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Monday, 13 February 2012
Page: 882


Mr FLETCHER (Bradfield) (17:03): I am pleased to speak on the Fairer Private Health Insurance Incentives Bill and related bills. The House is debating a simple, clear-cut issue—should the Australian tax system encourage all Australians, or as many who are able, to provide for their own medical expenses through taking out health insurance, or should it instead, as this government proposes, put private health insurance and choice of medical provider even further out of the reach of many Australians? Regrettably, that will be the effect of the fundamentally misconceived provisions in the bills the House is debating this afternoon.

When it comes to private health insurance, Labor has form. Labor is relentlessly hostile to private health insurance. Labor is hostile to private hospitals. Labor is hostile to the notion of Australians seeking to rely on their own resources, seeking to make provision for themselves and their families rather than relying solely and exclusively on the public system. This bill is redolent of ideological hostility towards private health insurance and towards self-provision, which is at the absolute core of Labor's approach. That is why this bill is designed to make it harder for Australians to help themselves and their families. This bill is designed to make it more expensive to take out private health insurance; it is designed to penalise many of those who seek to provide for themselves rather than be a burden on the public purse.

Let us remind ourselves of the principal provisions in the Fairer Private Health Insurance Incentives Bill. Firstly, the current private health insurance rebate, which for most people is set at 30 per cent of expenditures and for older people somewhat higher, will be reduced for those who are above certain income levels. If you are a single and your income level is more than $124,000, the rebate will be reduced to zero; if you fall into certain income levels below that, the rebate will be reduced by lesser amounts. The second major provision in this bill increases the current Medicare levy surcharge on your tax bill which applies if you do not have private health insurance. Today that stands at one percentage point; in the new world, should this bill pass the House, that rate will increase to 1.25 per cent for a single person with an income above $93,000 and 1.5 per cent for a single person with an income above $124,000. We have had some highly illogical and internally inconsistent arguments in support of this measure. Just today in the House the Prime Minister drew a comparison between a highly paid businessmen earning $500,000 a year and an apprentice earning much less, and argued that, in the absence of the measures contained in this bill, there is an unsavoury degree of cross-subsidy on the part of the apprentice to the businessman, who has the benefit of the private health insurance rebate. A brief look at the numbers indicates what a ludicrous claim that is. In the case of the businessman cited by the Prime Minister, the tax on $500,000 is $206,050, prior to the application of the rebate. If we assume a typical level of private health insurance premium then that tax bill will be reduced by a mere $720. By contrast, somebody earning $50,000 will have a tax bill of $10,200. So the suggestion that, in some way, the person paying $206,050 a year in tax is freeloading on the person paying $10,200 in tax, which was essentially the argument put by the Prime Minister in the House, is self-evidently not worth considering when you take even the briefest look at the actual numbers.

I want to make three points in the time I have available. Firstly, the measures inherent in this bill fundamentally attack the provisions of the private health insurance rebate and are an appalling abandonment of what was apparently previously an ironclad commitment. Secondly, for many years we have seen from the Labor side of politics a consistent mismanagement of policy in the area of private health insurance, founded on their implacable ideological hostility to the private health insurance industry. Thirdly, the ill-designed and ill-thought-through measures in this bill will seriously damage choice and equity in health care in Australia.

On the first point, I remind the House, as a number of other speakers have done, of commitments that were made in the lead-up to the 2007 election by a number of eminent members of the Labor Party. The member for Gellibrand had this to say: 'On many occasions for many months federal Labor have made it crystal clear that we are committed to retaining all of the existing private health insurance rebates, including the 30 per cent general rebate and the 35 and 40 per cent rebates for older Australians.' Then it was a commitment; now, apparently, that commitment is out the window and completely meaningless.

What did then opposition leader Kevin Rudd have to say just before the 2007 election? In a written commitment, a letter to the industry body, he had this to say: 'Both my shadow minister for health Nicola Roxon and I have made clear on many occasions this year that federal Labor is committed to retaining the existing private health insurance rebates, including the 30 per cent rebate and 35 and 40 per cent rebates for older Australians.' This is a shameful abandonment of a commitment previously given by the Labor Party.

