A short history of increases to the Medicare levy

Green Medicare card with chip
The Government is proposing to introduce legislation during budget week to raise the Medicare levy by 0.5% in order to help fund DisabilityCare, the name of the new National Disability Insurance Scheme. This recent Flagpost outlined some of the reasons for securing funding for the scheme. The Medicare levy has been increased a number of times, and there have also been occasions where an increase has been proposed in order to fund other proposals.

The Medicare levy is used to help fund Australia's national health insurance scheme, Medicare and is currently set at 1.5% of taxable income (with exemptions for those on low incomes and aged pensioners). Funds raised by the levy go into general government revenue—it is not hypothecated, which would mean it was dedicated to one purpose. In 2011–12, the levy raised around $9 billion in revenue, only partially offsetting the cost of Medicare services, which totalled around $17.6 billion.

When Medicare was introduced in February 1984 by the then Hawke Government, the Medicare levy was set at 1% of personal taxable income and was applied to all but those on the lowest incomes. In December 1986, the levy was increased to 1.25% to help offset an increase in medical costs. At the same time, the low income threshold exemptions were also increased.

From July 1993, the levy was raised to 1.4% of income to help fund additional health outlays (and the low income exemption thresholds were also raised). Two years later in July 1995 the levy was raised to 1.5%, to help offset a decline in Medicare levy receipts. The low income exemption thresholds were again increased.

In July 1996, the Howard Government introduced a 0.2% temporary surcharge on the levy to fund its gun buy-back scheme in the wake of the Port Arthur shootings. The surcharge was forecast to raise around $500 million. The gun-buy back surcharge was removed after one year, returning the Medicare levy to its previous level of 1.5%.

From July 1997, a surcharge of 1% on the Medicare levy was applied to high income earners who declined to purchase private hospital cover. This became known as the Medicare levy surcharge. At the same time, a capped means-tested rebate for hospital and ancillary insurance cover was introduced.

In late 1999, the Howard Government proposed a Medicare levy increase in order to fund Australia's military commitment in East Timor. The levy was to apply to those on taxable incomes above $50 000. The Government argued the levy increase was needed to offset the unexpected costs of the deployment and keep the budget in surplus. A bill was subsequently introduced but just weeks before the increase was due to take effect, the Timor Levy was scrapped. The reason given was that the cost of Australia's involvement in East Timor was lower than originally forecast and the budget had returned to surplus.

Adjustments to the Medicare low income and aged pensioner exemption thresholds continued to occur annually.

In the 2009–10 budget, the Rudd Government proposed proportional increases to the Medicare levy surcharge paid by high income earners who choose not to purchase private hospital cover. The measure was eventually passed in early 2012. From July 2012, individuals without private hospital cover on incomes over $97 000 will pay a 1.25% surcharge (in addition to their Medicare levy) and those on incomes over $130 000 will pay a 1.5% surcharge.

As well as the current proposal to raise the levy to fund the NDIS (also proposed by Queensland Premier Campbell Newman) there have been a number of proposals to use a rise in the levy to fund other measures. Examples include lifting the levy in order to fund dental services, a proposal supported by Independent MP Tony Windsor and the National Health and Hospitals Reform Commission which recommended the levy rise by 0.75% increase in order to fund a new dental scheme called Denticare. In the lead up to the 1998 Federal election, Labor proposed a 0.2% increase to the Medicare levy in order to fund its proposed Hospital Trust Fund. Increasing the levy to better fund health services has been proposed by among others Queensland State Labor MP, Gordon Nuttall in 2004, and the NSW Government in 2003.

Image source: Medicare Australia


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

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