Apparently the federal government has secured support in parliament to means test the private health insurance (PHI) rebate and to raise the ‘penalty’ surcharge on high income earners who do not take out PHI. See here. The problem with this is that it continues the confusion between taxation, health care and private health insurance.
The government likes more people to take out private health insurance because this reduces the payments under the public health insurance system. This is because of overlap between the systems. A privately insured patient means less cost to the government for a procedure than if the patient were only on public insurance. The problem with this is that the system distorts incentives.
The overlap between PHI and Medicare means that high income earners have less incentive to take out private insurance. So the government forces them via the tax system rather than dealing with the overlap. The relationship between public patients and Medicare means that the government has an incentive to prefer longer waiting lines for ‘elective’ procedures. This saves money by creating an incentive for people to take up PHI. But it undermines the health care of Australians.
I have no problems with a more progressive income tax scheme for Australia. But I do have a problem with hidden taxes and distorted incentives. The latest moves by the federal government reflect the problems of health insurance in Australia, not the solution.
What are the alternatives? I have blogged on this before here and here. In comments on an earlier blog, fxh pointed out the Dutch alternative. Whatever the solution to better health care for Australia, the current approach of confusing incentives and mixing taxation changes with health insurance is bad policy.