We have to think outside the square. I am not suggesting this concept is THE answer, by any means. I’m merely suggesting we need to look for alternative solutions and encourage ideas and discussion.
I recently suggested scrapping the Medicare Levy totally on the basis it leads politicians to focus on the wrong aspects of Medicare. “Medicare is not sustainable” they cry, yet primary care accounts for only 10.2% of the health budget. An admission to hospital costs, on average, $5,000 – even 20 GP visits a year times the rebate is a lot cheaper than $5,000. In 2012 the University of Melbourne completed a study which showed there were 7,000,000 bed days in hospital that could have been prevented (Source: Prof John Dwyer, Insight, at 27 min mark). What a saving that could be to the health budget (although there would be costs associated with the prevention).
I’m not suggesting the nation forgo the Medicare Levy revenue stream. I am suggesting we stop allowing it to divert attention from the real areas of potential cost savings. Aside from the 7,000,000 bed days, do you know that doctors have to get a new provider number when they relocate? Think of the administrative costs. What is the rationale? What is the benefit? Isn’t Dr J. Smith the same doctor irrespective of whether she or he is located in Euroa or Williamstown? Doesn’t this make reporting and auditing of a doctor’s performance or claiming patterns over his or her career more difficult and possibly expensive?
Subsequent to my admittedly rather off-the-cuff suggestion of scrapping the Medicare Levy, I was reminded that a number of our working population still have access to forms of salary sacrificing that have disappeared for many of us due to Fringe Benefits Tax (FBT). About twenty years ago we could salary sacrifice a car, private school fees, health insurance premiums and a number of other expenses. When FBT was introduced, the salary sacrificing of old virtually disappeared. Of course, CEOs still receive shares and other “indirect” remuneration, but the average management level employee suddenly had to pay their own health insurance premiums. For a while I was lucky and worked for an international company that had a global policy of paying health insurance premiums, irrespective of FBT in Australia, but it is no longer the norm for the majority of workers.
FBT doesn’t apply to all employees the same way. Not-for-profits have certain concessions, enabling them to provide salary sacrificing the commercial world no longer offers. Government department employees and politicians, for example, can take advantage. In June 2013, 16.4% of the working population in Australia were employed in the public sector. Not all of them would have access to salary sacrificing, but possibly enough to make a dint in the Medicare Levy revenue stream.
We know there are various ways of reducing taxable income and minimising income tax. Those who have higher earnings have more opportunities to do so than the average wage earner or salaried middle manager.
When income tax in minimised, so is the Medicare Levy. After all, it is assessed on taxable income. Get taxable income below the magic threshold and receive a higher rebate for private health insurance or avoid or reduce the Medicare Levy Surcharge.
Yet there is no reduction in rebate for those who may be shirking their fair contribution. Surely a better collection mechanism would be via the GST system, for the same reasons GST was implemented in the first place: those with a higher disposable income spend more and therefore pay more in GST.
There are, therefore two major problems with the Medicare Levy as it stands. First, it is distracting, as stated above. Secondly, it can be minimised by the very taxpayers who can most afford it. Increasing the Levy places the burden on those who can least afford it and does nothing to address the question of focus.
The challenge with the concept of moving the collection to the GST collection method is that we have a massive, expensive bureaucracy “managing” the collection and claiming back of GST by business. The businesses would not, I suspect, be overly thrilled with the idea of being expected to contribute to the universal health system when paying GST that is not claimable as a tax credit under the GST legislation. Edited to clarify – I am only referring to any GST that did not qualify as a tax credit under current policy. There is no suggestion the increase would be treated any differently. Yet why not? Is it not in the interests of business to have a healthy workforce? What is the impost on business of GST not able to be claimed as a tax credit? The costs of compliance could well be higher, although I’ve never set about analysing it. The end consumer is the one paying the bulk of the GST, as illustrated very nicely by the manufacture and sale of a table on the Australian Tax Office web site. An awful lot of toing and froing for $30, if you ask me. We have some very inefficient systems, we do. That is a debate for another day.
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