Since 1999 the Federal Government has been providing a 30 to 40 per cent private health insurance rebate that is not means tested.
It has worked in that there has been a significant increase in the number of Australians with private health insurance to 45 per cent. But because the insured are mostly those on higher incomes, low income taxpayers are subsidising the health insurance of the wealthy.
The subsidy therefore represents a good outcome for the private health insurance industry but a major setback for social inclusion.
Proposed legislation to apply a means test is likely to pass both houses of Federal Parliament despite the Opposition's intention to vote against it. They believe many of the insured will cancel their insurance and place a more heavy burden on the public system.
However a 2009 Access Economics report for Catholic Health Australia argued that means testing would have a negligible impact on the number of insured. Moreover a recent discussion paper from the Centre for Policy Development goes further by agreeing there will be little or no exodus from private health insurance, but suggesting that this is the problem.
According to the paper's authors John Menadue and Ian McAuley, the current system of multiple private health insurers takes money away from health care because it is inefficient.
Private health insurance is an expensive and clumsy way to do what the tax system and Medicare do so much better ... International experience shows that private health insurance buys more expensive health care than tax-funded health insurance, but it doesn't buy better health care.
Menadue and McAuley are not advocating 'socialised medicine' or 'free' health care, but a single national insurer, which they believe would provide the most efficient and equitable means of sharing the cost burden of health care.
The question of private versus public health insurance is related to the division of the hospital system between public and private hospitals. It has promoted inequity by subsidising, and encouraging queue-jumping by, those who can pay. The poor have only the increasingly dysfunctional public hospitals, while the wealthy can pick and choose.
There is no question that legislation for the means test should be passed. It will make health funding a little fairer. But it will not do much to change inequities in the health system as a whole.
Michael Mullins is editor of Eureka Street.
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