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Wednesday, 18 March 2009
Page: 1895


Senator HURLEY (1:14 PM) —In July 2008 the Senate Standing Committee on Economics undertook an inquiry into the government’s proposal to increase the Medicare levy surcharge thresholds. On completion of the inquiry the committee recommended the bill be passed, based on the premise that it was inequitable that an ever larger number of low-income Australians be forced to pay the surcharge or to purchase low-value private health fund policies. The committee found that there was unlikely to be a major impact on either private health insurance premiums or the public health system, and, whilst acknowledging that some Australians would indeed probably withdraw from private health insurance as a result of the legislation, this would not occur in such a way as to cause significant harm to a robust, competitive private industry sector.

The bill was passed by the Senate in October last year with some amendments, resulting in the thresholds being increased to $70,000 for a single person, and $140,000 for a couple, before the surcharge becomes payable—that is, single people can earn $70,000 a year before a Medicare levy surcharge is applied unless they have private health insurance. These thresholds had not been adjusted for over a decade. The bill returned the proportion of taxpayers impacted by these kinds of measures to the eight per cent originally captured when the Medicare levy surcharge was first introduced. So the bill sought to correct an anomaly that had grown up over time.

The coalition opposed this bill and were keen throughout the inquiry to emphasise the irreversible damage they believed the legislation would cause to the private health insurance sector, the public health sector and the Australian health system generally. They invoked images of droves of Australians flocking from the private system to the public, massive waiting list increases and enormous premium rises leading to an ultimate downward spiral and collapse of the private health sector. One might think I am exaggerating the coalition position, but a quote from the introduction of the coalition’s dissenting report reads:

Even on the most conservative estimates, health fund membership would plummet and premiums would rise well over the trends of recent years—driving more people out of private health and starting the downward spiral left behind in the 1990s.

Contrary to those pronunciations, the estimates given to the inquiry by Treasury indicated that about 485,000 adults might leave the private health insurance system. Estimates of the impact on premiums from the evidence we received on our committee varied wildly. However, at the conservative end, the estimate of the bill’s impact was a 2½ per cent increase in premiums above the expected normal adjustment to fees. It is also interesting to note that Treasury anticipated, as did many contributors to the inquiry, including Professor Deeble, architect of Medicare, that younger members would be most likely to leave. Indeed, this is confirmed in an article in today’s Australian which reports that 10 per cent of existing policyholders with the brokerage fund BUPA did not renew their policies and that the majority of those were younger people. However, BUPA still report a likely net growth of one per cent in membership this year.

To bring the debate regarding premiums into some context it is worth noting that, in the last five years of the Howard government, premiums rose by an average of 6.63 per cent. So the premium rise this year is in line with the average over the last five years of the Howard government. Indeed, premiums rose considerably and consistently during the Howard years. In 1997 the average premium increase across all private health insurance funds was 7.4 per cent. In 1998 it was 7.3 per cent. It dipped in 1999, 2000 and 2001, as additional supports and protections for private health funds were increased. Then in 2002 it rose by 6.9 per cent; in 2003, 7.4 per cent; in 2004, 7.6 per cent; in 2005, eight per cent. So I do not think anyone could describe the current increase as excessive, and certainly nothing like the predictions that were being given by the coalition at the time.

During the inquiry we also received evidence that, regardless of the impact of the bill, premiums as a result of increasing benefits and rising health service costs were likely to be approximately five per cent. Since then we have also seen investment losses as a result of the global financial crisis which added to the pressures on private health funds. So the current six per cent plus rise is very much at the lower end of the predicted rise in premiums and at the most conservative end of what we heard during the inquiry. And if five per cent is taken as the base level, the rise due to the bill is something like 1.3 per cent. That means that the fee rises are nothing like the increases predicted by the coalition and some of the more strident witnesses to our inquiry.

