Means testing of private health insurance, is it fair, or just another labor lie?

Juliar as Shadow health minister gave "an iron clad guarantee" that Labor had no intention of altering the private health rebate.

That would be yet another lie, and another demonstration of Labor values.

The Deloitte's report indicates that the $2.8bn that will be saved in the federal budget over 4 years will lead to an approximate $3.4bn rise in state hospital costs.

But why Should Juliar care, it just screws over the Liberal states.

You are quick to jump on the lie wagon. It's an idea from labour, to means test medical insurance subsidy.
And yes it should be, it's welfare for high income earners, and could be dispensed with.
Tony is against the idea, but that is Tony.

dont judge the..non core lie
party policy..decrees..it be done

enough is enough
if i dont trust a free docter
its my choice to get a private docter
[private school/private insurance...etc]

if i want special stuff..i must pay more
if i earn 200.000...and want to get the good stuff
then i must pay for my own wants

govt provides for need
not greed

or so we could expect
if the greedy wernt so needy

i can forgive good lies
and by the by..this absurdity of not planning
get over it julia..for once stop ya lawyer word selection

your not that clever ol girl
we see right through it..[but mate ya got a good heart..if you lied ya lied...ya cant get elected with truth

its sad really
but we just know..every promise..we make
to gain a vote..must be weighed againsat the votes we loose promising it..

hence the huge lie
re that 25 mandated carbon tax lie..is huge
means testing the rich..thats just all too true..as close to truth
in governing..*..for the betterment for all..as govt is allowed to be..

no govt cash should go to the wealthy enough
and no cash at all to groups..

keep the govt assistance..to individual needs
dentil health..is our biggest health problem

put that subsidy slush fund into dental
then egsamin..the medical drug subsidisatiion..scam
set a real limit on asistance...for drugs that dont cure..it once and for all

see they are so clever
they dont want a cure...they want your govt subsidies

havnt you learned from the great tamillflue scam?
they made the un declare a pandemic

for contacted terms to fall due
huge money scam..dun globaly

too big to fail
should be broken up...*now
before they fail again

"it's welfare for high income earners"

There is a lot of branding of any break for tax payers as middle class welfare or welfare for high income earners.

I suspect that in most cases that so called middle class welfare does not come near to meeting the increased costs to the service by the government involving itself in the first place. Attempts to make something more affordable for the few just make them less affordable for all.

I'll quite happily stop getting any middle class welfare if there is some protection for me against price rises caused by government inteference in the market and a removal of compulsion to subsidise others for the consequences of their own choices.

I'm required by the government to have hospital cover (or pay a whole bunch more tax ) rather than being allowed to consider the risk and self insure if that seems valid.

How much attention is paid to the impact on private health insurance costs caused by it being compulsary for many?

R0bert

Times change SM, when Julia was shadow minister, it's the party that make the rules. Upper class welfare is not necessary, If your hospital figures come from the noalition , they will be very elasticized, and riddled with holes of a dark nature.
The noalition at their worst supporting the wealthy, they are dangerous.

What is your title, in Julius media core 579?

This rebate was allegedly introduced to "take the pressure off the Public System".

Does anybody have any evidence that it has actually succeeded?

I would also be interested to see the annual profit statements for the private health funds nationally plus the total amount of taxpayer subsidy they receive. I have heard some interesting comparisons but am yet to locate a reliable source.

The various "sticks and carrots" associated with getting people into Private Health Insurance should be viewed as a whole, in order to get the full picture.

Underlying the whole deal is the basic question, "do we want a Private Health Insurance system here in Australia".

We appear to have reached the conclusion (with a few standouts) that yes, it is a good thing to supplement the funding of our health system through voluntary contributions made by individuals and families. This is a fairly intelligent and pragmatic approach: at the macro level, the system gets insurance premiums as well as taxpayers money, and the consumer gets greater choice.

But governments have a problem in balancing this out. Contributors to PHI have already paid their taxes - should they not get a little tax relief on their premium expenses? And the answer seems to be, within reason, yes.

There's another level of thought that says hey, if you are sufficiently well-off, you bloody well should pay your own way a bit more - hence the "stick" in the form of the Medicare Levy Surcharge. If you earn over a certain amount, and you don't have PHI, you get whacked for an additional 1% on your tax bill.

Means testing the rebate seems, on the whole, pretty fair to me. What seems out of balance is the second part - why there is a penalty, in the form of the MLS. Yes, we want you to join a Health Fund, but no, we're not prepared to give you a tax break, but yes, we will penalize you if you don't.

If the government wants Private Health Insurance to continue to pour tons of money into the health system as a whole - around $10 billion a year - it needs to be reasonably attractive. Taking away the carrot - unqualified access to a 30% rebate on premiums - should surely be accompanied by a removal of the stick.

Logically, that is.

But since when has logic influenced political decisions...

The first thing to confirm is that Labor prior to the 2007 election made an "iron clad" promise not to alter the private health rebate. This was never presented as "an objective" or "an aspiration" but as a promise.

