The Australian prime minister, John Howard, has engineered a major expansion of private health insurance alongside a universal, publicly funded health system. Various incentives and penalties have driven coverage up from 30% to 45% of the population, but the strategy of subsidising insurance premiums has been expensive and primarily benefited the wealthy.
Admissions to private hospitals have increased, but admissions to public hospitals have also increased, suggesting that the private insurance subsidies do not seem to have reduced pressure on Australian public hospitals as forecast by the government. This has led commentators to ask whether the funds injected into private insurance would be spent more effectively if invested directly in the public hospital system.
"The ideological focus of these reforms makes them attractive to those who prefer private institutions to fund health care," say the authors. "They show, however, that such policies create increased fiscal burdens for government, increase in equality in funding care, and have no observable effects on efficiency."
They conclude: "British and continental European conservatives should beware of the simple solutions used by their Antipodean colleagues. However, with John Howard being re-elected for a record fourth term in October 2004, they may also recognise that creating cost inflation and greater inequity in health care pays politically."