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BFCSA: Morrison - How average income earners will be pushed into private health insurance by 2020

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Puts the mediscare lie into was the Liberals who lied

How average income earners will be pushed into private health insurance by 2020

July 23 2015

Caitlin Fitzsimmons


Scott Morrison's super warning    video Courtesy ABC News 24

It would cost half-a-billion dollars to abandon superannuation changes announced in the budget - and the ratings agencies are unlikely to react well, warns Scott Morrison.   By 2020 average income earners will be forced to buy private health insurance or pay extra tax after the government quietly extended a freeze in the threshold for the Medicare Levy Surcharge.

The income threshold, where rebates start to phase out and taxpayers without private cover are charged the surcharge, will stay fixed at $90,000 for singles until June 2021.  The Medicare Levy Surcharge originally targeted high-income earners and was indexed to average weekly ordinary-time earnings.

However, the first Abbott-Hockey budget in 2014 paused indexation until June 2018. The 2016 budget extends the freeze for another three years, saving about $370 million on the forward estimates.  An income of $90,000 is 17 per cent above the 2014-2015 average full-time earnings of $77,000. But with this year's budget predicting wages growth of 2.75 per cent a year, $90,000 will be about the average full-time income by 2020-2021.

The move was buried within the 2016 budget papers$File/2016-17_Health_PBS_0.0_Complete.pdf and has mostly escaped public notice until now – at the time of writing even the government's own information was showing outdated information about when the freeze would end.

Ian McAuley, a fellow at the Centre for Policy Development, has highlighted the freeze in a paper on private health insurance and public policy to be presented at the 2016 Health Insurance Summit this coming Thursday.  Mr McAuley is a proponent of the idea that directly funding private hospitals alongside the public system would be more efficient than giving public subsidies to private health insurers.

He argues the freeze in the threshold for private health rebates and the Medicare Levy Surcharge takes the cost of subsidising the insurance sector off the budget and into the "dark world of hidden subsidies". He argues exempting private health fund members from the Medicare Levy Surcharge is a form of subsidy for the industry.

Currently the government pays $6.5 billion in direct outlays for the rebate and $1.6 billion in "tax expenditures" (because the rebate does not count as taxable income). The freeze in the threshold means the government will gradually shell out less for the rebate, while the pressure on individual taxpayers to buy private health cover will increase.

“What has has passed for an economic debate in the last two elections has been mainly about the size of the deficit," Mr McAuley says in his paper. "That focus encourages cost-shifting and resort to what are known as 'privatised taxes'. Private health insurance ... is essentially a privatised tax, designed to achieve some of the same outcomes as Medicare, but without the exposure of public scrutiny and without the automatic community rating built into the tax system.”

He says the political emphasis on the size of the deficit leads to politicians prioritising bookkeeping and the "cosmetics of fiscal rectitude" over responsible economic management – meaning if a cost can be shifted off-budget it will be because it looks better, even if it's less efficient. Toll roads and private health insurance are two key examples of this trend.


Health Minister Sussan Ley said the Coalition was committed to improving the value for money Australians get from private health insurance.  She pointed out that during the election campaign Labour proposed to pause the indexation for a decade while the Greens promised to scrap the the rebate altogether within four years.  While we are making it easier to compare policies and find a more-affordable deal, Labor and the Greens have only promised to take a bigger scalpel to people's private health rebate if they were in power," Ms Ley said. "The choice is clear.”

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