Coming to grips with the cost of free public health

Dan Mitchell describes the extent of the problem in the US. Don’t forget to subscribe to his column.

The United States is going to become another Greece, and it’s largely because of poorly designed entitlement programs. As the old saying goes, demography is destiny.

David Gadiel and Jeremy Sammut offer a way forward for Australia based on the Singapore model, adapting the superannuation system and permitting individuals to opt out of Medicare in exchange for the right to establish a tax-effective Health Saving Account (HSA).

This entry was posted in Budget, Rafe. Bookmark the permalink.

42 Responses to Coming to grips with the cost of free public health

  1. Lem

    Having just paid my medicare levy (and the “temporary” budget repair levy, another story) as well as my private health insurance which I last used in about 2010, I am inclined to agree with the proposition, but the demographics of this country, I fear, will not allow it to come to pass. And so, some of us shall pay through the nose, and all of us will get crap.

  2. Rob MW

    David Gadiel and Jeremy Sammut offer a way forward for Australia based on the Singapore model, adapting the superannuation system and permitting individuals to opt out of Medicare in exchange for the right to establish a tax-effective Health Saving Account (HSA).

    The basic problem is that politicians will always hold onto failed policies and external intervention through industry bodies as long as they can convince 51% of the electorate and with the blessings of a compliant legacy media.

    Some say that the superannuation mess now knocking on the door could have been avoided if the pilots strike of 1989 had been successful:

    Link

    Pilots employed by the major domestic airlines have, since the early seventies successfully negotiated two year Agreements with very little recourse to industrial action.

    The Federation had only 14 days on strike in 37 years, and part of that was when the Government decided to tax on superannuation at the rate of 66 cents in the dollar.

  3. stackja

    Australia got Gough and Medibank.
    ALP won’t allow any real changes.

  4. King Koala

    We can avoid Greece’s fate by cutting pensions to anyone drawing a pension from another country, deporting all immigrants drawing welfare and putting a moratorium of welfare so we stop importing immigrants faster than we can create jobs for them.

  5. .

    Which is close to what I said in another thread – and got virtually accused of “treason”.

  6. Bruce of Newcastle

    He should’ve included a third graph.
    And a fourth.
    And a fifth.
    I think I know where some savings might be possible.

  7. H B Bear

    When a government can’t even introduce a price signal of less than a middie of beer into the GP system there is no hope of reforming Medicare. As Peanut Head showed in the last election its main role now is to terrify the leaners.

  8. 2dogs

    The Health Saving Account idea seems a bit bloated.

    Wouldn’t it be simpler to backcharge Medicare for private health insurance holders, with an increase in the rebate?

  9. Oh come on

    The United States is going to become another Greece

    This is a prediction, not a fact. It’s not too late for the US to enact entitlement reform to head off the current spending trajectories of programs like Medicaid. This kind of reform is of course very difficult but not impossible. US policy-makers may reach a consensus point that the spending simply cannot continue without ruining the country, as the US lacks a Brussels to bail it out. It is unlike Greece, whose politicians quite plausibly felt free to run up such a huge tab with the confidence that the resources of other Eurozone nations could always be tapped if the demands of Greek debt required this. The US has nothing remotely similar to fall back on, even its currency’s status as the world’s reserve currency – which it wouldn’t be for long if the US treasury started printing money to pay for its excess spending directly (ie. not the same as QE).

    And demography is often – but not always – destiny. There are a number of events that can screw up projected demographic trends. War, the aftermath of war and pandemics spring to mind.

    I don’t buy all the bunk about the US’s entitlement programs representing a one hundred trillion dollar (or whatever that enormous figure is) future liability. No. This number assumes no policy changes will take place, and the US can find some entity to lend it such a colossal amount of money (it will not be able to, I don’t think). It’s only a liability when the debt is incurred. Between now and then, there’s plenty of time and opportunity to apply the brakes. Again, not easily done from a political perspective, but it could well become more so when the reality of sustaining such debt levels filters down to the electorate.

  10. Baldrick

    Good idea but too many bludgers in this country rely on other people’s money to support their health care.

  11. Oh come on

    We can avoid Greece’s fate by cutting pensions to anyone drawing a pension from another country, deporting all immigrants drawing welfare

    What the hell? Why rush to deport? Why not start with cutting their pension and telling them there are plenty of jobs in market gardens, manual labouring, office cleaning and supermarket shelf stacking?