This new legislation is based on a lie. (again)

Secondly the whole phrase "middle class welfare" is a term spawned by those that object to any incentive or rebate given to those of above average earnings, irrespective of whether this improves the welfare of Australians generally far beyond the value of the rebate.

The whole premise of the rebate was that by encouraging people to make use of private medical resources, the public resources could be used to provide better cover for less people. The independent estimate was that for every dollar of subsidy, there would be essentially 2 dollars freed for the public system. The Deloitte's report confirms this.

It is simply bad policy to reduce this rebate. The fact that it was based on a lie just makes it worse.

How can you tell when Gillard is lying - her lips are moving. She just got caught out with her preparations 2 weeks ahead to knife Rudd.

I think you are missing the point, Shadow Minister.

>>The first thing to confirm is that Labor... made an "iron clad" promise<<

I know how much you enjoy poking fun at Labour's policy tap-dancing. But in this case, it might be a good thing to look just as closely at the Coalition's position.

"The first thing to confirm" might be whether there is any suggestion that they might repeal the legislation when they return to office.

So far, so silent. Interesting.

The second might be to look at their arguments.

http://www.joshfrydenberg.com.au/guest/SpeechesDetails.aspx?id=125

One has to assume, I guess, that Frydenberg's statements accurately reflect Coalition policy. If they do, it's all a bit Swiss-cheesy.

Leaving aside the knee-jerk "she said she wouldn't, so she's a fibber" stuff at the beginning, what are the key points.

"Means testing the rebate will drive up premiums, force millions of Australians to downgrade their private health care with many abandoning it all together and increase the pressure on an already stretched public health system."

Those are just sound-bites. Unsupported hypotheses masquerading as fact. The entire argument relying upon its "millions forced out" starting point.

Which is debatable at a number of levels, but most obviously at the "why would someone who could afford it, give it up, when they will be whacked with the MLS anyway?" level.

It gets even flimsier. He even spikes his own guns, at one point.

After giving the now-mandatory Thatcherite speech on self-reliance, he points out that

"...a remarkable 5.6 million people with private health insurance have an annual household income of less than $50,000 and 3.4 million Australians with private health insurance have an annual household income of less than $35,000."

Ummm. These are exactly the folk who won't be affected by the rebate removal.

There's a whole lot more guff about personal choice, which, of course, remains entirely unaffected by the changes. You can still choose to take out insurance. No-one is stopping you.

It's pretty much like private education, which is also a choice. But one that folk are happy to accept, is an after-tax choice.

Pericles,

The biggest risk identified was that about 4.6 million will downgrade their insurance.

For example presently I can pay $160 p.m. for my family and get the basic health cover that will mean that I don't pay the penalty, and which covers stuff like basic dental and eye care, that I would probably take anyway. Instead I have a premium cover of nearly $300 p.m. that covers a lot of expensive treatments that are presently fully covered by Medicare, but through private insurance I can get faster treatment with private doctors.

I can easily drop my health cover and pay less and rely on the public health system for future hip replacements etc. This is where the money will be sucked out of the private health system, the premiums will go up, and the burden on the public system will increase.

Labor is deliberately lying if it thinks it will make no difference to the average man on the street.

It's scary isn';t it. Fancy trying to do the upper crust out of some welfare.
A Joice said he can't live on 2 million a year.
What is the proposed cut off limit in $
Well and truly justified.
The call has been for welfare reform, so here is an installment. The estimate i think was 1.5--2 billion in savings in 4 years.

That's from the Deloitte report, isn't it Shadow Minister.

>>Pericles, The biggest risk identified was that about 4.6 million will downgrade their insurance.<<

Plus a bit of your own inflation, I notice...

"Over a five-year period those numbers will dramatically rise to 1.6 million people who will withdraw their private cover and 4.3 million people who will downgrade their cover."

There are a couple of interesting things about that report. The first is that it was entirely based upon an ANOP/Newspoll survey, that asked for consumer reactions to "a 10 per cent increase in price". All the subsequent modelling delivered numbers that were based on that single premise.

http://www.hbf.com.au/pdf/Save-Your-Rebate-Deloitte-Report-2011.pdf

Every year the cost of PHI has increased by around 6%. And every year, membership has increased, and the level of cover maintained. The conclusion can only be that people don't tend to ditch or downgrade their health insurance just because the price goes up. There are deeper, lifestyle-related, family-related issues that drive their membership.

It is also worth pointing out that there was no discernible upward spike of new membership when the rebate was originally introduced.

Three measures were used by the Government to encourage membership, and they went like this:

1. Private Health Insurance Incentives Act (July 1997), the "stick" that introduced the Medical Levy Surcharge of 1% for high earners without PHI.

Impact: membership over the next year declined.

2. Private Health Insurance Incentives Scheme (January 1999), the "carrot" of the tax rebate.

Impact: membership over the next year increased slightly.

Lifetime Health Cover (July 2000), the carrot/stick that said if you don't join by June 30th 2000, you'll pay a 2% per year uplift on your premium, counting from your 31st birthday.

