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Tuesday, 14 February 2012
Page: 1083

Mr SOMLYAY (Fairfax) (12:02): I am pleased to be able to speak on the Fairer Private Health Insurance Incentives Bill 2011 and to say that I oppose it vigorously and passionately—as you yourself did, Mr Speaker, on the first two occasions this bill was presented. There is an article in today's Sunshine Coast Daily which says just that.

In the 2004 parliament, I was chairman of the House of Representatives Standing Committee on Health and Ageing and that committee carried out an inquiry into health funding in Australia. It was the most comprehensive examination of the public and private hospital systems ever carried out by this parliament. I tabled the report of the committee. It was called, of all things, The blame game: report on the inquiry into health funding. That is where the name 'the blame game' in relation to the health system originated. That report should have created a lot of interest and a lot of debate. However, I tabled it early one morning in late 2006 and, later on that morning, there was another significant event—the election of Kevin Rudd as Leader of the Labor Party. So the tabling of The blame game paled into insignificance and was largely forgotten. I do note, however, that the first two questions Kevin Rudd asked as Leader of the Opposition to then Prime Minister John Howard were based on quotations from The blame game about the public hospital system.

There is a fundamental principle of economics—if a government wants more of something, it subsidises it. If it wants less of something, it taxes it. The Howard government consciously decided that it wanted more people in private health insurance. It therefore introduced the rebate. I was part of that government, as were you, Mr Speaker. That rebate resulted in a dramatic increase in the number of people who took out private health insurance. In fact, in 2009-10, private hospitals treated 3.5 million patients. Private hospitals treat 40 per cent of all patients in Australia—a figure which was lower before the introduction of the rebate.

If that rebate is abolished, we will be doing the opposite of what I said—that is, subsidising something we want and taxing what we do not want. If we remove that subsidy, we will be telling people that we do not want them in private health insurance, with the result that the number of people who leave private health insurance will increase.

The main issue of concern in the electorate today is the cost of living. We hear about the carbon tax, the mining tax and the cost-of-living pressures that people are under. I cannot go into any shopping centre without someone raising the issue of the cost-of-living pressures they are under. The abolition of this subsidy, of this rebate, will only add to the cost pressures which people are experiencing right now.

It is not only those people on high incomes—those who will actually lose the rebate—who will be affected by the phase-out of the rebate. When there are fewer people in the system paying private health insurance, that puts the onus of the costs of private hospital cover—and so, effectively, the costs of the specialists who work in private hospitals—on fewer and fewer people. It is inevitable that there will be an increase in private health insurance premiums for everybody, not just the high-income earners, so that is a furphy.

As I said, this is the third time this parliament has considered this legislation. It was introduced in the last parliament despite explicit promises at the 2007 election that: 'Federal Labor has made it crystal clear that we are committed to retaining all the existing private health insurance rebates'. That was in a media release by the then minister, Nicola Roxon, in 2007.

The impact will be felt not just by high-income earners, as I said, who will incur a 43 per cent increase in their premiums; all Australians will face higher premiums in the future if these changes proceed. The coalition believes all Australians should have access to affordable health care and real choice in managing their healthcare needs. The coalition has strongly supported providing all Australians with choice through affordable private health insurance. As a result of the introduction of private health insurance rebates, the Medicare levy surcharge and Lifetime Health Cover under the previous coalition government—of which the member for Warringah, Tony Abbott, was a very good and effective health minister—private health insurance coverage increased significantly from 34 per cent in 1996 to 44 per cent by 2007.

Every dollar of funding provided for the private health insurance rebate saves $2 of costs that are then paid by private health insurers, according to private research. Private hospitals treat 40 per cent of all patients in Australia. In 2009-10 private hospitals treated 3.5 million patients. Private hospitals perform the majority—64 per cent—of elective surgery in Australia. Information that I have been given on Catholic hospitals by representatives of Catholic Health make it very clear that if this legislation is passed the result will be increases in the cost of private health insurance of up to 67 per cent for consumers aged over 65 who will lose access to the current 40 per cent rebate.

Research undertaken by Deloitte Access Economics for Private Health Australia, formerly the Australian Health Insurance Association, based on asking people how they would respond to these increases, found that these measures would result in:

1.6 million Australians will exit their private hospital cover (compared to Treasury estimates of only 25,000), with a further 4.3 million downgrading their level of cover

Private health insurance premiums will rise 10 per cent above what would otherwise be expected, making private cover less affordable for all Australians

Pressure on the public hospital system will increase as more than 845,000 additional treatments will be required as people withdraw from their private cover at an estimated cost to government of $3.8 billion.

Public hospitals are already struggling to meet their current workloads. The most recent data from the Australian Institute of Health and Welfare for 2010-11 shows public hospital elective surgery waiting times have increased by 12.5 per cent since 2006-07 from 32 days to 36 days. This has happened despite all the additional funding that the Commonwealth has provided to the states in recent years. The last thing the public hospitals need is additional demand from patients who were previously privately insured; it can only make this trend worse.

The AIHW's latest report on Australia's hospitals, for 2009-10, shows the significant contribution of the private sector to the health system: 41 per cent of hospital separations, or 3½ million out of 8.6 million in total, occurred in the private sector; in the last year, public patient separations increased by 1.9 per cent; private patient separations increased by 5.4 per cent; and separations for private patients funded by the private health insurers increased by 6.7 per cent. Between 1998-99 and 2007-08 overall separations increased by 37.3 per cent. Separations increased by 23.1 per cent in public acute hospitals and by 66.9 per cent in private hospitals, including freestanding day hospital facilities.

Private hospitals are an integral part of Australia's hospital system, including in regional areas and smaller states such as Tasmania. For example, many medical specialists in regional areas rely on their private hospital work to maintain a viable regional practice across both public and private sectors. If a reduction of private hospital separations threatens the viability of regional private hospitals, this in turn will threaten the viability of many regional specialist practices, leaving many regional communities at risk of losing access to even more medical services.

Treasury modelling has not taken into account the likely very large downgrading in policies held by the privately insured in response to large increases in premiums. Privately insured members subject to the Medicare levy surcharge can still avoid the surcharge by downgrading their membership in the comprehensive full-cover style of product to one subject to high excesses and exclusions from a number of conditions. The impact of many members downgrading, especially the younger and healthier members, will be a reduction in the money available in the total insurance pool and that will result in higher premiums down the track. This will adversely impact on the million privately insured members who earn less than $26,000 a year.

The new measures are very complex, with 10 levels of subsidy. The additional administration costs will total $69 million over five years, including $66.6 million to be spent by the Australian Taxation Office and $1.9 million by the Department of Health and Ageing. There will need to be additional matching administration resources deployed within health insurance organisations. Individuals will face an even more difficult burden in working out the bottom-line cost to them of selecting an appropriate health insurance product. Those who elect to receive their rebate through a reduction in premiums—the vast majority—and who underestimate their incomes will be subject to a significant tax bill at the end of the financial year.

The opposition vigorously and passionately opposes this legislation and we will fight to the last breath to defeat it.