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Means test won't fix health funding


Since 1999 the Federal Government has been providing a 30 to 40 per cent private health insurance rebate that is not means tested. 

It has worked in that there has been a significant increase in the number of Australians with private health insurance to 45 per cent. But because the insured are mostly those on higher incomes, low income taxpayers are subsidising the health insurance of the wealthy. 

The subsidy therefore represents a good outcome for the private health insurance industry but a major setback for social inclusion.

Proposed legislation to apply a means test is likely to pass both houses of Federal Parliament despite the Opposition's intention to vote against it. They believe many of the insured will cancel their insurance and place a more heavy burden on the public system. 

However a 2009 Access Economics report for Catholic Health Australia argued that means testing would have a negligible impact on the number of insured. Moreover a recent discussion paper from the Centre for Policy Development goes further by agreeing there will be little or no exodus from private health insurance, but suggesting that this is the problem. 

According to the paper's authors John Menadue and Ian McAuley, the current system of multiple private health insurers takes money away from health care because it is inefficient.

Private health insurance is an expensive and clumsy way to do what the tax system and Medicare do so much better ... International experience shows that private health insurance buys more expensive health care than tax-funded health insurance, but it doesn't buy better health care.

Menadue and McAuley are not advocating 'socialised medicine' or 'free' health care, but a single national insurer, which they believe would provide the most efficient and equitable means of sharing the cost burden of health care.

The question of private versus public health insurance is related to the division of the hospital system between public and private hospitals. It has promoted inequity by subsidising, and encouraging queue-jumping by, those who can pay. The poor have only the increasingly dysfunctional public hospitals, while the wealthy can pick and choose.

There is no question that legislation for the means test should be passed. It will make health funding a little fairer. But it will not do much to change inequities in the health system as a whole.

Michael MullinsMichael Mullins is editor of Eureka Street.


Topic tags: Michael Mullins, health, private health insurance, John Menadue, Ian McAuley, Centre for Policy Developme



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Existing comments

Why is everybody afraid to say the obvious: the problem with health is the obscene fees charged by specialists who have been trained at public expense and now gouge the very hands that fed them. Tennis players, professional sportspersons of all kinds, doctors - they are all trained at public expense and then go and rip off the system.

Frank | 13 February 2012  

I'm not sure about the logic of "low income taxpayers are subsidising the health insurance of the wealthy". After all, there are differing marginal income tax rates. Leaving that aside, health should be how Hawke orginally intended it to be - free, and available to all Australians. This is supposedly too expensive to be feasible, but that's because the issue hasn't been logically considered. 1. Legalise, and tax the consumption of presently illicit substances. A great deal less expense on policing, criminal justice and prisons would be required. By medicalising the problem, the consumption tax rate for each substance would be adjusted to match the ensuing health care and associated costs. 2. Apply the same approach to legal drugs alcohol and tobacco. Despite apparently high tobacco taxes, taxpayers are subsidising health care costs of tobacco use. This also holds for alcohol. A free, universal dental health care programme would also go a long way to saving on subsequent costs. There is a causal link between poor oral health and subsequent cardiac illness, for example.

David Arthur | 13 February 2012  

Private health insurance is not 'insurance' at all, just a government supported gift to worthless 'private' companies, many posing as non-profit organisations, to print money for themsleves. Two of my daughters were sent to a private hospital when one was taken by ambulance to the emergency department and the other developed tingling in feet and fingers. The private hospital doctors got the diangnosis wrong both times, and badly wrong, and it was left to our GP on the following day to recognise the symptoms and resolve the 'mystery'. The local public hospital did the rest, and very well too, thank you. Another one had opted to have her tonsils out in a private hospital, 'jumping the queue' as it is designed to do, to be fit for an overseas trip. The organisation of the hospital was woeful, terrible, and it was absolutely impossible to know exactly, precisely, what the bill would be beforehand. Finally, a sister in law has just died of cancer. In the private system, with full 'insurance', her fate was sealed and there was never to be a recovery anyway, but now her husband is thousands of dollars out of pocket, investments gone, all to pay the bills that this lieing product 'health insurance' fails to cover. The truth is, if you are seriously ill, only the public system works. If you are foolish enough to think cosmetic surgery to hide ageing is a serious issue, it might be a boon, but even then, you are forcing up the price of work for others who might need surgery for more serious reasons than vanity and a shortage of synaptic gaps.

