The government could save up to $8 billion by cutting tax subsidies and rebates, including the private health insurance rebate, says a 2012 report from the Australian Council of Social Service (ACOSS). According to an article from 9 News, ACOSS has identified a raft of “poorly targeted” benefits and entitlements that include the Private Health Insurance Rebate, the Extended Medicare Safety Net, the Medical Expenses Tax Offset and the Education Tax Refund.

The ACOSS proposals add fuel to an already raging debate over the Government’s changes to the PHI rebate that come into effect on 1 July 2012. The total cost of the rebate, said to be more than $4 billion, could be reduced by $1.1 billion by removing any entitlement to a rebate for “extras” cover, according to the report.

health comparison

According to a leading consumer group, nearly one-third of Australians are unaware that the rebate applies to anything other than the cost of basic hospital treatment. In practice, it extends to premiums that provide cover for physiotherapy dentistry, optometry and chiropractic treatment. This, says ACOSS, is outside the intended scope of the rebate, and benefits mostly the well-off, who generally enjoy higher levels of private health cover.

“A major problem with these rebates is that they mainly benefit people on higher incomes who can afford to pay more for these services in the first place”, said Dr Cassandra Goldie, CEO of ACOSS. “The time has come to pare back these programs beyond applying means tests to cap them at very high income levels.”

The ACOSS proposals certainly go well beyond anything suggested by other parties involved in the continuing debate over healthcare provision and its funding. At the other extreme, Shadow Treasurer Joe Hockey, speaking recently in London, appeared to commit a future coalition government to restoring rebates to present levels and removing the new means test entirely.

Private health insurance providers are naturally concerned that the rising cost of premiums, coupled with the July changes, will result in hundreds of thousands of policy-holders failing to renew in the coming year.  Potentially, this presents the industry with a financial headache at a time when the economic climate is already tough. Government ministers are trying to maintain confidence, pointing out that thousands of Australians continue to take out new policies in spite of the new rules.

Australian healthcare provision has come under fire from various sources in recent times, as waiting lists and lack of patient choice continue to cause resentment. A recent report that highlighted a significant increase in the level of private insurance premiums being spent on treatment in public hospitals – supposedly free to all citizens – was immediately turned into headlines by lobby groups.

So what do these changes mean for the average Australian? For those of you not following the matter closely, here is a summary of what you face:

From 1 July 2012, single people earning more than $84,000 a year and families or couples earning more than $168,000 a year will receive a lower private health insurance rebate. The more you earn, the less you get. Earn more than $129,000 as a single or more than $258,000 as a family or couple and you get no rebate at all.

The changes will also take a second bite from the better off; from 1 July, the amount taken from people who do not have private health insurance – the Medicare Levy Surcharge (MLS) – will also increase for those who are paid more. It seems there is nowhere to hide .