Impact: membership over the next year increased substantially, from just over 30% of the population to over 45%, where it has remained ever since.

I think the PHI industry will have egg on its face over this, and the Coalition may be crying wolf over an issue that is not going to win them a single vote.

I agree that the state should not subsidize the health of the wealthy.

Yes, the state needs to subsidize the health of the poor, but No, it should not subsidize the health-professionals.

Would you like it if the law forced you to purchase cucumbers?
If failure to purchase a certain amount of cucumbers would result in a fine exceeding the price of those un-bought cucumbers?
What if you didn't like cucumbers, or perhaps if you were even allergic to them?

- But that's exactly what the government is doing with medical services in collusion with the AMA!

Fortunately the government is not in collusion with the cucumber growers (although I am told that in Queensland it is in collusion with the sugar growers), but it is with the Australian Medical Association.

The bottom line is that the government forces people to buy a product they don't want and never asked for.

If a middle/high income earner wants to obtain a medical service, then they should simply find a provider/doctor/practitioner and pay for that service.

It is simple.

It encourages people to have a healthy life-style.

It encourages good practitioners, rather than the AMA's yes-men.
It discourages bad practitioners.
It creates a level playing field between conventional and non-conventional healing modalities, allowing the customer to choose.

It allows for more diverse medical-insurance schemes, including schemes that are currently illegal, such as those with more than $500/year excess.

Personally, I would select a medical insurance with say $50,000 excess to provide for the unlikely event of requiring any of the most complex operations. For the rest, if I choose to see medical doctors in the first place, I can and should pay myself.

Statistically, self-insurance is the cheapest!

The AMA knows it, so it uses the government to stifle competition and fill up their pockets.

Pericles has encapsulated the situation perfectly. The LNP likes to talk up the downside.
That is their policy platform in it's entirety SM.

Can I ask if the Deloittes assessment was commissioned by the PHI to put their case because that is all I could hear, from the bleating voices of the opposition during the debate in the Senate on the way home. The Member for Murray is an absolute disgrace with her lie-fest of a speech going all the way back to pink batts. You mean we actually pay such people for their contribution ?. Why ?.

Of course we should end the Health Subsidy and put more back into the Public Health Sector.

http://www.abc.net.au/unleashed/3826920.html

The link I'm providing gets really interesting when you start reading through the comments. The article describes the history of this subject for all of you youngsters.

A nurse describes the difference between the staff car parks of private hospitals and public hospitals and then goes on to say where all the public money has gone into the private health system. Into the pockets of doctors driving Porches and Rolls Royces. It's as close as you can get to the real picture.

private insurance..[like all insurance seems great]
till you have to pay the top up...[and realise you got scamed..or flooded out]

people dont realise..paying extra
means you must pay extra when you get sick

think of all the non docters
getting rich..from your health dollar
and worse..paying bonus to shareholders..needing a return

someone is proffiteering...on your sickness
insurance in japan..is only payable when your healthy
when your sick..you shouldnt have to cough up extra

think of one who paid full insurance
who goes to private hospital[for proffit]
dies after a few weeks..then his estate..cops a bill
when these lazey..docters..ignorance..kills them

or how about the private docter
time is money..so every birth is a ceaser
leaving ho\rrible scars..then plastic surgery corrections

and you must pay the excesss
to those who want it in cash..or on ya credit card

govt bad laws..
contribute to our illhealth
govt legislated the environment..that made us sick

its only right they..and the polutions
that made us sick alone should pay

does health insurance
insure the cost of court cases

to bring
the cause..of your illness
to account?

how is that greedy annual increase..
in private insurance cost..indexed
*way abouve..inflation..

no for proffit insurance
no for proffit health beurocracy

Means testing passed the senate this morning. The noalition voted against, as normal, and expected.
There seems little regard by the opposition for the economy, of our nation.
In fact they won't even mention the economy.

"Means testing passed the senate this morning."

How proud you must now be, 579, to force people to buy a product they don't want so that your friends who sell that product will get rich.

In British-ruled India, this was called the salt-tax.

Do you mind explaining your comment so we can all understand it.

"Do you mind explaining your comment so we can all understand it"

Certainly - we are forced to purchase private health insurance because of the Medicare-surcharge tax. That includes even those of us who do not wish to receive medical services (as well as those of us who wish to pay for them from their own pocket).

The government's main argument is that it prevents the wealthy from benefiting from Medicare at the expense of the poor working class, but nobody ever allowed the wealthy to opt out of Medicare, nobody ever asked us whether we are interested in having those Medicare benefits in the first place!

The government in collusion with the AMA does that in order to make their friends, the doctors, rich.

I would not know how much the medi care tax is now. If you want to finance your own medical bills, go ahead, i am sure you would not be pleased with the costs and charges. An extra 700,000 people have joined private insurance since 2010.
I am not sure where you get making doctors rich from medi care comes from.
Every body has medi care, or medi care and private. If you have none of that you should not be here.
Not very well explained.

