History is repeating itself. Medicare was created by the Whitlam government because of the abject failure of private health insurance or, as it was then called, voluntary health insurance.

As a result of the growth of private health insurance since 1999 under the Howard government, Medicare is now seriously threatened. Government subsidies for private health insurance will take us back to the pre-Whitlam and pre-Medicare era.

The Australian government today knows that private health insurance is in real trouble. But for ideological reasons it wants to prop up what John Howard foisted on us in 1999. That is the reason for the current review. It is like putting lipstick on a pig.

There are 34 insurers with 40,000 variations of policies available. Due to complexities and deliberate obfuscation, the public is confused about exclusions, inclusions and gap cover. It is an awful mess and it is not surprising that the public is increasingly sceptical. The former minister for health Sussan Ley told us: “Everywhere I go, consumers, health insurers, doctors and private hospitals tell me their needs are not being met by private health insurance … Australians are paying too much for health insurance that does not deliver them much value.”

It all takes me back to what Whitlam said in 1969 about private health insurance.

Voluntary health insurance was condemned in the Nimmo report for having become complex to the point of incomprehensibility, charging contributions beyond the means of many members of the community, paying less in benefits than the cost of medical and hospital services, causing serious and widespread hardship through the application of ‘special account’ regulations, appropriating too much of its own contribution income for operating expenses and accumulating excessive reserves.

What he said then about voluntary/private health insurance is still true today of PHI. It is inefficient and unfair. It is eroding Medicare. And the chief executive of NIB has warned us that that is what he wants to see, “to bring us back to the days before … Gough Whitlam introduced Medicare”.

Yet inefficient and unfair PHI is underwritten in Australia through an enormous government subsidy. It is subsidised by Australian taxpayers at a cost of $11bn a year. The motor industry never got a subsidy like this.

In 2015-16, that taxpayer subsidy was made up as follows: $6.56bn, direct outlays in the budget for the rebate; $1.6bn in tax-free income for those who got the rebate; an estimated $1bn for the benefit of exemption of taxpayers from the Medicare levy surcharge; and $2bn for the estimated cost to taxpayers of high costs associated with PHO and particularly unnecessary treatments.

That subsidy should be abolished and some of the money saved should be spent to include dental care as part of Medicare, at a cost of about $6bn a year. Almost 40% of Australians earning less than $75,000 a year cannot afford to see a dentist.

It is important to understand some history to realise the threat of PHI. We have been here before.

The ALP in the Senate in 1968 was responsible for establishing a select committee on medical and hospital costs. To head off this report, the McMahon government appointed Justice Nimmo to conduct an enquiry into health Insurance. Not surprisingly, both the Nimmo report and the Senate report condemned the inefficiency and waste of private health insurance that I have mentioned.

Those two reports laid the basis and the reasons for establishing Medicare. Private health insurance is now a grave threat to Medicare but the ALP does not seem to care.

Let me summarise the failings and risks of private health insurance:

• It threatens our universal health system through seriously weakening the ability of Medicare as a single funder to control costs. We have seen the enormous damage that PHI has wrought in the US. We are steadily going down the same dangerous path. On present trends, we will have a divided healthcare system. One system will be for the wealthy with a safety net system for the indigent.

• PHI not only weakens Medicare but in itself it does not have the market power to match the power of health providers who hold all the cards. In February this year in the Sydney Morning Herald, Dr Rachel David, the chief executive of Private Healthcare Australia, said: “Private health funds have no control over input costs, which include medical device benefits, hospital accommodation costs, allied health costs eg dental, medical specialist gap costs among others.” Without perhaps realising it she put the case against PHI … its inability to control costs.

• It favours the wealthy who can jump the public hospital queue by going to private hospitals.

• It penalises country people who have limited access to private hospitals.

• It has administrative costs three times higher than Medicare.

• Since Howard introduced the private health insurance subsidy in 1999, premiums payable on private health insurance have increased by more than 150% but the CPI has risen by 60%.

• Private health insurance has made it extremely difficult for public hospitals to retain specialists who are attracted to remuneration which is often at least three times higher in private practice and private hospitals. PHI has not taken the pressure off public hospitals.

• There are government-supported trials in Queensland to extend coverage of private health insurance to general practice.

• Medibank Private is pressing for private health insurance holders to get preferential treatment in public emergency departments.

If people want private health insurance that is their right. But why should taxpayers subsidise the private health insurance industry to corrupt and undermine a universal system that is available to all?

The vested interests in private health insurance never argue their case in public. They rely on private lobbying of ministers and officials.

Private health insurance is like a Trojan horse to lead us away from world’s best practice in healthcare, a single public payer with services provided by both private and public providers.

• This article originally appeared in Health Voices, the journal of the Consumers Health Forum, and has been republished here with permission