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Wednesday, 4 June 2003
Page: 15926

Ms WORTH (Parliamentary Secretary to the Minister for Health and Ageing) (9:20 AM) —The debate on the Health Care (Appropriation) Amendment Bill 2003 has been very wide ranging; therefore my own summary must be, at least to some extent, wide ranging. I would like to thank all members who have contributed to this debate, although there were times when I thought that perhaps some members opposite thought they were debating the Medicare legislation which will be before the House later today rather than this Health Care (Appropriation) Amendment Bill. Government speakers, on the other hand, have shown a keen interest in getting the best deal for their states because they know that their constituents will be better cared for.

I was interested in the contribution of the member for Hunter, and I agree with him. He said:

What has been very sad about this debate is the extent to which people have been prepared to deceive their electorates. Someone sitting at home, listening to this debate on the radio, must be thinking, `My goodness, this is a complex debate,' and wondering how it is that members from different sides of the chamber could have such different perspectives on what this bill means in terms of recurrent funding to the states for public hospitals.

I also think it is sad, because I think that the wider Australian public wishes that politics did not enter into all debate, that what may be in their best interests would be at the forefront of what is being said in this chamber, and that the opposition did not always have to find fault with absolutely everything the government does.

A health system should never be judged by the number of general practitioners who bulk-bill; unfortunately, this is the message that is portrayed by a number of opposition members. Wild accusations have been made that this is about the destruction of Medicare. How could this possibly be so when, in the last budget of a federal Labor government, the contribution to the health care of the people of this nation was $18 billion and now it is $30 billion? So much of providing good health care is not just about money but also about access and work force issues, and that is why this government has placed such a very important emphasis on those areas. This bill simply gives legislative underpinning for Commonwealth grants to the states for the running of their public hospitals.

The Commonwealth proposes to provide $42 billion for public hospitals over the next five years. This is $10 billion more than the funding provided under the last Australian health care agreements. Nationally, this represents a 17 per cent real increase in the Commonwealth's commitment. In signing an agreement, states will be agreeing to do three things: tell us how much they intend to spend on public hospitals themselves; commit to the Medicare principle of universal access to public hospitals; and improve performance reporting. States that meet these conditions but fall short of matching the Commonwealth's growth rate will receive 96 per cent of the maximum available to their state, whereas states that meet these conditions and match the Commonwealth growth rate will receive 100 per cent of the funds available to their state. This will provide a platform of guaranteed growth over five years upon which real health service reform benefiting all Australians can be built.

It is now over to the states to say what they are prepared to spend to support our future health care system, and this government stands very ready to work with them. I have to say that, if I were a state health minister, I would want as much money as possible for my public hospitals. I would go into cabinet and argue in the strongest possible terms for the best possible deal from the state budget because what the Commonwealth has put forward would assist my case, and not to have a win would have significant consequences for those people in my care.

Mr Speaker, it is interesting that in recent state elections—particularly at the last state election in our home state of South Australia—so much has been said about the emphasis that must be put on health and education. But state premiers cannot just be lobbyists to the federal government. If they really want to hand over all their powers, we will start fixing up the problems; but I do not think they want to do that. While they have the power, they must work with the Commonwealth and put up the resources necessary for what they say they are going to do.

Many of my colleagues on this side of the House gave indications of what the states would miss out on if they did not do the sensible thing and sign up and work for the betterment of their own hospitals and their own constituents. New South Wales could lose $1.1 billion; Victoria, $832 million; Queensland, $851 million; Western Australian, $404 million; South Australia, $260 million; Tasmania, $85 million; ACT, $58 million; and the Northern Territory, $89 million. Altogether the states would stand to lose $3.7 billion, and I cannot imagine that anyone would consider that to be a wise thing.

To listen to the arguments from some members opposite, one would think our health system was all about GP visits and public hospitals. But there is a great deal more to our health system than that. Last year the government announced an investment, for instance, of $291 million over four years in protecting those most at risk from the threat of meningococcal C. To date, all states and territories have commenced vaccinating via general practitioners children turning one to five years of age in 2003. School based programs to vaccinate senior high school students have also commenced in states and territories. The 30 per cent rebate for private health insurance provides average Australian families with around $750 as an annual contribution from the government towards their health care needs. But, as we know, unfortunately Labor is considering dumping this.

