The Federal Government’s health policies continue to unravel.
At the weekend figures were issued by the private health funds, the Australian Health Insurance Association, saying that there had been 100,000 new memberships for the first three months of the year. The figure might well be inflated, but even taking it at its face, it reveals that the 30 per cent tax rebate for private health insurance has been an unmitigated failure and an utter waste of public money.
The Government estimates that the rebate will cost the public purse about $1.5 billion a year. This money will go straight into the pockets of those who have taken out private health insurance. What has the rebate done in attracting people to private insurance in order to lower the drain on public funds? It has attracted just 100,000 memberships, and that is on the generous figures of the private health insurance lobby. If we multiply the 100,000 memberships by an approximate $1500 per premium we get $150 million. So we get an extra $150 million into the health sector for the expenditure by the Government of $1.5 billion.
It is madness. Folly. Stupidity. Government gone mad with ideology.
Who in their right mind would spend $1.5 billion of government money to attract a pitiful $150 million?
The Government would have been better off randomly selecting a million people out of the phone book and giving them private health insurance. At least it would have then got its $1.5 billion into the health system, instead of mostly into the pockets of people who already have private health insurance and would keep it anyway.
Alternatively, it could have given the $1.5 billion direct to public hospitals, by-passing the administratively expensive private funds.
It gets worse. Having attracted a pitiful extra 100,000 on the back of the Government’s ideologically misguided largesse, what do the funds do? They ask for an increase in premiums because, shock horror, these new memberships will make some claims. The increase asked for is 6 per cent. What is the consumer price index? What is the increase in average weekly earnings. Higher. The demand for a 4 to 6 per cent increase is an open admission of gross inefficiency. The funds cannot keep their costs below CPI or average weekly earnings. Heavens, old age pensioners are expected to do it.
The Government has been made blind by ideology on health care. Some things are much better run by the private sector: airlines and telecommunications are good examples. Some things are not: health, defence and road transport are good examples.
When will the major parties take off their ideological straitjackets and use some pragmatism. Some changes to health care were needed, but the Federal Government has given huge incentives for people to join private funds when on any measure the private funds are not as efficient as Medicare. Moreover, as economic rationalist will tell you, subsidies only increase inefficiency. This is exactly what has happened. The private funds, bloated by the subsidy of the rebate, now want an increase in premiums.
The fundamental problem since Medicare was introduced in 1983 is that it has been too generous. The 1.5 per cent levy goes nowhere near paying the medical and hospital costs it purports to insure for. Moreover, since everyone has to pay for it anyway, they may as well use it. Small wonder over the ensuing 16 years people has deserted private cover. And then will continue to do so while the disparity continues.
The answer lies in putting Medicare and the funds on a level field. People should be able to opt out of Medicare if they have private medical (as distinct from hospital) insurance. Medicare should be self-funding, which would mean a large increase in the levy.
The funds should be freed of present restrictions on community rating. Insurance will not work unless premiums are based on risk.
At present we are not getting the benefits normally associated with competition and private sector involvement. This is because the Government is fearful of being seen to meddle with Medicare which opinion polls show to be very popular. Of course it is popular, when it is underwritten by general taxes and the myth remains that you can get full health cover for 1.5 per cent of income.
We must retain universal cover and we must retain an infrastructure of public hospitals, but the present structure of public and private health financing does not reflect reality. While it does not we will continue to get the embarrassing figures we did at the weekend.