The Commonwealth Department of Health has produced an Options Paper on how to reduce pressure on private health insurance by addressing the growth in the number of private patients who get treated in public hospitals. But in this response, Grattan Institute Health Program Director Stephen Duckett shows that the Paper is flawed in its conceptualisation of the problem, introduces a range of options which are not feasible, and fails to consider all the options for responding to the identified problem. He suggests the states should consider introducing a special income tax on private health insurers, to mitigate any loss to state revenues caused by unilateral Commonwealth action.