Debate: does the private health insurance rebate relieve pressure on public hospitals?

Parliament house flag post

Debate: does the private health insurance rebate relieve pressure on public hospitals?

Posted 1/06/2011 by Amanda Biggs

As the Government once again prepares legislation to means test the 30 per cent private health insurance rebate—see this recent Flagpost for background—arguments over whether the rebate eases pressure on public hospitals, or exacerbates it, are likely to re-emerge. Because the rebate subsidises the purchase of private health insurance, which can be used to meet the cost of private hospital services, the private health insurance industry and others argue that it keeps pressure off public hospital services. They warn that means testing the rebate will encourage people to drop their private cover and then turn to the over-stretched public hospital system when they require medical treatment. The Australian Council of Social Services counters that the rebate redirects much-needed funding away from the public system—which those on low incomes rely upon—to the less efficient private sector.

Assessing the impact of the rebate on hospital utilisation rates might help resolve the arguments, but as a 2005 Background Note from the Parliamentary Library suggested, the evidence is not clear. In attempting to assess the impact of the rebate in the period following its introduction in 1999, this paper compared demand for public and private hospital services and the length of public hospital waiting lists. It found that private hospital utilisation rates had increased following the introduction of the rebate; the proportion of private hospital 'separations' (or episodes of admitted patient care) as a proportion of all hospital separations increased from 34 to 38 per cent. It also found that private and public hospitals tended to deal with different 'caseloads'. Public hospitals were more likely to treat emergency patients and those with more severe disease, compared to private hospitals.
However, the increase in private hospital utilisation was not accompanied by a decline in public hospital utilisation rates as might be expected if people were simply shifting to the private sector. Rather, the paper found that over the same time period, public hospital separations actually increased and waiting times for elective surgery lengthened. In other words, demand for hospital services across both the private and public sectors appeared to have risen following the introduction of the rebate.
When the private health insurance rebate was first introduced, it was argued that it would ease pressure on the public system. This has not occurred; demand for public hospital services has continued to grow and waiting times in public hospitals have lengthened. These indicators might support those who argue that the rebate has failed to ease pressure on the public system. But as the Library’s earlier analysis also explains, demand for health services is driven by a complex range of factors. The availability of new medical technologies, level and type of funding for health services (including incentives like the rebate), the ageing of the population, the clinical needs of patients and the limited capacity of the health workforce (often the same doctors working in both sectors) are just some of the factors that influence demand . The personal expectations of patients and their attitudes towards the health system also play a major role. While this makes attributing the growth in hospital services to a single factor, such as the rebate, problematic, it also makes it harder to argue that the rebate has failed to take the pressure off the public system.
A further issue to be considered in this debate is the question of whether the public and private systems are in competition with each other, or do they complement one another. Both the Government and the Opposition have argued they support a 'balanced' system (a mixed model of both the private and public sectors), but the evidence that the two sectors complement each other is mixed. The Productivity Commission found in this recent report, that while there are complementary components and differences in casemix between the public and private hospital sectors, the two also 'compete to offer substitutable services'.
If the preferred health model is a 'balanced', complementary one then the rebate could be said to play some role in supporting this system, although the extent of its impact remains unclear and continues to be contested. Regardless of the legislative fate of the means test, the long-running debate over the rebate and private health insurance more broadly is likely to continue. This reflects both the ongoing division of opinion between supporters and opponents of the rebate as well as the difficulty of assessing the impact of a single component in a complex, multi-faceted and interactive system.

Thank you for your comment. If it does not require moderation, it will appear shortly.
Facebook LinkedIn Twitter Add | Email Print


Flagpost is a blog on current issues of interest to members of the Australian Parliament

