JOHN MENADUE. Medicare – the Labor Party does not understand its own creation.

Aug 29, 2016


It is claimed that at the last Federal election, the Coalition lost support because it was going to undermine Medicare. In fact, at the last election, the ALP was proposing to do more to undermine Medicare than the Coalition.

Let me explain.

The ‘Mediscare’ campaign, insofar as it was effective, was because of the long history of opposition by conservatives to Medicare/Medibank both before and after it was introduced by the Whitlam government in 1975 and confirmed by the Hawke government in 1983. Philosophically the Coalition does not really believe in a universal health system that is available to all and with a single public funder which can control costs. With the long history of opposition to Medicare, it was not at all surprising that the Coalition is vulnerable on Medicare.

At the last election, the ALP criticised the Coalition for its preparations to privatise the Medicare payments system. This criticism was nonsense. Medicare services do not have to be delivered through a public agency. For example, in the current Medicare, medical services and pharmaceutical services are overwhelmingly delivered by private doctors and private pharmacists. The key to Medicare is a single public funder that ensures that quality services are available to all, regardless of means and are delivered in the most efficient manner. If the private sector can deliver services more efficiently for all, so be it, including the payments system.

The great threat to Medicare is the $11 billion taxpayer subsidy to private health insurance companies. This $11 billion subsidy supports the high cost and inefficient PHI companies, and favours the wealthy. Subsidised PHI makes it more difficult for Medicare to curb the power of providers – AMA, Australian Pharmacy Guild, Medicines Australia and private hospitals. As I have argued in an earlier blog, ‘The health insurance lobby at work at the expense of the public interest‘. This $11 billion subsidy is the ‘tapeworm’ that is eating away at Medicare. The taxpayer-subsidised growth of PHI is taking us down a two-tier health system and the disastrous path that we see in the US.

The ALP claims that it does not believe in a two-tier system. But its actions belie its claimed beliefs.

Before the 2007 election, Kevin Rudd sent a confidential letter to the private health insurance industry pledging that in government he would maintain the subsidy for PHI. We learned about this undertaking years later.

In the 2016 election, the ALP was offering the PHI industry more support than the Coalition. As Ian McAuley has set out in an earlier blog ‘Health care and Labor’,

In the recent [2016] Labor had fine words on healthcare – “Labor will ensure that access to health care is determined by your Medicare card and not your credit card” – but in reality its policy proposals, if implemented would have been even more destructive of Medicare than the Coalition’s. The Coalition, true to form, proposed to entice more people into holding private health insurance, but Labor’s enticements to hold PHI were even stronger. That’s because while the Coalition proposed to freeze the income cutoff threshold for the PHI rebate until 2021, Labor proposed extending the freeze until 2026. That threshold is the income, currently $90,000 for singles at which the rebate starts to cut out.’  

There are two possible explanations for the ALP’s proposal which would have entrenched PHI more than the Coalition proposal. The first is that the ALP does not understand what is at stake and the threat of PHI to Medicare. The second is that the ALP is so frightened of the power of vested interests, like the PHI industry, that it seeks to buy off their support by abandoning its principles.

What drove Gough Whitlam to introduce Medibank/Medicare was the inefficiency and unfairness of numerous private health funds. Conservative governments had subsidised these private funds by allowing policy holders to make tax deductions on premiums paid. This meant that higher income people got more of a taxation saving than low income people. Gough Whitlam often pointed out that he got a greater taxation subsidy for his private health insurance than his driver. In 1975 when introducing Medicare, subsidies to benefit private health funds were abolished.

When the Hawke government reintroduced an improved Medicare in 1983, subsidies for private health insurance introduced by the Fraser Government were abolished.

The Howard government reintroduced the subsidies for PHI which have now grown to $11b p.a . The ALP has been running away from the problem for years. The problem is that the $11 billion subsidy p.a. is promoting the development of a two-tier health system. The ALP just does not understand or is refusing to face what is at stake.

The ALP in government does not have a good record in defending Medicare. In the period 2007-2013, the Rudd and Gillard governments muddled through on health. The National Hospitals and Health Reform Commission that it appointed did not really take us anywhere. The Commission was stacked with health insiders and even put forward the suggestion of ‘Medicare Select ‘which would have crippled Medicare in its entirety. The Chair of the Commission was a senior executive of BUPA.

Abolishing the $11 billion subsidy for PHI would be a significant contribution to budget repair. It would also be a great step forward in restoring Medicare to the universal and single public funded institution that the Whitlam and Hawke governments set up.

If individuals want to take out private health insurance, that is their right. But there is no reason why the Commonwealth government should pay a $11 billion p.a. subsidy that is undermining Medicare.

At the last election, the ALP showed that it was prepared to do more to undermine and privatise Medicare than the Coalition.

The modern day ALP does not understand one of its most famous achievements – Medicare.

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