Government urged to double Medicare levy surcharge to get more Aussies into private health

The Federal Government has been advised to double the tax penalty that applies to Australians who don’t have private health cover. Have your say.

The government has ditched a policy change that would have encouraged more people to take up private health insurance.

A report by a consulting group recommended a doubling of the Medicare Levy Surcharge, from 1 to 2 per cent, so it was no longer cheaper for many people to pay the tax penalty than buy health cover, which has jumped in cost.

The Australian Medical Association has also called for the surcharge to be doubled, so more people take up cover.

The penalty kicks in once a single person earns more than $93,000 and a family $186,000.

People spilling over these income limits who do not have private health insurance have to pay a 1 to 1.5 per cent tax penalty — at least $930 for a single and at least $1860 for a family.

When it was introduced 23 years ago the penalty was meant to hit the rich but now it slugs those on less than average wage of $95,576.

And because private health insurance premiums rises have been so steep it is now $171 per year cheaper for many families to pay the tax penalty than buy health cover.

The cheapest health insurance cover — basic cover — for a family costs around $2031 per year including the government’s tax rebate while the tax penalty ranges from $1860 to $2160.

It is only once families earn more than $200,000 per year that buying health cover becomes cheaper than paying the penalty.

It is the same for singles where it is $97 a year cheaper to pay the tax penalty than buy health cover.

The cheapest health insurance cover — basic cover — costs singles around $1027 per year when you include the government’s tax rebate, while the tax penalty is between $930 and $1080.

It is only when a single person earns above $108,000 that the tax penalty is higher than the cost of insurance.

TRY OUR HEALTH PREMIUM CALCULATOR

The previous government commissioned a report from Finity Consulting to find ways of fixing the policy and it made the controversial recommendation that the government should double the tax penalty.

Finity Consulting called on the government to require people to buy more expensive Silver level cover to avoid the penalty. Currently you can buy cheaper basic cover to avoid the hip pocket hit.

The Department of Health conducted a public consultation on the proposed change which closed in August but News Corp understands the change has not been endorsed by Health Minister Mark Butler.

“The Government is working to improve the value and affordability of private health insurance,” Mr Butler said.

Private Healthcare Australia (PHA) chief executive Dr Rachel David said “some 500,000 people are paying the Medicare Levy Surcharge, even though taking out private heath cover would be the more cost-effective choice”.

“In this environment, there is an argument the highest income earners who can afford to contribute more to the cost of their healthcare should do so,” she said.

The PHA would continue to work with the government on policy that delivers the best outcome for the Australian community, she said.

Amanda Bentham has the third cheapest Gold cover in Victoria.. Picture: Sarah Matray

‘I DON’T SHOP AROUND’

Amanda Bentham is one of many Australians who have taken out private health cover. She joined Navy Health when she left the forces because it “offered that high level of care that I was used to expecting, after having served for 12 years”.

The 44 year old lawyer from Melbourne was pleased to discover it offered the third cheapest Gold cover in Victoria.

Rebates for services are generous and whenever she has made a claim, the person processing the payment “will say, oh, wow, that was a big payout,” she said.

After breaking a bone, she used a private hospital and found it covered the full cost of her scans and infusions. Her only out of pocket costs were for the surgeon and anaesthetist.

To be a member of Navy Health you need to have served or be a blood relative of someone who had served.

“I don’t actively shop around and if someone came to me with a lower price per month, it wouldn’t sway me. I find that Navy Health give me a service on top of just the product itself,” she said.

Originally published as Government urged to double Medicare levy surcharge to get more Aussies into private health