The government has spent around $2 billion on targetting rural health and aged care to promote and support access to doctors, specialists and nurses in rural and remote areas, and this is on top of the funding already provided through national programs such as Medicare and the Pharmaceutical Benefits Scheme. In fact, last year the number of doctors in regional Australia rose. We cannot correct years of neglect overnight, but we are now beginning to see the results of the coalition's well thought out investment in rural health care. The coalition is also making a difference in health care in regional Australia by committing funding for up to six new radiation oncology units. Cancer touches the lives of so many of us, and these new units will make a real difference for patients and their families.

Since 1996 the coalition government has almost doubled funding for Indigenous health. We are also working with doctors to deal with chronic and debilitating conditions such as asthma and diabetes through prevention, management and treatment. We announced funding for the successful national diabetes improvement projects grants in February this year. Nineteen projects across Australia will trial practical and innovative ideas aimed at improving the detection and management of diabetes. The projects are due to be completed next year. Bowel cancer kills 4,500 Australians every year. Early diagnosis is the key to successful treatment, which is why the government has committed over $7 million for bowel cancer screening.

We have a world-class pharmaceutical scheme, for which all Australians are eligible, with 155 million prescriptions being subsidised each year to the tune of $4.5 billion. Also we are leading the world in health promotion initiatives. The Tough on Drugs initiative is a good example. In 1997 the government committed more than $625 million to make every effort to address the illicit drug problem in Australia. There has been significant funding since then. Even in this most recent budget, funding has been made available for the diversion system, which keeps young people out of the justice system. That impacts on the states. It is good all round if young people, rather than going to jail, get medical treatment for their addiction. That not only saves the states money but also helps our communities and strengthens our families.

There is additional money for the particularly important areas now of dealing with psychostimulants and the co-morbidity that can exist with substance abuse and mental illness. We have a successful national tobacco campaign, and the number of Australians who smoke daily has fallen from 25 per cent to 20.2 per cent of the population since 1997. We have a campaign warning young people about the dangers of excess alcohol consumption and, since 1996, the coalition has increased funding for aged care from $3 billion to $5.6 billion. The coalition has also made a real difference by doubling funding for health and medical research. No government since Federation has given medical research such a high priority. This is not an exhaustive list—far from it. However, I hope I have painted a more realistic picture of a good health system for those people listening who, if they were to believe some of the speakers from the other side, might have thought that all was near to death and destruction. I have always believed and said that we need a strong public system working alongside a strong private system. That way the Australian people get the best possible value. At a personal level, I have benefited from care in both systems. I believe in both and appreciate the fact that we are one of the healthiest populations in the world.

This year's federal budget further strengthens Medicare by integrating prevention, health promotion and disease management within the health system, making prevention a fundamental pillar of Medicare. The focus on prevention initiatives will help improve the health and productivity of an ageing work force and ease cost pressures on the health system. Labor's opposition to private health care has put Medicare and our public hospital system under extreme and unsustainable pressure. Under the previous Labor government, private health insurance premiums grew by a rate of 11.3 per cent a year. Under this government, premiums have increased on average by less than five per cent a year. I cannot stress too strongly that, until the Labor Party commits to maintaining the 30 per cent rebate, Australians can expect the cost of premiums under a Labor government to increase immediately by an average of $750. By contrast, we are committed to keeping private health insurance and making it more available through the 30 per cent rebate. This is the key. The 30 per cent rebate represents a substantial benefit for almost nine million Australians. The Labor Party's opposition is an attack on the ability of almost half of the population to afford private health cover. The nine million Australians with private health insurance should be very concerned that Labor intends to tamper with the private health insurance rebate to pay for its prolific promises.

