How the rich get well - and enjoy subsidies
How the rich get well - and enjoy subsidies
24 Feb 2010
Dr Michael Taylor (La Trobe), Email: email@example.com
Dr Charles Livingstone (Monash), Email: Charles.Livingstone@med.monash.edu.au
First published in The Age on 24 February, 2010
One of the great challenges confronting the healthcare system in the 21st century is inequality. International evidence, such as that in the recently published Marmot review of health inequalities in Britain, shows there is now no doubt that lack of equality is a crucial factor in producing poor health.
In Australia, the worst - but by no means only - example of this is the disparity between health outcomes for Aboriginal and non-Aboriginal Australians.
Governments understand the link between equality and health to some degree. Medicare, funded by the tax system, provides all Australians with access to medical and hospital care. Without Medicare, we would be in a similar position to US citizens, whose privately focused system leaves about 46 million people without any health insurance. Despite spending more than twice as much per capita on healthcare than Australia, US health outcomes, such as life expectancy, are worse.
Before we get too carried away with our relative success, we should note that some ''reforms'' made by the Howard government to Medicare continue to attack equality of access.
The first of these is the private health insurance rebate, by which the government pays 30 per cent or more of the cost of private health cover. This is promoted as a way of ''taking pressure'' off the public system. Unhappily, the evidence for this is scant, whereas it is clear that treating people privately remains far more lucrative for doctors.
Many, if not most, of those with private health insurance are relatively well off and would have it regardless of the rebate. Yet it costs the taxpayer $3 billion a year and largely represents redistribution of scarce public health dollars to the affluent.
In this context, the Rudd government's proposals to reduce the rebate for the well-off are a sensible step. Unfortunately, the Senate has rejected these proposals and, as this article goes to press, seems set to do so again.
Beyond the rebate, another Howard-era health legacy also requires scrutiny. In 2004, the then government introduced the Extended Medicare Safety Net. This operates in addition to the basic Medicare safety net, which pays modest additional rebates based on the difference between the scheduled fee and the Medicare rebate. The extended version reimburses people for net out-of-pocket costs above $1126 a year ($562.90 for healthcare card-holders).
Once you've spent that much, 80 per cent of the further out-of-pocket costs are rebated. This scheme is mostly uncapped, except in some areas where there was evidence that doctors were structuring their billing to take maximum advantage of the scheme.
In 2008, the combined cost of the safety nets was $425 million, three-quarters of that for the extended safety net.
According to the government's recent review, only about 8 per cent of these rebates are for GP services. Most of the money is spent on privately provided specialist services.
Our analysis of the 2008 safety net data (published by the Department of Health and Ageing) demonstrates that payments flow strongly to society's most advantaged, and with a particular geography.
The three electorates with highest average safety net benefits in 2008 were the Sydney seats of Wentworth (an average of $89 a person), North Sydney ($77), and Warringah ($70), among the most advantaged areas in Australia. Coincidentally, all are blue-ribbon Liberal seats.
At the other end of the socio-economic divide, the three electorates with the lowest per capita payments were Kalgoorlie in Western Australia ($5 a person), Lingiari in the Northern Territory and Braddon in Tasmania (both $4) - all remote and significantly disadvantaged areas.
It's this last point that raises a further issue. In Australia, poor health is associated not only with disadvantage, but also with distance from a major city.
So, although the healthcare needs of those in electorates outside the major cities are likely to be greater than those in the inner city, the safety net favours those with the least need for the payment. Residents of inner metropolitan electorates received average safety net benefits of about $35 a person in 2008, compared with residents from outer metropolitan ($21), provincial ($15) or rural ($11) electorates.
In Sydney and Melbourne, the inner-city electorates averaged payments of more than $40 a person, compared with rural electorates, where payments averaged $11 in Victoria and $12 in NSW.
These Howard-era remnants do little or nothing to advance the health of our society. They deliver substantial benefits to those who need them least, and divert scarce resources away from areas of disadvantage, where significant health gains are necessary and possible.
Health insurance rebates and safety net subsidies to the rich significantly detract from Medicare's great strength - its universality. If we want to seriously reform healthcare in the interests of all, these measures should be among the first to go.