A new research has revealed that those who sign up to private health insurance to avoid tax or financial penalties were often younger, healthier and less likely to be admitted to hospital as private patients.
These findings have cast doubt on claims that an increase in the number of people with insurance would relieve pressure on public hospitals.
According to Denzil Fiebig, of the University of NSW school of economics, "The rebate is a blunt instrument, relying on the notion that people with private health insurance are going to use it. It's clear from our research that is not the case."
It has been estimated that the government has spent over $2 billion each year on the rebate since its introduction in 2000. Critics say this money would be better spent on public hospitals.
Professor Fiebig said, "While private health insurance coverage has increased by 50 per cent as a result of the rebate, that is not necessarily easing pressures on the public hospital system".
His research revealed that people took out the insurance for varied reasons such as thinking that they would get better and faster care, for security or to deal with serious health concerns.
However a significant 15 per cent reported that they were forced to join a fund because of the 30 per cent government rebate, tax penalties and premium rises imposed on people each year without insurance. Fiebig said that it was these people who could just as well use the public health system as the private hospital system.
He added, "This may be because they're happy with the public ... system, or it may be because of the out-of-pocket expenses they would face, even with private health insurance, in the private system."
The Federal Government has rejected these findings saying that without the 30 per cent rebate, the private health system would collapse.
Spokeswoman for the federal government, Tony Abbott said, 'The proof that the private health system takes pressure off the public system is that 56 per cent of all surgery is now done in private hospitals.Independent research by the Melbourne Business School shows that every dollar the Government spends on the rebate,saves up to two dollars in health costs that otherwise would have to be picked up by taxpayers.'
Labor's health spokeswoman, Julia Gillard, disagreeing with the Government's claim of "one person with private health cover is one less person relying on public hospitals" said that while admissions to private hospitals are certainly increasing, but so too are admissions to public hospitals."
She said,"The private health insurance industry is not sustainable."
According to Glenn Salkeld, an associate professor in health economics at the University of Sydney,"Attitudes, emotions and values all affect our decision to buy and what we do with the goods. You can play on emotion to get people to buy private health insurance but that doesn't guarantee that everyone will use it."