Medicare being misused in Australia

Medicare is Australia's publicly-funded universal health scheme, operated by the government authority Medicare Australia.

Medicare provides treatment by doctors and in public hospitals for all citizens and permanent residents.

Medicare is nominally funded by an income tax surcharge known as the Medicare levy, which is currently set at 1.5%. There is an additional levy of 1.0%, which is the Medicare Levy Surcharge, for those on high annual incomes ($50 000) who do not have adequate levels of private hospital coverage.

According to Australian Bureau of Statistics data, an elaborate market has been created to service high income earners to enable people to avoid the surcharge.

Many private insurance companies have resorted to selling substandard polices to avoid the surcharge and gain a tax benefit to the policy holder. It has become widespread, with almost 220,000 families and couples, and 160,000 single taxpayers in the high income category obtaining private health insurance to avoid the Medicare Levy Surcharge or to gain some other government benefit in 2004/05.

The practice of using low-cost hospital insurance products to avoid the surcharge resulted in tax losses of between $110 million and $250 million in 2004/05, with a best estimate of $230 million.

The government loses when high earners take cheap insurance, don't claim against their insurance policies but claim from Medicare for their medical treatment and also get the benefit of evading tax.

To avoid such misuse, effective oversight by the government is essential. Businesses and individuals who want to evade paying taxes will always find a loophole to avoid paying tax, even though it is intended for public good.

Treatment in a public hospital as a public patient is fully subsidised by Medicare. Regardless of means, every Australian is entitled to attend a public hospital and receive medical treatment free of charge.

For private patients in public or private hospitals, Medicare covers 75 per cent of the Medicare Schedule fee for medical procedures.