Unless the Coalition Government is careful it faces a major policy fiasco over health. All the signs are there for a stupid repetition of the Fraser Government’s white-anting of universal health insurance for purely ideological reasons. Its Budget proposals on Medicare are wasteful, foolish and already have been eroded by the private health insurers. They are so transparently doomed not to work that one has to wonder about the intelligence of those who proposed them. The Government’s aim was to get more people into health insurance (or retain those who might otherwise leave). It wanted to do this to get more money into the health system. But its scheme is hopelessly optimistic. The Government’s own Budget figures put the cost of the health-insurance rebate at nearly $500 million a year. Health insurance costs about $500 a head. That means the Government must attract or retain about one million people into private insurance every year the scheme lasts. It is pie in the sky. This $500 million spending on rebates is as foolish as the most ludicrous grant that the former Labor government gave to its coterie of ideologically biased splinter groups.
What has happened. The private health insurers have jacked up their fees and swallowed much of the rebate. This is not economic rationalism; if only it were. This is a gift to ideological mates.
It would have been better for the Government to take a Menzies’ approach. When asked by a Cabinet member after the 1961 election why he was implementing some policies espoused by the Labor Party, he said: “”Fifty per cent of the people voted for them.” Now, 50 per cent the people did not vote for Labor in 1996, but all opinion polls show there is huge support for Medicare. Of more importance, it is good for the people of Australia and should not be sacrificed to ideology.
Australia must not adopt the American system. America spends about 12 per cent of GDP on health to Australia’s 8 per cent and yet 20 per cent of Americans are not covered by any health insurance or government safety net and face bankruptcy or no treatment if they get ill.
The Government rightly points out that Labor’s Medicare system was unsustainable. It offered too much for too little and as people inevitably left private insurance there would not be enough money to fund the public hospital system. But its Budget bribe to middle income earners to take out insurance and its Budget penalty to high income earners who do not will not do the job … as we have seen with the funds putting up premiums this week. It is likely even more people will leave private insurance.
The Government should have been more rationalist. It should have allowed more sensible price signals to prevent over-servicing and misallocation of resources. It could do that by things like: not giving any subsidy in the form of tax breaks to people who take out insurance; not giving any grants or uncommercial loans to private hospitals; increasing the Medicare levy to cover all outgoings; giving full exemption from the levy to those with full private insurance; having a co-payment for medical services; insisting that all public and private patients get charged the same in public hospitals; that public patients be allowed to go to private hospitals with their Medicare insurance; and abandoning community rating.
That is a very full too-hard basket. But until such things are dealt with, Australia will either have Labor’s fools paradise mostly funded in disguise from general revenue or the Liberals dishing out money to a protected industry of ideological bedfellows.
The astounding thing is how good Australia’s health delivery is, despite the underlying folly of its financing. The problem is that unless the financing is dealt with health delivery will suffer. Health care costs are going up because of more expensive hi-tech treatments and the ageing of the population.
The important thing is for the Government to address the financial problem left by Labor which was caused by over-subsidising the public-insurance system without over subsidising the private system.
In dealing with Medicare, the Government promised it would keep the fundamentals of Medicare intact. One of the fundamentals, it thought, was bulk-billing. It said it would retain bulk-billing, and it has done so. But that could easily be killing Medicare with kindness. If the Government refuses to put up the schedule fee, most doctors will abandon offering their services at the bulk-billing rate. So, in theory bulk-billing will be available, it is just that patients will be hard pressed to find a doctor who engages in it. Alternatively, if the schedule fees go up and bulk-billing is retained, the system is strained through over-servicing (as now). The better approach would be to introduce a small co-payment for all patients. It worked wonders in stopping over-servicing in the pharmaceutical benefits scheme. But bulk-billing has now become a political sacred cow. Politicians fear that to attack it head-on would be to invite the political fate that befell John Hewson in 1993.
The Government must also find ways to contain costs. Labor’s approach was to set the two big private pressure groups against each other, so that the private funds police costs in the private hospital system for their members. But that will not be enough without throwing the public insurer into the competitive equation.