The Australian government is likely to start means testing the private health care rebate (i.e. subsidy).
I think that’s sensible — I generally support means testing of almost all government services — but it still makes me twitchy:
It amounts to saying that high-income households are free to choose how to spend their money, but for middle- and low-income households we’ll change relative prices so they’ll have an extra incentive to buy product X.
It’s analogous to food stamps in America — we don’t trust you to spend this welfare money on what we think you ought to spend it on, so we’re going to force you.
This is a problem of means testing in general, but I think it’s nevertheless worthwhile for three reasons:
(a) It helps minimise government expenditure;
(b) It avoids middle-class welfare, which I find fundamentally distasteful; and
(c) It provides an alternative mechanism of progressivity independent of the tax code, thereby permitting flatter (and, hence, simpler) taxes.