Parliamentary Library Logo showing Information Analysis & Advice




refugees asylum immigration parliament climate change Australian foreign policy elections social security welfare reform women welfare policy school education private health insurance Taxation Indigenous Australians Australian Defence Force health financing higher education emissions trading Australian Bureau of Statistics employment people trafficking statistics Middle East illicit drugs gambling health reform federal election 2010 income management Medicare disability Sport United Nations Asia politics criminal law Afghanistan health forced labour transport aid Australian Sports Anti-Doping Agency World Anti-Doping Agency United States federal budget Industrial Relations Carbon Pricing Mechanism dental health OECD Senate Australian Public Service constitution Australian Electoral Commission WADA child protection environment poker machines Australia in the Asian Century steroids National Disability Insurance Scheme detention aged care 43rd Parliament slavery health system multiculturalism ASADA Law Enforcement Australian Federal Police Fair Work Act governance labour force people smuggling debt international relations New Zealand food Australian Crime Commission pharmaceutical benefits scheme leadership electoral reform Census election results UK Parliament Papua New Guinea banking International Women's Day corruption pensions public service reform children's health Aviation federal election 2013 foreign debt gross debt net debt defence capability parliamentary procedure Senators and Members ALP Newstart Parenting Payment Youth Allowance sea farers domestic violence military history by-election political parties High Court skilled migration voting mental health Federal Court terrorist groups science social media Higher Education Loan Program HECS federal state relations accountability youth paid parental leave same sex relationships coal seam gas customs planning doping crime health risks Gonski Review of Funding for Schooling sex slavery Special Rapporteur Northern Territory Emergency Response social policy Productivity United Kingdom firearms public policy Population violence against women China ADRV terrorism transparency research and development welfare ASIO intelligence community Australian Security Intelligence Organisation carbon tax mining employer employee renewable energy regional unemployment fishing European Union family assistance United Nations Security Council Australian economy forestry food labelling vocational education and training Drugs welfare systems Indonesia children Constitutional reform local government codes of conduct terrorist financing homelessness Parliamentary remuneration money laundering Trafficking in Persons Report energy social inclusion human rights paternalism Ireland election timetable citizenship asylum seekers early childhood education Canada Financial sector national security fuel disability employment Tasmania integrity standards NATO Australian Secret Intelligence Service sexual abuse World Trade Organization Australia public health housing affordability bulk billing water health policy Governor-General US economy trade unions export liquefied natural gas foreign bribery question time speaker superannuation public housing expertise climate Intergovernmental Panel on Climate Change Department of Agriculture Fisheries and Forestry regulation Pacific Islands reserved seats new psychoactive substances synthetic drugs UNODC carbon markets animal health middle class welfare Indigenous constitutional recognition of local government referendum consumer laws PISA competition policy royal commission US politics language education baby bonus Leaders of the Opposition citizen engagement policymaking Australia Greens servitude Trafficking Protocol forced marriage rural and regional alcohol entitlements ministries Hung Parliament social citizenship maritime Iran ANZUS regional students school chaplains federal budget 2011-12 salary Medicare Locals primary care Building the Education Revolution family violence government financial advisers financial planners Financial System Inquiry Murray Inquiry China; Economic policy; Southeast Asia; Africa housing Speaker; House of Representatives; Parliament Defence High Court; Indigenous; Indigenous Australians; Native Title ACT Indigenous education Norfolk Island External Territories emissions reduction fund; climate change child care funding refugees immigration asylum procurement Indigenous health e-voting internet voting nsw state elections 44th Parliament 2015 ABS Age Pension Death penalty capital punishment execution Bali nine Bali bombings Trade EU China soft power education Fiji India Disability Support Pension Antarctica Diplomacy by-elections state and territories Bills anti-corruption fraud bribery corporate ownership whistleblower G20 economic reform innovation Members of Parliament Scottish referendum Middle East; national security; terrorism social services Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 online grooming sexual assault of minors ACT Assembly smoking plain packaging tobacco cigarettes Asia; Japan; international relations Work Health and Safety Migration; asylum seekers; regional processing China; United States; international relations fiscal policy Racial Discrimination Act; social policy; human rights; indigenous Australians Foreign policy Southeast Asia Israel Palestine asylum refugees immigration political finance donations foreign aid Economics efficiency human rights; Racial Discrimination Act employment law bullying Animal law; food copyright Australian Law Reform Commission industry peace keeping contracts workplace policies same-sex marriage disorderly conduct retirement Parliament House standing orders prime ministers sitting days First speech defence budget submarines workers Somalia GDP world heritage political engagement leave loading Trade; tariffs; safeguards; Anti-dumping public interest disclosure whistleblowing Productivity Commission limitation period universities cancer gene patents genetic testing suspension of standing and sessional orders live exports infant mortality honorary citizen railways disciplinary tribunals standard of proof World Health Organisation arts international students skilled graduate visas temporary employment visas apologies roads Italy national heritage NHMRC nutrition anti-dumping Rent Assistance obesity evidence law sacrament of confession US presidential election international days DFAT UN General Assembly deregulation Regulation Impact Statements administrative law small business Breaker Morant regional engagement social determinants of health abortion Members suspension workplace health and safety marine reserves hearing TAFE Victoria astronomy resources sector YMCA youth parliament Korea rebate Australian Greens presidential nomination Racial Discrimination Act political parties preselection solar hot water Financial Action Taskforce Horn of Africa peacekeeping piracy Great Barrier Reef Stronger futures political financing political education Social Inclusion Board early childhood National Quality Framework for Early Childhood Education and Care Murray-Darling Basin sanctions Norway hospitals republic President Barack Obama Presidential visits qantas counselling Korean peninsula Work Choices biosecurity hendra environmental law federalism federation preselection therapeutic goods Therapeutic Goods Administration plebiscites computer games pests suicide nuclear COAG Ministerial Councils floods ADHD stimulant medication advertising electricity extradition conscience votes poverty preventative health rural health coastal erosion Parliamentary Budget Office work-life balance

Show all
Show less
Back to top