That talk of an "iron-clad guarantee" made from Opposition got me all nostalgic.

A certain Mr Abbott, speaking as Health Minister in 2004 gave "an absolutely rock solid, ironclad commitment" to keep the Medicare Plus Safety Net in place after the election.

When is was later dumped his excuse was "during the election campaign, I had not the slightest inkling that there would ever be an intention to change this".

Now, was he lying before the election or did he lie afterwards?

The media had also revealed that the benefits being paid were heavily skewed toward high income electorates.

It all sounds so familiar.

Dear r0bert,

“I'll quite happily stop getting any middle class welfare if there is some protection for me against price rises caused by government inteference in the market and a removal of compulsion to subsidise others for the consequences of their own choices.”

Three letters...USA.

Dear Pericles,

“at the macro level, the system gets insurance premiums as well as taxpayers money, and the consumer gets greater choice.”

“But governments have a problem in balancing this out. Contributors to PHI have already paid their taxes - should they not get a little tax relief on their premium expenses? And the answer seems to be, within reason, yes.”

Or to put it another way the system gets a percentage of insurance premiums after the insurance companies have taken out their costs and profits and paid their shareholders dividends. Some consumers, not the greater percentage, get some choice but the more valued commodity they have purchased is a licence to jump the queue. Should they get a tax break on top of it? Nup.

Dear Yuyutsu,

I personally have no problem with the state paying the reasonable medical expenses of the wealthy if they are prepared to join the growing queue. I think there is a sleight of hand happening when we drop the top tax rate then slug people with the Medicare surcharge.

To me the government should be doing all it can to prevent us going down the American path. This latest measure in a small way helps.

This means test will take money out of medical care.

This is just another example of Labor's poor economic management, and lies.

Can't let that one pass without comment csteele.

>>...the system gets a percentage of insurance premiums after the insurance companies have taken out their costs and profits and paid their shareholders dividends<<

There are presently only two Funds that pay dividends to shareholders: NIB, which is a public company, and has around 8% of the PHI market. The other is Medibank Private with 28% - they have one shareholder: the Australian Government, to whom they pay a physical dividend. Only last year, the government extracted a "special dividend" from them of $300 million.

BUPA is also "for profit", but they are financed by bondholders, i.e. debt, upon which they pay interest. The vast majority of the rest are "not for profit", and only keep enough to pay their staff and expenses. And, as you would expect, sufficient in the kitty to cover the fluctuations in service demand.

But the other misleading part is that it is actually the policyholder who is paying these costs. The bulk - $13 billion - goes to hospitals and providers within our health system. So as well as contributing substantially to the health system overall, they are keeping a lot of very nice people in employment.

Neither position, I believe, affects the legitimacy of a level of tax rebate for lower-paid citizens.

cssteel/quote..""To me the government..should be doing all it can
to prevent us going down the American path.""

that jonny howard took us on

""This latest measure..in a small way helps.""

i agree

pericules/quote...""This means test
will take money..out of medical care.""

out of a duplicated beurocracy
yeah..only admin..and form shufflers/acountants...lawyers
not..*actual 'health care*'

""This is just another example of Labor's
poor economic management,and lies.""

no its an extra 3 billion
joe hockey has to find

to add into his numbers*...lol

""..The vast majority..of the rest
are "not for profit",...lol

beurocrats/lawyers/accountants..form printers
UN_NEEDED duplication!

plus the extra hospital admin..for billing/etc
keep it simple..!

every extra hand..that dont heal you
is sending ya broke

i dont need docters
i dont go to hospital
i dont want to be forced..to pay 'insurance'..[protection money]
for a service..i wouldnt know how to use*

how come so many of ya are sick
cause you want some cash back?
from the blackmail..your forced to pay[under threat and penalty]

govt cant compulsory force us into contract
that it thinks it can..needs fixing

""and only keep enough
to pay their staff and expenses.""

their buildings their free lunches..their pensions
and not opne is a docter or SERVICE provider..of actual health prouct

""sufficient..in the kitty""

lol invested..into finance
not health

""to cover the fluctuations
in service demand.""

good one
how much they banked..this year alone?
money...*that wasnt spent..on health*!

"I would not know how much the medi care tax is now."

-Currently medicare-surcharge is 1% on top of the 1.5% medicare levy. The government now wants to increase it to 1.5% (both Greens and coalition oppose).

For most affected people, it's therefore cheaper to get a private-health-insurance, then not use it.

When the surcharge was introduced, I was not aware of it until a few days before the end of the financial year. Fortunately I found an insurer that was willing to insure me RETROACTIVELY for the past year -how ridiculous!

"If you want to finance your own medical bills, go ahead, i am sure you would not be pleased with the costs and charges"

-I already do because I don't use conventional medicine.

"An extra 700,000 people have joined private insurance since 2010."

-Sure, but not because they suddenly cared more for their health and how to pay for it. It was a direct result of the medicare-surcharge, otherwise they would be paying more in tax.

