One nice thing about not being Dean is that I am getting time to catch up on some reading. So, in the ‘better late than never’ category, Agenda had an interesting set of articles about Australian health insurance in a special edition last year. It is accessible here.
The fourth piece (Paolucci, Butler and Wynand – PBW) looks at the duplication involved in the current mix of Medicare and private health insurance in Australia. Basically, when you buy private health insurance you still get Medicare coverage, so essentially you pay twice for the same insurance product. This can have undesirable welfare effects. As the article notes:
The current public/private mix in healthcare financing in Australia appears to leave unsolved several problems such as over-insurance, high transaction costs, cost-shifting and perverse incentives with respect to waiting times. It also does not seem to be able to achieve a number of policy goals such as to decrease the financial pressure on the public scheme and to increase the affordability and fairness in access to healthcare services for everyone.
PBW support an opt out system to avoid duplication. This is not a new idea but, as the authors note, has been floating around for some 20 years. It is good to see it getting real debate.
That said, the alternative is to have the Medicare scheme as a universal basic insurance scheme and to have private insurance as a ‘top up’. This also avoids duplication. Joshua and I tended to favour that outcome in our earlier work (which all seems to be behind paywalls except for this rather technical working paper!).
The key thing is that there is debate about Australia’s health insurance system. Too often, health insurance is put in the political ‘too hard’ basket. But it is an important area where economics can have a major impact on the welfare of Australians – and where there are some relatively simple improvements that can be made to our existing system.