The cost to government of the Pharmaceutical Benefits Scheme (PBS) is rising at over 10 percent per annum. The government subsidy to Private Health Insurance (PHI) is about $2.4 billion and rising. Despite this, the queues facing public patients — which were the primary justification for the assistance to PHI — do not appear to be shortening.

Against this backdrop, we seek to evaluate recent policies. It is shown that the reason commonly given for the support of PHI — the need to preserve the market share of private hospitals and relieve pressure upon public hospitals — is based upon a factually incorrect analysis of the hospital sector in the last decade. It is similarly true that the ‘problem’ of rising pharmaceutical expenditures has been exaggerated. The common element in both sets of policies is that they result in cost shifting from the public to the private purse and have little to do with the quality or quantity of health services.