Australia’s existing health financing arrangements lead to partial duplication in coverage for private health insurance holders. The two options to remove duplication are: 1) allowing individuals to ‘opt-out’ from Medicare either (a) by purchasing private health insurance or (b) by self-insuring via medical savings accounts or other pre-payment arrangements; 2) confining private health insurance to the coverage of supplementary services. This paper argues in favour of option 1(a), and argues that from an efficiency perspective: private health insurance should be fully substitutive of Medicare coverage (i.e. ‘opting-out’ should be allowed); community-rating should be replaced by premium bands; and the 30-40% ad valorem subsidy for private health insurance should be replaced by ex-ante risk-adjusted subsidies.
|Publication status||Published - 2012|