The Federal Government’s health rebate scheme was bound to be an expensive exercise in futility. The initial estimate of the cost of the scheme was $1.3 billion a year. This financial year it has cost $1.6 billion and next financial year it will cost $2.2 billion — $740 million more than in the forward estimates of 1998-99 when the scheme was first proposed.
The scheme was aimed at attracting people to private health insurance by giving them a tax rebate on their premiums if they earned under a certain amount of income. The scheme has failed dismally. The number of people in private insurance has hardly moved since the scheme was introduced, though it went up slightly with the introduction of two other schemes – heavy penalties (of one per cent of income) for high-income earners and the new age-rating scheme. These two scheme had a slight effect in increasing the number of people with private insurance.
But the rebate scheme has just thrown good money after bad. All the evidence suggests that nearly all the money has gone to people who already have private insurance and who had no intention of stopping it. The scheme was conceived in a cloud of ideology with stupidity as a midwife.
Back-of-envelope figures would tell the Minister for Health, Michael Wooldridge, how foolish the scheme has been. The money, $2.1 billion a year, could buy about a million private health insurance polices at $2100 a year per family. That would put about three and half million people in private health insurance. If the government has been serious about getting people into health insurance it could have literally chosen a million families randomly out of the phone book and given them private insurance. It would have been miles in front.
More pertinently, the Government should have given the money ear-marked for this foolish scheme directly to the public hospital system. Instead of propping up inefficient private-health insurers it should have spent money from the health budget on public health.
Incidentally, back-of-the-envelope figures from a single journalist are fair enough in this debate. This is how Senator Chris Evans in the Senate committee this week described the Government’s explanation of the blow-out (with its armoury of bureaucrats): “”Its sounds like back of the envelope stuff. This is a major government initiative with a huge budget attached to it, and it just seems like there is not much science involved.””
Did anyone in government think this scheme through? It has self-sowing seeds of over-funding. The more people it attracts into private insurance the higher the government pay-out becomes. It also sows seeds of over-funding in any other scheme the government dreams up to attract people to private insurance. In particular, the Government has thrown a threat out to young people to take out cover now or face higher premiums as they grow older under the Lifetime Health Cover scheme. If young people respond to the threat and take out insurance, the rebate blow-out will get worse. Typically young people have lower salaries and will qualify for the rebate.
It seems the Government did not think its schemes through. Health bureaucrats had a torrid time in the committee. A deputy secretary admitted the Department of Health simply did not know what effect the Lifetime Cover scheme.
Another senior health official explained that the cost blow was due to wrong costing at the time. That was because the Government changed the scheme after first announcing it. Instead of the rebate coming of tax at the end of the year, people could get it immediately through their health fund and it would go to paying some of their premium.
Changing the scheme was a foolish idea, done to help the private funds. It looked as if the premium was going down whereas in fact it was a government subsidy. It had two fall-outs. People took a higher level of cover (blowing out the cost of rebate even further) and the funds put their premiums up because the price hike could be disguised, though the funds and Government vehemently deny that the rebate had anything to do with premium increases. That, too, helped blow out the cost of the rebate.
The information about the cause of the blow-out had to be extracted from the health bureaucrats painfully by Senator Evans. And it contrasted with Dr Wooldridge’s less accurate view of the blowout.
Dr Wooldridge put it a different way. He rejoiced in the blow-out of the rebate costs. He said it meant more people were getting more money. It was a bizarre rejoicing considering how preciously few extra people are getting the rebate.
Since the beginning of this hideously costly scheme, private health insurance has gone from a nadir of 30.1 per cent of the population in December 1998 to just 30.9 per cent in December 1999. That is $1.6 billion dollars for 0.8 per cent of the population. That is $1.6 billion for 160,000 people (say, 60,000 family policies). That is nearly $27,000 per policy per year.
Fiasco. Failure.
But not one cent of this goes into health – doctors, nurses, medicines and the like. It just goes in tax rebates which people can spend on lollies. It is just chucking money at private insurance in the name of ideology. It could have funded 15 500-bed public hospitals.
Rather than crowing, Dr Wooldridge should admit his own incompetence or admit he cannot persuade the ideologues in his government to behave sensibly. Either way he should give up politics.
I’m not siding with the public system just for the sake of it, but calling for balance and sensible use of the money available. Money needs to go into health, not tax rebates. More money has to go into health before our quite good health system goes dud. The Medicare levy should be increased for health – not for Timor or to cajole high income earners to going private. The schedule fees for doctors should be raised in line with average earnings to make Medicare a viable option and to give doctors their fair cut.
In short health should be put before ideology.