The government is currently considering a range of options for reforming the government health system in Australia.
Having pursued a policy of ever-growing government spending and control in health over the last 40 years (including 5.8 percent annual growth over the past 10 years), people are increasingly coming to the conclusion that the system is broken.
Unfortunately, the answers being suggested are more government spending and more government control. Once again, the bureaucracy is being rewarded for failure.
The socialist approach is unlikely to work in the short-run and destined to fail in the long-run. According to the governments own estimates, by the middle of this century government health costs will go up by about 3.5 percent of GDP, which would require the GST to more than double. And that doesn’t include new government schemes like Denticare.
These challenges cannot be fixed with by throwing ever more money into a failing system, or by centralising the system with the Commonwealth government. And the answer certainly shouldn’t include an 8.5 percent tax hike on low-income workers. Instead, the government should consider structural reforms, such as those recently introduced in the Netherlands.
The Dutch have introduced a market-based system where people buy all their health cover from a range of regulated private providers, with the government providing a partial subsidy for all people and an additional subsidy for low-income people. Similar ideas have been suggested by the Australian Centre for Health Research.
The government is right to be re-thinking our health system. But instead of increasing taxes on low-income workers, throwing money around and centralising the system, the government should instead be looking at market reform that makes the system sustainable.