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Issue #1637      May 7, 2014

National Commission of Audit Report

Destruction of Medicare

The National Commission of Audit’s report on health set out in detail a blue-print for the destruction of Medicare and privatisation of public health services, claiming but not providing an iota of evidence that the present health system is unsustainable. The Liberals are and always have been philosophically opposed to the pillars of Medicare and our public hospital system: universal access, comprehensive cover, bulkbilling and no-fee public hospitals. These are the Commission’s main targets.

Sydney May Day 2014. (Photo: Tom Pearson)

Universal access abolished

Medicare provides cover for primary health care and public hospitals. The Commission recommends giving private health insurance funds (PHI) coverage of these areas with people on higher incomes ($88.000 pa singles, $176,000 pa families) denied access to Medicare and required to take out private health insurance for coverage. This would deny many workers access to Medicare.

“Expanded private health insurance plans would, at a minimum, cover all services provided by Medicare and public hospitals and would have to pay for all health care expenses of the insured, including the cost of treatment in a public hospital,” the report says.

The tax surcharge for those who do not take out PHI cover will be increased from the present 1.0-1.5 percent to 3.0-3.5 percent, depending on income, as an incentive to take out PHI for primary care.

Bulkbilling abolished

“As well as those on higher incomes, the Commission considers it is important that steps are taken to provide a signal to people about the consequences of the use of the health care system,” the report says.

“This should begin with a proposal for all consumers to make a small contribution towards the cost of their health care through a co-payment for all items listed on the Medicare Benefits Schedule.

“Co-payments send a clear price signal to all consumers that medical services come at a cost, which may reduce demand for unnecessary or overused services.” Again, not an iota of evidence of unnecessary services or over-use by patients, but clearly designed to reduce access for those on lower incomes.

There is a compulsory co-payment of $15 or $5 for concession card-holders, for all services under Medicare for those still eligible to Medicare. The safety-net threshold kicks in after 15 visits, when the co-payment is then reduced to $7.50/$2.50 (conc) for each item. How many bulkbilling doctors will want to deal with the costly administrative costs of such a small co-payment? It is a recipe for much larger patient contributions or faster through-put of patients.

The Commission recommends that the government encourages states to introduce co-payment for hospital emergency departments, cutting off access to free treatment.

Those who still qualify for Medicare cover may be required to do so through a PHI fund.

Safety net shrinks

At present there is a Medicare safety net which kicks in after $1,248.70 out-of-pocket (not bulkbilled) medical expenses, after which patients receive 80 percent out-of-pocket costs. The report proposes raising this to $4,000! The safety net is left in tact for concession card-holders for now.

It also proposes that a number of items be removed from Medicare coverage.

There are no recommendations to curb the unsustainable price-rorting by specialists, pathologists and other private sector operators. The audit just accepts their charges will keep rising at well above the rate of CPI.

The above proposals are in a section of the report titled “Short to medium term reforms”. They are the thin edge of the wedge. The means testing for Medicare eligibility could be adjusted very easily downwards at a later date, again using the argument that it is unsustainable and like-wise the co-payment will be increased.

Abbott might initially opt for the $6 co-payment being touted in the media.

Once the basic principle is broken, it is only a matter of time before the net shrinks and costs rise. The outcome will be loss of access to services, a hefty rise in costs, for families in particular, and down the track the development of more serious preventable medical conditions when monitoring and early checks are not carried out.

Deregulation of PHI

The report also recommends deregulation of the price of premiums and a “relaxing” of the community rating to provide for higher premiums – initially based on “life-style choices”.

Community rating is a system where premiums are based on the risks associated with a community as a whole, not on individual factors as is the case with car or home insurance. It might start with reference to “life-style factors” but won’t stop there – later it could be based on medical conditions such as diabetes, heart disease, genetic factors, mental illness, etc. It would become completely unaffordable for those in most need.

Health care would become a privilege, not a right.

As for the future of public hospitals, that will be up to the states to develop their own policies – fees, privatisation, limit access ...

The Commission leaves open the question of the PHI rebate which is one of the fastest growing, uncapped areas of the budget. Already around $5 billion per year, it would grow even faster if extended to primary health cover.


The report sets the scene for an Americanised managed health care system. It bemoans the fact that private health insurers are excluded from covering services provided through Medicare. “This limits the health funds’ ability to assist in improving the health outcomes of the elderly and chronically ill at the point of diagnosis, which is usually when they initially visit their local doctor,” says the report.

“In many cases health funds are not made aware of when their members develop medical conditions and find out only after the member has been treated in a hospital and seeks reimbursement from the fund. Allowing health funds to cover primary care settings would make it possible for them to be more aware of members’ health risks.

“Funds could assist members to manage chronic conditions in out-of-hospital settings. This change is also needed to underpin the requirement for higher-income Australians to take out private health insurance.”

Or, to put it more bluntly, PHI funds could intervene before someone was treated in hospital and decide whether or not they would be covered by insurance if they went ahead with the treatment. Welcome to the US system of managed health care where bean counters in an insurance company determine surgery and other medical treatment or tests.

Health care a commodity

So how does the Commission defend such a massive assault on Medicare and public hospitals? It takes a blanket approach to cutting costs, privatising and deregulating the 15 most costly and rapidly rising areas of budget – well not quite, defence doesn’t get the same treatment!

“The Medicare Benefits Schedule currently costs around $19 billion and is expected to grow by 7.1 percent per year until 2023-24 and continue growing,” the report says. “Health care spending represents the Commonwealth’s single largest long-run fiscal challenge …”

The report does not look at the benefits of this spending to the health of the nation, or one of the key and containable reasons costs are rising – the rorting of the system by specialists, pathologists and other private sector practitioners. The public health system is seen as nothing more than a “fiscal challenge” and potential source of profit-gouging if privatised.

Using true neo-liberal spin, it states without an ounce of humanity, “Putting health care on a sustainable footing will require reforms to make the system more efficient and competitive… More deregulated and competitive markets, with appropriate safeguards, have the greatest potential to improve the sector’s competitiveness and productivity.”

Treasurer Joe Hockey might think “the age of entitlement is over”, but as far as the people of Australia are concerned, basic human rights, including health care, are not up for sale. The Audit Commission report must be defeated and with it the Abbott government. The section on health exposes the bankruptcy of capitalism. Time for real change.

Next article – Vale Peter Nicholls – 1932-2014

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