Nats nix tax incentives for health insurance

National has ruled out providing a tax break for health insurance if it becomes government.

Friday, September 28th 2007, 5:11AM

by Rob Hosking

Such a tax break was policy back in 1991 but fell victim to the tighter-than-expected fiscal crisis. The party has looked at it closely and has sounded favourable towards the idea during the 2002 and 2005 elections without ever formally committing to such a policy.

Overshadowed by the kerfuffle over National's decision to remove price controls on GP visits is the decision to ditch the idea of tax incentives for health insurance.

National's health policy says a tax break would cost between $200-250 million a year.

The party has examined Australia's policy in this area, and says the lesson is tax breaks don't work.

Australia saw a huge slump in health cover when Medicare was introduced in the mid-1980s. Since 1998 the John Howard Liberal government has actively encouraged private health insurance - the OECD says it has the most activist policies in the world to encourage private health cover. However, the numbers taking up health insurance remained static.

"The lesson from the Australian experience is that tax rebates do not increase uptake of private health insurance but do make it cheaper for those who already have it. "It appears unlikely that private health insurance tax rebates by themselves would shift signficiant demand from the public to the private health sector," says National's health policy.

About 1.4 million New Zealanders – a third of the population – have private health insurance, compared to half the country 20 years ago.

There has also been a shift from comprehensive cover to surgical and medical procedures cover.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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