This bill will provide real increases of 17 per cent to the states and territories to run their public hospitals. The states and territories stand to receive an additional $10 billion in Commonwealth funding over the life of these new agreements. The shadow minister had a little to say about the 30 per cent rebate in his speech, and I am sure he will not mind me quoting him since it is in Hansard:

The final area I want to draw attention to, and which the second reading amendment draws attention to, is the government's absolute refusal to countenance any review whatsoever of the private health insurance rebate. The government introduced the rebate and has consistently failed or refused to review that operation in any way—to look at its effectiveness. I have often said that the big health issues, so far as the Commonwealth is concerned, are generally health economic and health financing issues—not from a bean-counting or a fiscal point of view, but from this context: there will always be a limited amount of money that the Commonwealth has available to spend on health; what is the best way to spend that limited taxpayer resource and give the best health outcomes?

That is interesting. I draw to members' attention and remind the shadow minister that the statistics on private hospitals clearly show the role that this sector plays within a balanced health care system. Private hospitals treat four out of every 10 admitted hospital patients in Australia. They perform 52 per cent of the surgery. In 200001, private hospitals admitted more than 2.2 million patients, which was up 12 per cent on the previous year. In the same year, capital investment by private hospitals increased by more than a quarter on the previous year. The bulk of the work for numerous complex procedures and treatments traditionally associated solely with public hospitals is now done in private hospitals. These procedures include treatment for sleep apnoea, knee procedures, hip replacements, cataract operations, breast surgery and chemotherapy.

I further draw the attention of the shadow minister and all interested colleagues to a well-researched paper from Harper and Associates, in which there is strong defence of and public support for private health care. The conclusion reached is that, in 200001 alone, private hospitals in Australia performed procedures which it would have cost the public hospital system around $4.3 billion to perform. I table this document and seek leave to have it incorporated in Hansard. It has some graphic material in it.

Leave granted.

The document read as follows—


Preserving Choice: A Defence of Public Support for Private Health Care Funding in Australia1

April 2003

Executive Summary

The Howard Government has recently introduced three reforms to private health insurance (PHI) with the aim of increasing the demand for private health insurance cover:

an additional tax penalty on high-income earners who do not have private health insurance;

a 30 per cent rebate on private health insurance premiums; and

lifetime health cover.

Those Australians who take up private health insurance or who pay directly for private hospital treatment pay twice for health care. They contribute through income taxes to the cost of the public health system as well as paying separately for the right to access private health care.

In effect, they pay for the option of using either the public or the private system whenever they need (or elect to have) hospital treatment. These additional resources help to keep the average cost of health care down in both the public and the private systems.

In a mixed health insurance system like Australia's, the existence of private health insurance allows those who value keeping their options open in health care to subsidise overall health care capacity. To the extent that people abandon private health insurance, the subsidy is reduced.

If people abandon private health insurance, the cost of providing public health care and the cost of PHI both rise, reflecting the loss of the implicit subsidy paid by those who take out PHI in addition to paying taxes to fund public health treatment.

This is the reasoning behind the Government's decision to support private health insurance.

Even though it might be at some cost to the public revenue (the 30 per cent PHI rebate cost taxpayers around $2.2 billion in 2001-02), so long as the cost incurred is outweighed by the value of the implicit subsidy, the net impact is positive.

In fact, it would cost the Federal Government more to allow PHI to dwindle than to continue to support it.

If private health insurance were to disappear entirely, the cost of providing public hospital treatment to all who were not prepared to pay directly for private hospital treatment (predominantly those in a financial position to self-insure) would escalate dramatically.

For instance, in 2000-01 alone, private hospitals in Australia performed procedures which it would have cost the public hospital system around$4.3 billion to perform.

In other words, had the private sector not carried its share of the hospital load in Australia in that year, public hospital outlays would have been around one third higher in real terms.

Even if PHI does not disappear altogether, fewer people taking up PHI means more people accessing the public health system, raising its costs. This is starkly evident in Figure 1 which shows the increasing cost burden imposed on public hospitals by the gradual decline in private insurance coverage.

Figure 12

Even those who choose to pay directly for private health treatment potentially raise the cost to the Federal Government, as the higher PHI premiums which follow their departure from the privately insured pool drive sicker, less wealthy patients out of the private into the public health system.

