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Health Insurer Seeks Public Remedy

Posted on: Monday, 8 November 2004, 15:00 CST

SOUTHERN CROSS Healthcare wants the government to subsidise health insurance premiums by 30% to stop the numbers of Kiwis with health insurance halving over the next decade.

A report prepared for New Zealand's largest health insurer by Australian economist Ian Harper says a subsidy would see the percentage of New Zealanders with health insurance rise from 33% to 37%.

The annual net cost to government coffers would be $103m. But the report says the annual cost of more people quitting insurance at current rates and becoming reliant on the public health sector would be $230m within 10 years.

It calculates that for every dollar the government would spend on an insured person, it spends $2.76 on the same health service for an uninsured person.

Southern Cross officials have had preliminary talks with Treasury and the Ministry of Health, and are due to meet Finance Minister Michael Cullen in the next few weeks.

Southern Cross chief executive Ian McPherson said some officials believed a health insurance subsidy targeted the wrong people.

"We would argue it's not fair the one million New Zealanders who have health insurance should pay twice - through taxes and their insurance premiums," he said.

He said there was a case for the insured person to receive a subsidy which recognised they had chosen to opt out of the public health system for elective services.

The Southern Cross initiative follows a report from the Health Funds Association last month recommending compulsory health insurance for all New Zealanders earning more than $38,000. It said public health inflation was increasing by 8% annually, which would mean public health spending could be 63% of GDP by 2050.

But Treasury put health inflation at 1.5%, and Cullen rejected compulsory insurance.

McPherson said it was easy to argue about fine details - "what we want are substantive discussions about how we are going to tackle spiralling health costs".

The percentage of New Zealanders with health insurance has fallen from around 50% to 33% over the past decade as health costs have spiralled and insurance premiums doubled in many cases.

McPherson said many people had downgraded their health insurance to cheaper alternatives, but were still finding the cost difficult to bear.

"We worry these people with bare-bones insurance will drop out altogether and throw a greater burden on the public system," he said.

In 2001 the Health Funds Association commissioned a report from the Institute of Economic Research which suggested the government look at tax options to provide incentives for health insurance.

The tax options were a tax credit to pay a flat rebate to households with health insurance, or exemption of health insurance premiums from fringe benefit tax.

In Australia at that time, the federal government introduced a tax rebate of 30% on health insurance premiums, and numbers of Australians covered by private insurance rose from just under 33% to 40% in less than a year.

But with the government here set against granting particular industries better tax deals, the proposal went nowhere. Now the government's recent indication that it may consider changes in the tax regime as it relates to savings has raised hopes that proposals for another look at the health industry might find traction.

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Source: Sunday Star - Times; Wellington, New Zealand

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