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Federal

Jun 21, 2016

Turnbull won’t ‘privatise’ Medicare, but he will destroy it

The Coalition's plan for Medicare is privatisation by another name, writes John Menadue, former head of the Department of Prime Minister and Cabinet.

Malcolm Turnbull says that the Coalition will “never, ever, privatise Medicare”. Given the wide public support for Medicare and Malcolm Turnbull’s way with words, his attempted rebuttal is not surprising.

But the Coalition has been eroding Medicare from within for a decade and a half since John Howard. The vehicle for this erosion is private health insurance (PHI), and the government is facilitating this process with the $11 billion p.a. taxpayer funded subsidy to support private health insurance.

And the ALP does not seem to care. It scarcely ever mentions the damage of PHI. Is it scared of this vested interest? 

If people want PHI, that is their right, but it should not be at the expense of others and, in the process, erode Medicare.

The erosion of Medicare is proceeding rapidly, which I will outline below. The danger and the threat increases every year. Steadily, we are moving down the disastrous US path of PHI with its horrific costs and unfairness. Warren Buffet has described private health insurance in the US as the “tapeworm in the US health system”.

[All aboard the ghost train for Labor’s Mediscare campaign]

The Coalition’s undermining of Medicare through PHI is insidious. It occurs in many ways. Medicare is becoming less and less a quality system available to all, regardless of income.

The threat takes many forms.

  • The $11 billion subsidy for PHI undermines Medicare’s principles of a single funder, universality and solidarity. The PHI subsidy goes overwhelmingly to people on higher incomes;
  • We are concerned about growing health costs, particularly with an ageing population but PHI makes it much more difficult for Medicare and the government to control costs. Providers — doctors and private hospitals — have the power to set prices in the market. Multiple PHI companies make it much more difficult to control those costs. US health costs are double Australia’s health costs as a proportion of GDP and this is almost entirely due to the inability of PHI to control costs. We need a health system that is efficient as well as fair. PHI results in both inefficiency and unfairness;
  • The erosion of Medicare and the loss of control over costs has been greatly worsened through gap insurance provided by PHI. As a result of that gap insurance, the public is being forced to pay for the greed of specialists whose over-servicing and overcharging is facilitated by PHI;
  • The erosion of Medibank means that PHI companies can foist higher costs on the community in other ways. The administrative costs of PHI are three times the costs of Medicare. These costs may be off the commonwealth budget, but the inefficiency of PHI is still borne by policy holders. PHI companies impose their own private tax. It is called “premiums”.
  • PHI premium increases have been at double the CPI rate for the last 15 years. The community pays for this inefficiency of PHI;
  • The political justification by the Coalition for the $11 billion subsidy for PHI is that it would take pressure off public hospitals. It has not done so. In fact, the reverse has occurred. Because of the weakening of Medicare’s ability to control costs and fees, many people on moderate incomes have been forced to go to the emergency departments of public hospitals. Most of these emergency departments have been at bursting point for years. Private health insurance has also under-written dramatic increases in salaries of specialists with the result that increasingly, clinicians in public hospitals are attracted to taking employment in private hospitals where the salaries are three to five times higher than in public hospitals. This is just another example of how PHI is hollowing out Medicare and the public system from within; and
  • A principle of Medicare is that quality services would be available to everyone regardless of where they live. Because PHI provides under-writing of private hospitals, this means that country people are disadvantaged. Almost all private hospitals are in urban areas. PHI clearly discriminates against people living in rural and remote Australia. The principle of universality is again eroded. The National Party allows this dudding of country people to continue.

The Minister for Health, Sussan Ley, has floated the idea that the Coalition will introduce categories of “gold”, “silver” and “bronze” to help patients better understand the many confusing and dud policies that PHI offers. But given the scale and nature of the problems outlined above, this is pure window dressing. It fails to address the erosion of Medicare by PHI.

In addition to the appalling performance of PHI, we have just learned that the ACCC is to investigate very serious breaches by Medibank Private in failing to disclose to its 3.9 million policy holders that it was slashing coverage of pathology and radiology services just when it was floating Medibank Private on the stock exchange.

[Who missed what at Medibank?]

The chairman of the ACCC Rod Sims has also commented: “There will be more enforcement action coming generally in the health sector … We have concerns and we are investigating other health insurers on a broadly similar set of matters to what we took Medibank Pte to court for.”

