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.

Free to choose in health

01 August 2014

gadiel-davidsammut-jeremyA Medicare co-payment is one way to share the cost of health and enhance the sustainability of the health system. Unfortunately, the politics of health seem destined to defeat the Abbott government's plan for a $7 out-of-pocket fee for GP and other medical services.

An alternative way to achieve health reform is by giving Australians greater choice in how health services are financed.

Those who wish should be allowed to opt-out of Medicare voluntarily in exchange for opening a Health Savings Account (HSA).

Those opting out would trade their Medicare entitlements for an annual Health Voucher (indexed) for deposit into an HSA that could be linked to an existing account-based superannuation scheme. The voucher would be worth average per person government spending on health – approximately $4,300 in 2011-12.

HSA funds would attract the same 15% concessional tax rate as superannuation during its accumulation phase. HSA account holders would draw upon such reserves to meet the cost of specified health expenses, including GP services and other non-hospital care, chronic and catastrophic health events, health insurance premiums, co-insurance and deductibles to cover hospital treatment costs. Upon retirement the health accumulation reserve would merge with the pension fund.

Integrating saving for health with saving for retirement would require adapting the superannuation system by modifying the 'sole purpose test' to permit existing accounts to carry reserves for current and future health expenses, and to facilitate their access before retirement.

This health model would emulate the way Singapore has developed a low-cost and cost-effective, savings-based health financing system. It would encourage saving for unforeseen high-cost health events rather than paying for high-frequency, low-severity contingencies. High-deductible insurance tables would offer the benefit of risk pooling for an account holder's exposure to outlier high-cost claims such as for hospital or day surgery treatment. A market for these new tables (separate from the existing community rated system) would quickly develop, probably offered through existing registered health insurers or other institutions operating HSAs on behalf of their holders.

To the extent that Australia has gone some way towards privatising the public pension system by shifting from Pay-As-You-Go taxpayer funding to Save-As-You-Go self-funding for retirement, there are good reasons on the grounds of sustainability and efficiency to emulate this transition for health services by diluting the monopoly of Medicare.

Finally, Medicare opt-outs would circumvent the politics of health.

Those who wish to remain with Medicare would be free to do so. And those who wanted a more efficient and cost-effective alternative to a taxpayer-funded, universal health system would be free to choose to self-finance their own health care.

David Gadiel is a senior fellow and Jeremy Sammut is a research fellow at The Centre for Independent Studies. Their report, Lessons from Singapore: Opt-Out Health Savings Accounts for Australia, was released on 28 July 2014.




Don't take the wrong lesson from latest cult case

01 August 2014

helen-rittelmeyer Preparations are already under way within the federal government for the launch of a new Civil Society National Centre for Excellence (NCE) to serve Australia's large and growing not-for-profit sector.

But even as those preparations proceed, some are still trying to save the Australian Charities and Not-for-Profits Commission (ACNC), the failed charity regulator the NCE is intended to replace.

The latest occasion for these last-ditch efforts was a report by the ABC's Four Corners on a group known as Christian Assemblies International (CAI). Four Corners alleged in a broadcast earlier this week that CAI is a cult and its former leader used his position to abuse CAI members.

Independent Senator Nick Xenophon stated that this report demonstrates the 'foolishness' of abolishing the ACNC.

'It would mean that organisations that are behaving unethically, that are dodgy, would still be getting taxpayer funding in effect due to [their] tax-free status.'

That short statement of Senator Xenophon's contains several flaws and fallacies. The first is that tax exemptions amount to the same thing as taxpayer funding. This conflation of money forgone and money disbursed is a common tactic used to justify government interference in independent organisations.

The second is the idea that not-for-profits can engage in 'dodgy' behaviour with impunity. Illegal behaviour is illegal whether perpetrated by an individual or a registered not-for-profit. In this case, the alleged cult leader identified by Four Corners was charged with abuse under existing criminal law.

The third is that charity registration will become an uncontrolled free-for-all when the ACNC is abolished. According to the Options Paper released by the Department of Social Services earlier this month, the abolition of the ACNC will not leave charities unregulated.

Whatever form the post-ACNC regulatory regime ultimately takes, groups applying for charitable status under the law will still have to demonstrate that they qualify for it, and groups that cease to qualify can still be deregistered if they are found to no longer meet those criteria.

Cults are a dangerous phenomenon, and those who escape from them deserve support. But sensational stories should not be allowed to distract from the ACNC's shortcomings as a regulator.

Helen Andrews is a Policy Analyst at The Centre for Independent Studies.



Unemployment - one size fits some

01 August 2014

cowan-simon This week we have seen several ambitious welfare reform plans. First, the federal government attracted negative attention for its proposal to make the unemployed apply for 40 jobs a month and complete 25 hours a week of community service.

Second, Andrew Forrest proposed a raft of changes including compulsory extension of the welfare basics card to everyone bar pensioners and veterans, linking welfare to school attendance and more closely linking training and employment.

While there may be merit in elements of the proposed reforms, the biggest drawback to both is that they wrongly treat the unemployed as a homogenous mass.

Most people (70%) cycle off unemployment within 12 months, and primarily need short term income assistance. Forcing these people into training or work for the dole, while quarantining their income, might prolong unemployment.

Some unemployed people don't have job search requirements at all, so it is unclear how this scheme applies to them, while others form a core of long term unemployed who frequently face additional barriers to finding jobs. They may need the more intensive intervention that Forrest proposes.

We also cannot ignore the significant barriers to employment created by government itself; from high company taxes, to high minimum wages, to restrictive dismissal protections. These workplace protections may benefit some workers but they also keep others out of employment.

There is a further undeniable truth that some people have rendered themselves unemployable through substance abuse or simply choose not to work, though there's a tendency by some to overstate the number of unemployed people to whom this applies.

Critics of the government's plan have suggested that there are just too few job vacancies with too many unemployed people to fill them, and that simply forcing the unemployed to apply for more jobs won't have any impact on the chances of employment.

To an extent these criticisms are valid. For some job seekers simply applying for more jobs without addressing the barriers they face to employment will have little effect. But critics of the government have inadvertently hit on another problem. If someone is simply going through the motions of applying for jobs so they can get the dole, then employers are unlikely to offer them a job.

In the end successful management of unemployment issues is tough for government, simply because they can't give jobseekers the attitude that would make them attractive to employers and their blunt tools struggle to deal with the different reasons why people are unemployed. Costly, intensive income management might help some jobseekers but rolling it out to everyone is likely to be a waste of money.

The best thing that government can do is limit the negative impacts it has on the labour market and the economy, and enable business to generate sustainable economic growth. This will not only increase national income but also increase the options available for job seekers.

Simon Cowan is a Research Fellow at The Centre for Independent Studies.