"Medicare stays" says Coalition banner. Interesting choice of words. Medibank "stayed" but was privatised.

The destruction of Medicare is the end-game for vested interests like private health insurance. The Coalition is facilitating that process with an $11 billion pa subsidy despite what Turnbull tells us. John Menadue gives us the facts.

MALCOLM TURNBULL says that the Coalition will “never, ever, privatise Medicare”. Given the wide public support for Medicare and Malcolm Turnbull’s way with words his attempted rebuttal is not surprising.

But the Coalition has been eroding Medicare from within for a decade and a half since John Howard. The vehicle for this erosion is private health insurance (PHI) and the government is facilitating this process with the $11 billion p.a. taxpayer funded subsidy to support private health insurance.

And the ALP does not seem to care. It scarcely ever mentions the damage of PHI. Is it scared of this vested interest? 

If people want PHI, that is their right, but it should not be at the expense of others and in the process, erode Medicare.

The erosion of Medicare is proceeding rapidly which I will outline below. The danger and the threat increases every year. Steadily we are moving down the disastrous U.S. path of private health insurance with its horrific costs and unfairness. Warren Buffet has described private health insurance in the U.S. as the ‘tapeworm in the US health system’.

The Coalition‘s undermining of Medicare through PHI is insidious. It occurs in many ways. Medicare is becoming less and less a quality system available to all, regardless of income.


The threat takes many forms.

  • The $11 billion subsidy for PHI undermines Medicare’s principles of a single funder, universality and solidarity. The PHI subsidy goes overwhelmingly to people on higher incomes. The key and founding principle of Medicare was that quality care should be available on the basis of need and not income. The $11 billion p.a. subsidy to PHI is a violation of that principle. It enables the wealthy to jump the hospital queue regardless of need.
  • We are concerned about growing health costs, particularly with an ageing population but PHI makes it much more difficult for Medicare and the government to control costs. Providers – doctors and private hospitals – have the power to set prices in the market. Multiple PHI companies make it much more difficult to control those costs. U.S. health costs are double Australia’s health costs as a proportion of GDP and this is almost entirely due to the inability of PHI to control costs. We need a health system that is efficient as well as fair. PHI results in both inefficiency and unfairness.
  • The erosion of Medicare and the loss of control over costs has been greatly worsened through gap insurance provided by PHI. As a result of that gap insurance, the public is being forced to pay for the greed of specialists whose over-servicing and overcharging is facilitated by PHI.
  • The erosion of Medibank means that PHI companies can foist higher costs on the community in other ways. The administrative costs of PHI are three times the costs of Medicare. These costs may be off the Commonwealth budget, but the inefficiency of PHI is still borne by policy holders. PHI companies impose their own private tax. It is called "premiums".
  • PHI premium increases have been at double the CPI rate for the last 15 years. The community pays for this inefficiency of PHI.
  • The political justification by the Coalition for the $11 billion subsidy for PHI is that it would take pressure off public hospitals. It has not done so. In fact, the reverse has occurred. Because of the weakening of Medicare’s ability to control costs and fees, many people on moderate incomes have been forced to go to the emergency departments of public hospitals. Most of these emergency departments have been at bursting point for years. Private health insurance has also under-written dramatic increases in salaries of specialists with the result that increasingly, clinicians in public hospitals are attracted to taking employment in private hospitals where the salaries are three to five times higher than in public hospitals. This is just another example of how PHI is hollowing out Medicare and the public system from within.
  • A principle of Medicare is that quality services would be available to everyone regardless of where they live. Because PHI provides under-writing of private hospitals, this means that country people are disadvantaged. Almost all private hospitals are in urban areas. PHI clearly discriminates against people living in rural and remote Australia. The principle of universality is again eroded. The National Party allows this dudding of country people to continue.


The Minister for Health, Sussan Ley, has floated the idea that the Coalition will introduce categories of "gold, silver and bronze" to help patients better understand the many confusing and dud policies that PHI offers. But given the scale and nature of the problems outlined above, this is pure window dressing. It fails to address the erosion of Medicare by PHI.

In addition to the appalling performance of PHI, we have just learned that the ACCC is to investigate very serious breaches by Medibank Pte in failing to disclose to its 3.9 million policy holders that it was slashing coverage of pathology and radiology services just when it was floating Medibank Pte on the stock exchange.

The Chairman of the ACCC, Rod Sims, has also commented

There will be more enforcement action coming generally in the health sector … We have concerns and we are investigating other health insurers on a broadly similar set of matters to what we took Medibank Pte to court for.’

News reports also tell us that the ACCC is within months of launching major cases against major hospital operators for engaging in anti-competitive conduct to keep out smaller health providers. The Chair of the ACCC added 

‘There are also broader competition issues which are reasonably advanced on whether the big players in the market are doing things to keep competitors out of the market.’

Ian Ramsay at Melbourne University also warned that Medibank Pte now faces possible ASIC investigation on top of the action by ACCC.

The current revelations about PHI come as no surprise. They are the tip of a dangerous iceberg. The end game is increased profits and the destruction of Medicare by stealth.

The ALP has proposed a Royal Commission into the dubious practices of our banking sector. PHI is also a financial intermediary. It does not supply any health services. The damage and hollowing out of Medicare that is occurring should also be fully exposed. by including an examination of PHI in the terms of reference of the Banking Enquiry.


The destruction of Medicare is the end-game for vested interests like PHI. The Coalition is facilitating that process with a $11 billion p.a. subsidy despite what Malcolm Turnbull tells us.

The forms and external structure of Medicare-the shell may remain but it’s founding principles — fairness, universality, solidarity and efficiency are being whittled away.

[Editor's Note:

The follow message was sent to John Menadue from cartoonist, David Pope, whose above cartoon was published in The Canberra Times.

I posted this cartoon on social media today, with links to your blog article [Pearls and Irritations]. The cartoon was, in part, inspired by your posts. Too often, a good thousand words is worth more than any picture. Thank you for them. David Pope.

This article was originally published on John Menadue's blog 'Pearls and Irritations' on 19 June 2016. You can follow John on Twitter @johnmenadue.

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