News reports also tell us that the ACCC is within months of launching major cases against major hospital operators for engaging in anti-competitive conduct to keep out smaller health providers. Sims added: “There are also broader competition issues which are reasonably advanced on whether the big players in the market are doing things to keep competitors out of the market.”

Ian Ramsay at Melbourne University also warned that Medibank Private now faces possible ASIC investigation on top of the action by ACCC.

The current revelations about PHI come as no surprise. They are the tip of a dangerous iceberg . The end game is increased profits and the destruction of Medicare by stealth.

The ALP has proposed a royal commission into the dubious practices of our banking sector; PHI is also a financial intermediary. It does not supply any health services. The damage and hollowing out of Medicare that is occurring should also be fully exposed. by including an examination of PHI in the terms of reference of the banking inquiry.

The destruction of Medicare is the endgame for vested interests like PHI. The Coalition is facilitating that process with a $11 billion p.a. subsidy despite what Malcolm Turnbull tells us.

The forms and external structure of Medicare, the shell, may remain but it’s founding principles — fairness, universality, solidarity and efficiency — are being whittled away.

*This article was originally published at John Menadue’s blog, Pearls and Irritations

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15 thoughts on “Turnbull won’t ‘privatise’ Medicare, but he will destroy it

  1. Barry Reynolds

    This sums it up perfectly. The libs have been trying to destroy Medicare since day one. They realise they can’t kill it off with one sweeping change so destroy it by a thousand cuts. The PHI rebate was done away with in (and don’t quote me on this) the 80’s. It took a liberal ferret to bring it back

    1. PaulM

      No Barry, there was no Government rebate on PHI premiums in the 1980’s. Premiums dropped in 1984 when Medicare was introduced, because PHI no longer had to (was precluded from) covering primary health care like GP visits. The rebate was introduced by Howard to provide something that would seem to be reducing health costs. Costs have grown since then. Yet another economic disaster foisted on us by the Party of better economic managers!

  2. klewso

    They’ll just eat it from the inside out.

  3. graybul

    John, thank you. A very thought provoking and worrying comment. Why is it that Conservatives, despite the evidence of viewing the deeply unfair and inequitable American health system are hell bent in dismantling ours in favour of a failed, fractured system?

    Of course it is both greed and an ideological mantra that precludes concern for others. As I move into the latter years of ageing I become more conscious and reliant upon a fair and functional health system. Yet despite a professional life involved in community care inclusive of all generational needs and life experiences now find myself no more or less equipped to ameliorate the circumstance of daily challenge faced by my ageing cohort. Conclusion being that despite experience and well founded values my generation cannot share, identify or easily embrace the practical realities and values currently espoused by those who desire the destruction of a world class Australian health system.

  4. Dog's Breakfast

    That $11b subsidy would go down well in the public health system, I would imagine.

    The underlying ideology, that the private sector is so much more efficient than the public sector, has no better rebuttal than the health services industry. The USA health system is an abomination. Working our way towards through the death of a thousand cuts is mind-bogglingly stupid policy.

  5. Andrew McIntosh

    Classic Lib tactics. Rather than abolishing outright, they make state institutions that actually help people as unworkable as possible.

  6. AR

    We can be as confident of the survival of Medicare as we were for that of its predecessor, Medibank under Frazer.
    It’s in their DNA.

  7. CML

    There are NO private hospitals or health funds in Canada…yet all my friends and relatives over there are completely satisfied with the health care they receive.
    Why doesn’t the Labor party have a very good look at their system?
    As someone who spent the best part of fifty years working in the healthcare system in three countries, I believe that Medicare MUST be maintained and the public system enhanced. Even if that means outlawing private health insurance.

  8. leon knight

    I can afford PHI but have never used it on principle, I keep faith in Medicare and will always take my chances with the public system.
    Thanks for the insights John, I will take this issue up with my local Labor member Stephen Jones.

  9. Duncan Gilbey

    The Coalition will “never, ever, privatise Medicare” in the same way they would “never, ever” introduce a GST.

  10. Beverley Gillan

    Who would have thought just 3 years ago the LNP would not have it’s elected Prime Minster, it’s elected Deputy Prime Minister and it’s elected Treasurer.
    And the LNP are trying to convince me that they won’t destroy Medicare.
    “It’s Time” to throw this mob out. Abbott and the right wing of the party have destroyed the LNP for years to come. This election is all about trust and no one trusts the LNP anymore.
    Bye Bye

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