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Wednesday, 24 February 2010
Page: 986


Senator BUSHBY (11:03 AM) —I rise today to speak on the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2009 [No. 2] and a related bill. The fact that I am standing here today speaking on these bills astounds me. I recall clearly Minister Wong standing up immediately after the defeat for the second time of the government’s CPRS legislation late last year and stating loudly and clearly that the legislation would be reintroduced as a matter of priority this year. Of course, this statement followed the pronouncement by the Prime Minister that the CPRS legislation was required to address the greatest moral challenge of our time.

So what has the government done with the CPRS? It has used its numbers to ram the legislation through the other place, but incredibly it failed to give the CPRS bills sufficient priority to bring them on here before the cut-off date. That is right, the government could not get its act together to get the legislation in here by the cut-off date—legislation that the government claims is needed to address the greatest moral challenge facing this generation, legislation that the minister said would be put before the parliament at the earliest opportunity. Clearly there appears to have been a greater moral challenge for the government, and that can only be the breaking of a clear promise to the people of Australia to maintain the Medicare levy surcharge and the private health insurance rebate.

It is clear to all this week where the priorities of this government lie, pressing forward with measures that are in clear breach of undertakings made to the Australian people. What is not clear is the government’s motivation. Did the Prime Minister really believe climate change to be the greatest moral challenge, or was it just a convenient political ploy that worked to wedge the then coalition government before the election? The lack of priority provided to their flagship measure for addressing climate change suggests it was probably the latter. Similarly, what motivations are behind the promise to maintain the levy surcharge thresholds and the private health insurance rebates followed by their current attempt to breach them? Again, a cynic would conclude the necessity of avoiding electoral backlash from everyday Australians with private health insurance cover may have had more to do with their promises prior to the election than any sort of commitment to maintaining the measures. Their current actions are illuminating in that regard.

The impact of the federal government’s proposed changes to the Medicare levy surcharge thresholds on the public hospital system are of serious concern and should frighten all Australians who care about the public health system, and all state governments due to the impact on their responsibility for delivery of primary health care. Not only have Kevin Rudd and Labor broken an election promise on private health insurance—one that he put in writing, I note—but they have also broken a promise not to impose new taxes, which is exactly what this is: another great big new income tax. By the late 1990s, private health insurance membership had collapsed to around 30 per cent of the population. In the June quarter 2008 it was 44.7 per cent. Make no mistake, this was all down to the Howard government’s success in encouraging Australians to take out private health insurance cover, to take pressure off the public purse and the public health system—a system which was designed to help those who do not have the financial resources to cover their health requirements.

This was a remarkable turnaround, from 30 per cent in the 1990s to 44.7 per cent in 2008. It did not just happen in a vacuum. The turnaround was achieved through the deliberate and persistent introduction of measures in the first few years of the Howard government. Upon its election in 1996, that government saw the need for urgent and decisive action to redress the neglect that the private health insurance sector had suffered under 13 years of Labor, which had led to the numbers of privately insured falling consistently for many years prior to the election of the Howard coalition government. It is important to remember that this is not just a question about the health of the private insurance industry or even about those who can afford private cover. What Mr Rudd is proposing in these bills will punish those who have been paying to look after their own health and, by the government’s own assessment, force tens of thousands of them into the public system, taking away resources from those who do not have the financial capacity to access the private system.

The issue is of huge importance to all Australians with healthcare needs and those who are close to them. Put simply, as the number of Australians and their families with private insurance falls, the number of Australians needing to access their healthcare needs through the public system increases, with consequent increases in demand for those publicly funded services and a greater inability by the public system to cope. And, as was happening in the early to mid-1990s, the more people who drop out of private cover and take their chances in the public system—in general and for obvious reasons, the people who drop out of private cover tend to be those with no immediate healthcare needs—the more expensive the premiums become for those remaining in the private system, who for obvious reasons tend to be those who actually do have current healthcare needs, and the more likely it is that those remaining will be forced to drop out because they can no longer afford the higher premiums that result. As this works through the system, that will include many of those who do actually have immediate care needs but cannot afford the higher premiums. In the 1990s the result was an impending explosion in demand for public health care, with detrimental consequences looming for all Australians’ healthcare needs. Wisely, the Howard government sought to address this through a series of three targeted measures now known as the three pillars: the 30 per cent rebate, lifetime health cover and the Medicare levy surcharge. With the three pillars and the delicate balance that they provide, the decline in private health coverage was arrested and we are now back at the levels of private health cover that we see today. But changes proposed by the government in these bills threaten to undermine the effectiveness of the three-pillars approach to private health funding, with enormous potential consequences for public health care in this country.

