Among the many bills the Coalition are committed to opposing in the new Senate is the legislation to change the threshold where a higher level of Medicare levy cuts in for those who don’t have private hospital insurance from 50k to 100k. The bill, introduced in May, was referred to the Senate Economics Committee which held extensive hearings and took submissions. The report [link to pdf] is out in time for the Senate’s spring sitting.
The majority report from the Labor Senators is careful to quote several comments from Peter Costello in his second reading speech back in 1996 and the explanatory memorandum in order to demonstrate that its stated purpose was to provide an incentive only to higher income earners. However, the grounds for defending the levy have shifted, reflecting over a decade of Howard era support for the private health industry. We’re now told that it would have a catastrophic impact on health funds. These concerns are largely dispelled by evidence from health policy experts and health economists cited in the report. There’s scepticism that the much heralded exodus from private health will actually take place, for two reasons – that the life time cover provisions are likely to provide the stronger disincentive, and that those who actually value private health won’t leave. In addition, the best estimate is that the costs to the public sector would be around 1.6% of inpatient expenditure, an increase relatively easy to absorb.
In effect, no one is disagreeing that the policy measures in place represent a subsidy to private insurers – of massive proportions. Using figures from the Productivity Commission and other sources, the report discloses that the 30% rebate alone cost $980 million in 2006-7, dwarfing the value of tax concessions available to primary producers – $192 million – and mining – $130 million and even surpassing the dizzy heights of assistance to the manufacturing industry – valued at $963 million. Yet the financial press, all the commentators and economists routinely decry such “industry assistance” as “business welfare” (with reason). Somehow the specious argument that the private health industry provides a public good isn’t held to anything like the same standard of rigorous assessment, though that case is made in this report by Greens Senator Rachel Siewert in her dissent.
Given that the evidence from independent experts suggests that the arguments of the industry and the opposition are gross exaggerations, it seems undeniable that the bill should be passed as a matter of equity. It will be interesting to see what Senators Xenophon and Fielding think.
From the Age yesterday:
PRIVATE hospital operator Ramsay Health Care says changes to the Medicare levy surcharge that will make private health insurance less attractive are merely a “bump in the road” and will still allow it to match this year’s earnings per share growth.
And when are we going to see a “national audit” of corporate welfare, I want to know. We are exhorted to work harder and smarter in order to keep the corporations afloat, many of which send their profits overseas, make do with massive employment layoffs so CEOs can extract their gross bonuses, and then watch our meagre tax dollars, that are supposed to pay for public education and health, being siphoned off to prop up failing industries. Parasites.
This report makes sense. The private health Ffunds are squealing because they are going to lose their easy money. A large number of healthy young people signed up to private health funds so they could avoid the surcharge. They don’t use the health funds and so their money just plumps up the profits of the funds. If they drop out of the health funds are they suddenly going to get sick and start infesting the public system? I think not. Those who have private health care like myself and who access it for many things are not going to drop out. The flooding of the public system just does not make any sense. And drawing on anecdotal evidence, most people I know rarely confess to having private health cover except when they need complicated medical procedures and need to jump the queue as they don’t want to make the huge gap payments that exist . Finally, when are we going to do something about that growing boil the private health care subsidy which gets bigger and bigger each year. When Howard brought it in and Kim Beazley described it as the worst piece of public policy he had ever seen and then voted for it (sigh) it was $600 million pa now it is more than $2 billion and growing. It has done nothing to keep health fund costs down they just increase their fees each year to soak up the subsidy. It is corrupt corporate welfare.
Alan – if the only people in health funds are sick people the entire point of the funds is defeated. You NEED healthy young people to make it work.
The people I associate with ar Proud to be private health members and doing their bit to at least partially get off the public purse.
I think anyone hoping that price is irrelevant to private health memebership is going to be disappointed. It won’t be an instantaneous flood but a gradually accelerating haemorrhaging . It probably won’t really bite the Rudd govt this term but if it wins a second it will be a serious issue and Rudd’s promise of the buck stopping with him on healthcare could be a very difficult promise to keep.
The only reason I maintain private health cover is because I’m getting to the age where I may need a hip replacement or heart bypass surgery. If Rudd manages to fix the health system, I’ll drop it in a New York minute.
I resent the double-dipping that the health funds make into my pocket, first directly and second through the massive government subsidies to the private health industry.
Thats not going to happen. We’re simply not willing to spend the amount of money needed to remove the waiting lists for “elective” surgery like hip replacements.
Unfortunately, those who think the increase in private health membership – regardless of the waste in taxpayer dollars – actually reduces pressures on public hospitals, don’t understand the reality on the ground. By encouraging more people onto private health care, the demand for private hospital services (especially surgical services) increase. As we don’t have huge increases in the number of surgeons in Australia, surgeons who contract with public hospitals/systems cut back on their public work to meet the demand for increased private work – providing no gain for those on public waiting lists. The Howard system is setting us up for a two-tier health system where those with fewer resources are destined for below standard health care.
“The
Howard Rudd system is setting us up for a two-tier health system where those with fewer resources are destined for below standard health care.”Fixed.
“The
HowardRudd system is setting us up for a two-tier health system where those with fewer resources are destined for below standard health care.”GAH!!!
Just one comment I don’t have to fix is all I ask!
