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.

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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