Fiscal Fiction: The Real Medicare Levy

The Medicare Levy is, and always has been, a fiscal fiction. The revenue raised by the levy is not ‘hypothecated’ – dedicated specifically to fund Medicare – but goes into general government revenue. Moreover, the amount of revenue raised by the levy accounts for a mere fraction of government spending on health.  Nevertheless, the levy – by fostering the myth that Medicare costs taxpayers only a small percentage of their incomes – creates the false impression that Medicare is a low cost and affordable government program.

This report sets the record straight by telling the truth about the Medicare Levy. The details provided here about the ‘real’ Medicare levy – the actual proportions and rate of income tax that funds Medicare entitlements and other health-related government expenditure – deserves to be well known by the hard-working taxpayers of Australia.  A better understanding of the true cost of health to taxpayers is essential in order to have an informed and honest debate about any plan to hike taxes by further increasing the Medicare Levy. The alternative approach recommended here is to seeking efficiencies in health spending by undertaking reforms that can produce substantial savings and be used for other purposes such as funding the NDIS.