janice wallace | 13 February 2012  

Dear Editor, some of your comments today and the comment by Frank should not be allowed to enter the public domain without commentary. I am moderately qualified to comment having worked as a specialist surgeon in the British Health service for 3 years in the NSW public hospital service for 36 years and in the private hospital service (St Vincents and Sydney Adventist hospitals) for 31 years. Dear Frank- Under Medicare, specialists are prevented by law from charging any fee to patients treated in the public system, a system to which everyone ,rich or poor is entitled. There are some very rich people treated for nothing. Perhaps you should be railing at them and not at their highly trained professionals.It will certainly be a surprise to you to learn that all medical specialists are trained entirely at their own expense. There is not a cent of public money spent in the training of medical specialists. You should know that all university graduates in Australia are trained at public expense regardless of wealth status and today, all pay back that cost in HECS.Your comment above, Frank, deserves no traction since it is fundamentally wrong as well as demeaning of doctors who in this country would treat you as well as they possibly could despite your unfounded vitriol. Dear Editor - 'The subsidy represents...a major setback for social inclusion'. How? Why? All Australians regardless of race, religion, wealth, private health insurance or refugee status are entitled to free health care. This is paid for by the taxpayers as a compulsory levy on gross income. The highest taxpayers contribute the most. Those who pay no tax, the disadvantaged, the unemployed, the poor, the mentally disabled and the able bodied who choose to work the system make no contribution but get what the PM and state premiers choose to call the best system of health care in the world. If, Michael, you would support means testing, this should be applied to those who are wealthy enough to make a contribution to public health care but choose to pay nothing in the public system. Your reliance on Menadue and McAuley would take too long to refute here(I suspect this comment is already too long) Suffice it to say that what is quoted reveals a fundamentaaly wrong understanding of the system. Medicare despite its abject failure (failure to get into hospital for emergency care, reduced public beds, nurses and doctors , preventable deaths and much more) is politically sacrosanct, a darling of 'human rights' and 'social justice'. Pity that facts seem to be unpalatable in the quest for social justice other than to imply that social justice does not apply to everyone in our society particularly to those who actually care for the sick!

john frawley | 13 February 2012  

Good story. The fact that the private and public hospitals are poles apart should not be a barrier to social justice and access to health care in Australia. We can find many ways of fiddling the books and balancing health budgets through means testing, cutting medications, closing mental health facilities ect, but all are just stop gaps until the next black hole. In the end both health practitioners and citizens have to play a role in making health care affordable. We can't keep ignoring the astronomical charges specialists ect charge for services, just as we cant ignore the millions of dollars alcohol and tobacco abuse cost the health budget each year. And in between we have local GPs continually calling the elderly in for health assessments ect ect as well as needing an extended consultation to take your blood pressure. basically people need to take more responsibility for their body and specialists need to hold off on the second lexus.

Paul Belci | 13 February 2012  

To JOHN FRAWLEY: It is refreshing to see an opinion published in the Eureka Street which is actually based on facts. I am surprised that your opinion actually got past the politically correct editors.

Beat Odermatt | 13 February 2012  

Yes quite obviously the means test should go. And it may well be that a single insurer should replace the multitude, especially those offering cover for fringe treatments of the most dubious effect. A counterbalance to the removal of the means test might be a legislative cap on the sometimes outrageous gap fees charged by procedural specialists in particular. Many ordinary folks think that private insurance is hardly worth the candle, when they get slugged, sometimes for thousands above the fund rebates, even when in the top table. The reason is simply greed. It is quite possible for specialists to practice quality medicine and make a comfortable living while charging just the schedule fees. Even some of these schedule fees, e.g. for cataracts and endoscopies, are inflated and disproportionate to the time and skill involved. How do I know this? Answer: twenty four years in private specialist practice. The public hospital system in which I now work, is full of frustrations, but at least our patients are not being held to ransom every time they require medical attention.

Physician | 13 February 2012  

I would just like to point out that those who purchase health insurance are also shouldered with significant extra out-of-pocket costs for 'gap' fees which are not claimable from either Medicare or health insurance funds (health insurance funds are prohibited from paying this gap). Is it any wonder that people with health insurance still choose to attend public hospitals (as is their right?). If governments are serious about fostering private health insurance for reasons of choice, they would review the current strictures placed on what health insurers can or cannot pay. Progressive income tax rates mean that wealthier individuals are not being subsidised by low-income earners or welfare dependants. I am also unclear on how the subsidy is a setback for social inclusion. It is clumsy, inefficient and perhaps counterproductive - but I am not convinced it is socially exclusive, particularly because many people with health insurance already choose public health care for the reason outlined above.

