Those who argue for withdrawal of support for private health insurance and expansion of Medicare into a single national insurer are usually rebuked with one or more of the following responses:

  • “Australians don’t want socialised medicine; we need private hospitals.”
  • “We support self-reliance; free health care encourages waste and dependence.”
  • “We support choice.”
  • “Our tax burden would be too high without private insurance.”

Does a single insurer imply “socialised medicine”?

In fact, the funding and provision of health care are quite separate. A national insurer can and does support the private sector. In Taiwan, for example, while there is a single national insurer, healthcare services are provided almost entirely by the private sector. In Australia the Department of Veterans’ Affairs operates as the single insurer for eligible veterans, while buying most services from the private sector.

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It is only because of poor design that private and public hospitals in Australia have different funding streams, and it would make sense if they both competed for business from the same funding source.

On self-reliance, there is no difference between the notion “Medicare will pay for it” and “HCF/MBF will pay for it”. Insurance, whether private or public, involves dependence on a third party payer and when services are free at the time of service delivery, there is an incentive for over-use.

It is quite feasible for a single insurer to promote real self-reliance by requiring people to pay from their own pockets before being eligible for public support, thus providing some price signals in health care. Sweden provides an example of such a system. Evidence shows Australians want a universal health system, but a universal system does not have to be an entirely free system.

Can a single insurer sustain choice? Obviously there is no choice of insurer: we all pay our taxes to the one authority. But what is important to most people is choice of therapy and choice of provider, and even the much-maligned British NHS provides consumers with such choices.

And can we afford the taxes to displace private insurance? Many people correctly point out that with an ageing population we will have to pay more for health care in the future. But they then go on to suggest we must switch funding to private insurance because otherwise the tax burden would be too high.

If we can afford private insurance, however, we can more easily afford taxes, for as international experience (particularly USA experience) shows that private insurance is much more expensive to collect than taxes, and it lacks the cost and utilisation discipline that can be brought to bear by a single national insurer.

At the Annual Health Insurance Summit in Sydney later this month I will be presenting the economic case for a single national insurer. (Download his paper from the CPD). Will the Commonwealth be listening, or will it go on taking money from the health budget to subsidise a highly protected financial intermediary?

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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