Senator LEES (2:25 PM) —My question is directed to Senator Herron in his capacity as the Minister representing the Minister for Health and Aged Care. Given the recent admission by the government that there is at least a $500 million a year blow-out in the cost of the private health insurance rebate, will the government respond to calls by Dr Brand, President of the AMA, to cap funding of this non-means tested rebate scheme? How can the minister justify the government's capping of vital pathology, radiology and general practice services while it continues to pour money into this uncapped, non-means tested private health insurance scheme?

Senator HERRON (Minister for Aboriginal and Torres Strait Islander Affairs) —The government is very proud of the action that it has taken to increase the number of people that are taking out private health insurance. As you well know, under Labor those levels fell to below 30 per cent. It was promoted by the previous minister for health in the Labor government that it should fall no lower than 40 per cent to allow for the viability of the public hospital system. That is on the record. Under Labor it fell below 30 per cent. We have taken action, through the 30 per cent rebate, to enable those numbers to increase. They are at a record level.

Senator Robert Ray —What's the percentage?

Senator HERRON —It is the fastest rise in 19 years, Senator Ray. Any increases in the estimates of the cost of the 30 per cent rebate simply mean that more people have taken out private health insurance or have upgraded their cover. There is no other alternative. Senator Lees shakes her head, but they have either upgraded their cover or taken out private health insurance. We have done more for the preservation of Medicare and the public hospital system by enabling people to take out private health insurance. It is an equilibrium that must be achieved. It was destroyed by Labor and that was the reason the problems occurred with the public hospital system of this country. It is fantastic news that this has occurred. It has been great.

Senator Robert Ray —What percentage is it now?

Senator HERRON —It is 31.7 per cent, Senator Ray. It has risen. That figure is adjusted for those people who are eligible for gold cards from the Department of Veterans' Affairs by excluding them from the Australian population. It is a series of many reforms that this government has introduced to ensure a stable and sustainable private hospital sector. The opposition statements regarding the rebate are quite misleading, as usual. We get an allegation a day about something or other that is refuted the next day. That is par for the course. We got into this terrible situation in this country after 13 years of mismanagement by Labor. We are doing something about it. We are showing that we are increasing the number of people taking out private health insurance.

Senator Lees mentioned means testing the rebate. Everybody in this room is taxed for Medicare. We pay a levy if we do not take out private health insurance. Now they are calling for a means test on it. There is no point introducing a means tested system. It would be very complex and would drive away many people from the private health insurance scheme. Means testing was a key element of the former private health insurance incentive scheme. Under this scheme membership decline slowed from its peak in 1983-84, but it was still falling at a rate of between one and two per cent per annum.

The experiment was tried and it did not work. Means testing the rebate would do little more than replicate the problems that the private health insurance incentive scheme was unable to fix. It will not address the very real need to attract and retain middle to higher income people in the system in order to spread risk and reduce overall premiums. That is the real reason people leave the private health insurance system. Every survey has shown that it is the cost of private health insurance that drives people out and stops young people from taking it up.

The general public likes the rebate because it applies to all Australians independent of their income and because its cost covers all membership types. You will recall during estimates that the cost of the rebate was estimated to be $1,617 million—that is $119 million higher than the previous budget estimate of $1,498 million, an eight per cent increase. So there is no great drama; it is an eight per cent increase.

Senator Robert Ray —Next year $2.1 billion and you know it.

The PRESIDENT —Order! Senator Ray, you have been persistently interjecting.

Senator LEES —Madam President, I ask a supplementary question. The minister mentioned in his answer that means testing had not worked, but the minister must agree that means testing has never been tried where you have a levy penalty and where you have lifetime community rating. I ask the minister to provide evidence that we are in any way assisting Medicare. Can you actually support your claim that this is reducing any pressure on the public hospital system and can you supply the data that would justify the spending of $5,000 per head for every new member who has joined a private health insurance fund?

Senator HERRON (Minister for Aboriginal and Torres Strait Islander Affairs) —Senator Lees—and I acknowledge her knowledge in this field—is aware that we have a rapidly ageing population and we have increasing technology and demands made on the system. It is inevitable that there will be increasing costs on the public hospital system. We as a government have provided 25 per cent more money to the public hospital system. Under the new Medicare agreement we have provided 25 per cent more than occurred under the previous Labor government. That is the evidence that Senator Lees asked for. It is on the table. We have provided it. It should be evident to her and I am surprised that she is not aware of it.