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Tuesday, 9 September 2003
Page: 14650


Senator ALLISON (4:29 PM) —The Health Legislation Amendment (Private Health Insurance Reform) Bill 2003 amends the National Health Act 1953 and the Private Health Insurance Incentives Act 1998. Part 1 of schedule 1 of the bill will decrease the regulatory burden surrounding health fund product design. Currently health funds are required to seek approval from the Department of Health and Ageing for all changes to rules and/or products, no matter how insignificant. The bill will replace that process with a system of monitoring and enforcement through the establishment of a series of performance indicators designed to ensure that changes are consistent with government policy objectives and maintain the principle of community rating. Part 2 of schedule 1 of the bill provides the Private Health Insurance Ombudsman with increased powers to investigate complaints and resolve disputes. Lastly, part 4 of schedule 1 of the bill will make a number of minor changes to the Lifetime Health Cover regulations.

It is important to have a health system that is responsive to community needs, provides incentives to doctors to excel and innovate and, above all, has some ability to take the overflow from the public system. Therefore it is important to recognise that a mixed system of health can be useful and enhance quality. However, we should recognise that health is not, as Mr Graeme Samuel suggested in a paper to the National Competition Council, a free market. The public good of having healthy neighbours, healthy fellow travellers and healthy workers is immense, but as important is the sense of our values as a community. Do we, in our fairly wealthy nation, believe that all of us, irrespective of our income, should have access to good quality health care? The Australian community has made it clear that this is indeed a core value and that Prime Minister Howard should have made Medicare and public health a core promise that he would keep. Instead, we are expected to believe, as Mr Howard and the Minister for Health and Ageing, Senator Kay Patterson, dismantle our public health system in favour of a market-driven private system, that somehow this equates to the Australian value of egalitarianism in health care.

Obviously it is important to have a good functioning private system as long as the purpose of that private health system is clear and the policy is coherent. In fact, we do not have clear goals for the private system, merely a confused morass of policies where sometimes the aim is to produce competition; hence we get the rhetoric of choice. And sometimes the aim is to take some overflow from the public system; hence the rhetoric of relieving pressure on the public system. At the same time that the government is trying to introduce more market signals through price in the public system it is also bending over backwards to control and regulate price and access in the private sector. Since the government has a 30 per cent investment in private health insurance, insurers have effectively become agents of Commonwealth health policies and insurers have been forced by government to limit the blatantly junk benefits in their ancillary products. Their premium increases are effectively controlled by cabinet and the minister has made it clear that management expenses are an issue that she is going to monitor.

In this regard it is interesting to note that in this year's health budget one of the most significant increases in spending is in Public Service administration. It increased from an estimated $778 million in 2002-03 to $884 million in 2003-04. That is a massive 13 per cent increase in administration. This is an increase of $106 million—and that is about half of the program budget for Aboriginal health, for instance, or more than the necessary budget for the childhood vaccinations, which have not been funded this year. This is an enormous increase and it would be absolutely hypocritical if the government were to criticise insurers for their seven per cent increase in premiums, two-thirds of which will be redistributed as benefits. I think this also demonstrates the value of the Senate: the ability to scrutinise government and its workings to ensure that power is used sensibly and that at all times taxpayer money is used for the good of the Australian community rather than wasted on a bureaucracy that is more and more being used to prop up the government in effectively a very inefficient public relations institution. I mean in no way to cast aspersions on the thousands of very professional and hardworking public servants but rather to criticise the purpose for which many of them are being used.

Inefficiency is something that the minister has expressed concern about. Her press release of 2 April last year signalled her concern about the efficiency of the private health insurance sector. She said:

The review will consider ways of ensuring that health funds are as efficient and as competitive as possible to continue to deliver affordable premiums to members ... I have announced my review to ensure that health fund members continue to get maximum value for money from their 30 per cent discount on health fund premiums.

On 11 September she announced reforms to the private health insurance regime that would `make private health funds efficient and competitive, with the aim to deliver better value for money to fund members'. I think we can ask why, in the explanatory memorandum of the bill that we have before us, it is said that there are no significant financial implications for the Commonwealth. It appears that this is a result of six months work by a high-level task force—according to the first press release—but there are absolutely no financial implications. We might ask: what exactly is the importance of this legislation? What was the cost of this high-level task force and why did we have to have it? Does this mean that there are no efficiencies to be made or that the government decided that it was all just a bit too hard? Is it just another example of the government being unable or unwilling to take on business rather than consumers as a source of savings? I think this is symptomatic of the government's progress to date in all areas of health.

