Dr WOOLDRIDGE (Health and Aged Care) (11:04 AM) —I move:

That the bill be now read a second time.

This is an important bill for it proposes a measure that will prove to be of enduring benefit to the Australian health system and to the Australian public, namely to cut the cost of private health insurance by 30 per cent through a rebate outlined in this bill. What this effectively means is that, for the majority of Australians, private health insurance will once again become tax deductible.

This is one of the simplest, most effective and most important changes that could be made to restore balance in our health system by working to slow the drop-out from private health insurance.

The proposed cut in the cost of private health insurance will help the private sector, take pressure off the public hospitals, and help restore much needed balance to our health-care system.

For the last 2½ years, my office has been virtually deluged with letters from people saying that they wanted to maintain their private health insurance but could not afford to keep it. A comment I have heard time and time again, particularly from older Australians, is, `We can't afford it, but we can't afford to be without it.'

We set about tackling this virtual haemorrhaging of the private sector in health by spending about one-twentieth of what we spend in the Commonwealth's annual health budget and about one-thirtieth of overall health spending in Australia in the Private Health Insurance Incentives Scheme.

It was an investment that did achieve some important successes in slowing down the drop-out rate of people who have private health insurance.

According to the Australian Health Insurance Association, there are now some 200,000 people with private health insurance who would otherwise have dropped out without the help of the incentives scheme.

It is certainly better than doing nothing, which is the only solution proposed by the opposition. If anything, the continued but slower drop-out is proof of the need for further action.

Making private health insurance 30 per cent cheaper for the 700,000 or so policy holders on annual incomes of less than $20,000 is a policy of which I am proud.

The rebate upholds people's choice and will relieve some of the burden of their financial sacrifice as they pay extra for a doctor of their choosing, a hospital of their choice and an operation when they need it.

The government's 30 per cent rebate is both entirely reasonable and necessary when you consider that one-third of total health funding comes from health funds and from individuals. More than one in every three operations and one in four bed days are provided in the private sector.

In recent years private hospitals have been shouldering more of the burden as public hospitals, mostly consciously, have treated fewer people who are privately insured. In 1991, 27 per cent of privately insured people were treated in public hospitals. This is now around 15 per cent. In some specialities—for example, complex knee surgery—more than half of all operations conducted in any one year are provided in the private sector.

These services are mostly financed by private health insurance funds—that is, by pooled contribution income from almost six million Australians who, despite the significant cost, choose to be privately insured. Each year the premiums paid by these people to the health funds and paid from the funds to the hospitals and other providers make a larger contribution to our overall health bill in Australia than the Medicare levy funded by almost every Australian taxpayer. Health funds contribute $4.5 billion; the Medicare levy about $3.6 billion.

Although the public and private sectors are sometimes seen as competing foes, notably on the left of politics, it is important to note that the private health funds contribute around $400 million a year into our public hospital budgets. People who ignore or disregard this major contribution by the private sector will find that the pressure on the public purse and public hospitals will only increase.

Supporting private health insurance restores some much needed equilibrium in the Australian health system. To do this is to put balance back into the health system and help relieve one of the greatest sources of pressure on the public sector in health.

Certainly I believe that high quality health care should be provided to every Australian, and I am fully committed to Medicare as a universal health care system and to our public hospital system. A record $31.34 billion of funding for public hospitals, which represents a 17.6 per cent increase in funding in the next five years compared to the last five years, is a clear sign that the Commonwealth is more than playing its part in supporting the public hospital system. That is a substantially greater increase than was achieved under the last negotiation by the previous Labor health minister, Graham Richardson.

Yet this additional funding for public hospitals will only be a stopgap if nothing further is done to support the viability of the private health sector and to address the reasons for the drop-out from private health insurance in the first place. The truth is we know the principal reason why people are dropping private health cover: it is overwhelmingly the problem of cost. In fact, to fail to do anything to address these crucial issues would be unreasonable and simply short-sighted. To do nothing could well spell the end of the private sector and only lead to increasing and intolerable strains on the public sector. That is why it would be a serious mistake if this legislation were blocked or delayed. It would also be a serious miscalculation to assume that the same amount of money would be spent elsewhere in the public hospital system.

Australians value a mixed system of public and private health care. This balance has contributed to the high quality system that we have in place today. Australians value choice, and this government recognises the contribution that Australians wish to make to their own health care.

We do not believe this choice is in any way contentious, as the member for Jagajaga wrote some years ago in her national health strategy. Those views were flawed because they did not take into account that—as in the latest health care agreements recently signed—every time health insurance levels drop one per cent, the extra cost on the states at a marginal cost rate is estimated to be $83 million. This is what the Commonwealth has undertaken to pay the states for the continuing decline in private health insurance.

Given that those who argue against this rebate are not proposing to do anything and will simply put private health insurance on the backburner, we can safely assume the drop- out rate from private health insurance will follow the long-term trend of two per cent a year.

By July 2001, if we do nothing, the Commonwealth would have to find exactly $500 million extra to the states, each and every year correspondingly, just to stay standing still. In other words, in three years time we will be where we are now—and, possibly even worse, we will fail to address one of the root causes of the problem.

This 30 per cent cut in the cost of private health insurance will make a genuine and lasting difference, and will preserve the integrity of our health care system of Medicare and of the public hospitals.

This bill and the accompanying bills, the Private Health Insurance Incentives Bill 1998 and the Taxation Laws Amendment (Private Health Insurance) Bill 1998, introduce the private health insurance initiative announced in the government's tax reform package, Not a New Tax, A New Tax System. The benefit will assist families and individuals with the cost of private health insurance by providing a 30 per cent cut in that cost in premiums from 1 January 1999. It will not be means tested and will cover premiums for all hospital and ancillary cover.

Those with health cover will be able to collect the benefit in one of three ways: either as a tax rebate, as a direct payment or as a premium reduction from their health fund. This approach provides maximum flexibility for those who pay health insurance premiums and those who are therefore able to collect the benefit. They will be able to choose which of the methods best suits their needs.

This initiative builds on and replaces the existing private health insurance incentive scheme. It is a welcome move, as is evident from recent comments of the Australian Medical Association's Federal President, Dr David Brand, and coming from an organisation that is not always complimentary of the government. It is clear from his comments that the AMA understands that this is a measure that is critical to the future of both public and private health in Australia.

In a submission to non-government parliamentarians, the AMA has also referred to the strong support of the community for this initiative. According to a Morgan Research survey that the submission quotes, nearly 70 per cent of Australians support the idea of a rebate for private health insurance.

Another point made in the submission is the claim that there are more than 180,000 jobs directly involved in the private health sector and many more in related services. These jobs are at risk if the Labor Party allows private insurance to collapse or if we continue merely to put it on the backburner.

The viability of our public hospital system is very seriously threatened by the continuing decline of private cover. At worst, the submission claims governments would have to provide an additional 25,000 hospital beds in the public system at a current cost of $3 billion a year. It is clear that those who understand the health care system, as Dr Brand does, also understand that this 30 per cent cut in the cost of private health insurance is critical to the private health sector and is critical to the future of the public system.

I commend the Private Health Insurance Incentives Bill 1998 to the House. I present an explanatory memorandum to this bill.

Debate (on motion by Ms Macklin) adjourned.