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Fears health tax may hurt insurers

The Government's idea of a dedicated health tax is worrying health insurance companies.

Wednesday, October 24th 2001, 11:46PM

Health insurers are arming themselves to lobby the Government over a possible new health tax.

The Health Funds Association (HFA), which represents most health insurers, has commissioned a report from the New Zealand Institute of Economic Research (NZIER) on funding options for health that are currently being considered by the Ministry of Health.

A dedicated health tax, similar to Australia’s Medicare levy, is one option being examined.

HFA executive director Andrea Pettett says Government must take into account the potential impact of any health tax on private insurance before making any decision.

She believes dedicated health taxes can lead to a fall in the number of people taking out private health insurance.

"One of the biggest concerns is that a health tax can lead to a misconception among the public that they are already paying for all their health needs, so don’t need private insurance."

This is unlikely to be the case, and the public needs to be made aware of that, she says.

Although a health tax is one of several options being considered, some industry members believe it might be attractive to the Government. The public is less likely to oppose a new tax if they believe the money will go into health, they say.

Pettett says a key theme in the report, due to be published in two weeks, is that the cost of a public health system will always rise faster than the Government’s ability to pay for it. One way to bridge this gap is to encourage people to take out health insurance.

In a previous report for the association, NZIER examined the benefits of a Government subsidy for private health insurance.

Pettett says any funding option that reduces the use of private insurance would have serious implications for the public sector. More people would need to use the public system, boosting waiting lists. There might also be a threat to the financial viability of private hospitals – where many public patients are treated. A reduction in private work would affect the income of specialists, who might then decide to leave New Zealand.

The concept of a health tax seems appealing, as it gives greater transparency to the cost of a public health system, Pettett says.

"But the risk is that it can lead people to think they have already invested heavily in health, so why do they need health insurance."

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