From 1 July 1997, the Federal government offered means-tested subsidies of up to $450 p.a. to Australian families taking out private health insurance, and imposed a tax surcharge on high income earners without such insurance. This initiative had apparently little effect on private health insurance coverage, which continued its long-term downward trend. In the June 1997 quarter, 2,116,000 persons (32.1 percent) in NSW were covered by private hospital insurance, but this declined to 2,021,000 persons (30.2 percent) by December 1998 (PHIAC, 2003). In January 1999, the subsidy component was extended to a 30 percent rebate on premiums which was not means tested, with the tax surcharge being retained. This seemed to provide only a modest stimulus to the Lflcidence of private health insurance coverage, which rose steadily to 2,211,000 persons (32.6 percent) by March 2000.