Bill Shorten’s pledge to cap insurance premiums will hurt those he says he wants to help, writes Nick Cater in The Australian.
No one would wish to discourage our politicians from thinking creatively over the summer break, but price-control edicts are unlikely to work any better for Bill Shorten than they did for the emperor Diocletian in AD 301.
“When by various extortions he had made all things exceedingly dear, he attempted by an ordinance to limit their prices,” wrote Lactantius. “Then much blood was shed for the veriest trifles; men were afraid to expose aught to sale, and the scarcity became more excessive and grievous than ever.”
It is at least 40 years since a mainstream political party in Australia has looked seriously at price-fixing to address a policy challenge.
That government retains the powers to regulate prices in health insurance at all is a legacy of a less sophisticated age, a burden we will be stuck with forever, since no one seems prepared to burn the political capital required to fix it.
We would hope, however, that no government would try to make a bad situation worse.
The consequences of Shorten’s pledge to cap premium rises at 2 per cent for the next two years will be bad for the customer, as blunt interventions always are. Health insurance will deliver even less value and companies will be tempted to introduce more exclusions. Worse still, they could require even higher price increases once the cap is lifted.
Larger funds will be able to survive the cap, but smaller players could be forced out of the market; some are already struggling to meet APRA’s strict prudential requirements.
Existing members will drop out and non-members will have even less reason to join. The uninsured will be the less affluent by and large, denying more Australians the choice of private healthcare, and forcing more sick people on to Medicare.
Consequences, however, are an old-fashioned way to evaluate public policy initiatives. Consequences are something for future governments to deal with, as has become painfully apparent with the National Disability Insurance Scheme.
Consequences are difficult to explain, since they require the rudiments of wisdom, some ability for rational thought and not a little political nerve. Why would anyone waste time and effort on all that when the driver of public policy today is sentiment?
Sentiment provided not just the gloss but the substance of the Opposition Leader’s speech to the National Press Club last week during which he dobbed in private health insurers as the new corporate scoundrels. “I’m fed up with the private health insurance industry treating Australians like mugs, gouging people on the basis of a con,” said Shorten.
Such is the level of malfeasance in the health insurance sector that bankers are paragons of virtue by comparison, Shorten leads us to believe. The return on equity for banks may be “well short of 10 per cent”, said Shorten, “but some of the biggest health insurance providers pocket a return of over 20 per cent”.
Never let the factoids get in the way of the truthoid. Medibank, the most profitable provider, made an after-tax profit of 7.7 per cent last financial year. In 2017 the industry’s average margin was 5.5 per cent after tax.
The Opposition Leader is trying to pull a swiftie. It is a contrivance, trickery, subterfuge, sharp practice or, as Shorten would call it, a con. It is he who treats Australians as mugs.
The rhetorical deception continues: health insurers do not report profits, they are “raked in” — $1.8 billion last year — says Shorten, without stopping to note the industry paid $450 million in tax, 20 per cent more than the year before.
Shorten’s disquiet with corporate profits, and the notion that shareholders might reasonably expect a modest return on their investment, is redolent of the politics of another age, when the proletariat and bourgeoisie engaged in historical struggles imagined by German intellectuals, and heartily supported by others, long after it had become apparent that it was tosh.
No party did more to widen the shareholding class in Australia than Labor. The superannuation funds into which Australian workers are obliged to deposit almost a tenth of their income look to banking and insurance stocks to make stable returns.
The consequence (that word again) of fixing prices will be felt by retirement savers, by the kind of people who shop at Foodland in Mitcham, no less the farmers’ market patrons in Double Bay.
A shape of sorts is emerging through the fog of soundbites to the economic policy Shorten will take to the next election. It is policy that presents as a cry of social justice, a popular sentiment among university-educated millennials to whom Labor’s message is increasingly focused.
Labor’s attacks on family trusts, “rich” superannuants, negative gearing and private health insurance will penalise thrift, reward the thriftless, enforce equality and encourage dependence on state services. Ironically, these policies won’t just hurt, they will damage the demographic Shorten is appealing to the most — the unemployed, graduates seeking to enter the workforce, and the poor.
Each policy, in its own insidious way, will serve to limit the independence of the middle class at a crucial moment in the nation’s economic development when the drive of independent ambition is badly needed.
Shorten’s headline-seeking behaviour hides a deeper problem. We sense that Labor is bored with proper policy and is looking for distractions.
The ageing of the population is upon us; the number of Australians older than 65 increased by more than half a million between 2011 and 2016.
The cost of health services demands an ever larger proportion of the wealth we create. Between 2005-06 and 2015-16, total health expenditure rose from 8.7 per cent of GDP to 10.3 per cent.
It was not for nothing that the National Commission of Audit described healthcare spending four years ago as the commonwealth’s largest long-run fiscal challenge. Governments, state and federal, will spend the best part of half a trillion dollars on health over the next five years.
Facing up to that challenge, however, demands exceptional political courage, something we struggle to see in Labor.
The party is hoping to win the next election by securing the low ground; the rest of the political class must avoid being dragged with it.