So currently, if you earn more than $50,000 you get charged an extra levy if you don’t take out private health insurance. That income threshold is set to double next week. Suffice it to say, that will reduce the incentive for many households to take out private health insurance. It is like a tax cut except that some households will also be deciding to save themselves insurance premiums while the government will have to deal with some extra costs from them.

The interesting thing is why it was done? Clearly, for the households affected, to not have a levy held to their wallet when they make insurance purchase decisions is valuable. But there doesn’t seem to be a huge amount of political capital in this. Unless of course you were thinking of reforming the entire health insurance system in the future.

In that case, one thing you would want to know is: what is the elasticity of demand for private health insurance? By increasing the income threshold, you can pretty much calculate that for every household you identify that drops private health cover. If it turns out that that number is small, then maybe bigger reforms are possible. If it turns out that that number is really large, maybe bigger reforms are too costly. So this could all be about gathering information to pave a path to future reform; something I, for one, think is long overdue.