Resident CPD health policy expert, Jennifer Doggett, takes a close look at what the government proposes to include in a bill to be introduced to parliament soon. While labor may now be calling for means testing the private health insurance rebate, Jennifer suggests there are better ways to allocate health funding that deliver health care to people when they need it most.
Almost all health economists and policy experts agree that the private health insurance rebate is a poorly designed and targeted program. In fact, when Labor won the 2007 federal election, the Department of the Treasury advised the incoming government that the funds allocated to the rebate scheme would deliver better outcomes if used to directly subsidise health services.
Therefore, the attempts by the Labor Government to roll-back the scheme through means-testing the rebate should be applauded. While the Bill to effect this change failed in the last parliament, due to opposition from the Coalition and independents, Health Minister Nicola Roxon has announced that she plans to re-introduce it in the near future.
Clearly, means testing will not eliminate the waste of these scarce health resources but it will go some way towards reducing the high cost of this program. Unfortunately, the Government does not appear to have considered the preferable policy option of abolishing the program altogether.
This may be due to the fact that the Government is concerned about the electoral impact of removing the rebate. While it is always difficult for a government to take something away from consumers – particularly a subsidy that has now been built into the price of the service – there are other alternatives to continuing this inefficient program that do not leave consumers worse off.
One option put forward in CPD’s book More than Luck: Ideas Australia needs now is for the funding currently allocated to the rebate to be redistributed to consumers in the form of ‘health dollars’ that they could then use to pay for health services, including PHI premiums. This would ensure people retained the value of the subsidy but were given greater choice over how it could be used.
If the funds currently going into the PHI rebate – approximately $4.5 billion per year – were redistributed in this way to low and middle-income households they would provide approximately $600 a year for each household earning less than $200 000 a year. This would represent a much more equitable allocation of health funding, compared with the current rebate scheme which disproportionately benefits high income earners.
This option would enable Australians on low incomes to access private health care, which currently can be difficult due to the high co-payments for many services. As the funds could be used to pay for basic forms health care – such as GP visits and prescription medicines – families who struggle to afford these services at the moment would also benefit. This would help respond to the growing body of evidence that many low income and chronically ill Australians struggle to afford basic, preventive health care services.
For example, a recent survey of people with mental illnesses, conducted by SANE Australia, found that the majority of respondents reported that they often had to choose between paying for healthcare or meeting daily needs. In fact, over half of the respondents (54%) said they had not been able to afford treatments recommended by their doctor, and 42% had not filled scripts for medication they had been prescribed because of the expense.
Another study conducted in 2008 by Commonwealth Fund survey surveyed chronically ill adults in Australia, Canada, France, Germany, the Netherlands, New Zealand, the United Kingdom, and the United States. The research found that over a third (36%) of Australians with chronic conditions reported problems with accessing health care due to cost. This was higher than participants from any other country, apart from the US.
Giving these consumers access to the funding currently being used to subsidise insurance premiums would achieve significant health and equity gains and result in a more efficient allocation of health care resources.
Those people who find PHI useful could simply use their subsidy to pay for part of their premiums, as occurs presently. They would therefore be no worse off than they are under the current scheme.
Means testing the rebate would be a major step forward but it will still result in the wasteful allocation of billions of dollars every year. If the Government is serious about maximising the value of our health dollars, it should carefully consider all options to redirect the entire $4.5 billion annual funding for the scheme into direct subsidies for health services, in particular for those who currently miss out on their fair share of care.
