Since 1999, the private health insurance rebate has blighted health policy, funnelling tens of billions of dollars into the pockets of middle and higher-income earners and private health insurance companies with little or no efficiency or output benefits for our health system. As a health measure, it has been one of the most extraordinary wastes of taxpayer funding in modern Australian history; as middle class welfare, it has been a great success.

The rebate combined two of the enduring characteristics of the Howard government — its support for hybrid industry sectors composed of private companies that depended fundamentally on taxpayer largesse, and its obsession with vote-buying and handouts to the well-off. Instead of confining the incentive to those on low-incomes, the government has elected to taper off the rebate for higher incomes.

Nonetheless, the passage of a means test for the rebate through the House of Representatives this morning is a significant step forward in curbing middle class welfare, one that will have significant and growing benefits for future budgets.

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That Tony Abbott, who already has enough problems with his fiscal policy, refused to commit to removing the means test by a specified date illustrates just how colossal an impost this policy is on taxpayers. The rebate in its current form should never have been introduced, and it should never return.


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Peter Fray
Peter Fray
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