The creation of the original Medibank concept is generally attributed by its critics to the Whitlam Government’s profligate reforming zeal. But there was a hard edge of economic rationality – as relevant today as it was then – to Labor’s motivation of social justice. The myth is that Medibank triggered an unprecedented upsurge in health care costs. The truth is that the development of Medibank coincided with a 50 per cent increase in 1975-76 in doctors’ incomes, massive pay rises for traditionally underpaid nurses and hospital workers, and a boom in expensive medical technology. The States could no longer afford the upkeep of public hospitals; the private health insurance funds would not have been able to keep pace with soaring costs without massive public subsidies. One way or another, the Federal Government had to intervene.

Bob Hawke holds one of the first Medicare cards issued. Credit:David Bartho

Hundreds of thousands of Australians were not covered for medical treatment or hospital care. Hundreds of thousands of others could ill afford the rising cost of private health insurance. Special arrangements had to be made for pensioners, but doctors were becoming reluctant to treat poor patients for little or nothing, or to continue the honorary system at public hospitals. The danger was that rising health insurance rates would begin to dry up the pool of voluntary contributors, especially the young and healthy, leaving the funds with potentially less income, but proportionately more claims, and forcing them to push their rates even higher or to press for bigger subsidies. Medibank – and now Medicare – was designed to overcome these problems and inequities.

Under Medicare, everyone in the community is insured. Everyone contributes through an income tax levy according to means (subject to upper and lower limits). Everyone is entitled to have the greater part of their medical expenses refunded – pensioners and other very low-income earners, including the unemployed, need pay nothing if doctors are willing to bill the Government direct for 86 per cent of the schedule fee – and everyone is eligible for free treatment by salaried or sessional medical staff in a public hospital. Most Australians will be better off financially under this income-related scheme; many higher-income families (especially those with two incomes) will pay more, certainly if they also wish to insure for hospital treatment as a private patient. A fringe benefit for the Federal Government is that the unions have accepted Medicare benefits as part of the social wage under the prices and incomes accord, and that the Medicare levy, unlike private health insurance premiums, is not counted in the consumer price index.

Most of the current public confusion and concern is over whether it is worthwhile insuring privately to provide for “choice of doctor” and better accommodation in public hospitals, and access to expensive private hospitals, which could mean priority as well as choice of doctor for non-urgent operations. This is something everyone must decide for themself or their family in the light of their preferences and means. It should be remembered, however, that much of the advice being given is not disinterested. Doctors are keen to preserve the lucrative advantages of the fee-for-service system, and private hospitals and private health insurance funds are eager to stay in business.