Don’t Expect Surprises On Budget Night

Editorial Friday 08.05.09.
As the Federal Budget looms closer, a flood of leaks has washed into the headlines alerting us to a range of measures to expect on Tuesday night. Among them are changes to significant components of health policy. The first is the move to restrict access to the Medicare safety net which provides additional rebates to patients who exceed a threshold figure in any given year. Rather than subject the safety net program to a means test, it appears that the government will simply remove support for certain services, including IVF treatment, which might be considered by some to be a non-essential medical service. The second item is the plan to introduce a means test for the private health insurance premium rebate. Both of these measures, if implemented would be a clear breach of election promises.

The argument will be that circumstances have changed, and that the extreme conditions of the Global Great Recession have made it impossible to conduct business as usual, and that reneging on these promises is the economically responsible thing to do. We will be told that these are tough times that demand tough action, but although there is considerable truth to that assertion, it remains open to debate whether these are the right choices. For example, cutting off all IVF from the safety net payments could easily be seen as producing a situation where only the well off can afford to have children in the case of infertility. That doesn’t seem to be consistent with a Labor Party social democrat philosophy now does it? There is concern that introducing a means test would have been contrary to the principle of the universality of Medicare, but to simply remove the benefit altogether obviously has the greatest impact on those who can least afford to pay full price themselves.

There is no such principle of universality involved with private health insurance, so the proposal to introduce a means test for the rebate is easy to understand. Despite the fact that it represents a blatant reversal of an election promise, it is far less contentious. The means test will only affect people who can afford to pay for their own private health insurance anyway. Lower income earners will still get the rebate if they choose private health insurance. Already people with higher incomes are charged an extra fee for Medicare if they do not have private insurance, which incidentally is also set to be increased in this budget, so means testing the rebate is consistent with the established principle of expecting higher income people to pay their own way.

The only problem with removing any, or all, of the private health insurance rebate is the concern that people may choose to drop their insurance rather than pay the full premium. If significant numbers do so it will place greater pressure on the health funds to push the price of premiums up for their remaining members, including those less well off people who make sacrifices and depend on the rebate to keep their membership current. If prices are pushed up sufficiently it could lead to a spiral effect which sees more people leave the funds in a vicious circle of rising costs and falling membership.


The trouble with that argument is that it pre-supposes that people affected by the means test will drop out. Some might, but if significant numbers do, surely that is an indication that private health insurance does not represent good value for money. If private insurance offers a good deal, and provides benefits that serve the needs of their customers, surely everyone who can afford to keep their membership will do so. Why wouldn’t they? I believe that if there is a significant exodus from private health funds after the introduction of a means test it will be a reflection of their performance as service providers rather than purely the price.

Of course it remains to be seen if the reported budget leaks are all accurate, but the tradition for federal budgets is to get all the bad news out in the press in the week prior, possible even have some of it exaggerated, so that on Tuesday night when the Treasurer makes his speech, the only surprises are pleasant ones. Given the economic circumstances, that part of the tradition might be difficult to deliver.