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Monday, January 13, 2014

Reform of Public Health can Ensure a Much Fairer Deal for Low Income Australians

Above: Australia's Health Care System is in Dire Need of Reform

By Tristan Ewins
Tuesday, 14 January 2014

Terry Barnes, a former former senior advisor to Prime Minister Tony Abbott has suggested a $6 dollar surcharge on bulkbilling via Medicare in order "to send a price signal". The suggestion is contained in a submission sent to the government's Commission of Audit, so may end-up becoming government policy.

The motive behind this proposal, apparently, is to save money through an 'efficiency dividend'; deterring only unnecessary bulk billing. However, welfare lobbyists are pointing to the regressive distributive outcomes of the policy; as well as the possibility that genuinely ill low income and welfare dependent Australians may not seek medical care when they need it. And also that the decision may place more strain on our hospitals. Of crucial note here: a great number of doctors already fail to bulk bill – and in that sense a 'price signal' already exists for many.

The Federal Government had already made some controversial decisions recently on the Health services front. The Conservatives' decision to remove means testing from the Private Health Insurance Rebate will also involve regressive distributive outcomes when it is ultimately implemented.  (according to Abbott, when the Budget is in surplus)  Dan Harrison of the Sydney Morning Herald has pointed out that abolishing the rebate entirely could save $3 billion. Though because the rebate is the 'Conservatives' baby' that outcome is unlikely so long as Abbott is in power.

On the other hand, the Conservatives like to retain the pretence of 'providing for the battlers'. And there are ways in which this could be provided for even should the government decide to adopt a surcharge and maintaining the rebate in some form.

Firstly, the means test on the Private Health Insurance Rebate needs to be restored. And the savings should be directed to a restructuring of the scheme. Savings here could be balanced between improvements in the Private Health Insurance Rebate for low income policy holders on the one hand, and improvements in the public health care system on the other.

Welfare dependent and low income Australians could then receive an 'amnesty' for rebate eligibility. That is: so long as they were low income or welfare-dependent they would not face spiralling private health insurance costs should they fail to take out private health insurance. The existing 'Lifetime Health Cover' policy – which imposes a cumulative loading building up with an additional "2 per cent per annum" for consumers over 30 who do not have private health insurance cover – effectively discriminates against the poor. Low income Australians effectively 'have a gun at their head' – and a choice to invest in private health insurance they cannot afford; or to take their chances with an increasingly neglected public system. It should be observed, also, that disadvantaged Australians could feel driven to take out the most minimal private health insurance policy just to avoid this cumulative loading, even though they receive only threadbare coverage in return.

But providing an 'amnesty' with regards the 'Lifetime Health Cover' policy would also make fiscal sense in that further subsidies for low income groups would be likely to win more Australians over to private health insurance. (which after all was the stated purpose of the whole policy!) This is quite simply because high income earners can already afford private health insurance; but for low income groups a stronger rebate and an amnesty could be decisive. And for those low income Australians who had already passed the 'deadline' of their 30th birthday – the lack of a full rebate as exists under the "Lifetime Health Cover" policy is already a clear deterrent against taking out private health insurance into the future.

Importantly, while older Australians already receive a higher rebate (40 per cent), the same cannot be said for other pensioners. So by the same logic, a more robust rebate for welfare dependent policy holders of 50 per cent could make private health insurance a more realistic prospect for many. Notably: Seniors' private health insurance from Medibank Private can cost in the vicinity of $2000 a year already. Before the rebate, that's about 10 per cent of a Single Aged Pension in one hit; and it's before we even begin to consider the impact of other cost-of-living pressures for low income Australians. (energy, water, communications, accommodation, transport) So to redress poverty and disadvantage, such measures must be combined with reform of pensions as well.

The mean-spirited provisions of the Aged Pension, Newstart, Disability and other payments ALSO already provide a deterrence preventing the poor and vulnerable from seeking medical care as needed. Therefore robust subsidies should be provided at a generous enough rate not only to address distributive injustice from austere pensions, but also negate the existing deterrence for low income Australians from seeking care as needed. New tax cuts for low income earners, and payments for the welfare-dependent could therefore be provided at a minimum rate of an extra $500 a year. Bulk-billing has already been progressively eroded for far too long. But such reforms could provide a 'way around' the dangers provided by that trend.

Of course there is the option of simply excluding pensioners from any surcharge which apparently is being considered; though should that policy be implemented it should also apply to ALL those considered to be on low incomes by any reasonable measure. The existing low income bracket (necessary to access the Low-Income Concession Card) applies to singles up to $500 a week, and couples up to $848 a week. This is also far too restrictive and mean-spirited. Arguably the bracket should be increased to thresholds of at least $650 a week for singles, and at least $1000 a week for couples – indexed to inflation or a cost-of-living index – whichever is the most generous. A mixture of restored means testing, and the exclusion of low income and welfare dependent Australians from any 'surcharge', would likely have a progressive impact.

It is conceivable that the measures suggested here (taken together) would not save $750 million over four years as anticipated by Terry Barnes with his specific proposals. Indeed – including robust pension and tax reform and an expansion of eligibility for 'low income' concessions - they could cost the budget bottom line – and need to be supported with other structural saves and progressive tax reform. Though it is important to observe that in 2012 Cassandra Goldie of ACOSS (the Australian Council of Social Service) argued that means tests for the Private Health Insurance Rebate and other associated measures could on their own save "$2.4 billion over three years".