"I am not sure where you get making doctors rich from medi care comes from."

-from BOTH medicare AND private-health-insurance: usually once people already had to pay for the service, even while they didn't require it to begin with, then they might as well decide to use it, so doctors get more work and earn more, both from government and health-funds.

"Every body has medi care, or medi care and private. If you have none of that you should not be here."

Yes, everybody has Medicare AND all those with significant income have private-health-cover too because that's the law, but not everybody wants either. Some reasons for not wanting Medicare/PHI are:

1. Being healthy.
2. Using only alternative medicine.
3. Using medicines that are better, but not listed for their condition (being experimental or dearer).
4. Spending much of the year overseas (Medicare does not provide for overseas medical expenses).
5. Having a private doctor/specialist which is not part of the system.
6. Generally, people who can afford paying for their medical expenses are statistically better off financially WITHOUT medicare and PHI.

Dear Cesttele,

"I personally have no problem with the state paying the reasonable medical expenses of the wealthy if they are prepared to join the growing queue."

Isn't that wasteful?
Is it not OUR tax-money after all?
Why should the wealthy not pay (either in person or via their private-insurance if they choose to have one) when they visit a public doctor or hospital?

I have no problem with welfare, for those who cannot afford, but what's the rationale for those who can?

Using this money could, for example, provide dental care as well for those who cannot afford it!

"I think there is a sleight of hand happening when we drop the top tax rate then slug people with the Medicare surcharge."

Indeed. That's what I called "salt tax". The government is shy of calling it what it is - a tax, then it would have to face the voter and let them decide whether it's justified, so instead it weaves fairy-tales about it being "for my own good".

"To me the government should be doing all it can to prevent us going down the American path. This latest measure in a small way helps."

The American path is that people with no money, get no health care. They are kicked out of clinics and hospitals to die in the street. There was NEVER any suggestion resembling it or in that spirit from any Australian party.

Simply, I cannot believe that Australian Taxpayers were spending $1.2 b a year (this is what the Gov't will save), on subsidising the private health insurance bills of the upper middle class and the incomes of wealthy private medical practitioners, instead of using that money to fund a national dental health scheme.

The LNP with their historically abysmal record in this area, can only come up with misinformation, that frankly is closer to fraud as their case.

They've worn me down. Bring on the next election so we voters can obliterate them.

Dear Pericles,

I was indeed a touch flippant but how was I to know you would be having a dip? ;)

The health insurers in Australia as a collective bunch, despite their status, had gross margins of nearly 15% and profit margins of nearly 10% in 2010-11.

Not brilliant if you are a manufacturer or a mining company but pretty darn healthy if you are shuffling paper.

Their total profits of $1.456 billion were larger than their total expenses bill of $1.410 billion. Therefore for every dollar spent on wages or rent or advertising they made two in gross profits. Not shabby at all. So it cost nearly 3 billion for the privilege of having them around.

Is either competition or a not-for-profit ethos being maintained?

In 2000 there were 44 insurers but by 2011 that number had dropped to 34. the number of private insurers had climbed from 4 to 7 but most significantly the for-profit market share had climbed from 12.5% to 68.6%.

“the traditional emphasis on not-for-profit operations and strong mutual ethos shifted as the number of for-profit insurers has increased” Private Health Insurance Administrative Council 2011.

While there has been a slight increase in the numbers of people insured, the 'Hospital Episodes' paid for by insurers have jumped 6.8% from last year and the Medical Services by 8.7% yet profit margins continued to increase.

The main burden of this increase was shouldered by the public hospitals, 6% compared to 1.5% for private. What is interesting is the dollars paid by insurers to public hospitals climbed by 10.4% for the same period the figure was 7% for private hospitals or nearly five times the Episode increase.

This is reflected in the per-Hospital Based Episode costs; $1378.28 for public vs $2485.55 for private.

The length of stay for private patients has increased by over 15% in a year.

Therefore I'm saying there are questions about the fairness, efficiency and benefit of the private health industry that need to be addressed.

We need to determine are they good for our country or are they just pimping access?

Dear Yuyutsu,

The American path was to let the insurance companies get such a strangle hold on government through the buying of politicians that now health care is triple the cost of what it is here. The profits they make are insane.

Joe Bageant wrote in his book Deer Hunting with Jesus that;

“...medical bills are the leading cause of personal bankruptcy in the united States for the uninsured. Half of the uninsured owe money to hospitals, and at any given time one third of them are being chased by collection agencies that will not hesitate to haul them into court for a hundred bucks.”

But get this,

“Sixty percent of those filing for bankruptcy have health insurance.”

So even those who can afford insurance are getting nailed.

You say; “I have no problem with welfare, for those who cannot afford, but what's the rationale for those who can?”. If you are talking about the welfare payments of health insurance rebates for the wealthy I agree, but if you are referring to the provision of direct health services I think the answer can be found in the “strong mutual ethos” that Australia has been traditionally been both proud of and renown for. It sets us apart from the US system. It is a notion of collective responsibility for all Australians, a determination that medical bills should not destroy families or curtail access to basic treatment and care. It is a willingness to share the burden for those whose medical circumstances have set back. That it should be universal is a given.