    Preferably this would be accompanied by labour law reform to reduce the financial disincentives that employers must currently consider when hiring low-skilled workers and the structurally unemployed (for instance, people with an inadequate grasp of the English language). Slashing the minimum wage, abolishing mandated penalty rates and reintroducing the ability of employers to negotiate employment terms directly with potential employees are a few ideas that spring to mind.

  12. PB

    When you work in a Public ED and you feel like you are in the Bar-room scene in Star Wars every night, and you can’t work out what Tariq or Fof’tiq’unana wants because English is their tenth language and they’re screeching at you for apparently not knowing their first language, then it feels real patriotic to know that the tax taken from your pay packet is being recycled straight back into this Maelstrom of vibrant diversity. Shouldn’t government be incentivizing those who can fend for themselves to not have to be there if they can avoid it?

  13. Oh come on

    No doubt the Ged Kearneys of this world would immediately predict such reforms as “a race to the bottom”. No. We are talking about improving the lot of those already at the bottom. Mean employers who don’t pay their staff what they’re worth will be coughing up for the cost of having a stratospheric level of staff turnover instead. Such employers exist, of course, but like landlords who refuse to drop the rental price of their property by a few bucks a week even though this mindset results in frequent property vacancy and transient tenants, they’ll be at a significant disadvantage to their more reasonable competitors.

  14. .

    A voucher scheme (opt in) or tax deductibility for say 3k a year or otherwise a HECS style system that is opt in, that can be spent on healthcare or health insurance. Link it to a HSA and have that opt in as well. Do not fund this by tax or have it treated like superannuation, which is now legally recognised as tax.

    The difficulty is tapering off the voucher scheme, but it should be done if it can be done with no welfare traps.

    Privatise hospitals, only subsidise a check up/fully body MRI and dental check/clean once a year.

  15. Dr Fred Lenin

    We could start by eliminating over administration in health . The huge well paid staffat the federal department of health which does not have one hospital or clinic,send instructions to the huge well paid staff at the state departments of health ,who actually do supervise real hospitals and clinics . they in turn send instructions to the huge well paid admin staff at hospitals ,who provide information to the states as instructed they
    in turn give that information to the federals as instructed . The wheels go round and round consuming taxpayers money at a great rate . Restructure to state only shows departments ,with less admin in hospitals ,and no federal department to leech on taxpayers . Unfortunately there would be no need for a federal minister of heslth ,a great loss to Australia but I think we could survive tgat calamity for career politics .

  16. .

    Fred

    What I propose could see State and Federal health departments abolished – funding would be streamlined into Treasury/ATO/Human Services. Also on average, at a lower total cost, indigent patients could be subsidised at a higher rate, but at market prices.

  17. JamesS

    The words used to describe the trajectory of our health care system “the Americanisation” of health care is always intriguing. What about “the Chinafication” or “the Africanisation” of our health care system. That sounds better!

    Too many special interest groups, too much regulation (to protect the interest groups), too much admin, lawyers looking for big payouts. Perverse incentives all round the place.

  18. Bruce

    I’m old enough to remember when Queensland funded its entire own hospital system from “sin taxes”, i.e. the substantial “rake-in” from the government monopoly on “low-level” gambling, to wit, the “Golden Casket” giant “chook raffle”.

    The “earnings” for this went straight into the health budget.

    That all died when the bolshevists took Canberra and “persuaded”, in their inimitable style, the states to join the “Borg” of “Medi-Bank”.

    It has been a race to the bottom ever since.

    The “take” from other “federal” sin taxes, notably excise AND additional taxes on booze and smokes, would pretty-much cover the national, dubiously run, “health system”.

    The vessel of ordure at the centre of all this, is the sad fact that death, disease and mutilation by “medical misadventure” in such establishments are already at staggering levels.

    See the UK “National ‘Elf” for some idea of what is coming.

  19. DM of WA

    The United States is going to become another Greece …

    Do not waste your time on these kinds of articles. Whatever problems the USA or the UK or Australia have, they do not bear comparison to the monumental stupidity and corruption of Greece and the EU which have led Greece to its present parlous state. It is just silly to make such comparisons. For starters: Greece is essentially a failed state, insolvent for most of its short, sorry history and propped up only by American and European aid.

  20. .

    US Federal debt is over 100% of GDP. It isn’t silly at all.

