By Greg Jericho

The Australian Financial Review reported that NIB’s CEO has said that the insurer needs an increase of around that mark because “ultimately, we have to cover claims inflation like any insurer because if you don’t eventually you go out of business.”

While this might seem obvious, it ignores the reality that the main reason private health insurers might go out of business is because people hate the product they offer, and even with all the carrots and sticks designed to force people to take out health insurance, a majority of Australians do not want it.

Over six years ago I pondered if private health insurance was a con. In the time since, during which we have experienced the greatest health crisis in a century, nothing has really changed the answer.

Not only does it remain untrue that private health insurance takes stress off the public system, it also remains a fib to call it private – it’s a public system merely carried out in an inefficient manner to deliver a product most people don’t want and haven’t ever wanted.

In the late 1990s, after 15 or so years of Medicare, fewer than a third of Australians held private health insurance. Then John Howard decided that the private sector needed help from the public sector.

He introduced a surcharge to penalise higher income earners who did not have private health insurance.

The stick was not enough. Howard then tried the carrot: providing a rebate on your private health insurance. These rebates are quite pricey – the government this year will spend about $7.5bn on them.

It did bugger all – you literally could not pay people to buy it.

While negative gearing gets all the hate, it really was John Howard who destroyed our housing market by handing out a big tax-free gift to property investors.

Prior to June 2000, if you made a capital gain (ie a profit from an investment) you discounted the profits by the level of inflation over the period of the investment before paying tax.

Then Howard (and Costello) changed it to being a straight 50% discount.

If you bought a property for $500,000 and 10 years later you’re able to sell it for $1m at a profit of $500,000, rather than pay tax on the whole $500,000, you only pay tax on $250,000. The other $250,000 is yours, tax free.

That is about as sweet as it gets.

[…]

At some point you have to admit what you’re doing has not worked. Or perhaps we need to admit that the aim all along was higher house prices.

Howard infamously said in 2003: “I don’t get people stopping me in the street and saying, ‘John you’re outrageous, under your government the value of my house has increased’.”

The tax policies he put in place worked. They ensured house prices would go up much faster than income and reduce affordability. Maybe it’s time to admit that if we keep them in place that situation will continue.