Health care policy is pretty screwed up as it is, and this proposal doesn’t make it any better. It’s not clear whether the suggestion is in relation to health insurance, general practice, hospitals, or all three.
The sole virtue of Medicare is that it provides care to those that could not afford private health insurance. But it does so very badly. By being free, it encourages a waste of health resources: some people over-use it, while others who need it get stuck on waiting lists. Moreover, it encourages bad lifestyles, as individuals do not face the financial consequences of their lifestyle choices. By reducing the scope for private health insurance, the public health system would resemble that of
There is also a strange relationship between Medicare and private health insurance. If you want to purchase additional private health care services to those offered under Medicare, you have to pay for your entire health care cost again — not just the top up. There is no obvious reason why you should take out PHI. To make it attractive, governments must either subsidise private health care or deliver substandard quality of public health care.
It seems Australian governments are doing both.”Everyone is a loser, babe, and that’s the truth” goes a popular 70s song.
The only decent proposal for governments is to replace the current public–private health insurance paradigm with one in which everyone receives a Medicare grant to use towards purchasing insurance (supplied by a public or private provider) and medical services. Individuals can choose to purchase additional health insurance. Insurers and hospitals will compete for patient funds, thereby promoting competition and efficiency.
The back of the envelope
- Cost: ~$20 billion:
- Expected impact on average earnings: Reduced incomes in long term
- Expected impact on economic growth: Reduction in growth
- Impact on incentives: Major incetive for moral hazard
- Impact on government spending: Big increase
- Impact on taxation: Taxation increased by 2% of GDP
- Winners: Public Health Administrators
- Losers; Patients and taxpayers