Private Health Insurance like all insurance is riddled with clauses and conditions, premiums and extras so its essentially impossible to compare two policies to one another; as such it is very difficult to know what policy is right for your needs and budget.
I assumed that I was insured under my parents private health insurance policy until while I was under 25 and still studying. I was recently advised by my mother that I am in fact not covered under my parents policy, as I am earning over $14,000 per annum and have been since I was 17. So this effectively means I have been without private health insurance for 5 years, because of some fine print. Lucky for me, I haven’t had to make a claim in that time, but this brings me to my next point; do I really need it?
Personally, as a capitalist, I think Private Health Insurance is a good thing for the country, it relieves the pressure form the public health care system and it ensures that policy owners receive better service than those on relying on the public system. Conversely, as a self confessed tight-ass I find it very difficult to bring myself to spend hard earned dollars on something I might not need. So you can see I am in a bit of a jam here; do I cough up the money for private health insurance and guarantee myself better treatment for treatment I may not need, or do I contradict my core values and rely on the public health system which my tax dollars are supporting anyway.
Instead of answering the question myself, I’ll flip it onto the government. They can either;
Option 1: Make the public health system as good, if not better than the private health system:
As nice as this idea sounds, it would take a massive investment in the health system. The money would have to come from somewhere, being tax revenue. It would be unfair to place excessive taxes on the lower income demographic, so it’d have to be a tax on wealthier Australians, who would (due to current MediCare Levy Surcharge Rules) probably already have private health insurance anyway. So effectively you’d be taxing wealthy Australians to support a service that they do not use. This is already the direction the government has been heading for several years now with the MediCare Levy. Peter Costello was on the right track introducing the MediCare Levy Surcharge and Private Health Insurance Rebate; by encouraging middle class and wealthy Australians to take up Private Health through a tax rebate and threatening them with a surcharge if they didn’t.
I am concerned about the direction that the public health care system is heading. The government is looking at spending more on the public health care system, which is great; but is looking at financing it by reducing the tax incentive to have private health cover in the first place. Counterintuitive much? The Liberal Party aren’t doing much better by proposing that the additional revenue be sourced from an increase in tax on tobacco. The irony of this proposal is that if the tobacco excise did in fact curb tobacco consumption; the government would lose the tax revenue to support the public health sector. This and similar kinds of social engineering (ie Alcohol, Gambling, Petrol taxes) are the government wanting to be seen trying to curb consumption by increasing excise, but what they’re doing is profiteering by taxing economically inelastic goods.
Option 2: Develop an ingenious way for people to finance private health insurance policies without spending cash out of their pockets:
At the moment Death, Total Permanent Disability and Income Protection Insurance premiums are allowed to be deducted from your superannuation fund. You’ll find these policies are dramatically cheaper if sought through superannuation rather than personally. This is because of the massive economies of scale and pooled risk diversification offered by a superannuation fund. Also, traditionally with insurance the more people insured the lower the premiums will be across the board, as the insurer has diversified the risk across a wider population. This means that the price of Private Health Insurance could effectively be halved if done via a superannuation fund. Further premiums would be paid by your superannuation fund as opposed to out of your own pocket; as such people would not feel the pinch of the fund premiums.
Due to the reduction in premiums, the no “out of pocket” cost and the simplification of policies; I believe more Australians would adopt Private Health Insurance, particularly if people had to “Opt Out” of default health insurance policies in their superannuation fund, similar to current arrangements with industry and retail funds. With more people in the private system, the burden is lifted of the public system, which means that public treatment will go to those that need it the most.
Current legislation prohibits private health insurance premiums from being taken out of superannuation, as the fund member would have the “benefit” of the insurance before retirement. I understand why the legislation was written like this, without it there would be nothing stopping a fund member from “investing” in a yacht and sailing the seven seas. That said I am sure that the SIS Act could be tweaked to allow Private Health Insurance premiums, as it is “an investment in the longevity of the fund member.”
The other counter-argument is that the additional insurance premiums would chew into retirement savings; this is 100% true. The solution; increase the superannuation guarantee above 9%! If the rumour mill is correct then this may already be in the pipeline. Super Guarantee gradually increased from 6% in 1997 to 9% by 2003. Since then it has stayed at 9%. If this country is serious about encouraging Australians to support themselves in retirement, then it should be doing its best to encourage people to invest more into superannuation. Since the last federal budget the government has halved the contribution limit and reduced the co-contribution by 33%. This created a short term revenue boost for the government, but the long term ramification of more people relying on an age pension would cost more in the long run.