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Private health insurance: A bipartisan con job

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(Image by Pictures of Money via flickr)

Successive Coalition governments continue to undermine Medicare and the modern Labor Party seems not to understand it, writes John Menadue

The ALP does not seem to understand its own creation – Medicare – and that the $11 billion taxpayer subsidy to private health insurance (PHI) is like a Damocles sword that hangs over Medicare. 

Ian McAuley in, 'Medicare under threat from Labor', points out that Labor in its”consultation document" on a proposed reference of PHI to the Productivity Commission suggests not only retaining PHI but strengthening it.

This may only be a stratagem to get the PHI lobby of Labor’s back in the run-up to the next election. But Labor’s record on PHI is not at all reassuring. Has there been a deal done with PHI as Kevin Rudd did before the 2007 election?

At the 2016 Federal Election, the ALP criticised the Coalition for its preparations to "privatise" the Medicare payments system.

That criticism was nonsense. Medicare services do not have to be delivered through a public agency. For example, in the current Medicare, medical services and pharmaceutical services are overwhelmingly delivered by private doctors and private pharmacists. The key to Medicare is a single public funder that ensures that quality services are available to all – regardless of means – and are delivered in the most efficient manner. If the private sector can deliver services more efficiently for all, so be it — including the payments system.

The great threat to Medicare is the $11 billion taxpayer subsidy to private health insurance companies. This $11 billion subsidy supports the high cost and inefficient private health insurance (PHI) companies, and favours the wealthy. Subsidised PHI makes it more difficult for Medicare to curb the power of providers — AMA, Australian Pharmacy Guild, Medicines Australia and private hospitals. As I have argued in an earlier blog, The health insurance lobby at work at the expense of the public interest‘, this $11 billion subsidy is the "tapeworm" that is eating away at Medicare. The taxpayer-subsidised growth of PHI is taking us down a two-tier health system and the disastrous path we see in the U.S.

The ALP claims that it does not believe in a two-tier system. But its actions on PHI belie its claimed beliefs.

Before the 2007 Election, Kevin Rudd sent a confidential letter to the private health insurance industry pledging that in government he would maintain the subsidy for PHI. We learned about this undertaking years later.

In the 2016 Election, the ALP was offering the PHI industry more support than the Coalition.

As Ian McAuley has set out in an earlier blog Health care and Labor’:

In the recent [2016] election Labor had fine words on healthcare:

 

"Labor will ensure that access to health care is determined by your Medicare card and not your credit card.”

 

But in reality its policy proposals, if implemented would have been even more destructive of Medicare than the Coalition’s. The Coalition, true to form, proposed to entice more people into holding private health insurance, but Labor’s enticements to hold PHI were even stronger. That’s because while the Coalition proposed to freeze the income cutoff threshold for the PHI rebate until 2021, Labor proposed extending the freeze until 2026. That threshold is the income, currently $90,000 for singles at which the rebate starts to cut out.’

There are two possible explanations for the ALP’s proposal in 2016 which would have entrenched PHI more than the Coalition proposal. The first is that the ALP in 2016 did not understand what was at stake and the threat of PHI to Medicare. The second is that the ALP is so frightened of the power of vested interests, like the PHI industry, that it seeks to buy off their support by abandoning its principles.

The ALP is determined not to be wedged on one issue after another. That makes it hard for people who believe in the political process to maintain faith in our democratic system.

What drove former Prime Minister Gough Whitlam to introduce Medibank/Medicare was the inefficiency and unfairness of numerous private health funds. Conservative governments had subsidised these private funds by allowing policy holders to make tax deductions on premiums paid. This meant that higher income people got more of a taxation saving than low-income people. Gough Whitlam often pointed out that he got a greater taxation subsidy for his private health insurance than his driver. In 1975, when introducing Medicare, subsidies to benefit private health funds were abolished.

When the Hawke Government reintroduced an improved Medicare in 1983, subsidies for private health insurance introduced by the Fraser Government were abolished.

The Howard Government reintroduced the subsidies for PHI which have now grown to $11billion per annum. The ALP has been running away from the problem for years. The problem is that the $11 billion subsidy per annum is promoting the development of a two-tier health system. The ALP just does not understand or is refusing to face what is at stake.

The ALP in government does not have a good record in defending Medicare. In the period 2007-2013, the Rudd and Gillard governments muddled through on health. The National Hospitals and Health Reform Commission it appointed did not really take us anywhere. The Commission was stacked with health insiders and even put forward the suggestion of "Medicare Select", which would have crippled Medicare in its entirety. The chair of the Commission was a senior executive of BUPA.

If there is a Shorten government, will we have a continuation of failure to protect Medicare that we saw from two Labor health ministers in the Rudd/Gillard governments? They were wasted years for health reform. Labor ministers may have been in office but they were not in power.

Abolishing the $11 billion subsidy for PHI would be a significant contribution to budget repair. It would also be a great step forward in restoring Medicare to the universal and single public-funded institution that the Whitlam and Hawke governments set up.

Last year, an Essential Poll showed that 48 per cent of respondents supported abolition of the $11 billion subsidy for PHI and using the savings to include dental care in Medicare. The case can be won.

If individuals want to take out private health insurance, that is their right. But there is no reason why the Commonwealth Government should pay an $11 billion per annum subsidy that is undermining Medicare.

In the Sydney Morning Herald, Ross Gittins described PHI as a 'con job’. Has the PHI lobby conned the ALP?

The modern-day ALP does not understand one of its most famous achievements — Medicare.

John Menadue is a commentator, businessman and former diplomat. You can follow John on Twitter @johnmenadue. This article was originally published on John Menadue's blog 'Pearls and Irritations' under the title, 'Private Health Insurance is a con job. Is Labor being conned again?'

 
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