Monday, 15 January 2018

Health Insurance in Australia

     I don't know what the fuss is about in America over the Affordable Care Act, nicknamed Obamacare. This is not an endorsement, merely a genuine statement of ignorance. I do not know enough about its costs and implementation to make an informed judgment. However, since I have a lot more readers in the U.S., and even Russia, than in Australia, perhaps I should explain the Australian system of universal health insurance, which is a composite of public and private insurance. It wasn't planned that way; it simply grew as a result of rival political philosophies pulling in opposite directions, as well as financial restrictions. But it works reasonably well. (Of course, nothing works perfectly.)
     The first government imposed universal health scheme came in just as I became an adult. Before then, I don't know how we managed. Again, this is simply a statement of ignorance; I never asked my parents how they paid for the many medical interventions our family required. Our state, Queensland has a free public hospital system. Most people, whatever their station in life, had private health insurance. Also, I believe there were clinics providing free care for pensioners. We were lower working class, we were battlers, we had very little money - but we got by. Most people did.

    First Principles
    During the Obamacare debate someone asked whether health care was a privilege of a right. I find that an incredible false dichotomy. Would we ever ask whether housing or food was a privilege or a right? I think most people would agree that, although the government ought to tackle the problems of homelessness, and the genuinely hungry, for the vast majority of the population getting a roof over their heads or food on the table is neither a right nor a privilege, but a personal responsibility. Why should health be any different?
     But if we are going to have a health insurance scheme which covers everybody, then a few principals should apply:
  • It should cover the big, unplanned expenses, not the smaller, regular ones. Because that is what insurance is for. After all, your car insurance doesn't cover oil changes.
  • It must protect the genuinely poor, who can't afford to pay medical bills.
  • However, it mustn't encourage overuse and overcharging ie it mustn't become a bottomless well of taxpayer's dollars into which doctors can dip.
  • Also, it tends to be forgotten that health insurance is unlike (say) home insurance. Your house may never burn down, and the risk does not change radically with time. However, you will get sick, and the most likely time is when you are old. The two periods we require most medical treatment is at the beginning of our lives and at the end. It is just common sense, therefore, that we pay into the insurance during the middle years when we are chronically healthy, to be withdrawn at a later date without complaints about "pre-existing conditions".
    With this in mind, let us examine the Australian system.

     Government Scheme
     The government health scheme is called Medicare, for which we are taxed 1.5% of our income. Recently, it has been increased to 2% to cover the (so far) underdeveloped National Disability Insurance Scheme (NDIS), but 1.5% is supposed to cover Medicare. It doesn't, as will be discussed later. Normally, an old age pensioner would not pay anything, except that he would have been paying it when he was young and healthy. Medicare covers three main fields.
     Doctor's bills. A set of standard fees are agreed upon between the Government and the Australian Medical Association, for which Medicare pays 85%. The theory is that, if doctors "bulk bill" ie bill Medicare directly, the loss of bad debts, etc will justify discounting 15%. However, a lot of doctors charge more than even the standard fee. It varies with practices. The practice I attend bulk bills pensioners, and also non-pensioners for expensive procedures, but expects working people to pay for normal consultations up front and seek reimbursement from Medicare. The practice my wife attends does not bulk bill at all. Most pathologists and radiologists bulk bill, and it is suspected that their services are overutilised. The Labor Party would prefer that all doctors bulk bill, but it's not going to happen, because the standard fees are too low.
     Public Hospitals. They are free, and probably represent the largest single costs on Medicare. Also, some places, such as much of rural Queensland, are better served by private hospitals.
    The Pharmaceutical Benefits Scheme subsidies the cost of medications, so that people can access expensive drugs. Currently, working people are expected to pay a maximum of $39.50 per script, or $6.40 for pensioners. Also, there is a safety net of a maximum amount you can pay in one year before they become free. However, it does not cover medicines which are of social value, but not strictly speaking necessary, such as inoculations for overseas trips, or Viagra. A corollary, of course, is that it is forbidden to export medications beyond the immediate needs of your overseas trip, because the Government has purchased them for you.
     Some people have asked why dental treatment, which can be very expensive, is not included. The short answer is that it wasn't included at the start, and it hasn't been added later because, contrary to popular opinion, the Government is not made of money.
     As you can imagine, these schemes have undergone many changes over the years. At one stage, halfway through the cycle, we had the situation whereby you could choose to use your 1.5% for either the Government insurance scheme, or a private one, you got free hospital treatment, but you had to pay the first $20 of every medical bill, to discourage overuse. Personally, I consider this the ideal system, but it is not going to be reintroduced, because medical costs have greatly increased in comparison to inflation and wages. The Medicare levy should probably be doubled, but no Government is prepared to do that, so they do the next best thing: encourage private insurance.

