Budget 2017: Medicare – not even Labor lite

So the economic narrative of the Turnbull Government has come to this. A ‘tax and spend’ Budget that is more Labor (not even Labor-lite) than Liberal, with health policy as its political centrepiece.

All governments make political calculations at budget time, especially in electorally-sensitive policy areas. But what is so shocking about this Budget is the extent to which the government caved in over Medicare.

Unfreezing the indexing of Medicare rebates is obviously intended to neutralise Labor’s ‘Mediscare’ and placate the AMA, which has been in campaign mode ever since the ill-fated Medicare co-payment debacle of 2014.

What’s worse– from the perspective of Coalition supporters wanting lower taxes – is how the government has reached deeper in taxpayer’s pockets to buy its way out of political trouble.

Raising the Medicare Levy to pour even more money into health (and the NDIS) is not only contradicts the government’s repeated claims Australia has a spending problem; it is also proof the government has given up on economic reform to achieve Budget repair.

But the Prime Minister and Treasurer may well get away with this new raid on the hip pockets of taxpayers, who will cop what is being presented as ‘small’ rise in the levy of 0.5 per cent from 2 per cent to 2.5 per cent of personal income.

This is because the Medicare Levy is fiscal fiction that tricks people into thinking Medicare costs them only a small percentage of their income.

As I show in my new report, the revenue collected by the Medicare Levy accounts for a mere fraction (under 15 per cent) of government spending on Medicare.

These are the kinds of truths about the real cost of ‘free’ healthcare that we might expect Coalition politicians to hurl against a Labor administration.

And this is what is so truly depressing about the 2017 Budget, which appear to have re-written the established rules of political game.

We used to say that only a Labor government could implement Liberal economic policy.  Until yesterday.

We can now say, alas, that only a Liberal government can pay for Labor social policy by hiking taxes.

Jeremy Sammut is Director of the Health Innovations Program at The Centre for Independent Studies, and author of the report, Fiscal Fiction: The Real Medicare Levy.