That ethos may well have been under attack over the last decade but it is something I hold dear and would fight to preserve,

The alternative is not what I want for Australia.

Dear OUG,

Glad you agree. Unusual but welcome.

Dear Csteele,

First apologies for the typo in your name in my last post.

"The alternative is not what I want for Australia."

There are many more alternatives. I am not aware of any political party offering the American model anyway, either now or ever in Australia.

My favourite alternative is as follows:

1. The standard medicare levy pays for a fixed sum in health-vouchers given to every citizen (if necessary, the percentage may be revised).
2. Anyone can use their vouchers as they see fit to pay for (or toward) anything that can broadly and reasonably be considered as health-promoting. That can be for example doctors, hospitals, medicines, treatment overseas, gym-membership, alternative medicine, therapeutic massage, corrective cosmetic surgery, etc., but the most common use would probably be either a private health insurance or Medicare.
3. The fixed sum of the vouchers is guaranteed to be sufficient to cover Medicare, which will provide more or less the same as it does now.
4. To prevent abuse, Medicare will have cooling periods for pre-existing conditions as well as a commitment for a minimum number of years for the newly insured.
5. Other than Medicare, private health funds can offer any type of health cover - for any combination of medical-conditions and treatments as well as any financial terms and conditions, all based on transparent free-market principles.
6. Vouchers can be accumulated, to be used in subsequent years (although they are likely to lose value due to inflation).
7. Vouchers are transferable within the family.
8. Vouchers can be donated or bequeathed to charities which help the poor in need.

Thus, the mutual factor is maintained, but there is also a healthy competition in the health market and much more free choice.

The power of health-insurance companies is reduced because of:

1. Direct competition with Medicare.
2. Competition with more diverse health-insurance options.
3. If the health-funds are not cost-effective, then those who can afford to pay their own medical expenses will not take a health-insurance at all (and those who cannot afford will choose Medicare).

It's good to discuss the issues with someone who knows whereof they speak, csteele. Refreshing, in fact.

>>Their total profits of $1.456 billion were larger than their total expenses bill of $1.410 billion. Therefore for every dollar spent on wages or rent or advertising they made two in gross profits. Not shabby at all. So it cost nearly 3 billion for the privilege of having them around<<

Being this close to the business, you are also aware that the management of PHI Funds is, on the whole, rather conservative. They were thoroughly spooked, for example, by impact of the GFC on their portfolio, which took a massive hit in 2008-9. Collectively, the Funds lost $84 million that year on their investments, which, as you know, represent their rainy-day reserves. The word went out, and matters are now back on an even keel - over half a billion dollars of their $1.45bn profits came from investment revenue in 2010-11.

Oh, and they also paid $300 million in tax, which you should realistically subtract from your "it costs $3 billion to have them around" calculation. But again, keep in mind that it is the people paying the premiums that are bearing this cost, not the taxpayer.

On the topic of not-for-profit, my own view is that there is absolutely no case to be made for PHI Funds to involve shareholders. The extraction of dividends is, to my mind, the major contradiction in the entire PHI landscape. But your statistics, while correct, are still a touch misleading, as I pointed out before.

>> the number of private insurers had climbed from 4 to 7 but most significantly the for-profit market share had climbed from 12.5% to 68.6%<<

Point one: 43% of the for-profit sector belongs to the government, so it is the taxpayer who receives the dividend.

Point two: another 35% of the for-profit sector belongs to BUPA, who do not have shareholders, but bondholders. So the "dividend" is closer to a "cost of funds" equation than rewarding shareholders.

[contd]

[contd]

It is also relevant that the policies are not actually "risk" products in the normal sense, as the actuarial work is done across the entire population under community rating. So, to my mind, there seems to be no community benefit to having shareholders at all.

In fact, raising capital though a public offering, given the closed nature of the industry, would seem counter-intuitive at every level. Apart from the prospect of "buying out" other Funds, there is little scope in the present set-up for useful capital investment.

However...

One of the key platforms at government level is the broader topic of health management - Minister Roxon was eloquent on the topic, and I suspect the efforts will continue. Faced with an ageing population, and a higher expectation of services generated by that population, health costs are certain to escalate in the future. Solution: educate the citizenry to look after themselves better. Using taxpayers funds, naturally.

The equation - for PHI Funds - is simple: if they have a healthier membership, they pay out less in benefits. Commercial sense. The initiatives under way at Medibank, BUPA and HCF, to name just three, are designed to this end - the trend is, inexorably, to health management, not just "health insurance". Funding for these programmes - which by definition need to be "free" to the consumer - can only come from premium income, and from the rainy-day reserves. At no cost, note, to the taxpayer.

Given the necessity for a return on investment that appears on the bottom line of the annual report, it is extremely likely that these programmes will be a) better designed b) more carefully targetted and c) more financially effective, than anything that a politically-motivated bureaucracy can devise.

