Australia’s private health insurance system is heavily subsidised, increasingly unaffordable and delivers poor value – especially for those on lower incomes.

Last week I was asked by someone on a very modest income whether it was worthwhile keeping private health insurance.

I replied that, for someone in their circumstances, almost certainly not. The starting point is that what we have in Australia is not private “health” insurance, but rather private “hospital” insurance. It does not cover medical services. Indeed, it is illegal for an insurer to provide insurance for the cost of medical services beyond the Medicare scheduled fee.

This leaves people on low incomes with, in effect, worthless insurance coverage. Facing the need for a medical procedure, they might well be able to jump the queue by going to a private hospital whose fees are covered by the insurance, but the fees charged by specialists, particularly surgeons and anaesthetists, put the medical treatment in that hospital beyond the reach of those on low incomes.

There is no point in buying insurance for a bed in a private hospital if you cannot afford the medical treatment in that hospital.

In Australia, at least, the low-income patient can turn to the public system. That works well for serious illness and accident for which treatment is free, good quality, and timely. But it is hopeless for elective, or non-urgent treatment such as knee- and hip-replacements for which waiting times stretch into months or even years.

It was not always the case. In the first decade and a half of Medicare (1984-1999) treatment in the public system was free, good........

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