Of course, the private health funds might require less public subsidy if they actually offered a product that people might want to buy, at a price that people might be prepared to pay. I know it’s a revolutionary concept, almost unknown in any Australian industry, but it might be worth a try.
Having read the small print of a number of private health insurance policies, I wouldn’t have paid for any of them with someone else’s washers.
Having worked in private health insurance back in its glory days – 2000, the Medicare levy surcharge as a reason to take out health insurance only applied to those who seeked to dodge the tax. As such, the main policy was one for around $420/yr which for someone earning 50k meant $80 in their pocket with rather poor insurance coverage. In fact anyone with such a policy was advised not to disclose their health insurance status and could still be covered ‘free’ at a public hospital.
The level of the threshold has not changed since its introduction and it is an outrage now to think that 50k represents high income earners. Regardless of the amount of income I earn, I will never purchase private insurance due to the fact that the whole system is a rort to line the pockets of shareholders…
If private health insurance cannot exist without a government subsidy (30% rebate) or the coercion of citizens by the government (LHC, Surcharge) then obviously it is inefficient and seeing how the government is all about fostering its economic management capabilities how about we just let the private sector work itself out and plough the $3bn plus subsidies back into the public sector…
Yay, Adam. If the private health insurance companies have products which people want, then they’ll be fine. like any other business. It’s been a giant rip-off of the Australian people.
Is anyone else annoyed at the failure of media coverage to identify the changes to the Medicare Surcharge Levy as a tax cut for millions of middle income Australians?
I haven’t heard much in the media about the Opposition’s plans to oppose said tax cut. This is a tax cut which will actually save the Government money, not to mention all those workers who might save some money!
Surely the Liberals should be getting roasted about this??
In some peoples eyes, it isn’t really a tax cut – basically it is a redistribution of money from the government (people paying the surcharge) to PHI (paying premiums to avoid the surcharge). The lifting of the threshold is the same as readjusting the tax brackets for bracket creep…
Just look at the increase in average weekly earning from 2000 – $800/week or $41k to today, whereby average wages are $1,132/week or $58k a year. This means that there is a vast proportion of the populations being squeezed at both ends either extra tax or pay for health insurance. No wonder the health insurance companies are seeking to protect their interests…
Andos, the reason the Libs won’t back this (even if they viewed it as a tax cut) is because it would directly affect their mates in the private health industry. I agree they should be getting a shellacking over it, though.
Adam, I agree with you completely about health funds. However I lack the courage of your convictions – the thought of needing a new knee and having to wait years for it worries me a lot (particulalry as my knees are starting to get dodgy).
Adam – if wages have grown about that much then shouldn’t the threshold be set at around 60-70k rather than 100k? And why the other change at not having the family income threshold double the single income threshold (150k rather than 200k).
David – well you can self insure, though there is a risk involved in that you might need it tommorow when you haven’t saved enough money up yet and it requires a fair amount of financial discipline not to spend the savings. But hey insurance premiums are all about reducing risk. You buy insurance expecting to lose money in the long term (that or your insurance company is going to be bankrupt in the long term which is far worse).
The people I associate with ar Proud to be private health members and doing their bit to at least partially get off the public purse.
- kingsley
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Err, your associates do realise that the value of the tax rort they have been given often exceeds the likely public health expediture on them, don’t they?
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They’re not “off the public purse” at all, just as “self-funded” retirees aren’t (on average the actuarial value of their super tax concessions and Senior Australians Tax Offset far exceeds the value of an age pension).
Chris – I think the best bet would be to remove the surcharge or to increse the medicare levy for all and enable full public provision of healh care. Private health insurance may go to the wall, however, the government can contract out services to the private sector – hospitals – using their market power – as the only purchaser of health services in the economy to lower costs. Coupled with the savings involved to the economy on lower admin costs – PHI is around 14% while Medicare has around 3% and the rebate the level should only have to be an increase of .75% – although I have done no modelling on this…
David – I recently had a cornea transplant through the public system, while you have to wait, you still get a good level of care and have had no problems..
Adam, I’m not worried about the level of care – let’s face it, if you’re seriously ill the private providers don’t want to know, and they’ll fuck you off to the nearest public hospital anyway. It’s the waiting that could be an issue, as my near-future plans involve being reasonably mobile.
David, if you are going to benefit from the service, then do it – it is a tough one. I know that what I seek is an ideal. If you have an illness that requires elective surgery, then you should consider your options.
Unfortuntally, we have to live within the confines of the system we currenly have…
There are limits to family budgets. I am one of those young healthy people who probably will drop out. I will do so for two reasons.
Firstly, its not insurance – its tax. Lets be honest here. True insurance is based on risk. An under 25 year old pays more than a 55 year old to insure their car, but the same to insure their body. Go figure. Cardivascular fitness, Body Mass Index, smoking and drinking have nothing to do with the price of insurance policies in this country – and frankly that stinks. I long for a day when Governments can be honest and just call a spade a spade. We are not stupid.
Secondly, we are “blessed” with statisically abnormal housing unaffordability. Whats blessed the Boomers has cursed the Gen X and Ys. This burden of debt has reached such a crisis point that our health will suffer. Period. There comes a point where in order to lead a healthier life you simply must have more disposable income. That means less debt or more income or a combination of both.