John Menadue. The health insurance lobby at work at the expense of the public interest.

For many years, Ian McAuley and I have been highlighting the damage to our health system and the Australian economy as a result of the $11 b. p.a. subsidy to the private health insurance industry.  We have highlighted the following and never has there been a rebuttal by these vested interests.

  • The subsidy favours high income groups. Taxpayers money is being used to help the more wealthy jump the hospital queue
  • Through gap insurance PHI has underwritten enormous increases in specialist fees.
  • Despite the claims PHI has not taken pressure off public hospitals. It has made it worse by attracting salaried staff from public hospitals to private hospitals with much higher remuneration.
  • PHI discriminates against country people who have limited access to private hospitals. Yet the National Party supports the subsidy.
  • Premium increases for PHI over the last 15 years have been at more than double the CPI rate.
  • PHI has administrative costs three times those of Medicare.It aggressively conducts pointless advertising campaigns and sponsors organisations such as  the Public Health Association of Australia and the most surprising of all the Grattan Institute.
  • The PHI industry talks about the high cost of health care but weakens Medicare’s ability to control costs.
  • PHI takes us down the disastrous US private health insurance path. Which Warren Buffett has described as the tape worm in the US health system?

Despite what I think is an overwhelming case against taxpayer funding of PHI I have not seen a serious response from the PHI industry…ever. I can only conclude that it has no confidence to defend its position, and if it attempted to do so it would open up a debate that it wants to avoid at all costs.

Instead of joining in a public debate to justify $11 b. p.a. government subsidy, it relies on lobbying directly and secretly on the federal government, both ministers and officials.

In 2007 Kevin Rudd made a secret deal with the PHI industry that a Rudd Government would maintain the taxpayer subsidy. We only learnt about it years later.

Now CEDA’s Balanced Budget Commission has suggested revenue measures which the government should consider to achieve a balanced budget.  One revenue measure it suggests is ‘removing the private health insurance rebate exemption’. The CEDA Commission also suggests ‘cutting the private health insurance rebate’. This CEDA report is professional and supported by a cross-section of very senior academics and public officials including four former heads of PM & C. But once again I expect the PHI lobbyists will try to close down the ‘debate’ as quickly as they can.

In so many areas of public life in Australia, vested interests are abusing their power and influence on government. It is a public scandal what the PHI industry has been doing at the expense of the Australian taxpayer and good health policy.  But it is not just health policy that is being corrupted; it is our democracy where vested interests exercise enormous and secret power.



John Laurence Menadue is the publisher of Pearls & Irritations. He has had a distinguished career both in the private sector and in the Public Service.

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6 Responses to John Menadue. The health insurance lobby at work at the expense of the public interest.

  1. Ellie says:

    What a great rersouce this text is.

  2. John Boyd says:

    I often think that it is just as well that we are such a big fat rich country that we can afford to carry these huge economic inefficiences. A policy objective of any government should be to hold the total cost of health care to the current level of about 10% of GDP, and then work out the efficiencies required to achieve that objective.

  3. Colin Cook says:

    Is lobbying a Tax Deductible expense? I suspect it is – in which case we are paying these experts to thwart good community-focused policy yet cannot afford/are unwilling to employ well qualified public servants to develop and implement such policies. Are we mad or just stupid?

  4. Jen Hocking says:

    Thanks again John for your tenacity with this issue. I just wanted to mention a specific health issue that’s important to my profession of midwifery. I have 20 years experience of working in public maternity hospitals and many times I have observed the public maternity system picking up care of previously PI women who have sustained significant complications as a result of surgical births performed by obstetricians in the private system. Some great research has been done in the Australian context on maternity outcomes from public vs private maternity facilities. It is well known that private practice has much higher rates of intervention including caesarean section – the reasons are complex – and so are the outcomes. Women I have cared for have placentas morbidly adhered to various parts of their bodies, chronic infections and high risk pregnancies as a result of these interventions. Their care requires clinical expertise and lots of money for extended inpatient stays and ongoing diagnostic testing, not to mention to extraordinary impact on the rest of their (mothering) lives.
    And who pays for this?
    Another example of the burden that private care places on the public system.

  5. Edward Fido says:

    Sad news indeed. I suppose the only practical antidote to this is to keep publicising the matter and the lobbying until they become an important public issue. Perhaps those opposed to the PHI may need to do their own lobbying. Politics is a dirty game and until politicians feel threatened with losing their seats they tend to do nothing.

  6. John Thompson says:

    The private health insurance industry has also used its influence to quietly insinuate itself into the Commonwealth Government’s latest primary health initiative, the Health Care Home. This is a program recommended by the Primary Health Care Advisory Group (PHCAG) established by the current government to develop recommendations to address the rising cost of chronic care. Not surprisingly when the membership of the PHCAG consisted mainly of GPs or GP-affiliated persons, the Group recommended a GP-centric care system attracting more Commonwealth funds for GPs. It seems that the private health insurance representative on the Group was also effective in representing his industry as the recommendations of the Group included a role for PHI in the new model – a vague and somewhat poorly articulated role, but a role nevertheless. This follows the various quiet attempts by the private health insurance industry to get a seat at the Primary Health Networks. These PHNs were established by the Commonwealth to replace the Medicare Locals that the previous Labor government had established and which were just beginning to get some runs on the board.
    The CEDA recommendations relating to private health insurance are certainly appropriate.

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