Private finance publicly subsidized: the case of Australian health insurance

Australia’s Medicare is a universal, publicly funded comprehensive insurance scheme that provides all its citizens with free treatment in public hospitals, and subsidizes out-of-hospital medical services and pharmaceuticals. Yet alongside this public insurance there exists a strong private health insurance sector that covers private in-hospital treatment or general (largely dental and other) ancillary services. Policy initiatives implemented since 1997 have provided both incentives and penalties to encourage the uptake of private insurance. The proportion of the population with insurance for hospital treatment grew from around 33% in December 1996 to a high of 45% in 2000; it then declined slightly until 2007 and has increased since then to 47% in December 2015 (APRA, 2016). Consequently, significant public funds have been directed to support the private health insurance industry and, by extension, the private health care sector. Current policies reflect the ambiguities of the electoral popularity of Medicare alongside the push to restrain public spending. This apparently anomalous situation can only be understood in the context of the contested ground between public and private interests in health care financing. In less than 40 years, from 1970 to 2010, Australia moved through the following approaches to health care financing: voluntary private insurance with public subsidies (pre-1974); publicly financed national universal health insurance (Medibank, 1974–1976); a series of policy changes that returned the system to voluntary, predominantly private, insurance with public subsidies (1976–1984); publicly financed national universal health insurance (Medicare, 1984–1996); publicly financed national universal health insurance with publicly subsidized private health insurance (1996–2006); and publicly financed national universal health insurance with an expanded role for publicly subsidized private health insurance (2006 until time of publication). Following a change of government in 2007, a new direction in health care financing was sought. Interestingly, given the previous focus on the roles of