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The Analytics of the Australian Private Health Insurance Rebate and the Medicare Levy Surcharge

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  • Alex Robson
  • Henry Ergas
  • Francesco Paolucci

Abstract

This paper presents an analytical framework for examining changes in the Private Health Insurance rebate (PHIR) and the Medicare Levy Surcharge (MLS), and uses it to establish three key propositions. First, increases in the MLS rate tend to reduce the elasticity of demand for private health insurance. Second, simultaneously increasing MLS rates and thresholds has a theoretically ambiguous effect on PHI take-up rates. Third, means testing the PHIR can never increase PHI take-up, and will reduce it in some circumstances. The paper concludes with a discussion of the possible consequences of recently proposed policy changes to private health insurance in Australia.

Suggested Citation

  • Alex Robson & Henry Ergas & Francesco Paolucci, 2011. "The Analytics of the Australian Private Health Insurance Rebate and the Medicare Levy Surcharge," Agenda - A Journal of Policy Analysis and Reform, Australian National University, College of Business and Economics, School of Economics, vol. 18(2), pages 27-48.
    • Handle: RePEc:acb:agenda:v:18:y:2011:i:2:p:27-48
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    File URL: http://press-files.anu.edu.au/downloads/press/p151621/pdf/ch034.pdf
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    References listed on IDEAS

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