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Stephen Leeder calls for some clarity in the private health insurance muddle

I’ve been struck by how public debate has framed changes to the private health insurance rebate as “an attack on middle class welfare”.

This distracts attention from the arguably more important issue that PHI is considered by many to be an inefficient, inequitable way of funding health care. It also seems to undermine community understanding of the importance of universality in health care, and perpetuates the notion of health care as a private good rather than something that confers many public benefits.

Professor Stephen Leeder, director of the Menzies Centre for Health Policy, University of Sydney, has also been contemplating the PHI debate, and writes:

“Just as the bionic eye (“to provide 2020 vision”!) became the attention grabbing media icon (or should that be eye-con?) of Summit 2020, displacing from sight and funding virtually all the other complex and interesting ideas put forward by the health stream at that event, so the cuts to the private health insurance subsidy (PHI) have caught our attention in the current federal budget.

They are seen as the ‘health bit’ in it. But unlike the 2020 Summit, where health policy ideas abounded, the budget has so little to do with health that the PHI subsidy cut is at least something to talk about.

The spread of patrons of PHI is stereoscopically wide, ranging from young people worrying about teeth, accidents and pregnancy through to older people deeply concerned that if they need orthopaedic surgery (and not it alone) electively they may have to wait a long time if they cannot go private.  In the budget, people on lower incomes will continue to be supported if they seek private farinaceous.  By means testing the subsidy for PHI, generally well to do individuals families will pay the full price for PHI, though by avoiding the extra Medicare impost if they join PHI there is still a (sort of) subsidy for it .

I do not think that anyone really knows what the elasticity around pricing PHI is for high income earners.  Cutting the subsidy to them will create a natural experiment.  I would be surprised if the drop outs are cataclysmic.  A few may leave but  not many.  Most will wear the additional cost.

What is more complex is the attitude of the federal government towards the private sector in health care. It is hard to read this in the PHI subsidy cuts.  The puzzle of how we pay for health care has just become a grade more complex as a result.

Let me ask: by retaining the PHI subsidy for less wealthy people, and imposing additional taxes upon the wealthy if they do not join up, is the government endorsing PHI as a public good, or does it see it as a discretionary private good?  If Medicare is funded adequately, why do we need to support anyone who takes on PHI?  Or are we saying that the public hospitals are now of such a poor quality that we will pay the less affluent to take out PHI so that they don’t need to use them?

This is not just an intellectual curiosity: the answer cuts to very heart of how we will shape our reform agenda for health care for the future.  This is one are where more muddle is a real health hazard.  I wonder if the various reform commissions can shed light on what the thoughts are of those elected and paid to consider health policy for the future on this matter.”

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