Putting a healthy surplus before personal well-being

Terry Barnes, a former former senior advisor to Prime Minister Tony Abbott has suggested a $6 dollar surcharge on bulkbilling via Medicare in order "to send a price signal". The suggestion is contained in a submission sent to the government's Commission of Audit, so may end-up becoming government policy.

The motive behind this proposal, apparently, is to save money through an 'efficiency dividend'; deterring only unnecessary bulk billing. However, welfare lobbyists are pointing to the regressive distributive outcomes of the policy; as well as the possibility that genuinely ill low income and welfare dependent Australians may not seek medical care when they need it. And also that the decision may place more strain on our hospitals. Of crucial note here: a great number of doctors already fail to bulk bill – and in that sense a 'price signal' already exists for many.

The Federal Government had already made some controversial decisions recently on the Health services front. The Conservatives' decision to remove means testing from the Private Health Insurance Rebate has also involved regressive distributive outcomes. Dan Harrison of the Sydney Morning Herald has pointed out that abolishing the rebate entirely could save $3 billion. Though because the rebate is the 'Conservatives' baby' that outcome is unlikely so long as Abbott is in power.

On the other hand, the Conservatives like to retain the pretence of 'providing for the battlers'. And there are ways in which this could be provided for even should the government decide to adopt a surcharge and maintaining the rebate in some form.

Firstly, the means test on the Private Health Insurance Rebate needs to be restored. And the savings should be directed to a restructuring of the scheme. Savings here could be balanced between improvements in the Private Health Insurance Rebate for low income policy holders on the one hand, and improvements in the public health care system on the other.

Welfare dependent and low income Australians could then receive an 'amnesty' for rebate eligibility. That is: so long as they were low income or welfare-dependent they would not face spiralling private health insurance costs should they fail to take out private health insurance. The existing 'Lifetime Health Cover' policy – which imposes a cumulative loading building up with an additional "2 per cent per annum" for consumers over 30 who do not have private health insurance cover – effectively discriminates against the poor. Low income Australians effectively 'have a gun at their head' – and a choice to invest in private health insurance they cannot afford; or to take their chances with an increasingly neglected public system. It should be observed, also, that disadvantaged Australians could feel driven to take out the most minimal private health insurance policy just to avoid this cumulative loading, even though they receive only threadbare coverage in return.

But providing an 'amnesty' with regards the 'Lifetime Health Cover' policy would also make fiscal sense in that further subsidies for low income groups would be likely to win more Australians over to private health insurance. (which after all was the stated purpose of the whole policy!) This is quite simply because high income earners can already afford private health insurance; but for low income groups a stronger rebate and an amnesty could be decisive. And for those low income Australians who had already passed the 'deadline' of their 30^th birthday – the lack of a full rebate as exists under the "Lifetime Health Cover" policy is already a clear deterrent against taking out private health insurance into the future.

Importantly, while older Australians already receive a higher rebate (40 per cent), the same cannot be said for other pensioners. So by the same logic, a more robust rebate for welfare dependent policy holders of 50 per cent could make private health insurance a more realistic prospect for many. Notably: Seniors' private health insurance from Medibank Private can cost in the vicinity of $2000 a year already. Before the rebate, that's about 10 per cent of a Single Aged Pension in one hit; and it's before we even begin to consider the impact of other cost-of-living pressures for low income Australians. (energy, water, communications, accommodation, transport) So to redress poverty and disadvantage, such measures must be combined with reform of pensions as well.

The mean-spirited provisions of the Aged Pension, Newstart, Disability and other payments ALSO already provide a deterrence preventing the poor and vulnerable from seeking medical care as needed. Therefore robust subsidies should be provided at a generous enough rate not only to address distributive injustice from austere pensions, but also negate the existing deterrence for low income Australians from seeking care as needed. New tax cuts for low income earners, and payments for the welfare-dependent could therefore be provided at a minimum rate of an extra $500 a year. Bulk-billing has already been progressively eroded for far too long. But such reforms could provide a 'way around' the dangers provided by that trend.

Of course there is the option of simply excluding pensioners from any surcharge which apparently is being considered; though should that policy be implemented it should also apply to ALL those considered to be on low incomes by any reasonable measure. The existing low income bracket (necessary to access the Low-Income Concession Card) applies to singles up to $500 a week, and couples up to $848 a week. This is also far too restrictive and mean-spirited. Arguably the bracket should be increased to thresholds of at least $650 a week for singles, and at least $1000 a week for couples – indexed to inflation or a cost-of-living index – whichever is the most generous. A mixture of restored means testing, and the exclusion of low income and welfare dependent Australians from any 'surcharge', would likely have a progressive impact.

It is conceivable that the measures suggested here (taken together) would not save $750 million over four years as anticipated by Terry Barnes with his specific proposals. Indeed – including robust pension and tax reform and an expansion of eligibility for 'low income' concessions - they could cost the budget bottom line – and need to be supported with other structural saves and progressive tax reform. Though it is important to observe that in 2012 Cassandra Goldie of ACOSS (the Australian Council of Social Service) argued that means tests for the Private Health Insurance Rebate and other associated measures could on their own save "$2.4 billion over three years".

The point would not necessarily be overall savings for the whole package of proposals here, but greater efficiencies and a fairer system– the benefit of which would be passed on to the disadvantaged, the poor and the vulnerable both through socialised health care and state subsidy for a means-tested Private Health Insurance Rebate. The 'price signal' suggested by Barnes could still apply to non-disadvantaged Australians, recouping some of the associated costs. Though special provisions could also apply to the chronically ill, with the surcharge being waived from such people entirely. Sending a 'price signal' to the chronically ill just wouldn't make sense as it is indisputable that such people need constant care and feedback.