PHA CEO Dr Rachel David discusses the importance of the Medicare Levy Surcharge on Radio 5AA

Station: 5AA
Program: Mornings
Date: 14/3/2023
Time: 11:06 AM
Compere: Matthew Pantelis
Interviewee: Dr Rachel David, CEO, Private Healthcare Australia


MATTHEW PANTELIS: Well, the income threshold for single people, this is the Medicare levy threshold, is going to move from 90,000 to 93,000; families, $180,000 to $186,000. And what this basically means is this levy was introduced way back by the Howard Government to encourage people to take out private health insurance. People who didn’t have health insurance, who could otherwise afford it the argument was, would have to pay a higher Medicare levy to fund their own healthcare through the public system.

Well, the rate hasn’t changed since then, and many more people are paying essentially up to around $900 more per year as a result of the fact the levy is set at 90 grand as the threshold qualifying limit for all this time – the last 20 or so years. There’s a sting in that tale though apparently.

Dr Rachel David, CEO, Private Healthcare Australia, on the line. Hello, Rachel. How are you?

RACHEL DAVID: Good morning, Matthew.
MATTHEW PANTELIS: Tell me more about this story. So people are being penalised $900, and you’d argue unfairly perhaps.
RACHEL DAVID: Well, look, I think the Medicare levy surcharge is designed to actually make the system more fair. And bear in mind, this is a fine or a penalty that’s paid for higher income earners or people that are doing pretty well to ensure that they pay their fair share towards the costs of our health system, which is a great health system, but it is very costly – close to $200 billion per year are spent on health in Australia. And if you are doing well, the argument is that you should pay a little bit more either through your taxes or by taking out health insurance to ensure that we all have access to really high quality healthcare.
MATTHEW PANTELIS: There’s not much incentive, though, is there, with health costs for a family being around $500 a week now. You’d almost- sorry, a month rather now, in terms of a premium. You’re almost better off paying the 900 bucks.
RACHEL DAVID: Well, look, not really. I mean, I think if you- there are a number of bronze and basic hospital products out there that you can take out that do mean that if you are unexpectedly admitted to hospital, you will get a fully trained doctor to look after you, continuity of care, and for some treatments and for some treatment areas, you’ll be able to be treated in a private hospital as well. So look, there is- and obviously the big one, without a waiting list or having to go on a waiting list. So, look, there is value for families in there.

But most importantly, I mean, this does raise some revenue for the Government – about a half a billion dollars’ worth of revenue that, you know, like all of our taxes goes towards supporting the health system. It is only applied to people who are doing well, who are higher income earners. It starts at about next to 1 per cent for people that are at that $93,000 or $186,000 level and then it goes up a little bit to 2 per cent as people’s incomes increase.

But it’s reflective of the fact that our health system, particularly with an ageing population and particularly right now after the pandemic, when it’s under the maximum amount of pressure with waiting lists blowing out all over the country, that not only is this revenue important, but it’s important that we all, particularly people that are doing better, take responsibility for it.

MATTHEW PANTELIS: All right. Is that levy kicking in soon enough then? I mean, is- 93 is a fair whack of dosh to be taking home every year. Even today, what we’ve seen with inflation and everything else, it wouldn’t be that many people at that level. Should it be increased further? Should it come down? What’s your thoughts?
RACHEL DAVID: Well, look, I think that the thresholds going up reflect that, look- you know, they haven’t been adjusted in many years, and I think the thresholds going up do mean that we’re not slugging people too low down the income scale for money, particularly at this time where affordability and cost of living is a major problem for families. Wages have gone up a little bit, so I think it is fair that the thresholds are increasing.

But furthermore, we’ve got about 412,000 people that are paying the surcharge and who are paying the fine. And the reason for most of them is not that they’re conscientiously objecting to private health insurance, but they’ve just forgotten that their income has drifted over the threshold level or they’re not aware. And I think that that’s probably an argument. At some stage, if the crisis in our health system, the crisis of access to waiting lists continues, I think there is an argument to probably put the surcharge up for those people to encourage more of them to take out insurance and reduce the risk of them ending up on a public hospital waiting list.

