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There's nothing fair about Australia's tax on sickness

Tim Woodruff |  23 June 2016


Do our leaders believe in a fair go? Prime Minister Malcolm Turnbull has stated that he and his wife Lucy have been lucky and observed that 'there are taxi drivers that work harder than I ever have and they don't have much money'.

Doctor and patientOne might expect that such recognition of the place of luck (genes, family support, education, freedom from illness or exposure to trauma) in achieving wealth and the security that goes with it would lead to the development of policies which minimise the place of luck in our lives.

But timely access to affordable health care, first class education and justice before the law remain a struggle for many. It appears that both major political parties are quite happy to pursue policies which entrench the importance of that luck. An examination of our health system highlights this.

My patients who earn $36,000 a year pay $36 for most prescriptions. My patients who earn $360,000 pay the same, and those on $3 billion pay the same. Usually, these prescriptions are for conditions which can't be avoided — it's just bad luck.

This government imposed co-payment is a tax on illness. It is not noticed by those on $360,000 but for those struggling on $36,000, or pensioners who pay a reduced tax on illness of $6 per prescription, this does affect their small disposable incomes. It is a regressive tax.

The effect of this on patient behaviour is well documented. The Australian commissioned a Newspoll Survey in 2011 and reported that 18 per cent of those earning $40-79,000 delayed or did not fill a prescription due to cost.

Slightly lower figures for the whole population from the Australian Bureau of Statistics Patient Experience survey (10 per cent) and the Commonwealth Fund survey (14 per cent) indicate that underuse is a major consequence of such co-payments.

The Commonwealth Fund survey has also looked at sicker Australians and found, not surprisingly, that the figure rises to 20 per cent for them.


"Our leaders claim that such taxes are necessary to ensure that people value the service and don't overuse it. The hypocrisy of this claim is demonstrated by the facts."


So much for the government imposed tax on illness, the prescription co-payment. There was also the general practice (GP) co-payment in its many forms. The ALP's Senator Wong correctly labelled it a tax on illness. That label has fallen from the ALP lexicon, presumably because they realise that the prescription co-payment they support is also a tax on illness.

But we are left with doctor determined co-payments. This is the so called co-payment by stealth, whereby the government has frozen the indexation of the Medicare rebate resulting in a gradual decline in GP Medicare income, forcing doctors to either accept a salary decrease or charge co-payments. Both major parties have applied this freeze, claiming it needed to be done as a savings measure. The Coalition however has been clear about its other intention, which is to force doctors to charge new or higher co-payments and discourage use. This intention is based on the flawed Commission of Audit report suggesting patients were seeing doctors too often.

To date the bulk billing rate hasn't fallen, but over time GPs are unlikely to accept the $18,000 decline in their income from Medicare. New or higher co-payments will be charged. Some doctors will have standard co-payments whether the patient's income is $36,000 or $360,000. The Coalition knows this will be the result. Is such a regressive tax on illness fair?

Our leaders claim that such taxes on illness are necessary to ensure that people value the service and don't overuse it. The hypocrisy of this claim is demonstrated by the facts. Both major political parties support the laws which have been passed to encourage 'no gap' private health insurance for hospital care which, when it works properly, ensures that there is no price signal, no co-payment for repeated admissions to a private hospital in any one year. In addition, the Coalition supported a 2014 trial in general practice which eliminated co-payments for GP visits for private health insurance members. It would appear that our leaders believe that some taxes on illness are necessary only for those who can't afford private health insurance. Is that fair?

We have a progressive tax system which exists as a recognition that the market delivers income to people very unevenly, and if we are to have a civil society which respects and supports people irrespective of luck, we need to redistribute that income. Taxing illness does the opposite. It redistributes advantage to those on higher incomes.

It would seem that our leaders' attitude is 'I have made it, I plan to stay comfortable. You are unlucky. I might help you a little, but I'm not changing the system to minimise the place of luck in getting to my position of security and wealth.' Elitism and entitlement rather than a fair go would appear to be the principles driving most of our leaders.


Tim WoodruffTim Woodruff is vice president of the Doctors Reform Society, an organisation of doctors and medical students which exists to support equitable access to timely, culturally appropriate health care. He has previously published in the The Age, The Drum, Crikey, and other online publications.

Main image: Shutterstock


Tim Woodruff


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Submitted comments

Hear, hear.

Anne Benjamin 24 June 2016

Yes Tim, our leaders are sharing the boat with the GPs......'unlikely to accept the $18k income decline'. If 1 group could just set an example!!

John Doolan 24 June 2016

Yes, Tim. As a pensioner with multiple medical problems, I choose between heat to keep warm, and visiting my GP. Also, the wait time for surgery. I have cancer, but no surgery date - must wait 30 days or more while the cancer keeps growing. Appalling state of affairs don't you think?

Lois 24 June 2016

Wht does 'co' mean? Does it mean 'extra'? Is 'co' just a nasty little word that's meant to con people into thinking the price hasn't really gone up?

Gavan 24 June 2016

In Acts 2: believers helped one another in need. In Acts 4: there were no needy people among them. God's favour rested on them and so the Gospel was preached with great power & there were many miracles. In other words - good government or bad government - believers did the right thing by one another and God's pleasure became tangible. This is still an option.

Dr Marty Rice 25 June 2016

Thanks Tim. I could not agree more. Health care should be free at point of need. The argument for so called co-payment is in fact all about putting people off; there may be small % who always will abuse the system but it is price worth paying to protect the common greater good. Could I please thanks you for all the great work you have done over many years in being the conscience of a medical profession that can too often be self-serving and over-entitled (if not down-right financially rapacious among some proceduralist groups!).

Eugene 27 June 2016

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