Take two aspirins and call for more reform

Kevin Cox is to be congratulated for promoting the concept of a health savings account. However, establishing an account and diverting tax cuts into it is only the beginning of reform. Many related initiatives need to be put in place otherwise people may see the account as delivering something akin to Paul Keating’s equally infamous L.A.W. tax cuts.

First, many people have a justifiable degree of cynicism about private health funds. They see premiums rise, but are often dismayed at the level of return they receive when making a claim, after which there can still be considerable medical bills to pay.

If health funds had to submit applications for approval of premium increases to the independent Australian Competition and Consumer Commission to make a ruling on, rather than the Health Minister, then an element of the political controversy could be taken out of the debate on public health.

Meanwhile, the government could also weight its health insurance rebate. This would mean that the lower your income, the greater the rebate for maintaining private health coverage. Indeed, a parallel might be drawn with the superannuation co-contribution scheme for low income earners.

Furthermore, the proposal could be expanded to become a part public-part private coverage mix. Where an individual was prepared to purchase some health services privately, but could not afford a complete package, they could still attract rebates and, where possible, referral between the public system and private service providers. This would help to meet those health needs people could not cover themselves, as efficiently as possible.

This option sets up a definite reward system for those prepared to take control of their health and offers at least a partial alternative to remaining on a long public waiting list.

The concept of mixing and matching services could also be extended to the private health funds themselves. At present, customers purchase private insurance from a company, which presents them with a health insurance package. There may be a few optional extras and a few gimmicks to get you to join, such as free gym shoes, but ultimately the insurer wants you to sign a contact and pay a premium. Would it not give consumers more power if they (or brokers they hired) mixed and matched packages and premiums according to an individual client’s needs? Therefore, I could purchase optical cover from one company, dental from a second and surgical from a third, in much the same way as many Australians keep a portfolio of investments.

Equally, if consumers could elect to take part of their Medicare Levy and put it in their own long-term health savings account, this could make providing their own “health future” more attractive.

While some may say this strikes at the heart of the universal nature of Medicare, this supposedly communal, egalitarian system has a dark side. This dark side is the fact that the greatest impact of the Medicare Levy is felt by workers on the lowest incomes. No less than the head of Access Economics Geoff Carmody has labeled the Levy a flat tax which, when means-tested exemptions are clawed back, amounts to an effective 20 per cent tax on low income earners.

This cannot possibly be fair and workers on low incomes should be the first to get the 20 per cent tax back in their health savings accounts.

Furthermore, in the same speech to the National Press Club where he explained the real cost of the Medicare Levy, Mr Carmody also made a compelling call for wide-ranging tax reform, which would have seen a rise in the minimum tax bracket, abolition of most allowable deductions, along with a uniform rate of both personal and company tax.

Such steps would simplify the tax system while also putting money back in taxpayers’ pockets. A percentage of this sum could also be ear-marked for the health savings account or alternatively, incentives could be offered for individuals to make voluntary contributions to their account of pre-tax dollars, mimicking the salary sacrifice arrangements available for superannuation now.

Some may still say this proposal strikes at the universal provision offered by Medicare. But is the current system so attractive after all? Its funding levy hits the lowest paid the hardest: while leaving your health care to be provided for entirely by the public sector means that you are allowing a bureaucrat to place you on a public waiting list; to determine when you will be admitted into a facility; if you will have a procedure cancelled; and, if it is not cancelled, to have it conducted by a doctor selected by the state.

It may be that none of these factors will have any impact on the outcome of your procedure. Also, some of us may not be in a financial position to make such choices.

Nothing in what either Kevin Cox or I are proposing should therefore diminish the acknowledged vital role of public health care. However, just as superannuation cannot and will not ever entirely remove the need for some government-funded pensions, public health care is already stretched and is unlikely to be able to cover all Australians’ health needs in the time and manner we demand.

Individual health savings accounts will give consumers greater ownership, autonomy and choice in how they manage their health and that of their family, while also providing scope for government to more effectively apply scarce public health dollars.