There are a number of facts that are relevant to this debate. Labor says it needs this tax because of the global financial crisis and its impact on the government’s ability to fund health measures. But the fact is the government’s attack on private health started in its first budget, before the global financial crisis, when it was still predicting large surpluses—and those were the days! Labor says that these measures will save $1.9 billion over the forward estimates, this coming in the same week that we see the pink batts program exposed as throwing away and wasting billions of dollars. The government says that scheme and other measures—such as the bungled Building the Education Revolution—are stimulating the economy. But the reality is that all these measures contain massive waste and inefficiency and any actual benefits could have been achieved for far less with better targeted measures that were better thought out. There is a total sum of around $94,000 million, or $94 billion, committed to stimulus measures. If better targeting and management could have resulted in just a 10 per cent saving on that spend, some $9,400 million, or $9.4 billion, could have been saved—not to mention the interest savings of at least half a billion dollars each and every year as less would have had to be borrowed. It becomes clear that Labor’s attempt to disenfranchise middle Australians from their private insurance health cover cannot be justified on good management grounds.

While Labor rips $1.9 billon out of the hands of private individuals, the government continues to borrow billions, raise taxes and distort the economy with ill-conceived, non-productive and badly run programs. If it isn’t pink batts or Building the Education Revolution, it is the nationalisation of the communications network and a program of central control of the economy which is clearly going to see health nationalised as part of the government’s head-long ideological rush towards a failed system that we all thought had ended decades ago. Raising the cost of people’s private health cover will not fix the massive and unnecessary national debt that Labor has created. And the fact remains that encouraging people who can afford to make a long-term commitment to private health is good for the overall viability of a health insurance system built on the community rating approach, under which insurers are prohibited from charging premiums assessed on the basis of risk; that is, they cannot price-discriminate on the basis that a potential insured person is, for example, a smoker or on the basis of their age or family background or medical history or even their current medical condition. Indeed, having healthy people participate is a vital component of a system based on the community rating approach.

It is also important to note that private health insurance adds money to the health system. Over 10 million Australians have private health insurance. This means that over 10 million people are adding an amount, generally equal to 70 per cent of their private health insurance premiums, to the overall amount of money available to fund health care across Australia. And of course, yes, the government has also paid 30 per cent of each premium. As such, for every 30c in the dollar that the government spends on health care supporting the privately insured, a further 70c is contributed by individuals to the overall amount of money being spent on hospital health care across the country—but not if Labor has its way and introduces a reduced rebate. Looking at it the other way around, on the fairly sound assumption that without the delicate balance provided by the three-pillars policy people would drop out of private cover and that they may, sooner or later, require hospital care which would then need to be entirely funded from the public purse, the government is getting a return on its expenditure through the 30 per cent rebate of over 200 per cent; that is, for every dollar it spends assisting the private health insured it saves over another $2.

In a sense, rather than the federal government subsidising people’s private healthcare needs, the system is actually subsidising the expenditure of all Australian governments on primary health care to the tune of 70c in the dollar for every privately health insured person in this country. But the government is prepared, through the measures contained in these bills, to put all this at risk. As a result of these bills, the delicate balance achieved through the three-pillars process will be destabilised, leading to a mass exodus—by the government’s own figures as released in Treasury modelling last year—from the private health system mainly by, and this is important, those with little immediate need for hospital care. This will then lead to the semifailure or even the complete failure of the community rating system as the loss of the premiums provided by those who have little need for current care will leave a greater proportion of those privately insured who do have high-care needs, thereby leaving the private insurers with the majority of expenditure while suffering a severe loss in income. As such, private health insurance premiums will go through the roof.

This in itself is bad. In the short-term it will lead to far higher premiums but it will probably have little impact on the public health sector, as the first wave of people leaving private health insurance as a result of higher premiums will have little immediate need to call on public health resources since they are probably the healthier of those who are currently insured. But what will be the further consequences? As private health premiums rise, the number of insured persons with little ability to pay higher premiums but with high hospital care needs—particularly older Australians—will increase. Shamefully, many will be forced to abandon their private cover because they simply cannot afford higher premiums. This is when the public health system will start to feel the full consequences of this measure—when the loss of the 70c in the dollar subsidy that privately insured persons provide, from their own pockets, to the overall healthcare spend in the nation will come home to roost.

Over 10 million Australians are covered by private health insurance for hospital cover. There are 1.3 million people insured who are over 65 years of age, which is 50.3 per cent of all Australians in this age group. Members of health funds contributed $10.6 billion to the Australian healthcare system in 2008, an increase of 10 per cent on the previous year. Fifty-six per cent of all surgical procedures are performed in private hospitals. Most of these are covered by private health insurance. Almost 15 per cent of public hospital admissions are privately insured patients. It is estimated that premiums will increase at a rate of around 10 per cent or more per year from 2011 to 2012, rather than the five to six per cent increase that we see currently.

