Private health rebate warning

UP to 25 per cent of higher-income earners would downgrade their cover if the government succeeds in means-testing the $4 billion private health insurance rebate.

UP to 25 per cent of higher-income earners would downgrade their cover if the federal government succeeds in means-testing the $4 billion private health insurance rebate -- challenging federal government claims that the move would not harm funds financially.

The head of leading market research company Ipsos Australia told the National Press Club yesterday that analyses of surveys conducted by the company had shown "many low-, middle- and even some relatively high-income earners could not afford their current private health insurance if the rebate they get was removed".

Ipsos Australia executive director Tony Quint told The Australian most of those earning enough to be affected by the proposed means test, which would cut in progressively for singles earning more than $75,000 and for couples earning more than $120,000, had indicated they were unlikely to drop their cover altogether, to avoid paying more tax. But this concealed a widespread intention among individuals to limit the hit to their disposable incomes, by switching to cheaper health insurance policies.

"Not many higher-income people have said they will drop private health insurance (if the means test comes in), because most of them realise they are locked in by the tax -- they will pay a higher Medicare levy surcharge if they drop it," Mr Quint said.

"But one in four of the people in the affected income groups that would be captured by the proposed means test . . . would downgrade their level of cover."

Mr Quint said this was likely to see more people taking out policies with higher excess payments, which in turn would probably lead to more people choosing treatment in public rather than private hospitals.