The prospects for health reform in the near future just reduced considerably with the Senate’s rejection of the legislation to reduce the private health insurance (PHI) rebates for high income earners. The proposed changes were very modest indeed and, on any reasonable estimate, unlikely to have much impact on levels of PHI membership.

While the Senate’s rejection is a $1.9 billion headache for the Government, it has a more fundamental implication for broader health reform.

The key issue for health reform is not so much deciding what needs to be done. For example, we now have before us three comprehensive reports on how to deliver a better health system for Australia over the next decade and beyond. Developing a comprehensive and feasible reform strategy from those reports is not that difficult conceptually.

The sharp end of health reform is in the implementation — as President Obama is now finding out in the USA.

The health sector is particularly riddled with sectoral interests that are both vocal and well able to use the media effectively to express their concerns. Unlike most other sectors, health issues can readily be reduced to life or death fears or hip-pocket concerns. In these circumstances governments’ resolves tend to buckle in the heat of debate.

The PHI changes were certainly modest. The worst case scenarios put forward by the PHI lobby were just not credible.

Their scenario would heave resulted in about half the affected population dropping their cover overnight, most of those who dropped out requiring virtually immediate public hospital care and premiums skyrocketing for those who kept their cover. The only evidence to support this scenario seems to have been a hastily conducted survey.

The complexities of the interaction between the loss of PHI rebate, the accompanying increase in tax surcharges for high income earners who do drop their cover and the propensity for high income earners to over-insure seems to have been overlooked by the lobbyists.

In some respects the PHI changes were like a canary in the coal mine — if they start to look sick, it’s time to get out of the mine. Let’s hope the Government does not take that message.

Robert Wells is Director of the Menzies Centre for Health Policy at the ANU.