Real cost of health rebate

by Kerry Ans

The Howard Government's publicly funded 30 percent subsidy to private 
health insurance holders was originally costed by the Department of Health 
and Aged Care at $1.7 billion per annum. According to the Government, the 
rebate has attracted an increase of two million in health fund membership, 
and will ease the pressure for public hospital funding by approximately 
$1.3 billion.

In fact the rebate will cost taxpayers a minimum of $2.75 billion a year, 
according to recently released estimates.

This cost is supposed to be partly offset by the increased use of the 
private sector by these newly insured members and related decrease in use 
of public hospitals.

But there are a couple of major flaws in this logic.

Firstly, there is a 12-month waiting period for many conditions before many 
funds' health cover kicks in, and these people will continue to use the 
public system in the waiting period.

Secondly, the new members may reproduce the trend of a significant number 
of current members, who continue to use the public hospitals and who don't 
declare their insurance cover for fear of incurring gap costs.

The other factor which the Howard Government's joint scheme for subsidising 
the private health sector (the 30 percent rebate and Lifetime Health Cover) 
doesn't take into account is the rising cost of living.

The GST and recent petrol price rises will increase the rate of inflation 
in the next and subsequent quarters, impacting on lower and lower middle 
income groups.

Many of these people, originally feeling forced into private health 
insurance, may reassess the true cost of private health insurance to their 
cost of living.

The sort of dynamic operating with the 30 percent rebate, whereby the more 
people who join a health fund, the greater drain on the public purse, is 
similar to that operating in the funding of private schools.

In the schools sector, the Federal Government's Enrolment Benchmark 
Adjustment system takes funding from state government schools in proportion 
to the increases in enrolments in private schools.

As in private health, the real cost of private schooling is subsidised by 
government revenue.

But to return to the Government's original claim that it is relieving 
pressures on public hospital funding — the best way of doing that is to 
give the $2.75 billion to public hospitals, not to the private system.