FAQs About Proposed Changes To Means Test The Rebate
1. What is the Federal Government 30% Rebate on Private Health Insurance?
2. How would the means test work?
3. What would be the impact on those directly affected by the means test?
4. Isn’t it only the wealthy who would be affected?
5. How many people would drop their cover if the means test were to be applied?
6. What impact would this have on the cost of private health cover?
7. What is the impact of the means test on the public health system?
8. But won’t the means test save the Government (and tax payers) money?
10. What can I do to make a stance on the means test?
1. What is the Federal Government 30% Rebate on Private Health Insurance?
Since 1999, the Federal Government has paid 30% of the cost of private health insurance (up to 40% for older Australians) for almost all Australians choosing to take out health cover. From 1 July 2012 this rebate will be subject to a means test
2.How would the means test work?
The most recent version of the means test published by the Government suggests that the means test would apply as follows:
Note: The thresholds increase annually, based on growth in Average Weekly Ordinary Time Earnings (AWOTE). Single parents and couples (including de facto couples) are subject to the family tiers. For families with children, the thresholds are increased by $1,500 for each child after the first.
Singles earning $84,000 or less and families earning $168,000 or less will continue to receive the existing 30, 35 and 40 per cent rebate, depending on their age.
3.What would be the impact on those directly affected by the means test?
A lower rebate, or no rebate, would mean for many Australians the cost of health cover would increase dramatically.
Families or individual who lose their rebate altogether would actually see the cost of their health cover go up by 42%.
4.Isn’t it only the wealthy who would be affected?
No. Independent Research conducted by leading market research company ANOP / Newspoll and a new Report by financial experts Deloitte (“Economic Impact Assessment of the Proposed Reforms to Private Health Insurance”) has estimated that many health fund members would drop or downgrade their cover and that as a consequence premiums would rise for those who remain and there would be significant additional burden on the public health system.
5. How many people would drop their cover if the means test were to be applied?
The ANOP/Newspoll survey found that that of those directly affected by the means test, 11% would drop their hospital cover and another 24% would downgrade while 18% would drop their ancillary (general) cover and another 34% would downgrade.
The Deloitte Report estimates that in the first year 175, 000 Australians would drop their hospital cover and a further 538,000 would downgrade. 554,000 Australians would drop their ancillary (general) cover and 803,000 would downgrade.
Over five years 1.6 million people would drop their hospital cover, and 4.3 million downgrade. 2.8 million people would drop their ancillary (general) cover and 5.7 million downgrade.
6. What impact would this have on the cost of private health cover?
The reserach shows that those dropping their cover would be those less likely to have claimed healthcare benefits. To compensate for the loss of these members Deloitte estimates that in the five years after the means test is applied health funds will be forced to increase premiums by 10% more than would otherwise have been necessary.
This increase will affect everyone with health insurance.
7.What is the impact of the means test on the public health system?
The loss of health fund members would mean a significantly increased burden on the public health system.
In their Report Deloitte states that “Deloitte estimates that the average waiting time would increase from 65 days to 259 days for 15 common surgeries if no additional public capital investments were made.”
8.But won’t the means test save the Government (and tax payers) money?
No.
The Deloitte Report states that “the proposed policy change will trigger a series of events that will result in deteriorating government savings and ultimately net costs to government.”
Treasury has estimated that savings from the means test will be $1.9 billion over four years but Deloitte estimates that additional cost from higher demand for the public hospital system will be $2.4 billion over the same period.
9.The Government plans to increase the Medicare Levy Surcharge on higher income earners without health cover. Won’t this stop people from dropping their cover?
The ANOP/Newspoll findings factors in the impact of a higher MLS for those who choose to drop their cover.
The MLS does not apply to ancillary (general health cover) so members dropping their ancillary cover would not be penalised by the MLS.
10.What can I do to take a stance on the means test?
Register your support for the 30% Rebate and write to your Federal MP to let them know that you value your rebate and want thsi policy reversed.
Subscribe and join the team and we will provide you with regular up-to-date information about private health insurance and health policy, as well as suggesting ways you can help work to keep your 30% rebate.
Comments
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Jonathan in his comment assumes that ‘people who have private health insurance are wealthy’ This could not be further from the truth. Many pensioners and self-funded retirees on a limited income forego other things in their budgets in order to pay for their private health insurance. If more people drop out of private insurance, demand on the public hospitals system will go up and waiting lists will be longer. The cost for private health insurance will of necessity increase, making it even more difficult for those on restricted incomes to keep up their private health insurance.
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I’m a young single male that earns about $70k, so as the numbers stand, I wouldn’t be directly affected by proposed changes. I need more convincing this is a major issue.
I’m a little sceptical about the indirect result in increased premiums for all. Private health cover is something I have learned to accept paying for, even though premiums are on the rise every year without fail with only a generalised explanation from health insurance companies.
In my opinion, dropping private health cover would be an option of last resort for most people because if you can afford private health cover it is presumably always going to be a better option than the public health system. In particular, why would wealthy people drop their private health cover if they were to get less of a government rebate? Unless I am terribly mistaken, private health cover is going to be a relatively small portion of total income for the wealthier, so it is difficult to see why they would drop their cover.
I don’t agree with some people missing out on a rebate completely though, that seems unfair.
Have your say
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10 February 2012
Just last week I decided that because I have returned to full time work that our family could afford private health cover and i took out some health insurance. My husband and I both work very hard and have two children to support.
Now I am going to be penalised for my hard work by another expense. I am angry because I work in the public health system, it will face increased burden with this short minded decision. This decision is just about Labour saving its political face because it promised a surplus. This decision is not about whats best for the Australians or our health system.