I am also very pleased to note today the latest economic data available on the Medicare levy surcharge threshold increases. In the December quarter of 2008, private health insurance membership grew by 54,000 people, or 0.1 per cent. This brought the total proportion of Australians covered by private hospital insurance to 44.8 per cent, the highest proportion of people covered for hospital treatment since December 2001. While this is a modest growth, it is worth noting that this was during a time of economic contraction, decreased consumer spending and consumption and a shrinking of demand in the economy generally.

On the other hand, the change delivered tax cuts to 250,000 Australians and relieved them of the inequitable burden of being caught in a tax trap between buying cheap health insurance and having to pay the surcharge. Whilst any increase in premiums puts pressure on families, the 6.02 per cent increase would raise the cost of a combined hospital and general treatment policy for an average family by about $3 per week, allowing for the 30 per cent rebate. Considering that back in July last year a forecast of a five per cent increase without the impact of the threshold increase was being put forward, this casts doubt, to say the least, on assertions that premiums would skyrocket, forcing Australians out of private health insurance. In September last year, the Hon. Joe Hockey predicted that premiums would rise by 12 per cent as a result of the government’s changes to the MLS. This clearly has not occurred and displays the hysteria shown by the coalition at the time that this bill was before the parliament.

The final thrust of the coalition report was that public hospital waiting times would be impacted upon by the introduction of the MLS changes. The committee report noted that the government’s investment of $3.2 billion for the National Health and Hospitals Reform Plan, including $600 million to reduce elective surgery waiting lists, would serve to ameliorate any changes to public hospital waiting lists. The last federal budget also provided $1 billion of immediate funding to relieve pressure on public hospitals. As of July 2008, all states and territories had received their total allocated funding and had agreed to the number of additional surgeries they would complete. At the Australian Health Ministers Conference on 5 December 2008, state and territory health ministers reported that all jurisdictions had already met or exceeded their targets for 2008. The national target of 25,278 surgeries to be completed in 2008 had already been exceeded by 10,000 patients, the total as of the end of November 2008 being 35,388 surgeries completed. Especially in light of what we heard just now about the Queensland position regarding elective surgeries, I should point out that the target for Queensland was for 4,000 additional elective surgery procedures to be completed in 2008. The actual number of additional procedures completed was 6,857—that is, 2,857 more Queenslanders got their elective surgery done, thanks to the Rudd Labor government and its cooperation with the states. I think that that message will not be lost on Queenslanders in the forthcoming election.

Previously, under the Howard government, there was internal bickering between the federal government and the states and a shifting of blame. The Rudd Labor government has come in and changed that situation, whereas the Howard government was content to stand back, having taken billions of dollars out of the health system, and blame states for the state of their health systems. The Rudd Labor government has fulfilled its election promises and partnered with and talked to state governments and restored some of the funding that has been lost. The result has been, even in these early days, a change in the way that we have seen hospitals and the health system operate. These additional elective surgery procedures are the first of many changes that have been or are being put in place by the Rudd Labor government to restore cooperation and improve the Australian health system. I think that people around Australia have already appreciated the change in temperament and the improved health outcomes that come from having a federal Labor government which has a different emphasis from that of the former Howard government and which is prepared to work with state governments to implement effective changes to our health system.

The Rudd government is delivering on its commitment to reduce waiting lists for elective surgeries and to relieve pressure on public hospitals, and there is no evidence that the introduction of the MLS changes will have anything like the disastrous impact in this area forecast by the coalition. I think it is an illustration that the coalition, rather than being obstructive in this place, and, in a knee-jerk reaction, opposing changes to anything that belongs to the Howard government, should work more constructively with the government for the benefit of Australians, for the benefit of state governments and, more importantly, for the benefit of people who need to rely on the health system for any kind of treatment.

The politics that the coalition is consistently playing is to the detriment of the Australian people. The Rudd government will continue to try to implement meaningful, lasting, appropriate and well-directed assistance in the health sector for not only Queenslanders but all Australians.