For-profit system hurts public health
Kerry Ans The interim report of the Senate Inquiry into Hospital Funding confirms that the publicly funded rebate scheme for private health insurance does not take any pressure off the public hospital system. The rebate scheme offers those taking out private health insurance a tax rebate of 30 percent on the insurance premium, regardless of how much they pay. Senator Crowley, chairperson of the inquiry, claimed that its 90 submissions indicated little support for the Howard Government's assertion that the rebate would ease funding pressures on public hospitals. These findings vindicate claims by opponents of the scheme, including the CPA, that it is merely designed to prop up the private health insurance and hospital systems. According to the Democrats, the scheme was originally to cost taxpayers $1.7 billion per year, but this has increased to $2.3 billion, on current estimates. Dr Peter Davoren, of the Doctors' Reform Society, claims the $2 billion would fund sixteen 500-bed hospitals every year. The amount of money going to the rebate is almost as much as the entire general practice payments under Medicare, according to Dr Davoren. The rebate is a very cost ineffective mechanism that acts as a tariff for the more expensive, profit-driven private sector. It more than covers the cost of administering the many private funds — each with their separate administration costs. The inefficiency of the private system is seen in their high administration costs which absorb 12.5 percent of premiums compared with Medicare which spends 4.7 percent of its income on administration. There was a rapid decline in membership of private health funds between 1984 and 1998 since the introduction of Medicare with its free public hospital care and bulk billing. Efforts by the Government to encourage people to retain or resume private insurance have been made more difficult by the rapid rise in premiums over that period. The premiums of the largest insurers in each State increased (in real terms) by between 58 per cent and 173 per cent. Prime Minister Howard's 30 per cent rebate (public subsidy) is designed, in fact, to counteract the unaffordability of private insurance, not to take the pressure off the public system. The shocking truth of the matter is that the new Health Act, which enabled the rebate scheme to go ahead, contains a mechanism that claws back funding to the public sector as increases in private insurance membership occur. People who join funds thinking they are taking the pressure off the public system (like some in union-run health funds), are actually triggering this clawback mechanism, and unknowingly adding to the funding crisis of the public hospital system. The rebate is one of the ways of propping up the private system, as is the Lifetime Healthcare Cover plan (the younger you sign up, the cheaper your premiums). Another, more covert, way is the recent NSW Government agreement to let public hospitals contract local private hospitals (which have been under- utilised and making losses for many years) to provide public health services in peak periods. According to Dr Christley, Chief Executive of Sydney's Royal North Shore Hospital, their contract with the private Catholic Mater Hospital to take his hospital's excess patients is efficient and cost effective. In reality it serves to disguise the shortage of public beds and other resources as cutbacks continue. It is privatisation by stealth.