Have low income earners been ‘punished’ by changes to the private health insurance rebate? > Check the facts

Who: “Now, the thing about private health insurance is it’s lower income people that work really hard to hang onto their private health insurance, because it gives them choice and it gives them a sense of security about their healthcare. And they’ve been punished by a lot of changes that Labor has made.” Shadow Treasurer, Joe Hockey.

The claim: Low income earners have been ‘punished’ by Labor’s changes to the Private Health Insurance Rebate.

The facts: Prior to July 2012 the Private Health Insurance (PHI) Rebate applied to all people with private health insurance and the Medicare Levy Surcharge was waived for those with private health insurance.

The changes to the PHI rebate in July 2012 only affected people with taxable income above $84,000 and families with incomes above $168,000.

In the year 2012-13 the rebate was phased out for singles earning $84,000 or more and stopped  when income reached $130,000. For families the rebate was reduced for incomes over $168,000 and reached zero at $260,000. Those cut off points have been indexed and are now $88,000 to $136,000 for singles and $176,000 to $272,000 for families. In each case the family thresholds are double the single thresholds.

The Medicare Levy Surcharge was also phased back in over that income range.  For the full details click here.

The finding: Low income earners are unaffected by the changes to the PHI rebate and the Medicare Levy Surcharge.

Discussion of evidence: The Australian Tax Office publishes taxation statistics showing that 85 per cent of individuals who submitted returns had a taxable income of less than $80,000 in 2010-11, the latest year available. Since only 15 per cent earned more than $80,000 and so it is unlikely that many more would have earned $84,000 by 2012-13.

The median taxable income in 2010-11 was $49,100.

‘Low income’ is a vague concept, but it is clear from the tax office figures that the means test on the PHI rebate and Medicare levy surcharge puts the changes well beyond any reasonable definition of low income earner.

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