What Welfare? Providing a Bed for Private Health Insurance

I remember the day in the early 80s when my father entered the house, exclaiming that he was going to cancel his private health insurance with MBF. He had just received the rebate on a recent treatment, which was somewhere near 50% of the cost. He thundered about paying premiums every month for years, only to get back the meagre amount from the insurer the one time he claimed. The health insurers still do the same with claims on minor treatments, dental care and glasses.

Flash forward to the late 90s and we had the Howard Government, in a very non-neoliberal move, ensuring in 1999 that the Government was to prop up the ailing private health insurance (PHI) industry and the private hospital network it was supporting. They began the 30% government rebate to those wealthy enough to pay for private health insurance. As a result, the government set up a system that ensured that a considerable about of money going into the health budget was not being placed in public hospitals, instead it was to be used as an incentive for more people to take out private insurance. Even better, the same government punished those who were considered to be earning too much to not have private health insurance by starting the Medicare Levy Surcharge (MLS). In other words, forcing a large sector of the population to take out private health insurance. It’s a social coercion scheme that any old Communist leader would admire for its ingenuity. Imagine if the government did the same for independent schools.

As a result, many of us are forced to take out private health insurance most of us barely use or need. Most of our health needs are serviced by the Medicare system, with the exception of optometry, dentistry and elective surgery. Even in those cases, if we didn’t have to pay the MLS or for PHI, we could save and pay for most procedures many times over. It has also instituted the belief amongst many people in society that they now must have private insurance no matter what, that to have a private room and choice of doctor is a right, not a privilege. It’s now become almost an article of faith that we should have a subsidised private health establishment. That it allows people avoiding public hospital waiting lists for needed “elective” surgery – and that if there was no private health insurance or hospitals, the public hospitals would be overflowing.

These arguments have their flaws, however. This is public money being put into the hands of private individuals – away from hospitals that could expand their elective surgery departments. Could be put into a dental scheme. If the Howard Government was really interested in a neoliberal agenda that involved small government, it should have prosecuted the argument that people who want to choose their own doctor, have their own maternity room or have elective procedures quicker than others should have been paying for that privilege. The private hospitals would still continue to provide their limited range of services – as well as pay their nurses considerably less than those who work in the public system.

This is a point that is crucial about private health cover. While there is a cogent argument for the extras cover for things like optometry and dentistry, the biggest proportion goes to the private hospital system. They, unlike independent schools, will never provide a full alternative for the public version, especially in terms of emergency and accident care. If they did, there could be some argument for governments subsidising them in the same way they support independent schools.

As a result of the Howard Government’s largesse, we are still paying many billions of dollars each year for various forms of middle class welfare like the private health insurance rebate. It is difficult, nigh on impossible, for any government to stop these forms of payments, for fear of an electoral backlash. And so we arrive at the Gillard Government means testing the rebate, which will save governments many billions of dollars into the future – in addition to increasing the punishment for people for people earning a certain amount who don’t take out PHI.

The Australian has performed what seems to be a regular job of attempting to whip up battler anti-government sentiment through a Verity Edwards article featuring a family who will be forced to pay the full commercial cost of PHI. As is usual with such articles, Edwards found people earning that money who were performing a job that we associate with the working class – concreting. These battlers, earning more than $258,000 p.a, may be forced to pay somewhere near $800 each year more for it. It’s a curious article, especially this quote

“It’s ridiculous – the better we do, the more the government takes,” Ms Richards said yesterday. “Every time we try to get ahead and don’t rely on the welfare system, we get a guarantee they’ll hit us again.”

They are relying on the welfare system. The rebate is a welfare payment. In addition, the comment “the more the government takes” is also a clear inaccuracy, as company taxation rates have steadily fallen over the years and will continue to do so when the MRRT kicks in. It would be interesting to see if any columnist at the Australian or any other paper would point out that inaccuracy. The article also includes this curious quotation –

“I think if they’re going to take away the 30 per cent, I would be looking at what we’d spent, what we received back with Josh, and whether we need it,” she said.

The difficulty for them is that they would be punished if they didn’t take out the insurance, because they would pay the MLS. Not that this is pointed out by Edwards in the article. There is no way they would do it, based on the stratospheric costs associated with orthodontistry and physiotherapy.

I believe that the government should kick away all the props from the private health industry, but I understand the difficulties that would flow from that action. In terms of the changes they have made, however, I think governments should be using public money to fund hospitals and health care for as many of those who need urgent medical care. Better that trying to bribe a family that takes in more than a quarter of a million dollars a year to support private enterprise. I look forward to seeing people from the IPA supporting the Government on this issue. It is exactly what a libertarian would be doing.


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