There is evidence that the gradual decline in the proportion of the population with PHI has produced an `adverse selection spiral' in the pool of privately insured health risks. As this has occurred, the health profile of the privately insured has steadily become less robust. This is mainly reflected in the higher average age of the privately insured.

In other words, it has been the young and the healthy who have opted out of PHI (or chosen not to join) and decided instead to access the public system or to `self-insure'.

With a deteriorating health profile of the privately insured, the subsidy to the health care system implicit in PHI takes on an additional flavour. Those taking out PHI and subsidising the public system are increasingly the older and less healthy members of the community.

This flies directly in the face of the principle of community rating, one of the benchmark goals of Australia's mixed health care system. Community rating requires that the healthy subsidise the sick, not the other way around.

The gradual decline of PHI in our system prior to 1998-99 reversed the principle so that, increasingly, the older and sicker subscribers to PHI contributed additional resources to the health system—with the result that younger and healthier Australians could access free public health care more easily.

Support for PHI in the three forms introduced by the Howard Government has helped to shore up the principle of community rating by encouraging more people to take up PHI.

In a properly functioning health insurance system, those with good health cross-subsidise those with poor health.

Prior to the recent reforms, those with private health insurance (increasingly older and less healthy members of the community) cross-subsidised those without insurance (predominantly younger and healthier people) at the rate of about $1,150 per privately insured taxpayer per annum.

Today that rate is about $850 per privately insured taxpayer per annum, closer to levels of 20 years ago when PHI membership was nearer 50 per cent of the Australian population.

The lower `tax' on private insurance has also induced more people to take out PHI (infusing younger and healthier risks into the privately insured pool), as has the encouragement provided by lifetime health cover.

Taken together, recent reforms to PHI have helped to redress the topsy-turvy nature of the Australian health insurance system—bringing it more into line with the principle of community rating—by making it more likely that the healthy compensate the sick, rather than the other way around.

* The involvement of Joshua Gans and Stephen King of CoRE Research Pty Ltd in developing the arguments in this report is gratefully acknowledged. The report was commissioned by Medibank Private Limited—however, the ideas and views expressed are those of the author and should not be attributed to Medibank Private Limited, its shareholder or employees.

For further information contact Professor Ian Harper on 03 9349 8264 or 0412 103 165. Email:

1The involvement of Joshua Gans and Stephen King of CoRE Research Pty Ltd in developing the arguments in this report is gratefully acknowledged. The report was commissioned by Medibank Private Limited—however, the ideas and views expressed are those of the author and should not be attributed to Medibank Private Limited, its shareholder or employees.

2Sources: PHIAC, Australian Institute of Health and Welfare.

Ms WORTH —As I mentioned, it does contain graphic material, but it also contains very useful information for all colleagues and all those who are concerned about our health care system. In closing, I remind those opposite that a good health system is not just about general practitioners and public hospitals. If you think about it, it is so much more complex than that. I have already mentioned the necessity to be concentrating on preventative health measures, work force issues and access issues, looking to see where some people in this vast country are missing out, and doing our best to remedy any failings that there may be. If one thinks about it and examines it a little further, it is not surprising that those patients who go into the private health system do save the public system so much, because their private health insurance will contribute a significant amount, if not the full amount, to their daily rates in hospital—and then there is always the surgeon's fee and the anaesthetist's fee, and an assistant surgeon's fee, physiotherapy, pathology and radiology may also be involved.

I remind members that 75 per cent of the scheduled fee for all of those procedures, tests and investigations is paid for out of Medicare. The other 25 per cent of that scheduled fee is paid for through private health insurance, and then there may or may not be gap cover for those patients. So to simply argue in a philosophical way demeans this whole debate. We should all be working to ensure the best possible health system for Australians. I urge those opposite to, instead of bagging this government, go out and negotiate with their state governments—because there are Labor state governments around Australia—and point out all the good news if they sign up to these health care agreements.

Question put:

That the words proposed to be omitted (Mr Stephen Smith's amendment) stand part of the question.