Moira | 13 February 2012  

Dear Physician, As you know,the outrageous fees to which you refer are not chargeable in the public sector and apply only to those who choose private treatment. The real obscenity, however, is that Medicare contributes to the patient fee rebate, taking funds from the public sector for which the funds are intended. Another disastrous fault in the planning of Medicare! Of course, this rebate has also over the years fallen far behind costs of living, increased costs of treatment based on extraordinary advances in healthcare, increasing needs and populations, and for some treatments has been effectively reduced by government and eliminated for some services, justifiably for some (such as lifestyle plastic surgery) and unreasonably for others. The gap is in the main due to another of Medicare's great failures, namely, the failure to appropriately increase the rebate or alternatively to eliminate rebates for private treatment and leave that up to the private insurance funds. Medicare has been seriously flawed since its inception and radical reform of its system of operation is the only key to a fair and equitable health system.

John Frawley | 14 February 2012  

My experience as a surgeon was about as long as John Frawley's. There are several half truths in his first comment that should not pass unchallenged. Some patients in public hospitals are classified as 'private' and charged fees. One reason is that public hospitals may have facilities not available in the private hospitals and insured patients are entitled to have access to these. Trainee specialists are trained in public hospitals using facilities paid for by the taxpayer. To say that 'not a cent of money is spent' in training ignores this. In his list of defects of Medicare he lists 'preventable deaths'. Does he imply that preventable deaths do not occur in the private system? If so, can he provide evidence for this statement? I don't believe his stayement is true and it is offensive to all who work in public hospitals.

Surgeon | 14 February 2012  

Dear Surgeon - Yes, private patients are treated in the public hospitals and are charged a fee by the doctors involved. I was talking about 'the public system' which treats public patients and expressed no 'half truths' in that regard. Pleae accept my apology for not spelling out in detail what I meant by 'the public system' Regarding costs of training. I would not think that when a shop assistant applies for a job, at say Myers, and learns on the job, that such learning involves direct expenditure on the part of Myers in favour of that employee. Unless an aspiring specialist wins one of the very few scholarships or grants available (usually overseas for a limited time) there are no public funds made available for specialist training. I am sure you know this and that like the vast majority of us you paid from your own earnings the costs of educational courses, conferences, examination entry fees, and if you trained overseas, of travel, accomodation and all other costs for yourself and your family if you had one at the time. Money spent on hospital facilities is not money spent for the purpose of training specialists or any other doctor for that matter. Please accept my apologies if I have offended 'all who work in the public hospitals' by expressing my frustration and disgust that preventable deaths occur as a result of the system in public hospitals. In my 31 years of work in two private hospitals (both of which had Emergency Departments) not a case that I can recall grabbed headlines in the print or electronic media concerning people sent home without treatment and who died within days. I don't know where you practice,Doctor, but if that is in NSW you could not possibly have missed the recently reported cases of two children (6 and 8 years) who died within two days of being sent away from understaffed Emergency centres with classical appendicitis. Nor the 15 year old schoolboy rugby player sent home with a ruptured thoracic aorta with classical features diagnosed from a Sydney Morning Herald report by a number of my colleagues who never saw the boy. In this State there have been innumerable reports of deaths that were eminently avoidable. There has been one public report in recent times of a death in a private hospital patient from an epidural abscess following an epidural anaesthetic for childbirth which presented some weeks after returning home and was missed in a public emergency department. Of course deaths occur in both public and private hospitals but unavoidable ones are far more prominent in the public system as various reports have shown in recent years and are largely not the fault of those who work in the system (people like you and me and the overworked and sparse nursing sevice). I regret that you believe me to be a liar ,Doctor, and apologise for offending you. As a fellow surgeon, however, I suggest that we have little need for offence. What we need is a radical overhaul of the glaring deficiencies of the Medicare system, particularly in the manner of funding and provision of adequate staffing particularly of Emergency Departments in public hospitals and the acceessibility of the dangeruosly ill to these depatments and hospital beds. Finally, not knowing where you practise, my brother (or sister), please believe that I have addressed you as Doctor rather than the generic 'Mister' ('Miss') without any intent to offend.

john frawley | 15 February 2012  

I stopped my private health insurance when the private health rebate was introduced & i have not regretted this at all. I thought then & still do that the rebate is profoundly unfair. Why should the poor have less access to health? Of course they do not need to except in terms of being on waiting lists for some surgery. As far as i am concerned I should not get precedence over others merely because i can pay. I pay a significant tax surcharge because I have no private insurance & this I consider is fair. It so happens that recent negative comments to me from people about their health experiences have all been from people who were privately insured so it is certainly not only only those who 'go public' who are unhappy. And to those who state that errors are made in the public sector, of course they are as they are in the private sector but I know of no reliable statistics that suggest one sector is more prone to error than the other; let's not make wild statmemtns without verifiable statistics (& that's not reports of 'one offs' in the press). In case you are interested, i am a retired medico who worked in both the private & public sectors.

Rosemary | 17 February 2012  

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