Introduction

The Australian prime minister, John Howard, has engineered a major expansion in private healthcare insurance and been re-elected. The electorally popular Medicare provides universal coverage for free public hospital treatment, out of hospital medical services, and pharmaceuticals. Private insurance is limited to private treatment in hospital and some ancillary services, including dental care.1 Yet the two decade trend of falling insurance cover has been reversed, and over three years the proportion of the population insured grew from 30% to 45%.2 What can the leader of the British opposition, Michael Howard, and other European conservatives learn from an Australian colleague who has deliberately sought to enhance the role of the private sector?

Australian health service

John Howard and the Liberal party have been opposed to Medicare since its introduction in the early 1980s. In 1996, when the Liberal party was returned to government, it promised to maintain Medicare while strengthening private insurance. In fact, government policy has supported private health insurance. It introduced a 30% subsidy of the cost of premiums, which has been associated with a growth in use of private hospitals, private dental care, and other ancillary services while public hospitals and general practice, essential components of Medicare, faced growing difficulties with increased waiting time for hospital care and growing gaps between the cost to patients of primary care and Medicare reimbursements.3 4

The Australian private health insurance industry is heavily regulated; only approved insurance funds can offer health insurance, insurers (generally) are obliged to take all comers, premiums are community rated (that is, individuals pay the same rate regardless of their individual risk), and premium increases require government …