Medicare should be like HECS

MedicareMedicare should be reformed so it is more like HECS. When you front up to the doctor or hospital for medical services then in order to pay the medical bill you should have the option of whipping out some cash, whipping out the MASTERCARD or whipping out the Medicare card. Medicare should be a credit fascility much like MASTERCARD or VISA. The only difference should be that the Medicare debt should be repaid via the tax system in the same way that HECS debts are repaid. In fact the debt could be administered by the same bureaucracy.

Such a reform would ensure that medical consumers seek value for money. However it would still provide access for those with financial difficulties. Medicare should be regarded as a payment system not an insurance system. Insurance should be entirely optional.

32 thoughts on “Medicare should be like HECS

  1. I have an alternative view, which I think isn’t as good as your idea Terje. Medicare should be a voucher system (without means testing for low income earners) but also without churn, that can be spent on any medical service, good or insurance.

    If we ended the protection of Australian Healthcare Benefits comapnies and let the poor purchase their own healthcare, there would be adequete cover for all.

    Your second para cuts to the bone of the issue. I actually think your idea works well to the parameters I set except that it doesn’t deal with moral hazard too well.

  2. I’ve heard someone talk before about “reverse insurance”. It’s private, and is a pre-approval by a company that if you need money for a big health issue, they will loan it to you. I don’t remember what was proposed as collateral. Your new kidney maybe….

    With the government doing it, at least you know where the money will come from when someone defaults….

  3. I should have put it as a question: How will your idea be affected by moral hazard?

    One problem: you require an income or wealth tax or at least the bureacracy to administer this. It’s still very hard to fault this idea as a reform.

  4. Mark – Like you I want to see income tax abolished. HECS does not work without income tax because repayment is via the income tax system and the rate of repayment is dependent on income. Lots of worthy reforms are incompatible with other worthy reforms. I try not to tie myself in knots about it.

  5. Insurance would be a personal matter. If you incurred a large medical expence on medicare and you had insurance then the insurance company would clear some or all of the debt. If you had no insurance you would have a higher tax bill in future years paid for through your wages like HECs is. If your income is low enough for long enough the debt may never be repaid but this would be rare.

  6. How about for the old – who are no longer earning but run up the lions share of the medical bills. And indeed, the large portion of medical costs experienced in the last 6 months of life? Don’t get me wrong, I love the idea, but it does nothing to stop the elderly spending lavishly to prolong their lives by a few months, which is currently the biggest problem with our free health system.

  7. I have third view, which is that we could just have one account for superannuation, medicare, unemployment benefits, HECS and so on. This account could go into the negative, but the amount you would have to pay back should capped at CPI rather than real interest rates, so you couldn’t go bankrupt because of it (as you can’t with HECS). This means that for most people past a certain age (i.e., those who did not get HECS or had paid it back), the net cost of medicare and unemployment benefits would simply the administration fee of the government (which they have now anyway), and you would have an incentive not to use the benefits, as it would diminish your superannuation. If this was done, you could delete all the programs forcing the unemployed to look for work and save money there too, since then it wouldn’t be unemployment benefits — it would be access to your own money (perhaps excluding those whose accounts were negative).
    One problem with this would be people over 65 taking all their superannuation out and then not wanting to pay Medicare. However, this could be solved simply by asset testing the users of these schemes. Either that or you could allow the claims to go into negative, and have the money paid back when the person dies (the problem with the second of these is that then you have to worry about the transfer of assets and so on).

  8. So, non-workers get it free, since they’ll never earn enough to pay it back? A lot of people will never pay back their HECS debt in their lifetime… a disproportionate number of them women.

    In fact, there is enough evidence to suggest that HECS increases have zero effect on enrollment rates… so the “people will seek value for money” argument might not be entirely valid – particularly if the debt in this case is essentially “on tap”

  9. Yep — that’s one of the Hazards, but since they’re going to get it free anyway, I think its better. I’d be happy to see it all privatized personally — but if you must have hoards of government freebies and government forced savings, I don’t see why you can’t just conglomerate them all.

  10. Conrad,

    Superannuation is a financial asset (for the citizen) managed by a private fund manager. HECS is a financial debt (for the citizen) managed by the government. If they were integrated they probably wouldn’t achieve their objectives. No private operator would want to manage a debt like HECS because it is unsecured and their lack the power of coersion (taxation) to readily collect repayment in the orderly manner or in a progressive manner as intended by the designers of HECS. On the flip side who would want the government managing their superannuation? As such I don’t think these two systems should be integrated. However if somebody dies or immigrates permanently and they have both a HECS debt and a lump of superannuation then it would seem reasonable to me for the HECS debt to be settled using funds from the super account.

  11. For the record, I certainly think a HECS-style medicare is preferable to the status quo – but if it’s unlimited, then doctors will bill as much as possible.

    The advantage of a (capped) voucher type system is that I think it would have a bigger impact on how you spend it… though, obviously, the amount you have in such a situation needs to be limited. I think funding is going to be provided, then from the bottom-up is always better than top-down.

    Hmmm… maybe we could make them transferable – let people sell their health vouchers.

    Probably a bad idea… don’t mind me – just thinking out loud.

  12. Letting people access their super for medical bills is probably a good idea too… then again, letting people access their super for housing, investments… and frankly anything else they choose is probably a good idea too.

