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Monday, 8 March 1999
Page: 2317

Senator WEST —My question is to Senator Herron, the Minister representing the Minister for Health and Aged Care. I ask: how does the minister defend the massive 22 per cent rise in premiums for the 44,000 members of the Defence Health benefits fund in light of the billions of dollars the coalition government has pumped into the private health insurance sector?

Senator HERRON (Aboriginal and Torres Strait Islander Affairs) —I thank the senator for the question, and I will shortly have the answer for her.

Senator Faulkner —Look it up!

Senator HERRON —I do have to look it up, Senator Faulkner, because I want to have the opportunity of telling you that Dr Wooldridge supported the proposal for the Defence Health benefits society to increase their premiums from 1 March this year. To deny a health fund a premium increase in circumstances of financial need could result in the health fund closing and disruption for its members. I am sure that is what the Labor Party would want, because their whole ethos has been to destroy the private health insurance industry.

Members face an average increase of 22.3 per cent. While this is a significant increase, it is reasonable considering that the last increase was on 1 November 1997. It was one of the few funds not to seek an increase last year. We well know that the cost of private health care is increasing dramatically. The population is ageing, technology is improving and increased costs are occurring. Senator West may well want this particular fund to go broke, but we on this side do not. We want it to continue in a viable fashion.

Defence over the last two years has experienced a large increase in members due to the significant product price advantages and marketing campaign. It is a responsible management practice for the fund to maintain adequate reserves to meet the future needs of members. An investigation has shown that the appropriate way to maintain reserves in this case is to increase premiums. None of us like to pay increased premiums, but the facts of the matter are that they are unavoidable. If costs rise, the premiums have to rise to meet those costs if you are going to provide a service—and that is what has occurred in this case.

The industry operates in a market system. It does not operate in a socialist system, as some senators on the other side would want. It has to be funded, and it is market forces that bring this about. At the very least, it must ensure that the premiums collected each year from members can cover the cost of claims by its members—even the ACTU health fund operates on market forces. I am sure they do not call on their members to subsidise those who are not privately insured. So it is purely a market phenomenon—costs rise, premiums rise.

Senator WEST —Madam President, I ask a supplementary question. In light of continuing low inflation and the government's injection of $1.7 billion of public funds into the private health system, how far does the minister expect private health insurance premiums to come down when they are adjusted in June-July this year?

Senator HERRON (Aboriginal and Torres Strait Islander Affairs) —I have said on previous occasions, as has the minister, that the prediction of the future is fraught with difficulty in all regards. Senator West may be aware of this or she may not be aware of it, but to try to put a figure on any particular thing in relation to the economy—

Opposition senators interjecting

Senator HERRON —Look at what the Labor Party did to the economy. Look at what happened to inflation under the Labor Party.

Senator Cook —It came down!

Senator HERRON —Even Senator Cook is getting into the act. I am starting to stir them up a bit. The facts of the matter are that the economy will have an effect. The costs, the inflation rate—every factor—will be taken into account. It will be up to the insurance companies to determine what the premiums are. We will look at them at the time and then determine whether the reserves warrant those premium increases, and that is what will occur in the future.