The point would not necessarily be overall savings for the whole package of proposals here, but greater efficiencies and a fairer system– the benefit of which would be passed on to the disadvantaged, the poor and the vulnerable both through socialised health care and state subsidy for a means-tested Private Health Insurance Rebate. The 'price signal' suggested by Barnes could still apply to non-disadvantaged Australians, recouping some of the associated costs. Though special provisions could also apply to the chronically ill, with the surcharge being waived from such people entirely. Sending a 'price signal' to the chronically ill just wouldn't make sense as it is indisputable that such people need constant care and feedback.

Again: the Federal Government must account for distributive outcomes as a consequence of any policy. We do not need disadvantaged Australians to be deterred from seeking medical assistance when they are in need. And neither should we be imposing a surcharge whose structure and impact is similar to a regressive flat tax.

Finally there is the prospect of the privatisation of Medibank Private.

Certainly the Ideology of privatisation has never been more entrenched. And to be honest this is as much Labor's responsibility as it is that of the Conservatives. But without getting in a general debate about privatisation, there are two very likely or certain consequences of any Medibank Private privatisation that deserve attention.

Firstly Medibank Private is paying the government almost half a billion in the financial year up to October 2013. Though Fairfax has its net profit rate after tax at $233 million. This was following a shift on the part of Medibank Private from a 'not for profit' footing to a 'for profit footing' under the Prime Ministership of Kevin Rudd in 2009. Arguably this policy had the effect of undermining the mission of Medibank Private to provide very strong competition in the sector in order to drive the cost of private health insurance for consumers down.

But regardless of Rudd Labor's decision, to forsake Medibank Private's substantial dividends at a time when the government is arguing there is a 'budget emergency' does not make sense. Privatisation, here, will likely cost the Budget bottom line and lead to further austerity against the vulnerable later on.

Yet because of the central historic mission of Medibank Private in injecting a vital dose of competition into a sector which otherwise could be marked by greater collusion in the context of an oligopoly, there is a convincing case to restore Medibank Private to a 'not for profit' footing. Any foregone tax revenue should be made up elsewhere (the alternative is likely a poorer deal for consumers). Privatisation of Medibank Private would undoubtedly cost consumers over the long run 'on two fronts' – not only forsaking dividends, but 'shutting the door' on a return of the enterprise to a 'not for profit' footing.

And what is also notable is that currently a good portion of the Private Health Insurance Rebate is recouped when increasing numbers of health consumers choose Medibank Private for their health insurance policy.

This leaves the Federal Government with little more than an ideological agenda: an outlook which Abbott had disavowed in his book 'Battlelines' – where he claimed to be a 'practical' conservative."

Well: if Abbott meant it when he made those arguments then it is time to put rhetoric into practice.

And for Bill Shorten and Labor: stating that any Medibank Private privatisation will be reversed by an incoming Labor government could also provide a welcome and popular deterrent.

To conclude: others on the Left may be surprised or dismayed that I am arguing for reform of the Private Health Insurance Rebate which do not amount to its outright abolition. In principle certainly I am in favour of a massive injection of funds into socialised health care. I am in favour of a radical expansion and progressive restructuring of the Medicare Levy - with billions injected into dental, mental health, the Pharmaceutical Benefits Scheme - and all areas of need.

I am also genuinely afraid that the mooted $6 surcharge could be 'the thin end of the wedge' for a gradual erosion of public health, and the further entrenchment of a 'two tier health system'. Here arguments about the 'ageing population' need to be met head-on with counter-arguments pertaining to distributive justice: and with reference to the priorities of our welfare state and social wage. Certainly we have one of the most tightly targeted welfare states in the world; and further progressive reform of tax, elimination of 'corporate welfare', and appropriate targeting of some programs (eg: the Private Health Insurance Rebate again) – could save many billions. As Richard Denniss of the Australia Institute also infers constantly: 'welfare for the rich' in the form of superannuation concessions should be abolished – potentially saving tens of billions. This can be extrapolated from his claim that over $10 billion could be saved from removing the concessions from the top 5 per cent income demographic alone. So removing those concessions from the top 15 per cent, say, could go a very long way to neutralising the 'ageing population crisis', with the associated health costs. Do we really need 'welfare for the rich' in the form of superannuation concessions for millionaires? And what rationale is there when such a policy does nothing to further reduce the overall costs to the Budget when both Concessions and Pensions are taken into account ?

Progressive reforms in public health are more likely to occur under a Labor government. But so long as we endure under a Conservative government Labor and the Greens need to be open to compromises which could be of benefit to their core supporters amongst the poor, the vulnerable and the disadvantaged. Apparently no decision has been made yet on the matter of the policies suggested by Terry Barnes. But should some kind of 'surcharge' be implemented the compromises I am suggesting here could matter a great deal for disadvantaged Australians in the meantime.

That is until the next Federal election – when it is to be hoped a renewed Labor government will make the most of a progressive mandate on distributive justice – radically and progressively expanding public health.

1 comment:

  1. Just to clarify - I was asked today why not just direct the $3 billion straight in to public health? Well - I'd be all for injecting $3 billion into public health; But I say 'fix the public health system and people will come'; Fix the public system and the Private Health Insurance Rebate will wither away because consumers no longer see the need for it. But in the meantime we have a Conservative government. So first get rid of the blackmail against low income Australians in the form of the Lifetime Health Cover policy. That can benefit many low income Australians in the meantime. And drive down private health insurance expenses by restoring Medibank Private to a 'not for profit' footing...