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Thursday, 15 March 2012
Page: 1863


Senator XENOPHON (South Australia) (13:16): I again rise to speak on the policy behind the Fairer Private Health Insurance Incentives Bill 2012 and related legislation. Again I oppose it. Just a few minutes ago, I had a meeting with representatives of the Australian Physiotherapy Association. What they said to me was that they are very concerned about this bill because of the effect it will have on ancillary cover, such as physiotherapy. The concern is that many Australians, because of the ham-fisted way this bill has been structured, will end up dropping out of their ancillary cover. They will still stay within a private health scheme in order not to be penalised with this carrot and stick approach, but, because of the lack of the rebate, they will cut back on their cover. Where will they cut back on their cover? On ancillary cover: physiotherapy, optometry, occupational therapy and a whole range of associated services will be left behind. Australians will not get the additional help they need on a whole range of preventative health measures, such as seeing a dietician or getting psychological help for stress. These are the sorts of things that will suffer as a direct result of this bill.

I fear this bill will have all sorts of unintended consequences for all Australians and their access to health care. One of the challenges in health is getting the right funding mix between government, private health insurance, individual out-of-pocket payments and third-party payments, all of which are important parts of our health system. It is about equilibrium and achieving an equilibrium that gives all Australians access to affordable, high quality health care. I firmly believe that private health insurance plays an important part in the mix of health funding and the delivery of health services and that as many people as possible should have access to the highest quality and affordable health care. I believe this is best achieved by the right mix of private and public health care.

I note that 45 per cent of Australians hold some form of private health insurance cover and in my own state of South Australia that number is in the order of 56 per cent. That makes a bill such as this very important as it has the potential to affect a lot of people and the decisions they make about their private health cover. The government has advocated means testing the current 30 per cent rebate on health cover on the basis of equity and sustainability. But let us analyse that. I strongly support a healthcare system in Australia that is equitable and accessible for all Australians and sustainable to the taxpayer. I do not believe that the government's proposal to means test the rebate and create a tiered health system will achieve this outcome. Rather it will create a lopsided system and damage the equilibrium between the public and private health systems. We must always be wary of unintended consequences.

As I have said before, what makes private health insurance accessible and affordable for many Australians is the 30 per cent rebate. There are many Australians below average weekly earnings who sign up to private health cover because they can see the important benefit for them. Most Australians on an average salary would struggle to afford private health insurance, especially during times when so many are struggling to balance the family budget and so many are worried about job security. Health is not something that can be taken for granted. You can see that in the almost 50 per cent of Australians who do what they can to budget for private health insurance for their wellbeing and that of their families.

In December 2009 the Productivity Commission released its report examining comparative hospital and medical costs for similar procedures in public and private hospitals, the rates for fully informed financial consent, relative performance indicators and most appropriate form of indexation. That report arose from an agreement I reached with the government when I raised concerns about the lack of information about how our health system worked, about comparative funding and even basic information on health outcomes, particularly on comparisons between the public and private systems. That was in the context of the Medicare surcharge legislation at the end of 2008. That was at a time when the way I voted did make a difference on the outcome of some legislation and I am pleased to have been able to secure that concession from the government. I thought it was a very good and valuable exercise in informing public policy in this area.

We need to reflect on some of the aspects of the Productivity Commission report. That report made it clear that both the public and private systems work best side by side. The report says:

The strength of interaction between the two sectors—

that is, public and private—

has led some to describe them as ‘interdependent’ … reflecting the fact that the services and functions of each sector help to support the other. The interaction between the sectors may be demonstrated by, for example: the sharing of resources in co-located establishments; medical staff working across both sectors and the exchange of spillover benefits (the private sector benefiting from the public sector’s investment in medical training and research).

The AMA's submission to the commission's report summarises this well in saying:

… the plural nature of the public and private hospital system is one of the strengths of Australia's health system. It is readily apparent that taxpayer sourced funding cannot bear the whole load of financing health care … Australia gets its best result when the two sectors have a strong symbiotic relationship …

My concern is that that strong symbiotic relationship will be frayed and could well be damaged beyond repair as a result of these proposed changes.

At the time of the report there were 768 public hospitals and 556 private hospitals in Australia, providing 4.7 and 3.1 million episodes of care respectively for admitted patients in 2007-08. It is a delicate balance between the two, with their services often being complementary. For example, public hospitals handled around three-quarters of all medical separations—that is, episodes of care—while private hospitals performed around 60 per cent of all surgeries and nearly 70 per cent of other procedures in 2007-08. Around 95 per cent of outpatient occasions of services, including emergency department presentation, were handled by public hospitals, while nearly two-thirds of elective surgery separations were performed by private hospitals. I think these examples show just how much the public health system needs the private health system side by side and vice versa. If even some of that demand shifted to public hospitals then before long something would have to give.

Public hospitals do a great job in providing acute care and a whole range of other care but, the more pressure you put on them, the result will be longer and longer waiting times in areas such as elective surgery and for the ancillary cover, as the Australian Physiotherapy Association quite rightly pointed out. This is a clear example of how private and public health systems do complement each other to provide better health care for Australians, and it is an equilibrium that could be put at risk if the means-testing of the current 30 per cent rebate results in people pulling out of or downgrading their private health insurance. Back in 2009, when the government first announced means-testing the 30 per cent rebate, the Treasury projected that as a result of the policy change 225,000 high-income consumers would withdraw from private cover. My concern is that higher premiums mean less affordable cover for all people, resulting in fewer people having access to private cover and putting more pressure on the public system.