The system ain't perfect, we all know that. But under the circumstances it is a pretty good balance of public good and private benefit.

The money being taken from families by the means test is not going to go towards public health, it is simply going into the federal coffers to pay for other waste that the government is trying to compensate for.

If as predicted 4.3m people downgrade their insurance (even if a lesser number does), there will be more pressure on public resources, and the lower income earners will suffer more.

Dear Pericles,

I'm going to disappoint you I'm afraid. Rather than being “someone who knows whereof they speak” or “Being this close to the business” my only talent is a moderate skill in making my way through a set of figures and a deep desire to protect whatever communal nature or notions of common-weal that is left in our health system.

However I do welcome the debate and hopefully the exchange might help raise at least my understanding of the issues.

To your first point that “43% of the for-profit sector belongs to the government, so it is the taxpayer who receives the dividend.”

I think we both accept that we are one Craig Thompson inquiry from the opposition being in power and according to the big guy “there have been a number of transactions in the private health industry over the last few years that would indicate that it’s worth something around the revenue level which is around $3.8bn”. It will be one of the first things they do, and is anyone betting against Macquarie Bank handling the sale?

You second point was “another 35% of the for-profit sector belongs to BUPA, who do not have shareholders, but bondholders. So the "dividend" is closer to a "cost of funds" equation than rewarding shareholders.”

The difference between a bond holder and a shareholder in this instance is really rather small. Both are seeking to maximise returns while managing risk. Sure the bondholder foregoes potentially large capital gains but is happier that he/she is unlikely to lose the lot.

In fact the UK investment group Tideaway Investment Partners put BUPA as “Tideway Bond of the week (may be the year!)” noting among other things, the bonds had “minimal exposure to European sovereign debt crisis”, from a “sound simple business, relatively recession proof”, returning “8.4% yield for 9 years on investment cost”, with a “potential 37% capital gain on top of yield if called”, which “gives 11% return to call date”.

Cont...

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Their analyst Peter Dougherty gave four reasons for describing them as good value;

1. There is a very high degree of certainty that an investor will get the principal amount of the investment back. Safety first.
2. The annualised return for a medium term holder can reasonably be expected to be well in excess of inflation. Here 11% p.a. is the base return.
3. In a normalisation of the credit markets, the bond price will revert to 85 / 90 giving an annualised yield for that annual period of circa 20% (15 points of price + interest)
4. The underlying business of the issuer is stable and if for any reason the company did get into trouble it wouldn't be unusual for new equity investors to appear ahead of a default.

http://www.tidewayinvestment.co.uk/bond-v-equities-update.html

Australian health expenditure is helping pay those returns to offshore investors.

I agree with you that “there seems to be no community benefit to having shareholders at all.” it is just I don't see the need for profit making enterprises usurping 'mutual societies'. The one attraction though of bonds rather than shares is the ability of management to look to the long term rather than living or dying by the share price and the detrimental impacts of revolving CEOs determined to make their mark.

I too recognise the benefits of health management, I'm just not as positive that the PHI funds are as fully committed as the government. Where they seem to be concentrating their efforts is toward 'hospital-substitute' treatments which rose by over 400% last year and 'exclusions'. The percentage of policies with exclusions had bumped along at between 3-5% for many years but in 2008 shot into double figures and now stands at over 27%.

Dear Yuyutsu,

A well thought out system but one that doesn't come close to what universal coverage can deliver with far less administration costs. There certainly are countries that could benefit from it but we have an extensive and mutual system that doesn't rely on the benevolence of family, friends and charities. Why should we change?

I think the savings are going to dental.
Welfare reforms in motion.
1.5% medicare levy.
Long overdue, and very good reform.
Lets hope the coalition does not have ideas of upping the GST, and making it broader. [ a whisper ]

Dear Csteele,

"Why should we change?"

Because the current system is corrupt, unfair and coercive.

It's a win-win offer - the only losers are such doctors and health funds which currently abuse their government lobbying powers to get more than than the fair value of their services in a free market.

Nothing requires you to rely on the benevolence of family, friends and charities - if that's your preference, then you may still continue exactly as you do now, with Medicare, a current-style PHI or both. If you don't like, then you don't have to give anything to your family and charities - the beauty is that it is all entirely up to you!

That's not at all disappointing, csteele.

>>I'm going to disappoint you I'm afraid. Rather than being “someone who knows whereof they speak” or “Being this close to the business” my only talent is a moderate skill in making my way through a set of figures...<<

Mine too, so props for coming across as an insider.

I have observed that we are both looking at the same published set of numbers. Also something of a rarity here.

And I suspect that you are absolutely correct in forecasting a Coalition government's sell-off of Medibank Private. As I indicated, I believe this is inappropriate for a Health Insurance business, but its saving grace might be that it would open the way for broader-based investment in health management. Over half their employees live outside the PHI umbrella, after all.

