Prime Minister Kevin Rudd thought the changes to the Medicare levy were important enough to warrant a separate, pre-budget announcement. But his health minister, Nicola Roxon, has spent the time since playing them down.

When the levy was imposed by the Howard government, she says, it was supposed to only apply to the rich. But because the thresholds have not changed since then, inflation has meant that it now amounts to a tax which many working families have to pay if they do not join a private health fund. All the Rudd government is doing is restoring it to its original function; it’s essentially just a piece of budgetary housekeeping, an administrative correction.

This soft-soaping is presumably designed to take the moral high ground over the private funds, which immediately threatened savage increases in their already extortionate premiums as a result of the proposed changes. While their reaction was predictable, it sounded rather more bellicose than the circumstances warranted.

The funds have long feared that a change of government would mean an erosion of the extraordinary privileges they were granted by Howard and his health minister Tony Abbott, and perhaps they suspect that Roxon’s administrative correction is the thin edge of the wedge. And perhaps, just perhaps, they are right.

Howard and Abbott always claimed to be all in favour of Medicare; indeed, Abbot said they were better friends than Labor had ever been. Certainly they were keen enough to preserve the name, especially around election time; polling showed that the scheme remained overwhelmingly popular with the voters.

But the Howard-Abbott version of Medicare was very different from the original. Medicare, like its predecessor Medibank, was designed by its founders as a universal health scheme. It was to cover the health needs of all Australians under a public system. The existing private funds would be allowed to continue to operate but they should be seen as an optional extra, offering additions to the basic service provided by Medicare. And they were to be self-supporting; government funds, through the special Medicare levy and top-ups from consolidate revenue, would go to the public system.

Naturally enough a great many people, especially the young and fit, opted out of the private funds, which then screamed that it was all unfair, they couldn’t survive if their members actually claimed the benefits to which they were entitled. Premiums would have to rise, which would reduce membership still further. If they were to fulfil their role of providing the rich with luxury and choice, they needed help.

And the coalition, which had always opposed Medibank and Medicare as socialising the medical profession and thus as an attack on private enterprise, the economic model created by God to bring profit to their supporters, was only too willing to oblige. Howard could not attack Medicare too vigorously; his predecessor John Hewson had done that in 1993 and it had been a key factor in costing him the unlosable electorate. But he could, and did, turn the system upside down.

Medicare, not the private funds, was to assume the secondary role. It would remain, but only as a safety net for the deserving poor. Everyone else had an obligation to join a private fund, or else. The or else involved both carrots and sticks.

The biggest carrot was the 30 percent rebate on premiums, correctly described at the time by Jenny Macklin as the worst piece of public health policy in history — the point being that it actually diverted resources from public health to private health. And the biggest stick was the extra levy, which, as was intended, caught more people every year and ensured a steady trickle out of the public system and into the private. At the same time Howard and Abbott reduced the share of commonwealth funding to the state-run public hospitals, thus making them less efficient and the private alternative more attractive. The private funds had never had it so good.

But now Rudd is pouring money back into the hospitals and the levy has been lifted to free most of those whom it forced into the private funds. The rebate still stands as one of Rudd’s unbreakable election promises for his first term, but the trend is clear: Medicare is to be restored to its former pre-eminence and the private funds can go whistle. Roxon has already signalled that she will not be too sympathetic with the funds if they start crying poor and demanding a new premium rise.

Yes, a change of government does change the country, especially if you are running a private health fund.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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