  21. Helen

    US Total health spending 2015 – 17% GDP (Australia 8.9%, OECD Average 8.8%)
    US Medicaid 2015 – 2% GDP.
    US Medicaid enrolment 2013 18%; 2015 13.8% population (it seems to have come down).
    So Medicaid spending is about 1/8 of total health spending. And it goes to about 1/7 of the population.
    That seems a reasonably fair allocation, given that those enrolled on Medicaid are likely to be the poor, the old and the unemployed and their families. The US unemployment rate in 2015 was 5.5%.

    The article, and the linked earlier ones, start with a very American premise that all welfare is baaaad,and will lead to the deepest disaster – Greece!
    This makes it hard, impossible?, to look dispassionately at the aims, methods and problems. yes, there needs to be better management, especially of administration costs, and better targeted programs. But perpetually falling back on the evils of welfare tends to avoid the elephant in the room: why is medical care so expensive in the US, and who is really reaping the financial rewards; the insurance companies? the medical specialists?

  22. Botswana O'Hooligan

    Rob MW
    We were never on strike mate believe you me, and many of us wish we did go on strike instead of resigning in the biggest mistake any bunch of reasonable well balanced realists have ever made in modern history. Hawke threatened to confiscate our homes, investments, and probably household pets as well, and our supposedly expert legal advice told us that he could so we resigned. I doubt if Hawke could spell “chess” let alone play it, but he had advisers and we were simply checkmated, tilt, game over.
    They did threaten super once as you rightly state, but we just refused to carry any politicians to Canberra so they left us alone. After the dispute Hawke got rid of the defined benefit scheme, at least for pilots, but we had fled overseas to work and I don’t know if it covered everyone except public servants of course, but Hawke would look after his mates, and in fine political tradition, himself.

  23. Helen

    Lem, I’m writing to thank you for paying your medicare levy. But I can assure you that it is not so that ‘all of us will get crap’. I am a recent beneficiary of yours and everyone else’s payments.
    A few months ago the public health system saved my eyesight. I went to the emergency unit at the regional hospital on a Saturday night, was in an air ambulance next morning to the specialist hospital in the city and in the operating theatre the following day. The efficiency and competence of the system was impressive.
    So for the public cost of my transport and the treatment , the problem was caught at an early stage, I can still see, so I am able to keep working and will not need to go on a pension (yet). It wasn’t entirely free, I had to pay my accommodation in the city for a week waiting for post-op check-up, and the travel costs to return for subsequent check-ups.
    Thank you again.

  24. .

    American healthcare is the best in the world but about 40% of their total costs arise from occupational licensing that doesn’t occur here.

    Healthcare costs would be 10% of GDP if not for rules like giving tasks to doctors that we’d normally get doctors here to do.

    The AMA is a very powerful cartel. US physicians are paid on average almost 265k AUD p.a.

  25. .

    who is really reaping the financial rewards; the insurance companies

    No, it is cheaper than here for the same level of care.

  26. Tel

    Greece is essentially a failed state, insolvent for most of its short, sorry history and propped up only by American and European aid.

    So… did it start out that way?

  27. Lem

    Lem, I’m writing to thank you for paying your medicare levy.

    My pleasure, Helen. If only the government were so polite to me when they send their tax assessments.

  28. TheDAwg

    umm, we have the highest paid doctors in the world. A GP here makes double what a GP makes in Germany.

    There is NO oversight! Doctors do and charge what they like. The taxpayer pics up the Bulk bill tab.

    Cut the fees that taxpayers are on the hook for. No GP should be able to bill in excess of $500k a year. I have many that do.

  29. .

    umm, we have the highest paid doctors in the world. A GP here makes double what a GP makes in Germany.

    I insist the (US) AMA is worse. Look at the data. 196k USD in 2015.

    No GP should be able to bill in excess of $500k a year.

    I see where you’re coming from but revenue isn’t salary or profit.

    GPs should be allowed to bill as they like, but not on our dime or with rampant protectionism.

  30. Mark A

    .
    #2309437, posted on February 26, 2017 at 7:20 pm

    umm, we have the highest paid doctors in the world. A GP here makes double what a GP makes in Germany.

    European doctors from Austria Slovenia Hungary etc. do locum duties in Sweden and UK over weekends making twice the money they would at home and are happy about it. Airfares paid of course.

  31. john constantine

    Looking forward, the possibilities from high-end intervention with the most cutting edge biotech will be full of promise.

