Will means test justify the end?

The Opposition says that the reason the government plans to means test the private health insurance rebate is simply that it wants the money; and the Opposition is quite right.

The government does indeed want the money so that it can spend it on something useful, rather than on the stupid, wasteful, inequitable, unconscionable rort that is private insurance for the rich.

When John Howard introduced the scam in 1999 it had two clear purposes: to undermine Medicare by strengthening the private system at the expense of the public system, and to lock in the votes of the well-off, especially the so-called 'doctors' wives', with whom he was having a little trouble. This was at least consistent with traditional Liberal policy, which has always been to oppose and attack public health wherever and whenever possible.

Back in the 1950s when Robert Menzies's health minister, Earle Page, set up the health insurance scheme which endured, unchallenged, until the advent of Gough Whitlam. Page was himself a very successful and wealthy surgeon and his principal aim was to secure and improve his own privileged position. He was vehemently opposed to the public health system: public hospitals, he argued, posed unfair competition to private hospitals, of which he happened to own several.

So since he could not abolish the public system altogether, he set up a private alternative which was heavily weighted in favour of the medical profession. People were more or less compelled to take out private insurance if they wanted prompt, top class treatment, because that was where the money went.

The justification, then as now, was that encouraging people to move into the private system would take the weight off the already over-burdened (because it is under-funded) public system. In fact it did, and does, no such thing.

All accident, emergency and otherwise urgent cases still go first to public hospitals as a matter of course, but the doctors go the other way: after all, they get paid vastly more by the private than the public hospitals.

For some specialists, such as orthopaedic surgeons, it can be four or five times as much, because they can effectively set their own fees. They know the insurance funds will usually raise their own rates to meet them and if they don't, well, tough; there is always gap insurance to cover the excess.

Thus the profession's outrage when Whitlam attempted to bring in Medibank, a truly universal public health care scheme, was one of the most vicious and unprincipled demonstrations of self-interest ever seen in the country. The hapless minister in charge, Bill Hayden, was accused by the Australian Medical Association (the militant and ruthless doctors' union) of being a communist, and also a Nazi. Medical records were faked to prove that he was insane as wild rumours about his private life were spread through the consulting rooms of the nation.

The Liberals gave the doctors their unquestioning support; eventually Whitlam needed a double dissolution of parliament and a joint sitting of both houses to get the Medibank legislation passed. And when the Liberals regained power in 1975, Malcolm Fraser quietly set about dismantling the system; when Labor came back in 1983 Bob Hawke had to re-invent it as Medicare.

It took 13 years to put the Liberals back on the Treasury benches, and by then Medicare was too popular for John Howard to attack openly; so he promised to keep and improve it, while planning to undermine it by whatever devious means suggested themselves. The most obvious was to keep pouring public money into the private system, and the private health insurance rebate was the first move.

It was ineffective in its stated aim of increasing their membership; it took another step, the big stick which threatened voters with constantly increasing rates for every year they delayed taking out private insurance, to achieve any substantial jump. The private health rebate was simply a direct taxpayer subsidy to the chosen lifestyle of the rich.

Labor's shadow minister, Jenny Macklin, described it at the time as "the worst example of public policy ever seen in this parliament" and it would certainly have to be in anybody's top 10. But after that, Labor backed off; its opposition became muted and eventually non-existent, as successive leaders consciously avoided offending any identifiable lobby group in an increasingly desperate struggle for votes.

Kevin Rudd even promised to leave the scheme untouched before the 2007 election, and it was the first, and just about the only, explicit promise he broke: and even then, rather than going the whole hog and abolishing the rebate altogether, his modest proposal was for a progressive means test. The populace was still to be encouraged to take out private insurance but the super rich were no longer to be subsidised.

The Libs, of course, opposed even this puny measure, and twice knocked it back in the Senate. Now finally, with the help of the independents in the House of Reps and the Greens in the Senate, it is set to pass.

There is, of course, a chorus of doom and gloom from the private funds, which, despite their regular profits and huge cash reserves, now claim to be facing ruin. They are, of course, lying; there is still a lot of milk to be extracted from those cash cows.

But the finest examples of confected outrage have come from the rich themselves. My favourites are the Richards, an Adelaide husband and wife team with a combined income of over $258,000 a year - that's about $5000 a week to you peasants. Mrs Richards whinged to a sympathetic ear (from The Australian of course): "It's ridiculous. The better we do, the more the government takes." Actually it's not the government taking: it's the rest of us peasants no longer being made to pay for your indulgences.

Or at least not as much: we're still looking after the private school where you plan to send the kids. That will be the next popular front, when yet another Howard rort comes up for review later this year. Will Julia Gillard and her government hold their nerve when the time comes to storm the private education citadel? Watch this space.

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