not cover medical services. Indeed, it is illegal for an insurer to provide insurance for the cost of medical services beyond the Medicare scheduled fee.

This leaves people on low incomes with, in effect, worthless insurance coverage. Facing the need for a medical procedure, they might well be able to jump the queue by going to a private hospital whose fees are covered by the insurance, but the fees charged by specialists, particularly surgeons and anesthetists, put the medical treatment in that hospital beyond the reach of those on low incomes.

There is no point in buying insurance for a bed in a private hospital if you cannot afford the medical treatment in that hospital.

In Australia, at least, the low-income patient can turn to the public system. That works well for serious illness and accident for which treatment is free, good quality, and timely. But it is hopeless for elective, or non-urgent treatment such as knee- and hip-replacements for which waiting times stretch into months or even years.

It was not always the case. In the first decade and a half of Medicare (1984-1999) treatment in the public system was free, good quality and timely – so much so that people very reasonably abandoned private insurance. It sank to about 30 per cent of the population in 1999.

It should have been allowed to sink to nothing. If everyone had to rely on the public system, no politician aspiring to re-election would have allowed the system to get into its present-day state. The literate, articulate, demanding well-off people would rise up.

Instead, however, a series of measures by the Howard Government massively subsidised private health insurance so the public system could be neglected, and the middle classes could rely on the private system.

But now that is under threat because no-one thought to control specialists’ fees. Their skills and services are extremely rare so, unregulated, they can charge pretty much what they like. Even people on fairly good incomes now greet specialists’ fees with horror. Their fees are often more than treble the Medicare scheduled fee. And they cannot be insured for.

The two 1999 changes were for the government to subsidise premiums through the tax system (via a 30 per cent rebate) and to impose a penalty (the Medicare surcharge) of up to 1.5 percent of income for those without private cover. These are the main reasons people keep private cover.

It had nothing to do with health. It was an ideologically driven attempt to undermine and destroy Medicare.

Treasurer Jim Chalmers should look at these measures in the Budget. The rebate is costing about $7 billion a year. The exemption from the surcharge is costing about $3 billion a year. The $10 billion is, in effect, a straight transfer from the less-well-off who rely on the public system to the better-off.

It is a bloated, unjustified subsidy for a grossly inefficient “industry”. Private health insurers account for just $20 billion of Australia’s $270 billion annual health-care spending. For that, taxpayers are paying $10 billion in subsidies. It is a bad deal. It is inept public policy. It is unfair. And it should end.

By all means have a private element in our health system. But it should be genuinely private, not one propped up by government huge subsidies and which benefits a decreasing number of people.

People expect government to improve and increase government services, not make them worse through decades of malign neglect and deliberate policy decisions which favour the well-off. And it is not just health.

Small wonder a lot of voters have “had a gutful” and are openly saying so. That resentment is easily exploited.