     Private Insurance
     I knew a woman who worked part time on a low paid, low skilled job, yet she always met her private health insurance premiums. Where there's a will there's a way. The Government encourages it by three methods:
  • They pay a 30% subsidy on any private health insurance. This means, of course, that they regulate the costs of the insurance as well. Some ignorant people call this "middle class welfare" (although not everyone who uses it is middle class) and think that abolishing it would reduce Government expenditure. However, sensible people realize that this would ultimately cost the Government more, by forcing people back into the Government system. The users of private health insurance and private schools are subsidising the Government facilities.
  • If you earn too much money - roughly the top quintile of the workforce - and don't have private insurance, your Medicare levy is increased.
  • The longer you delay taking out private insurance after the age of 30, the more expensive it is. This follows the rule I mentioned earlier: you pay when you are young and healthy so that you can claim benefits when you are old and sick.
     So what do you get for it?
  • Well, what you don't get is the "gap" between the actual doctor's fee and the Medicare rebate. Health insurers are forbidden to insure for the gap. Presumably, the government believes - and I think correctly - that to do so would encourage overuse and overcharging, and result in an upward spiral in insurance costs.
  • What you do get is a contribution - amounting to about a third or a half, depending on the policy - towards auxiliary treatment such as physiotherapy, dentistry, and even spectacles.
  • Most importantly - and this is required for any policy wishing to to recognized by the Government - you get treatment in a private hospital, less any excess you agreed to.
    A relative of mine needing surgery for renal cancer was able to get it done in a private hospital after just a two month wait. However, he had no private insurance, and when he discovered the cost, he cancelled, and opted for treatment in a public hospital in three months' time. But one month was neither here nor there as far as the prognosis was concerned. This is typical. Exceptions occur, naturally, but as a general rule, the public hospital service is very good for essential or emergency treatment. However, for elective surgery - say, a hip replacement - you really need private insurance, otherwise you will find there is a waiting list just to get on the waiting list.
    Altogether, the Australian system works well in that what you get out of it depends on what you put into it, while still providing essential treatment for the genuinely needy. Which is how it should be.

     Other Countries.
     U.S.A. Someone once said that anyone who robs Peter to pay Paul can rely on the support of Paul. As I mentioned, I am not competent to discuss the fine details of the American system. But what I do find extraordinary is that it should require Peter to buy insurance for Paul if Paul happens to be his employee. (Presumably, if Paul became a contractor, he would have to purchase it himself.) I know a custom had developed in the U.S. of employers providing health insurance as a way to reduce their employees' income tax, but I can't see how that justifies forcing them to do so. If the boss wants to buy the insurance for his staff - or even pay their tax for them - let him do so, and provide a relevant contract. But the Government has no right to force him.
    It is noteworthy that the demand to include contraceptives, including the morning-after pill, as a requirement for all policies was an executive decision which had not been voted on by Congress. Now, this is the equivalent of car insurance covering oil changes; it is not a large, unplanned expense, but a regular expense easily planned for. Contraceptives are not that expensive. The executive must have known that they would be trampling on some employers' consciences with this regulation. The fact that they continued to push it, even persecuting a group of nuns, despite losing in the Hobby Lobby and Wheaton College cases, suggests that trampling on consciences for the sake of sexual licence was not a bug in the system, but a design feature.
     Singapore is now a first world country. When I visited it last month, I asked my guide about health insurance. She told me that they pay 25% of their income into a "compulsory savings" fund, administered by the Government and paying twice the bank rates. It can be used for three things: public housing, retirement, and health care for oneself and one's close family. There is probably more to it than that, because I also read in the local newspaper about Government funding for the extremely expensive treatment of people, mainly children, with very rare medical conditions.