But I must disagree with your assessment of the bond vs. shareholder issue. The analyst's view of the BUPA bond issue is entirely irrelevant to anyone except today's buyers and sellers of the bond itself. Interest is paid at a rate struck at issue time, and does not change through the announced life of the bond. The cost to BUPA - and therefore the business - remains at 6.125% until 16th September 2020, when BUPA has the right to call them at par. Fluctuations in its traded value have zero impact on the cost of funds.

http://www.bupa.com/media/60114/prospectus__330m_bond.pdf

This is an interesting observation:

>>I too recognise the benefits of health management, I'm just not as positive that the PHI funds are as fully committed as the government.<<

What signs have you noticed that the government is "fully committed" to a broader-based approach to health management? What taxpayer funds are being allocated, and where?

Dear 579

So thats how the Coalition intend to make up for $70 b hole in the budget figures. By increasing and broadening the G.S.T.

They won't let that cat out of the bag before they control both houses of Parliament. As was their form with Workchoices.

Dear Pericles,

I'm not as confident in there being any saving graces with the privatisation of MBP.

Just look at the current differences between MBP and BUPA which, undoubtably would not be as great after its sell off.

MBP benefits paid as a percentage of contributions are higher than BUPA. It has lower management expenses as a percentage of contributions, 8.9 to 9.7. BUPA's surpluses are 20% higher and their management cost of $272 per policy are 25% higher than MBP's.

MBP has a market share of 28.4% but only fields 23.4% of the industry's complaints. The figures though for BUPA are 9.7 and 10.4.

In my opinion any sell off would continue our march toward the disaster of the US system.

I take your point that “Fluctuations in its traded value have zero impact on the cost of funds “ but your position was “the "dividend" is closer to a "cost of funds" equation than rewarding shareholders.” I would argue that 6.25% bond returns would be superior than any share dividend before any capital gains considerations.

But ultimately it doesn't matter what we call these commissions more the fact that they are appropriated from the health spend.

If this whole lot were government managed then it would negate the need for finding money on the open market or paying a shareholder dividend. Also there would be large savings on administration costs as most health transactions have a Medicare component in them regardless of their source. I might have to leave your health management question until tomorrow to do it justice.

Dear Yuyutsu,

I have an inkling that what you consider to be “corrupt, unfair and coercive.” may not be what I consider them to be. Sounds a little Ron Paulian to me but would welcome clarification.

A question of your scheme if I may; if a person goes an uses all the vouchers at their disposal to take the alternative medicine route to tackle their ailment, what happens to them if they are no longer in a position to afford a life saving conventional medicine remedy?

Dear Csteele,

"Sounds a little Ron Paulian to me but would welcome clarification"

-As far as I can tell, Ron Paul opposes any form of public health, which is too extreme and certainly "un-Australian". No Australian party ever suggested we should go down that path.

In fact, my above favourite policy is a variation on the Australian LDP's health policy: http://ldp.org.au/policies/1155-health-returning-control-to-the-consumer

"if a person goes an uses all the vouchers at their disposal to take the alternative medicine route to tackle their ailment, what happens to them if they are no longer in a position to afford a life saving conventional medicine remedy?"

To begin with, any responsible person should only avoid all forms of health-insurance if they have a backup option. The transition to my scheme will involve an education campaign that will make that clear.

In my personal circumstances for example, since I can afford paying myself for all but the most expensive medical operations/treatments such as liver-transplant, I will use a portion of my vouchers to purchase a health-insurance with about $50,000 excess, thus covering only those rare treatments which I cannot afford paying myself.

Back to your story, that ill but irresponsible person should have NO CERTAINTY of treatment, because certainty encourages irresponsibility. In practice however, in 99.999% of the cases s/he WILL end up getting the conventional treatment somehow -either:

1) s/he will have funds, a house to sell/mortgage, a car to sell, superannuation, etc.
2) their family would help.
3) somebody will give them a loan (a friend, an employer, a stranger).
4) a charity will provide.
5) a doctor will volunteer to provide the treatment for free.
6) the ill person will give a film-producer rights to make a movie out of his/her story, receiving treatment-funding in return.
7) the government will give them a compassionate exceptional loan beyond the letter of the law.

Note that persons who DELIBERATELY seek to abuse and take advantage of the system shouldn't receive assistance.

As per the above link, "The LDP believes government should intervene only on a case-by-case basis, where other avenues have been exhausted."

Depends which way you look at it, csteele.

>>I would argue that 6.25% bond returns would be superior than any share dividend before any capital gains considerations.<<

Don't forget that approximately Stg 1 billion debt currently supports BUPA's world-wide operations. Last year they paid Stg 80 million in interest, on a total debt of Stg 1.4 billion. That's not a significant number, a little over 1% of revenues.

Translated to the BUPA's Australian operation, that would equate to a local interest bill of A$47m. Last year NIB paid investors 13c a share, around A$60m, and they are less than a quarter the size.

As a method of funding it would appear to be considerably less onerous than keeping a bunch of shareholders happy.