Inevitably, in the next Australian healthcare agreements there will be demands from the states for additional public hospital funding from the Commonwealth to compensate them for extra pressure on their public hospitals directly arising from the passage of these bills. The consequences for the private health sector—not just private health insurance but the providers they fund—and the public hospital system are completely ignored by this government and, tellingly, by the state Labor governments. Hopefully, there will be a couple fewer of those in a few weeks time.

The changes to the private health insurance rebate are just the latest phase in Labor’s unrelenting war against private health insurance. It is undeniable that Labor hates private health insurance. The coalition introduced an open-ended private health insurance rebate, because, for every rebated dollar, a privately insured person contributes two more to our health system as a whole. The coalition believes in the right of all Australians to take charge of their own healthcare needs and plan for the future. We have always worked hard to deliver incentives to promote the uptake of private health insurance and take the pressure off Medicare. People will drop out because they cannot afford the much higher premium increases. That will restart the catastrophic premium membership death spiral of the 1980s and 1990s, when Labor almost wiped out private health.

If tens of thousands of people now give up their private cover, the Prime Minister and this government will be directly responsible for a massive blow-out in public hospital waiting lists. At this stage, there is no indication that any meaningful compensation or allowance will be made by the Commonwealth to compensate for the impact on the states and territories of this measure that we are debating today. The Australian Medical Association has said:

Changes to the 30 per cent Private Health Insurance Rebate mean many Australian singles and families will pay a lot more for health insurance, and if you don’t keep your private health insurance you’ll be slugged with an increased Medicare Levy surcharge. They get you both ways.

Labor clearly promised prior to their election that they would maintain the Medicare levy surcharge, but they are now opening the door for thousands of people to leave private health insurance. Sick people already wait for hours in public hospital emergency departments, despite the big increase in bulk-billing since 2003. Australians still wait months for elective surgery, despite a 16 per cent real increase in federal funding for state-run public hospitals by the previous government under healthcare agreements. People who leave private cover as a result of these changes will now add more waiting time and people to these lists.

Fewer people covered by the surcharge means less money invested in the health system. At present, a family on $100,000 a year takes out private health insurance or pays an extra $1,000 to Medicare. Statistically, most families in this situation have private insurance, which means that they do not compete with less financial people for elective surgery in public hospitals, or they can contribute to public hospital revenue by electing to be treated as private patients. Under the measures contained in this bill, these families will have far less incentive to be privately insured.

On 12 May 2009, The Australian Health Insurance Association said:

The Rudd government’s decision to dismantle the private health insurance rebate will place increased pressure on the public hospital system and force up premiums for those Australians who take responsibility for their own health care by taking out private health cover. Every single one of the more than 11 million Australians with private health insurance (one million of whom live in households with an income of less than $26,000 pa) will have to pay more for their private health insurance as a direct result of this policy.

The Prime Minister himself has undertaken not to play with the three-pillar system. In a letter to the Australian Health Insurance Association, the Prime Minister said:

Both my minister for health, Nicola Roxon, and I have made clear on many occasions this year that federal Labor is committed to retaining the existing private health insurance rebates, including the 30 per cent general rebate and the 35 and 40 per cent rebates for older Australians. Federal Labor will also maintain Lifetime Health Cover and the Medicare Levy Surcharge.

No wonder Australians are questioning the Prime Minister’s ability to do what he says he will do. Let us not forget Labor’s abject failure in health. Kevin Rudd has promised big but delivered little. Of the billions of dollars splashed around in the stimulus package, not one cent went to health. The billions spent on insulation batts have been more important to this government than people continuing to fund their own health needs—or building hospitals or paying doctors or nurses more money.

Labor’s overriding promise was to ‘fix’ the nation’s hospitals. Labor ‘had a plan’, Mr Rudd told Australians, ‘to end the buck-passing’ between Canberra and the states. He had ‘a long-term plan’ to fix the nation’s hospitals, and the ‘buck would stop’ with him. Mr Rudd went further—he promised to ‘fix’ hospitals by mid-2009 and said that ‘if significant progress’ on hospital reform had not been achieved by then his government would ‘seek a mandate from the Australian people at the following federal election for the Commonwealth to take financial control of Australia’s 750 public hospitals’.

But the hospitals remain unfixed and, as evidenced by the legislation we are debating today, it has not taken long for the old ideological hatreds within Labor to emerge in the government. This attempt to limit access to private health insurance rebates—which would see people downgrade or drop their cover—is an instance of that. We see the government’s attempt to introduce superclinics—there are only 12 operating out of the 36 promised—along with their attack on private hospitals and health insurance, and we have to ask: are they trying to move us to a British-style national health system?

Working families, low- and fixed-income earners, the elderly and people living in rural and regional Australia will be hardest hit by the consequences which will flow from this ill-conceived policy. This legislation represents bad policy, appears hard to justify on any of the measures put forward by the government and will ultimately lead to the undermining of the public-private healthcare balance achieved in this nation.