Ideas@TheCentre – The Centre for Independent Studies


Ideas@TheCentre brings you ammunition for conversations around the table.  3 short articles from CIS researchers emailed every Friday on the issues of the week.

How (not) to pick a nanny-state winner

20 January 2012

Hot on the heels of the Wilkie and Xenophon-led pokies debate, a Southern Cross University report released this week has warned of the next big bogeyman. Online gaming, like everything else online, is growing fast.

Australians now spend $600 million annually gambling online, and problem gamblers lose an average of $825 per month, according to the report.

The report will no doubt excite the hand-wringing brigade (‘we must do something!’) but it should also set their alarm bells ringing. While the boffins are preoccupied thinking up clever and complex ways to stop us from putting money into machines, Aussies have found an even more efficient method of blowing their hard earned cash: via a credit card and a few keystrokes in their lounge room. Could it be possible that the pollies are a few steps behind?

This sudden explosion of online gaming highlights the difficulty of regulating vice. Whether it is sex, drugs, punting on the horses, or eating Big Macs – if people want to do it they will find a way. We can regulate pokies and regulate online gaming, but in the blink of an eye some other as-yet-undreamed-of technology will spring up to replace it.

With the trend for all things retro, perhaps we’ll even see a resurgence of illegal backyard shed casinos, fumigated with Chop Chop and lubricated by moonshine RTDs.

What makes online gambling all the more difficult to regulate is that so many of the gaming websites are hosted overseas. Are digital poker games such an outrageous problem that we think it is necessary for government to block foreign websites? A few years back, Senator Stephen Conroy’s attempt to ‘filter’ the Internet taught us what a fraught – and fruitless – exercise that would be.

Governments and the do-gooders that egg them on can try all they like to protect us from ourselves. But they can’t get away from the fact that, ultimately, some people just don’t want to be protected.

Jessica Brown is a Research Fellow at The Centre for Independent Studies.

Nudge, nudge, here come the Germans

20 January 2012

Okay, forget, for a moment the monumental folly of the European common currency, which wasn’t really the Germans’ fault. It was pressed on them by Mitterand as the price for French agreement to reunification.

Consider, instead, German social policy. We might all learn something from the way the Germans tackle problems that the Brits (and to some extent the Aussies) struggle with.

Consider, for example, family policy, and the child support rules for absent fathers.

The German civil code establishes a principle called the ‘solidarity of the generations.’ This stipulates that ‘lineal relatives’ (children, parents and grandparents) have a legal obligation to maintain each other. The primary obligation to support dependent children falls on parents, but if they lack the means or will to pay, grandparents become liable.

While our politicians voice platitudes about strengthening family life, the Germans give extended families real duties. Before taxpayers are asked to contribute to the costs of maintaining other people’s children, German law insists that the extended family should draw on its own resources.

So if a father defaults on his child support payments, both sets of grandparents are required to pay. Grandparents know they may become financially liable for their grandchildren, so they do all they can to ensure that the parents discharge their responsibilities properly in the first place. Brilliant!

Another example of German ingenuity concerns education. Ever since Britain abolished state grammar schools, bright kids from poor backgrounds have been consigned to what one Labour minister infamously called ‘bog standard comprehensives.’ In many parts of Britain, the only way to get a good education now is to pay for it. Even firebrand Labour MPs pay for their kids to be educated privately.

The trouble with the old system was nobody liked the 11+ exam which determined whether you went to a grammar, technical or general (‘secondary modern’) school. Too many middle class children failed the exam, and pressure built to overthrow the whole system. But in Germany they still have it. So why do German parents still accept selection when British parents don’t?

A key reason is that German parents are offered some control over the selection process. Head teachers in primary schools recommend to parents which type of secondary schooling would best suit their child, but if a parent insists their dull child should go to a grammar school against the head’s advice, this can still happen. When such children then struggle (as they almost certainly will), they are transferred after a year or so, disrupting their education and fragmenting their friendship networks. Most parents therefore go along with head teachers’ recommendations.

A lot of policy wonks in Britain, Australia and the United States got excited a few years ago about the idea of ‘nudging’ people into doing the right thing, but these two examples suggest the Germans have been ‘nudging’ for ages.

If a father falls down on his child support obligations, the Germans don’t send for the bureaucrats at the Child Support Agency (CSA). Rather, they mobilise the extended family to put pressure on him.

And the Germans didn’t antagonise parents to the point where grammar schools lost public support and got shut down. Rather, they allowed parents the chance to discover for themselves that their dull children really are dull, which legitimises selection.

Peter Saunders is a Senior Fellow at The Centre for Independent Studies.

The great Medicare swindle

20 January 2012

An article published this week by the former head of the Professional Services Review (PSR) in the Medical Journal of Australia generated much needed debate about the wisdom and sustainability of Medicare.

According to Dr Tony Webber, Medicare rorts are costing taxpayers between $2 billion and

$3 billion every year because of over-servicing and other dodgy billing and clinical practices.

The PSR is a peer-review process that investigates suspicious conduct as identified by Medicare Australia. However, the rorts don’t end even if doctors are found to have acted inappropriately.

The PSR can order a doctor to repay funds improperly claimed from the Medical Benefits Scheme (MBS), but the repayment is tax deductible. Rort the system one year, get a tax break the next!

I spoke at a conference in Melbourne with Dr Webber a couple of years ago. When he told the audience of eminent surgeons about the tax break double rort, they all broke out laughing.

This showed just how indefensible it is to treat fraud as if it’s a legitimate business expense.

Withdrawing doctors’ ‘get out of jail free’ card would certainly help improve Medicare’s integrity. But it is also a bit like shutting the gate after the horse has bolted.

The problems with Medicare fundamentally stem from bulk billing the vast majority of

GP (approximately 75% of consultations) and other primary care services, which are consumed without any user charges.

Most patients don’t care what MBS items they are ‘billed’ for because their Medicare card,

in effect, is an unlimited credit card fully paid for by the federal government.

If we really want to control the cost of Medicare and prevent over-servicing, some basic market disciplines are needed.

To try to stem rapid growth in Medicare expenditure, the Hawke government decided to introduce compulsory co-payments in 1991. However, the co-payments were quickly abolished after Paul Keating became prime minister. Keating had opportunistically used the issue to swing some members of the Labor Left behind his successful second challenge against Bob Hawke.

If we really want to stop Medicare rorts, it’s time to revisit this issue. A properly designed system of co-payments can protect the truly poor and sick and need not mean these groups will go without necessary care. But everybody else should have to pay something out of their own pocket each time they see their bulk-billing doctor.

Dr Jeremy Sammut is a Research Fellow at The Centre for Independent Studies and author of How! Not How Much: Medicare Spending and Health Resource Allocation in Australia.