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Monday, 23 November 2015
Page: 13352

Dr GILLESPIE (Lyne) (21:14): I rise to talk about private health insurance, tax and federation. As our nation participates in a lively discussion about how to improve our tax system and federation through wide-ranging reform, it is also very important that we take into account one of the biggest challenges facing the nation—that is, how to fund our health system. The health system is at the nexus of that federal-state fiscal interplay and, at the heart of this, is the private health insurance system.

Private health insurance is currently held by only 47 per cent of the population, which, in itself, challenges the community rating principle. Yet one-third of the people who go into a public hospital have a significant part of their care paid for by private insurance rebates. At the moment the federal government is acting as a major self-insurer for the health system. It underwrites the Pharmaceutical Benefits Scheme, the Medicare Benefits Schedule and the activity and risks that occur in the private hospital system. It gives grants to the states to run their hospitals, but it also gives a private health insurance rebate because the Medicare levy does not cover all the costs of Medicare.

Our role as a government is to make sure that there is a health system. But, in an insurance sense, the federal government is taking the majority of the risk. I would like to see the majority of the risk moved from the federal government to both the states, who are equally responsible, and the private insurance products. But there are problems with private insurance. It is a train wreck happening in slow motion. The very affordability of private health insurance is being challenged by increasing premiums due to the costs of healthcare technology and community expectations.

There is a massive increase in the number of exclusionary products—that is, insurance products that insure you for everything except the things that cost a lot of money—which, in itself, challenges the value proposition for most people holding the insurance, so more of them are dropping out. In the lead up to the changes in the rebate, there was a rush of people forward-purchasing their health insurance for a couple of years and those people have now reached decision time again. I suspect, judging by past behaviour, that more people will drop out of private health insurance, which will then challenge the community rating principle.

We need to look at other ways of increasing private health insurance, because having more people holding private health insurance will improve its affordability and instil the community rating principle. At the moment, while the community rating principle results in money going into the insurance pool, the people or health funds that are initiating risk-reducing activities are not getting the full benefit of it. But if everyone held private health insurance it would, by its very nature, deliver that benefit across the spectrum.

We need to look at innovative ways of delivering a viable private health insurance industry. If we do not and it collapses, 100 per cent of the risk will return to the federal government. What I am suggesting is that we need to increase the strength and viability of private health insurance so that we are not taking all the risk ourselves. Things that we must consider include making health insurance a legitimate cost for a family to claim as a tax deduction and introducing innovative products like annuities, where you can pre-purchase care and have the funds for that care held either by an insurer or by other bodies that are prepared to take the risk, much like a bond for going into a nursing home. These issues need to be addressed; otherwise we will find that in two or three years time the number of people holding private health insurance will drop beyond the stage where it is a viable solution for funding health care.