The government has argued that this 25,000 figure from Treasury is inconsequential, that it would have no significant impact on the numbers of people with private health insurance cover. But the modelling that this is based on has not been tested and is not transparent. The assumptions have not been spelt out. It does not consider just how price-sensitive people are when it comes to the cost of their private health insurance going up. Also, there is no modelling at all when it comes to the issue of ancillary cover. We can explore this, I hope, in the committee stage, but if the Australian Physiotherapy Association tells me—and I accept fully what they say to me—that there is no modelling on the impact on ancillary cover then how on earth is this going to be modelled in terms of the impact it will have on the public system? How many more people will be queuing up to get physiotherapy and occupational therapy and to get advice from dietitians and psychologists—a whole range of health professionals in the public system—because people will drop out of the private system, at least in terms of ancillary cover?

Getting the policy settings right on public health insurance is very important. Sadly, the government seems more interested in getting its budget in the black by, in effect, putting household budgets in the red. The government really needs to seriously consider the consequences of this bill. I note that a number of my colleagues have mentioned Deloitte's research. Deloitte produced its report for the Australian health insurance alliance—so it is a report for an industry group, and that needs to be taken into account. But I think it is fair to say that Deloitte as a consultancy service is well respected and has done some rigorous work in this field, and the onus is on the government to rebut it. I think that what Deloitte has put up is very compelling. It talks about the fact that in the last full financial year, 2010-11, private health funds have paid $12.4 in benefits towards the health care of 11.7 million Australians who hold some form of private health cover. That is no small amount of money or people. Just imagine if significant numbers of those people—even 10 per cent—withdrew from private health cover or downgraded their cover.

Let us consider the picture that Deloitte has painted. Deloitte estimates that in the first year of a means-tested rebate, 175,000 people will withdraw from private hospital cover and a further 538,000 will downgrade. In addition, Deloitte estimates 554,000 people will withdraw from general treatment cover and another 803,000 will downgrade. Over five years, Deloitte estimates that 1.6 million people will withdraw from private health insurance and a further 4.3 million will downgrade their cover. Further, people who withdraw from their private health cover are less likely to have claimed healthcare benefits than those who choose to remain.

As people withdraw from their private cover, they become more reliant on the public healthcare system. Or, worse still, they just do not seek help, which can have catastrophic consequences for the health of those individuals. Between 2012 and 2016, Deloitte estimates 845,000 additional separations will need to occur in public hospitals as a consequence of the means-testing of the rebate. This translates to $3.8 billion in additional operating costs over five years to the public health system, with $1.4 billion in the fifth year alone. That is not a pretty picture for the future of Australia's health care system. As Deloitte says in its report:

As people withdraw from private health insurance, the burden on publically provided healthcare rises. The findings indicate that the cost of treating consumers in the public hospital system are expected to rise substantially above what is currently anticipated by Government.

These numbers I have just mentioned are staggering and highlight that, if people leave the private health system, the burden on public health care does not just rise; it escalates. We have a government that wants to get its budget in the black by in effect putting household budgets in the red.

I know the government disputes the findings of the ANOP/Newspoll survey that Deloitte's figures are based upon, but I think Rod Cameron and ANOP/Newspoll are well respected in terms of the work that they do. It is a prospect we need to seriously consider, especially when Deloitte is such a well-respected and reputable firm. A more pressured public health system with less affordable private health cover is a serious matter. It is a recipe for policy failure within a healthcare system that is neither equitable nor sustainable—the very opposite of what the government says it is trying to achieve. The government might mention that the predictions of people dropping out due to the Medicare surcharge legislation back in 2008 did not come to fruition. That is the case because the legislation was significantly amended. I think in a way that was tempered; it did not push those price sensitivity points, in a sense, with the Medicare surcharge legislation. I can foreshadow, in case we do not have time to properly debate this bill in the committee stage, that I will be moving an amendment, which I will now briefly outline. My idea for this amendment came to me after an ABC journalist at the Senate doors one morning was grilling me about whether or not I would support an independent body for collecting information on the composition of health funds, which I think I alluded to. George Roberts was the journalist, and I am not sure that the ABC wants to be pulled into policymaking, but I am grateful to Mr Roberts for his question because it has led to me having an amendment drafted, which I will name the 'Roberts amendment,' which probably horrifies Mr Roberts.

The amendment I propose is that the Productivity Commission, in its independ­ence, reports annually on the composition of private health funds. It is vital that we know from an independent source just how many people drop out of private health insurance or reduce their cover as a result of means-testing the 30 per cent rebate. I believe that the Productivity Commission is well placed to do this, particularly given its previous report that comprehensively looked at the mix between the public and the private health systems. By reviewing annually the composition of health fund membership we will be able to see precisely just how many people drop out or downgrade their membership. It is almost a rule of public policy that there will always be unintended consequences, and in this case it is important that these consequences be monitored, because I believe they could well be severe. That is why it is essential to have the Productivity Commission take on the role of monitoring the impact of these changes.

My question, respectfully, to the government will be: if the government does not support the amendment in its current form, what assurances can it give to this place, to the people of Australia, that there will be a mechanism to monitor the number of people dropping out or downgrading their cover? The downgrading of cover is where I think the sting is in the tail with this piece of legislation and the impact it will have. I would be grateful if the government could provide me with a comprehensive answer in relation to that. Surely there must be some responsibility mechanism, an independent and robust mechanism, to determine what the impact will be.

I believe we owe it to the Australian people to not take risks with their health but to give Australians the options they need to get the best possible health care and to give Australians a healthcare system where private and public work side by side in a symbiotic relationship, complementing each other to achieve the best health outcomes. This legislation does not do that.