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winding back middle class welfare .....When dozens of private hospital staff gathered outside Rob Oakeshott's Port Macquarie electorate office on Saturday to urge him to reject means testing of health insurance, they risked provoking the wrong response. He was tipped off on Friday about the protest and heard it was being pushed by the health insurance billionaire Paul Ramsay. Oakeshott has had a gutful of big money trying to influence politics and, if anything, Saturday hardened his resolve. He witnessed the miners cripple the Rudd government and the gambling lobby inject such fear into the Labor caucus that it forced Julia Gillard to tear up her deal with Andrew Wilkie. This week, the government plans to have the lower house pass the legislation to means test the 30 per cent private health insurance rebate that was introduced by the Howard government just over a decade ago. Back then, Labor opposed the rebate, saying the $1.6 billion a year it was forecast to cost would be better spent on public health. The Australian Democrats made the same arguments before seeking to broker a compromise of a means test applying at $30,000 for singles and $50,000 for families, income levels which, back then, were judged as well-off. Howard bypassed the Democrats, cut a deal with Brian Harradine, introduced the rebate and applied it to everybody, regardless of income. Its effect on take-up rates of private health cover was minimal, however. It was only when the government introduced an accompanying policy of lifetime health cover - in which financial penalties would apply every year if somebody delayed taking up private cover after turning 30 - that coverage levels took off. The rebate's estimated $1.6 billion annual cost to the budget blew out to $2.3 billion. Today, it is $4.7 billion and rising so rapidly that it is the fastest-growing area of federal health spending. Before the 2007 election, the then-Labor leader Kevin Rudd promised not to touch the rebate if elected. He broke the promise in 2009 when he sought to introduce a means test starting for singles earning more than $75,000 and couples earning more that $150,000. Labor, battling a budget ravaged by the global financial crisis, argued the rebate was creating a structural deficit that needed to be capped. Rudd wheeled out the doomsday warning that it would cost $100 billion over the next 40 years. But the Senate rejected the means test twice and it sat, unused, as a double dissolution trigger. Now it is back and the government appears to have the numbers. Wage indexation since 2009 means the rebate will start being reduced for singles earning more than $83,000 and at $166,000 for families. It will disappear altogether for singles on $129,000 and one-child families earning more than $258,000. Oakeshott and Wilkie, the two independents the government is believed to have secured, will come under intense pressure in the days leading up to the vote. Wilkie has Treasury figures showing 83 per cent of his electorate will be unaffected. In Oakeshott's seat of Lyne, just 300 families or singles will lose their rebate altogether. This week, figures will show 50,000 more people took up private cover in the last quarter, twice the total number Treasury estimates will drop their cover if the means test is introduced. Private health lobbyists are countering with forecasts of a big drop in coverage and a shortfall of private hospitals and specialists outside metropolitan areas. The government says the punitive increase to the Medicare levy surcharge that will apply to any high income earner who ditches their health cover is designed to head off such scenarios. The means test will begin on July 1, the same day high income earners will also begin to experience the impact of the carbon tax for which they will not be compensated. (They will get back their contribution to the flood levy, which only runs for a year). The Coalition has two lines of attack - broken promise and cost of living. The Health Minister, Tanya Plibersek, argues the broken promise argument no longer stands given Labor took the means test as policy to the 2010 election. She says it is now a matter of fairness and budgetary restraint. The Coalition bitterly opposes the means test, worth $2.4 billion in savings over three years, but what it cannot say is whether it will repeal it if elected. Given its own internal ructions, caused by the need to fund the promises it has made so far, the Coalition must be tempted to keep the means test if elected but let Labor wear the opprobrium for its introduction. Either way, it is a policy position the Coalition ought to define if it wants a clear line of attack. Because, as Labor found out last week, when it stops talking about itself and focuses on policy and the economy, all does not seem lost.
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