My second point is that the policy area of private health insurance is one which has been subject to consistent mismanagement over many years by Labor during its times in government, and by contrast the coalition has shown a sure hand in seeking to maximise the number of people who take out private health insurance and thereby contribute themselves towards the cost burden of the health system, which would otherwise fall entirely on the public purse. When Medicare was introduced in 1984, a decline began in the percentage of the population covered by private health insurance. By 1998, only 30.4 per cent of the population was covered by private health insurance. I need hardly add the obvious point that this left the vast majority of Australians drawing on the publicly funded system, putting it under substantial pressure.

The Howard government, I am pleased to say, unlike the approach of the present government, tackled this pressing policy problem with measures that were well designed and which achieved their desired outcome. The desired outcome of course was to increase the proportion of Australians with private health insurance cover—that is, to increase the proportion of people who were taking upon themselves the burden of funding their own health needs rather than simply leaving it to the public purse.

The measures introduced by the Howard government involved a mixture of carrot and stick. The carrot of course was the introduction of the tax rebate, which is now under savage attack in the legislation before the House today. The stick of course was that if you did not take out private health insurance above certain income thresholds, you were required to pay the one per cent Medicare levy surcharge. Those measures were extremely successful. By 2007, private health insurance coverage had climbed to 44.6 per cent of the population. In my own electorate of Bradfield, 85 per cent of households have private health insurance. In other words, a very substantial proportion of the people in my electorate of Bradfield have taken the decision to incur, out of their household budget, expenditure against their future health needs because they want to make sure that they are doing what they can to provide for their own health needs and the costs of those health needs rather than simply leaving it to the public purse to support their health needs. I commend them for doing that.

Let me turn therefore to my third point and perhaps the one which is most important, as the House considers this package of measures. What will be the impact of this legislation on the policy objective of choice and equity in the Australian healthcare system? I am sorry to say the effect of these measures will be very damaging. Some 2.4 million Australians are directly affected and they face an immediate increase in premiums, depending upon which tier they fall within, of between 14 per cent and 43 per cent. In turn, it is likely that there will be a material reduction in the percentage of Australians who hold private health insurance. Conversely, there may also be people reducing the tier of insurance they hold. Private health insurance premiums are likely to rise and the inevitable consequence will be more pressure on the public health system and more pressure on the public purse which funds that public health system.

Analysis by Deloittes, which has been cited by a number of speakers in the House this afternoon, predicts that some 1.6 million consumers are likely to withdraw from private health insurance cover, a number which is very, very different from the panglossian assumption in the work done by the Treasury that a mere 25,000 people will give up coverage. The further issue which presents itself is that the dollars which are purportedly saved out of this exercise must be offset against the extra cost which the government and in turn taxpayers will be required to bear towards the cost of the public health system. According to research conducted by Econtech and other parties in 2004, for every dollar of public funding going into the private health insurance rebate $2 was saved—that is to say, $2 towards the cost of the health system that was met by private health insurers, rather than being required to be paid out of the public purse.

Many of the arguments that have been made by the government in favour of this measure do not bear up to close scrutiny. It is claimed to be a savings measure, but in real terms it is in fact a tax increase, because Australians above a certain income tax threshold who do not take out private health insurance will now face a further increase in their income tax rate, which could be as high as one per cent or 1.5 per cent. This in turn creates what might be described as a price shield for private health insurance premiums, as the eminent economist Henry Ergas has argued in the Australian newspaper today, and the consequence of that is that there will be an upward force on private health insurance premiums which would not have existed in the absence of the measures contained in this bill. The consequence in turn is that private health insurance will become increasingly unaffordable for a proportion of Australians.

When you step back and look at the overall impact of these measures, it is very difficult to avoid the conclusion that what the Labor Party is doing here is pushing us towards a two-tier health system in Australia, where the poor or the less well off are in the public system and the more affluent are being pushed into a private health insurance funded private system. That seems a very curious approach for the Labor Party to be taking. It is a profound attack on the principles of both economies of scale and equity that the public health system is supposed to deliver and it is one of the many curiosities of this deeply ill-conceived piece of legislation, which attacks fundamentally Australians who seek to provide for themselves.