Cost shifting to consumers has become an art form—one that is not shared by the Democrats—as a legitimate means of saving money. A more sensible and popular form of saving would be to remove the Lifetime Health Cover and to means test the private health insurance rebate. It is likely that immediately this would free up $500 million when the so-called `grudge purchasers'—who have been frightened into funding a system they would really prefer not to use—drop out of private health insurance. This would work wonders in freeing up taxpayers' money to be utilised for providing access to primary health care or dental services, to name two. The Democrats have found widespread support for reform of the primary health care system. The ideas that we floated with regard to the Commonwealth's providing walk-in, walk-out infrastructure to rural GPs, multidisciplinary health centres and different funding mechanisms have all been warmly received by many health policy and economic policy experts.

In contrast, in the public hearings of the Senate inquiry into Medicare there have been extremely few supporters of either the Medicare package or the private health insurance rebate in terms of the provisions of equitable access to health care. If we accept that this bill does not produce any savings to the Commonwealth—and that means no reductions in outlays for the 30 per cent rebate in out years—what does this bill provide for consumers, insurers or hospitals? It appears that the government has decided that the principle of community rating should be retained, despite its erosion through the implementation of Lifetime Health Cover. Let us remember that the principle of community rating predates Medicare. It was introduced in the 1950s, I understand, to ensure a flat rate of payment to health insurance as a means of ensuring access to health care for the poorer members of our society. However, Medicare went one step further by funding a public system through the income tax system. It is more progressive and ensures that the wealthy pay a higher proportion of income for their own care as well as subsidising the poor.

This is what makes a mockery of the government's claims behind closed doors that Medicare is middle-class welfare. In fact, the middle-class are the group who pay for it. They typically fund not only their own care but that of the elderly and the poor as well. There is less reason to retain community rating as a principle when Medicare has replaced private health insurance as the core and fundamental funding mechanism for access to health services. Already we see that the principle of community rating is outdated. There is no reason to strengthen it in our view unless, of course, what this government intends to do is dismantle Medicare and return to private health insurance as the main funding mechanism for health services. This is a very real scenario and one that the Democrats are not prepared to countenance.

The Democrats did not support the passage of the 30 per cent rebate bill in 1998 and we do not support it now. We have heard in this place about the politicisation of the Public Service. In the case of private health insurance, the regulator of the insurers is also the policy adviser to the minister, which I think blurs the boundaries considerably, leaving the industry at the mercy of unpredictable political decisions. Now we have direct involvement by the minister in the administration of operational issues that affect the industry. In this bill, the minister is granted considerable discretion in determining whether insurers should be disciplined, as well as the powers to refuse loyalty benefits dependent on management expenses. There are no guidelines provided as to what the parameters are for the minister's discretion.

This government seems to have real problems deciding whether it wants a free market or a nationalised industry. Irrespective of that, I believe that greater transparency is important in this $2.3 billion investment by taxpayers. Taxpayers and industry should be able to see where the intervention of the minister and the Public Service occur and for what reasons. Perusal of the private health insurance web site and the Department of Health and Ageing's circulars reveals an extraordinary lack of guidance by the department in terms of how they interpret in operational terms the regulations for private health insurance. In stark contrast to other agencies with regulatory powers, such as the Australian Taxation Office, there is absolutely no information on how the department interpret the law. I do not believe this should be allowed to continue, given the size of the government investment and the lack of certainty this provides to insurers, hospitals and manufacturers. At best there appears to be a conspiracy of silence.

I will therefore be moving amendments to make more transparent the operation of the Department of Health and Ageing and the minister with regard to the operation of private health insurance. If indeed the insurance industry is effectively an instrument of government policies then the Democrats want the interventions of the minister and her department available for scrutiny. I will also be moving a second reading amendment which calls on the government to study the replacement of the 30 per cent private health insurance rebate with a capped and means tested rebate in line with the Private Health Insurance Incentives Scheme previously in place and the removal of the Lifetime Health Cover age loading on premiums. I move:

At the end of the motion, add:

“but the Senate accepts that while private health insurance will continue to be important in people's health choices should they wish to pay for it, it calls on the Government to limit the use of taxpayer subsidies of private health insurance by:

(a) replacing the 30 per cent private health insurance rebate with a capped and means-tested rebate in line with the private health insurance incentive scheme previously in place; and

(b) removing Lifetime Health Cover age loadings on premiums”.