So it stands as part of the complex mix that characterises our health care funding. There is no integrated health care “system” in Australia: rather we have a set of programs with different legacies, different loci of responsibility and different funding principles.
Within that mix private health insurance has taken its place, and there is an assumption that the funding of private hospitals is inexorably linked to private insurance.
Because governments have been becoming increasingly concerned about the budgetary costs of the private health insurance rebate, they are shifting towards the incentives in the Medicare Levy Surcharge as a way to support private insurance.
This makes assistance to private insurance more opaque, particularly in a political environment where there is undue emphasis on fiscal outcomes (rather than economic management). Use of such hidden assistance is a retreat to the policies of the 1960s, before the cost of tariff and quota assistance for manufacturing was brought to account.
In the absence of economic analysis of the costs and benefits of private insurance, governments, particularly Coalition governments, have argued to defend its privileged position – relieving pressure on public hospitals, providing choice, protecting the “private system” – and have suggested that publicly-funded health should be re-defined as distributive welfare for the needy rather than as a shared universal service.
But as a means of sharing health care costs, private insurance is a high-cost and inequitable mechanism to achieve what the tax system and a single insurer can do far better. Its administrative overheads are high, and it lacks the incentives or capacity to control moral hazard and to contain health care costs.
There is mounting evidence, revealed in the recent election campaign, that public opinion is coming to align with economists’ view that a single insurer such as Medicare is the most appropriate way to share health care costs. There is little point in saving the public $1.00 in taxes paid to the ATO if instead they are cajoled into paying $1.10 or $1.50 to private insurers – essentially privatised tax collectors.
Australia needs exposure of the cost of support for PHI, and, an open debate about health care funding – not the emotive “private” vs “public” rhetoric that often takes place, but rather the basic question about how much we should take personal responsibility for paying for our own health care, without insurance, and how much we should share through Medicare. If the options are explained clearly Australians may accept a reasonable regime of co-payments, so long as they are not seen as a wedge to allow private insurance to destroy Medicare.
Ian McAuley, Fellow, Centre for Policy Development
For a link to Ian McAuley’s full paper, see http://www.ianmcauley.com/academic/confs/phijul2016.pdf