MATTHEW PANTELIS: Alright, is there a wait for private health insure- I mean, if you’re rec- referred to see a specialist, even with private health, you could be waiting months to see that specialist.
RACHEL DAVID: Well, look, that’s why – and there is a problem in some specialities at the moment with outpatients, so seeing specialists in the community and that’s an issue that’s occurring across private and public systems, but it is much easier to get to see a specialist in private than it is going into- trying to access a public hospital’s outpatients at the moment. And furthermore, you get predictability around the time. So you’re not sort of waiting for a whole day to see someone who might not even be fully trained or familiar with your case. So there’s still a very significant advantage at the moment of going private to see a specialist. And in terms of hospital admissions, if you do need treatment in a hospital, whether it’s for surgery or for a mental health condition, which are the main reasons why people choose a private health insurance, then the waiting times are very much less. It can be measured in terms of weeks rather than years, which is what we’re looking at for elective surgery at the moment.
MATTHEW PANTELIS: Alright. Rachel, just on the Medicare rebate, there’s a line of thought that says it should be increased for longer consults. Others want- other doctors want the bulk billing incentive paid to doctors to be increased in the budget. Should those things happen?
RACHEL DAVID: Well, look, we really- the government is very aware that we do need to address issues of access and affordability in primary care. I mean, GPs are the linchpin of our health system. Without them, the system would become unwieldy and very expensive. So I do believe that the government, through the Strengthening Medicare Taskforce is trying to resolve some of these problems. But again, I would re- and in doing so, they will help both the private and the public health systems remain affordable because the more we can treat and the more conditions we can prevent in primary care, the more sustainable our health system actually is. But increase to the fee for service component of the GP rebate will be a very big step, but a very big impost on the budget. And while the country is a trillion dollars in debt, those decisions have to be, you know, very carefully considered as to whether, you know, the- this- you know, the rebates increased on a fee for service basis or payments to GPs are made in another way.
MATTHEW PANTELIS: Yeah, alright. Well, I reckon more Australians would like health service funding increase as opposed to, as you say, the budget in a tricky position, as opposed to maybe arts spending or other things that can be luxuries in a time of plenty, but in a trillion-dollar debt situation, well, maybe health should be one of the things funded right up there with the new submarines.
RACHEL DAVID: Well, yeah, that’s right, and it’s certainly not the time to be thinking about removing or reducing the Medicare levy surcharge which is the source of- which is a source of revenue for the government.
MATTHEW PANTELIS: [Talks over] Yeah. Alright, Rachel, I appreciate your time. Thank you.
RACHEL DAVID: Thank you.
MATTHEW PANTELIS: Dr Rachel David, CEO, Private Healthcare Australia, the organisation on the Medicare surcharge which is a levy paid by people who don’t have health insurance and their earning now coming up to I guess the 1 July, $93,000 a year or more in singles, in families $186,000. So there it is, and the levy will apply to those people who don’t have private health. Mind you, the levy at around $940 I think it will be, health for a family, private health, costs five grand now. Arguably you could save yourself about four grand a year. Pay the levy, four grand goes in the bank, and it stays there – you have to be disciplined though – it stays there until you need it for a health emergency, but will you have enough is the question, and this is the perennial debate between private health, having it and not having it. If you can afford to have it, it’s a great thing. If you can’t – and given mortgage rates and given cost of living, electricity bills, all the rest, all going up, council rates – we haven’t seen those for next year yet – it’s going to hit home pretty hard, I suspect, and private health, is it a luxury or is it not? That’s one of the decisions that I think individuals, families need to make depending on how much income is coming in or how much is left after each pay and all the bills. Tough calls.
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