    I must say, having people’s HECS debt (and medicare debt if we go that road) settled from their super account in case of death is an interesting idea…

  13. Terje,

    The problem I see with selling this system is that people see Health care in this country as a right. Telling people they need to pay for it and that it will in fact become cheaper if they start paying for it directly is an impossible sell. People will think this system disadvantages the poor.

    Why not just allow people to opt-out of the public health system? If you so choose not to be part of the public health system you simply opt-out and pay a poor tax that goes to opting-in for people who genuinely can’t afford to pay for medical expenses whilst leaving all those who believe in socialized medicine to pay for it themselves.

    This way we look after the poor but don’t have to opt-in to an inefficient system.

  14. Ben,

    People used to regard higher education as a right but HECS moved the debate along. People are not so hung up on the idea of health care being a right as they are hung up on the notion that somebody might die or suffer simply because they are currently poor. Some would object to the idea of people having to pay back the medical expense over time however I do think it is sellable in so far as an incumbent government could bring it in and still get re-elected. Just as Labor did with HECS.

    I actually think your proposal is much harder to sell. Many Australians don’t like the idea of allowing people to opt out of safety nets. Like watching an acrobat on the high wire with no net below they feel all queezy watching.

  15. I like the idea. Anything that starts to raise the awareness that there is a price to restore good health will have two effects: 1) shorten waiting lists (demand) for the service, and 2) promote health raising activities by those who care to think for two seconds about the issue. And it does it with a small step, rather than a giant leap.

    Opponents:
    1) doctors and health care workers who are benefiting under the current perception that there is a huge demand for them, and they can milk the taxpayers through the current system. They would have more difficulty when it is user-pays.
    2) The Aged who have a disproportionate share of the expenses and also disproportionately less capacity to repay from income. I would not be supportive of netting assets and medicare debts for these folks (at least this generation). Which suggests an age based phase in with the age limit rising each year until the old system disappears entirely.
    3) The career social security advocates who have a vested interest in representing a large group of disadvantaged people and perpetuating the myth or fear of a dramatic increase in teh size of this group. Putting a safety net into the system to deal individually with the disadvantaged rather than collectively would be beneficial to those genuinely disadvantaged (in some cases permanently, but in many cases temporarily), and there would be less need for the “representative” industry.

  16. The aged with little income would simply accumulate a Medicare debt until such time as they pass on. In other words they would essentially still get medical services for free. However it would be a better service because it would be at least somewhat market driven.

  17. Terje,

    What about the following changes?

    1. A voucher system for those who cannot possibly repay the potentially unlimited costs?

    2. If we change to a consumption tax, still use a HECS system to garnishee wages

    3. As an alternative to 1., using 2. to garnishee estates on death.

    4. As others have suggested, tapping superannuation etc.

  18. In terms of selling such a reform the politics would be easier if you skip option 1. Of course unless you limit HECS style deferment so it only covers the medicare scheduled fee (ie not the gap) then you would risk a budget blowout. I’d suggest that retaining the schedule may be easier than integrating a voucher scheme. Presumably a voucher scheme would be very genereous for the naturally health individual and rather spartan for the naturally unhealthy individual. The other option, although crude, would be to retain the existing principle of free medical care for children and those over 65. That way you would have a market setting prices for the bulk of the population and a benchmark for setting the schedule for the government sponsored remainder.

    I’d agree that any debt remaining after death should be paid for from the estate, although I also see a risk that this may create some perverse incentives for the relatives.

  19. Afternoon all,

    My first post here and the excitement is killing me…

    The key issue here, for mine, is the taxation burden under this new scenario. If current income tax is reduced by an amount (more or less) proportionate to my share of maintaining Medicare, I will jumpt at the chance.

    Otherwise, I am happy to let everybody exploit their Medicare benefits and (eventually) watch the whole welfare system crumble down under it’s own weight!

  20. ADM – It’s a shame you haven’t written here earlier.

    I share the same concerns as you do. But one upside is that the present system is so inefficient in subsidising losses, as opposed to funding optional insurance and other costs, this may well be cheaper…and ultimately user pays.

    I’d rather see us weened off churn and welfare than have us crumble under economic mismanagement.

  21. Hi Mark

    I have no idea on whether it may or may not be cheaper, I really haven’t put that amount of thought into the matter as yet… To be honest, I would probably need to see more research done before the extra time spent thinking about this becomes worth my while.

    Re your “weaned off welfare” comment – I am not convinced! If we were to crumble under economic mismanagement, then the opportunity to create a minimalist society from scratch might ultimately allow us to reach that society sooner than a gradual weaning process.

    Of course, I concede that it might also allow other, not so like-minded folk with the opportunity to create a fully interventionist kind of society…

    *Insert the Imperial March here*

  22. Dear ADM, At one time, Sweden was held up as a shining light of a workingman’s utopia. For most of that time, their welfare state was not funded by the Government, and was not open-ended. Then (perhaps some nice hippies gave them something dodgy to smoke) they altered the system that had worked so well, and had been self-funding. Since swedes were not now paying for their own insurance, they turned the system into a typical European dole scheme. Now they want to change it, but don’t know how!
    The moral of the story is- all insurance schemes should be self-funding, and have no financial imput from the Govmint.

  23. Terje, it may not have been clear in the previous post – at this point in history, I agree.

  24. Pingback: I don’t want private health insurance « Thoughts on Freedom

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