Removing Howard’s Medicare white ants

Say you ran a big insurance company that had income from premiums of a little over $5 billion and costs of around $32 billion. You would have only three ways out. Go bankrupt and wind up; increase premiums; and/or cut costs drastically.

That is unless you were Medicare. Because those are Medicare’s figures, but Medicare, year after year, gets bailed out by the taxpayer and the payment gets added to deficit or debt.

But what does it matter, you might ask. It all comes out of the public pile one way or the other.

Well, it matters a lot, because while ever Medicare drains public funds, those in search of reducing deficits; balancing the books; or running surpluses will have to look for cuts elsewhere to make up the difference. And whenever governments cut, the cuts usually come from the people who make the least noise: the vulnerable; those without lobbyists; and those with little money to organise and fight.

Medicare was a big feature of the election. Prime Minister Anthony Albanese was constantly showing his Medicare card saying Labor would strengthen Medicare while asserting that it is in the Coalition’s DNA to weaken or destroy it.

But “strengthening” Medicare by throwing money at it is not enough. And will not ensure its future as a universal insurance scheme that provides free, timely, and quality health care for all.

Its future will never be secure while John Howard’s white ants are allowed to continue to gnaw at its foundations and framework.

Those white ants have been at work for more than two decades. They are: 

0 The Medicare surcharge for those on high incomes who do not have private insurance. 

0 The age-based higher premiums for those who fail to take out private insurance by age 30 and try to take it out later in life – the Lifetime Health Cover loading.

0 The tax rebate for health-insurance premiums.

It has been a corrosive combination of blackmail and bribery that has resulted in substantial middle- and upper-class welfare propping up an inefficient private system that would never survive on its own.

As it is, private health funds made more than $2 billion profit in 2022-23 (the latest reported year). All of it went to shareholders, not health. And that is after big fees and salaries paid to directors and upper management.

In the year to March 2024 “management expenses” – executive bonuses, salaries, and marketing – grew from $2.82 billion to $3.45 billion. Healthy for some, but not others. Benefits to policy holders fell from 88 per cent to 82 per cent of funds’ income and continues to fall.

The inefficiency is horrific. Australians pay about $30 billion a year in private health insurance premiums, of that $5.5 billion goes in profit and administration – 18.3 per cent.

Medicare’s overheads are around 5 per cent depending on how you calculate it.

The argument that private health insurance relieves the “burden” on the public system is nonsense. The private system cherry picks the easy low-cost routine procedures – joint replacements, basic heart stuff like stents, eyes and the like. It turns away hard stuff like accident and emergency, and difficult heart and cancer patients. 

It has commodified medicine in the service of profits, bonuses, and fees. It has played on the under-resourcing of the public system which has created long waiting times – a primary incentive to get private insurance.

Labor should now call in the exterminator and get rid of the Howard white ants. It should concurrently make Medicare’s financing sustainable in a way that reduces waiting times.

The first white ants to go should be the easy “blackmail” ones – the lifetime loading and the surcharge. Then people would have a free choice about whether to privately insure, instead of being cajoled into it.

The Medicare levy itself should be raised to a realistic level – about 11 or 12 percent of income to cover its cost, even if it means reducing income tax as a partial offset initially.

In doing so Labor could also partly chip into negative gearing and the capital-gains-tax concession, by imposing the Medicare levy on pre-gearing and pre-concession income. It could also impose the levy on income before deductions for lump-sum concessional superannuation contributions.

After all, income tests on many things are done on pre-gearing income – the health card, age and unemployment benefits, and, can you believe, the Medicare surcharge. But not the Medicare levy itself. There is no logic in it.

Why should people negatively gear themselves a reduced Medicare levy?

Overall, taxpayers are funding Medicare one way or the other. It is really a question of how fairly and efficiently you do it and what incentives and disincentives are inserted in the system.

At present the incentives and disincentives are geared towards leaching precious health dollars to non-health profits, bonuses, and directors’ fees in the private sector.

People will only crave the illusory security blanket of private cover while waiting times in the public sector remain high. Refinancing the system could end those waiting times.

Apologies for the plethora of statistics, but sometimes it is the only way to expose a con trick.

O O O O O

The Ben Roberts-Smith defamation case with its $30 million in legal costs and counting and the $2.3 million costs order in the defamation action lost by former Victorian Opposition Leader John Pesutto illustrate the dysfunction of our defamation law.

Maybe there is a case for scrapping it. Now that everyone can publish to the world without going through traditional media, people can just defend themselves by slagging back, especially if they, too, are immune from a defamation suit.

People can then just judge for themselves what to believe or not. As it is, the legal system seems to have priced itself out of the market for the task of seeking out the truth for the vast bulk of people. Its only use now is to use costs to scare people into capitulation or not publishing at all.

This article first appeared in The Canberra Times and other Australian media on 20 May 2025.