Dr SOUTHCOTT(1.26 p.m.) —The issue of compensation for people under public liability or workers compensation is an enormously complex area, and often it does not just involve one fund or one claimant. For example, in the case that the member for Hunter (Mr Fitzgibbon) mentioned—the case of Ms White—in the Private Health Insurance Complaints Commissioner report, one of the problems that emerged from that case was that there were three different entities that were publicly liable. It is an extremely complex area where a number of parties can be involved and not just the claimant. So, in any private member's bill or any piece of legislation, it would be difficult to put together legislation which would not be unfair and which would actually protect the health funds.

The member for Hunter mentioned that one of the problems with private health has been the declining levels of private health insurance. That is a problem which has concerned this government. The Productivity Commission inquiry report, which came out earlier this year, dealt with some of the problems for the decline in private health insurance. Despite the speech we have had this afternoon, I scanned through the Productivity Commission's report on private health insurance and it did not mention the issue of compensation once. I could not find it anywhere. I know the member for Hunter made a submission to the Productivity Commission on that subject. But, in actual fact, they documented that a spiral had occurred—a cycle. In that cycle, as premiums rose and payouts increased, you had adverse selection where the elderly and people who were more likely to make claims stayed in the funds while the young and fit and healthy pulled out.

They also said that there were almost two different periods in the Hawke-Keating government where, during the 1980s, several decisions were taken by the Hawke government in the period 1986 to 1988 which directly led to an increase in premiums. Those government decisions, the Productivity Commission estimated, were responsible for about 30 per cent of the increases in private health insurance premiums. Access Economics has estimated that those decisions increased the cost of premiums by 39 per cent. This was caused by things like removing the Commonwealth bed day subsidy, changing the Medicare rebate from 85 per cent to 75 per cent for inpatient stays, the 1993 Medicare agreements which encouraged public hospitals to increase their throughput of public hospitals and removing the Commonwealth contribution to the private reinsurance pool. All of those things led to an explosion in premiums in the period 1986 to 1988 of over 40 per cent.

More recently in the 1990s, as they documented, the major factor which has seen a rise in the premiums of private health insurance has been the increasing use of private patients of private hospitals. That is responsible for something like 30 per cent of the increase in premiums. Many people know, anecdotally, that private hospitals now offer a much greater range of services than they used to, and private patients are able to be seen in private hospitals. But that is a lot more expensive.

Returning to the private member's motion, it is important to realise that one of the problems this motion could create is the problem of double dipping. In the area of Medicare benefits and nursing home benefits, it was noticed by the previous government that double dipping was a particular problem whereby people would be paid Medicare or nursing home benefits but had actually received compensation and not reimbursed the Commonwealth.

The member for Brisbane (Mr Bevis), when a parliamentary secretary and speaking on the Health and Other Services (Compensation) Bill 1994, referred to double dipping and a review of the relationship between compensation and health and community service programs which found that many people receiving compensation designed to meet the full cost of injury related, medical and other care needs do not reimburse the Commonwealth. They double-dip by receiving free or heavily subsidised services funded by the Commonwealth as well as compensation for the full cost of those services.

The member for Hunter also mentioned the complaints commissioner. Regarding the specific recommendations of the complaints commission, the commissioner suggested, as the honourable member mentioned, that health funds should be required to pay benefits for the treatment covered by damages and compensation rights as long as the members concerned enter enforceable undertakings with the health funds to take reasonable steps to pay back the money eventually. Repayment would occur if and when the claims for damages or compensation were finalised successfully.

In a letter to Ms Perrett, Russell Schneider, the Chief Executive Officer of the Australian Health Insurance Association, responded that the comments about compensation need to be seen in the light of a longstanding industry dispute involving compensation insurers, Medicare and the legal profession in relation to sweetheart compensation deals. Sweetheart deals have been a longstanding problem in the area of compensation. In sweetheart deals lawyers agree not to pursue medical damages if the fund has already paid. That puts the claimant at a disadvantage when they find that neither Medicare nor the fund wish to pay for the liability for which another insurer, the compensation insurer, has charged a premium.

Effectively, this motion is asking private health funds to act as a bank in cases where, for example, a work cover insurer has already accepted a premium on the guarantee that they will pay out in the case of a workers compensation liability or a public liability insurer has received a premium on the guarantee that they will pay out in the case of a public compensation liability, and pay for something that the public liability insurers or the work cover insurers have already accepted a premium for.

I have a lot of sympathy for the constituents mentioned by the member for Hunter and the constituent from the electorate of the member for Charlton (Mr Robert Brown), but it needs to be remembered that these cases are not typical. Most compensation cases are resolved quickly. In actual fact, if there are any out-of-pocket expenses, more often that rests with the hospital or the doctor concerned in that the bills are often made directly to work cover or to the insurer.

Another issue that this motion raises is whether we can do it. Under the National Health Act we have very wide powers to legislate for private health insurance, but the issue of compensable schemes and compensation has always been recognised as a matter for the states and it is generally a state government responsibility. Things like workers compensation and so on are administered through public hospitals.

One problem I have with the motion is that forcing the funds to pay for a compensable injury could be another factor leading to further premium rises. I know that the member for Hunter outlined in a previous speech on the Private Health Insurance Incentives Bill his concerns about private health insurance premiums rising. We are looking at trying to constrain the amount by which premiums rise. Any premium rise has to be approved by a committee consisting of the Prime Minister, the Treasurer and the health minister. Health funds have been told they cannot raise premiums just to go onto their bottom line. They have to be for the specific purpose of topping up their reserves.

Regarding some of the cases we have heard about, including that outlined in the complaints commission report, court hearings can be extremely protracted in this area. That is where there is a problem. As the member for Hunter recognised, the funds do have the discretion to make a payout if they wish in those circumstances. If people are concerned that this may be a problem, they should, as with most things, shop around. Most of the funds do not offer insurance payments—(Time expired)