Issue 20 / 6 June 2011

AS the federal government prepares for another attempt to means test the private health insurance rebate, isn’t it time we had a proper discussion about this controversial element of our health system?

A lot of claims are made on both sides, but finding clear evidence about the rebate’s impact on hospitals and the patients they serve is harder than getting to the front of an elective surgery waiting list.

In 2005, 6 years after the introduction of the rebate, the then Health Minister Tony Abbott said (as he announced yet another rise in health insurance premiums): “Every patient treated in a private hospital is one less patient on a public hospital waiting list.”

As if anything in the health system is that simple.

It’s certainly possible to argue, as the insurers and others do, that the rebate has reduced pressure on the public system by encouraging more patients to go private.

But it’s equally possible to claim the rebate is an example of “middle-class welfare”, one that shifts resources from the public to the private sector, leaving the public system less able to meet demand.

A summary from the Federal Parliamentary Library last week made clear that we simply don’t know what the net impact has been, partly because the differences in caseload between the two systems make it risky to assume an increase in one represents a straight transfer from the other.

We do know that the private system increased its share of admitted patients over the 6 years following the introduction of the rebate. But the picture is complicated by the fact that demand increased across both systems over the same period, as did the median waiting time for elective surgery in public hospitals.

The health system is a complex beast and there are many possible reasons for an increase in demand — our ageing population, the introduction of new treatments, and even the rebate itself, if it led patients or doctors to believe services would be more available or affordable.

When talking about insurance of any kind, it is worth keeping in mind the economists’ concept of the “moral hazard” — the idea that people behave differently when they are insulated from the consequences of their actions. Optometrists’ advertisements urging people not to miss out on the “free” glasses they are entitled to under their health insurance might be an example of that.

Unfortunately, debate about these issues always takes place within a fog of ideology, as the conservative side of politics gets all warm and fuzzy over anything with the word “private” in front of it, while Labor gets gooey about the other “p” word.

Imagine if we could instead find solid evidence for decisions about how we spend our health dollars — and rather a lot of health dollars in this case, as the current rebate is estimated to cost government more than $4 billion each year.

Rather than tinkering around the edges with means testing, we might then be able to answer some bigger questions: What is this rebate designed to do? And is it giving us value for money?

Jane McCredie is a Sydney-based science and medicine writer.

Posted 6 June 2011


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7 thoughts on “Jane McCredie: Ideology clouds rebate debate

  1. daman langguth says:

    It makes no sense to have money returned when you have already paid it in tax. Unfortunately, Howard wasted a large amount of the Costello surpluses with wasteful policy. However, there is good reason to encourage people who can affored to, to use the private system. Whatever people say, the efficiencies of the private system are streets ahead of the public system, and you only need to work in both to see this. So this is a fine balance, though a political football that is abused by both sides, and there is no chance a rational use of subsidy will occur.

  2. jenny cameron says:

    It would be good to dissect this situation as I suspect many people buy (often on the advice of their tax accountant) the cheapest possible private health insurance for the sole purpose of avoiding paying the extra Medicare levy (applicable if you earn above a certain amount). These people most likely do not use the private hospital system as it still carries significant out of pocket expenses. So there is not only the cost of the rebate but also the loss of the extra Medicare levy that is hurting the public health system. I would abolish the rebate entirely, if people want to buy private health insurance, fine, but leave the public health dollar in the public health system. It works, it’s fair, it’s Medicare.

  3. Dr. ARC says:

    I would like to see a return of the system which existed before 1972.
    96% of the population were privately insured with a full tax deductibilty on the premium and the remaining 4% had full access to the public hospital system which catered for the indigent, the indolent and the fixed income pensioners. The system worked well prior to the $5 carrot introduced by the Whitlam Labor government.
    There is now a two-tier system, compare with the system in U.K…. the public system and BUPA.
    People have the right to expect excellence in both systems and if they can afford to insure privately they should and deserve full tax rebates on premiums paid.
    The public system must be funded and a levy on income earned over a preset level is essential to do so.

  4. grrgh says:

    The utopian universe Dr ARC refers to will never happen.
    More’s the pity.
    We cannot have a rational debate about health until it is realised by the punters that the Medicare levy is a small fraction of the true cost of health.
    The public/private argument is as unwinnable as is the public school/private school subsidy debate.

  5. Anon says:

    Yesterday’s public hospital orthopaedic list was turned on its head by trauma patients, some of whom had elected to be admitted under their private insurance. Many elective surgery patients occupying public hospital beds also choose to use their private insurance. Why do we continue to allow this ridiculous abuse of the system (by the states and by clinicians)?
    Tony Abbott’s argument that “…every patient treated in a private hospital is one less patient on a public hospital waiting list..” holds no water while private patients continue to be treated in public hospitals. Proceduralists earn double the sessional rate, even when they “no-gap” the patients, so there is no doubt about potential conflict of interest. The sooner the Feds take over 100% of health funding the better. The system is neither transparent nor equitable.

  6. Doc Strange says:

    Excellent questions – high time to get the evidence. Is private really delivering better health care, if so is it cost effective and is it fair to have a ‘substandard’ for the rest of our population? Is it fair to charge higher rates for the same procedure/consultation just because we can thus increasing healthcare cost? There’s some hard questions out there and I’m not surprised by the lack of data or evidence to back anything.

  7. Dr MJ says:

    Privatisation of health promotes increased inequity in what the UN declares a fundamental human right – access to timely and competent healthcare.
    The ‘working poor’ and pensioners languish on overblown waiting lists whilst public resources are directed towards expediting queue-jumping by those of us fortunate to be in a position to earn a higher income.
    The inequity is further exacerbated by the consequent deterioration in health of those unable to access care within a reasonable timeframe – it is difficult for a labourer to work when waiting 2 years for his hernia to be repaired.
    I am ashamed of my colleagues who reap huge incomes by sifting the easy income from this private pool. Hippocrates is turning in his grave.

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