The efficacy of these subsidy programs is frequently discussed, with questions as to whether A$6.7 billion of tax payer money that is used to subsidise healthcare insurance for private individuals can be better invested in Medicare or directly funding hospitals.
Our goal was to find the answer to this question: will the savings resulting from increased the number of people who have private insurance far outweigh the expenses incurred by the government through providing subsidies to private health insurance rebates?
Our study, which was conducted by a commission and paid for through the Department of Health and Aged Care, discovered significant advantages for the government, particularly when older individuals enroll in private insurance. In the average, the government can save around $554 for every person who receives the subsidies it provides each year.
However, rebates may be better focused on Australians with a higher likelihood and utilize health services.
How did we figure this one out?
To see whether the cost of the subsidy for private health insurance will pay off, We looked at the expenses (from the premium rebates and the tax that is not paid due to the Medicare Levy Surcharge) as well as the savings.
To determine the savings, we looked at the amount of dollars the government would be spending in the event that these individuals did not have health insurance through private companies and were enrolled in an insurance plan that was part of the health care system rather than the private one. This is referred to as”offset. “offset.”
This is an important measure of the success of the carrots and sticks because it can reveal the costs of health care that are lowered by government programs when people have private insurance.
Using private health insurance expenditure data from the year 2019, we based our estimates on the assumption that a day at private hospitals costs the same as one day at a public institution Based on the findings of the Productivity Commission.
We also accounted for our government’s 75 percent Medicare Benefits Schedule fee share and higher prices of prostheses (for hip replacements as well as other implants) within the private system.
Read more: We can cut private health insurance costs by fixing how we pay for hip replacements and other implants.
On average, we found that private health insurance offsets public healthcare costs by about $1,400 per person, with greater savings for older people than younger people, reaching $4,000 for those aged 75 and above.
To determine whether the savings from private insurance cover outweighs the expenses incurred and incurred, we must examine the amount that the government pays to help finance insurance.
We used the normal percent of rebate for premiums that a person who is 70 or over earning upwards of $90,000 gets an 32.812 percent rebate, whereas those under 65 who earns between $105,001 and $140,000 will receive an 8.202 percent rebate.
The savings were higher for people over 50, those who are more likely to seek health services. Anna Schvets/Pexels
An average cost for private insurance is $2300, which means that the government is liable for costs that range between $755 and $189.
Since those who enroll in private insurance do not have to contribute an additional Medicare Levy Surcharge that funds our public healthcare system. we determined that the lost tax amount ranges from $970 and $2,400 for the single people who are with a penalty.
