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Monday, 3 March 1997
Page: 1140

Senator BROWN(8.35 p.m.) —The aim of the government in this bill is to reverse the decline in the private health insurance system by giving a subsidy to low and medium income earners towards the cost of private health insurance and by penalising high income earners without private health insurance by a one per cent surcharge on the Medicare levy. There are some problems at the outset with the implementation of this scheme.

Firstly, income thresholds are not graded and this will lead to significant marginal tax rate effects. Secondly, income thresholds are not indexed, so the numbers of lower income earners eligible for the subsidy will decrease over time and those higher income earners subject to the surcharge will increase. Thirdly, people who self-insure are not eligible for the subsidy or to be exempted from the surcharge. That is, the bill pushes people from self-insurance into the private health funds.

What is the likely effect of this? Currently about 33.3 per cent—one in three—of the population is covered by private health insurance. Significantly, as other speakers have said, this is a halving of the percentage, two-thirds of the Australian populace having been covered in 1983 before Medicare was introduced.

What will be the effect of this stimulus for people to join private health insurance? It is estimated that it will be very limited. The coverage due to these bills may be increased by two per cent or three per cent, or, according to the Productivity Commission, at the high range, 5.2 per cent in the percentage of people who have private health cover.

Some points need to be made about the issues in this legislation. Firstly, Medicare is popular, that is very clear, and the declining membership of private health funds is not necessarily a problem—except, of course, to the profit line of the private health funds and to the wellbeing of those funds themselves.

The cause of declining membership of those funds, besides Medicare being as popular as it is, has been pointed to by earlier speakers. Firstly, there is a high level of out of pocket payments for doctors' fees during hospital treatment, and then there is the rapidly increasing premiums themselves. I think anyone who has got an acquaintance with this system can instance some stories like those referred to by Senator Carr. People have gone to their health fund expecting to get 70, 80 or 90 per cent of their money back, thinking that they would be covered under private health insurance for doctors' services, and they have found they were getting less than 20 per cent of the amount of money expended. So they immediately throw their hands up in the air and say, `What is the point? I am paying $250 or $300 a quarter'—that is for single people; it is much more for families. `Where is the benefit in paying $1,000, $2,000 or $3,000 a year if I am not going to get most of the cost of my health care returned?'

There is a fear that as more people drop out of the private health funds they will place an increasing burden on public hospitals. But that fear is not well founded and certainly has not been well tested. While everybody agrees that public health systems are creaking and groaning in most areas of the country, the change in the percentage of people with private health cover has not led to the end of the world as far as our health systems are concerned. A significant number of people are choosing to self-insure: 15.6 per cent of patients who go to private hospitals, for example, and 42.7 per cent of those using private day surgery. I reiterate that those folk are going to face a heavy disincentive as a result of the legislation now before the Senate.

To the extent that declining levels of private health insurance are a problem for public hospitals, this ad hoc package of incentives and penalties will not solve the problem because it does not solve the structural issues which are causing such pressure on public hospitals in this country. Direct and explicit subsidies for private health insurance are new and the money could be better spent on other more urgent priorities in the health care field.

The cost of the subsidy inherent in this legislation is over $600 million per annum once the scheme is fully implemented; it will be $1.7 billion over four years. That compares with a total expenditure on health of $38 billion, of which $4 billion is through private health funds. They are a pretty small component of overall expenditure. So the government is now proposing to contribute directly a sum which amounts to 15 per cent of current health expenditure through the private system.

The $600 million per annum could be better directed to community based health improvement programs rather than directly subsidising the private system. That will be very clear to people who have had much to do with the health delivery system in this country. Maintaining and strengthening the public health system allows the government to directly address causes of ill-health. If you look at the example of air quality, you see that in Melbourne 20 per cent of asthma attacks are related to ozone from traffic, as are a significant proportion of the 300 deaths from respiratory problems associated with particulates which are generated from traffic, basically coming out of the exhausts of vehicles in the inner city region.

What could $600 million per annum or $1.7 billion over four years do to ameliorate those statistics? A heck of a lot. There are so many ways in which primary health care could be boosted by this huge amount of money which instead the government is using to try to boost the private health insurance industry.

In summary, the Greens support the Medicare levy surcharge. We oppose the link to private health insurance, which cuts out self-insuring people. I need to just say here that it is a tax—a tax on higher income earners. I do not cavil at that, but I think the money is being hypothecated across to the private health system and it ought not be. It is stimulating the private health system. The government would be better putting the money from the surcharge, as well as the incentive from the levy, into generating a better public health system and into taking some of the pressure off the public health system that we currently have.

We oppose the private health insurance subsidy. So there it is. On the final summary, we oppose the subsidy because it is good government money basically being given across as a stimulus to the private health system instead of going into the public health system. Let me say that again. We oppose the subsidy—

Senator Neal —I think you got it right.

Senator BROWN —Yes, I did. Thank you, Senator Neal. We oppose the subsidy and we believe that the Medicare levy surcharge is the wrong way to be going.