How Fair is Health Spending?: The Distribution of Tax Subsidies for Health in Australia

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    Private health insurance incentives will cost Australian taxpayers $3 billion a year in
    less than eighteen months if the Federal Government’s 30 per cent rebate for private
    health insurance rises at the rate presently forecast by the Treasury.
    While the costs of the new concessions for private health insurance have escalated,
    the rebate has failed spectacularly to reduce public sector health spending or increase
    membership of private health funds. It has also contributed to a burgeoning
    Commonwealth Government health care bill exceeding 48 per cent of Australia’s
    health care costs.
    In addition the private health insurance concessions strongly favour wealthy
    households. Previous analysis by The Australia Institute exposed the inequity of the
    superseded income-tested incentive scheme. Using new Taxation Office data on the
    30 per rebate scheme, this study shows a substantial worsening of the inequity. The
    latest data shows that approximately half of the present open-ended subsidy for
    private health insurance goes to the top 20 per cent of taxpayers and nearly threequarters goes to the top 40 per cent.
    The rising Commonwealth share of health costs and declining role of private health
    funds have been at the centre of health financing policy debate in recent years.
    Seeking to encourage greater private provision for health, the Howard Government
    introduced the 30 per cent rebate for the costs of private health insurance in 1999.
    This replaced the failed income-tested incentive for private health insurance
    introduced from June 1997.
    The 30 per cent rebate has proved very expensive. The cost to the budget of private
    health insurance was around $1.6 billion in 1999-2000, and will increase further
    following the large jump in health insurance coverage from mid-2000. The sharp
    increase in coverage was not due to cash incentives for fund membership. The
    increase resulted from deregulation of health funds and the introduction of life-time
    health cover rules.
    Original languageEnglish
    PublisherThe Australia Institute
    Publication statusPublished - 2001


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