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This article examines the likely effect of the 30% private health insurance rebate on private health insurance coverage. It is based on a survey of the Australia population conducted in April-May 1999 which collected information on health insurance purchasing behaviour and intentions. These data are used to predict the subsidy's likely effect on hospital insurance coverage, with estimates ranging from 30.5% to 34.3% by May 2000. Ancillary insurance membership is forecast to increase to between 32.7% and 37.2% of the population over the same period. The 30% insurance rebate will probably produce, at best, a small increase in hospital insurance membership. The cost of the rebate is estimated at $1.4 billion in 1999-2000. Given the small increases in projected membership, the cost of the initiative is very high.

The effect of the 30% private health insurance rebate on the purchasing behaviour and intentions of the Australian popula