    In an economy where all the low end jobs are done by robots and artificial intelligence, there will be voteherds depastured in welfare plantations demanding their lives be extended at a cost of tens of thousands of dollars a month.

    Should people die months before the date that they could be stretched out to?. When there are rich people that could be taxed to buy life for the poor?.

    Should the poor people of the third world die months before the date they could be stretched out to, when there are countries they could move to that would pay for their treatment?.

    The unfunded medical possibility budget will be weaponised by their left as a tool of revolution. [with pope fidel chavez ibn bolivar leading the charge.]

  32. Dave Wane

    I am all for the availability of opting-out of any compulsory scheme, regulation or even some laws.
    Whether it be in the field of health or in the labour market or wherever, surely freedom should be provided as an option to compulsory government control?
    Of course we would be far better off without governments dreaming up new ways to “help” us and obviously help them to spend our money.
    But here in Australia the Whitlam Socialist Disease is now well entrenched and all that can be offered in retaliation is “FREEDOM”; albeit the simple freedom to choose to opt-out of a compulsory government “institution”.
    Industrial relations, Superannuation and of course Health all come to mind.

  33. Dave Wane

    Whether it be in the field of health or in the labour market or wherever, surely freedom should be provided as an option to compulsory government control?
    Of course we would be far better off without governments dreaming up new ways to “help” us and obviously help them to spend our money.
    But here in Australia the Whitlam Socialist Disease is now well entrenched and all that can be offered in retaliation is “FREEDOM”; albeit the simple freedom to choose to opt-out of a compulsory government “institution”.
    Industrial relations, Superannuation and of course Health all come to mind.

  34. Paridell

    The U.S. another Greece? That will take some doing. I seem to recall that the GDP of Greece is about the same as the Greater Miami area. Speaking of Greece, the really old saying is “Character is destiny”, which goes back to Heraclitus. As for “Demography is destiny”, it cannot be all that old – Achille Guillard only coined the word “demographie” in 1855.

  35. Paridell

    Tel, yes, Greece did pretty much start out that way, in modern times at least. It has had periodic financial crises throughout its modern history, which is why it should never have been allowed to join the euro.

  36. Dave Wane

    Bruce
    #2309263, posted on February 26, 2017 at 4:35 pm

    Correct Bruce. As much as Joh was an Agrarian Socialist, he could do basic arithmetic. He understood expenditure and income. A concept that is so simple yet beyond the grasp of presumably learned politicians from both sides, but especially those from the “Rudd-Gillard-Rudd/ Wong-Swan School of Economics and Financial Management”.

  37. Dave Wane

    The answer seems simple:
    Allow opting out of compulsory everything: health, superannuation, industrial relations laws and a whole lot more.

    Governments made these schemes, rules and laws to “deal-with-us”, and at our expense. The least we can do is ask them politely to turn these unnecessary impositions into something we can either choose to go along with, or choose to make our own arrangements.

  38. .

    Paridell
    #2309681, posted on February 26, 2017 at 10:23 pm
    The U.S. another Greece? That will take some doing. I seem to recall that the GDP of Greece is about the same as the Greater Miami area.

    US debt to GDP is 104%. A couple of bad years and irresponsibility, then maybe a war and they can be stuffed like Japan or Greece. They also have an ageing population like Japan has, but are 10-20 years behind Japan.

  39. Rafe Champion

    US another Greece? Eight years with a Democrat in the big house might have done it.
    With Trumpie its 50/50:)

  40. King Koala

    The US has anywhere between 11 million and 30 million illegals using the medical system without paying it. When these people are deported and a big beautiful wall keeps them from coming back the problem will be solved. Not only will the medical system no longer be covering millions of freeloaders but all the jobs done by illegals will be done by currently unemployed Americans who draw on the medical system without paying into it.

  41. .

    It has very little to do with illegals. US healthcare costs have been high for a long time and no serious study has ever said that illegal immigrants are a major cause of the high costs, particularly employer mandated insurance.

    FICA is one thing illegals actually contribute to, even if they don’t pay some state taxes.

    Also unless the US has taken in another 20 million illegal immigrants over the last decade, even with a brief moment of not emigration to Mexico recently – you are just making figures up, kenny.

  42. Dan Phillips

    There has been a huge amount of emigration from Greece over the years. We and other countries got the best Greeks. The ones that are left behind are a bit dim, sad to say. According to a quick Web search, the average IQ in Greece is 92, which is borderline for being able to sustain a successful democracy.

Comments are closed.