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Wednesday, 9 September 2009
Page: 6159


Senator SIEWERT (5:14 PM) —I will start by stating the obvious, the Greens very often stated position: we are opposed to the private health insurance rebate. We have argued many times before that it is bad policy. It pours taxpayer funds into the pocket of the private health insurance industry as subsidies for their products at the expense of Australia’s desperately underfunded public health system. Our public hospitals and our health workers are struggling with a lack of resources, while $3.8 billion goes to the private health insurance industry. We believe that these funds would be much better directed to the public health system. We remain implacably opposed to this approach to health funding.

That said, we concede that means testing the private health insurance rebate is an improvement on the current flat rebate approach of 30 per cent to all private health insurance holders, irrespective of their income level and capacity to pay. Removing the rebate from those on higher incomes is a step towards the Greens position of getting rid of the rebate altogether.

I have in the past outlined the Greens’ position on the private health insurance rebate quite extensively. We believe that the Greens are not alone in this view. In fact, as has been mentioned in this place before, Treasury shared the Greens economically responsible position. In February this year, the Age ran on its front page an article saying that Treasury had advised the government that the private health insurance rebate was in fact bad policy and that the $3.8 billion would be better spent in our ailing public health centre, a sentiment with which we concur. The article cited documents from a Treasury briefing to the Rudd government shortly after the election. The article reads:

THE private health insurance rebate paid to millions of Australians is ‘very poor policy’ and should be dumped, according to a confidential briefing to Treasurer Wayne Swan ... The briefing said the billions of dollars lost annually to the rebate would be better spent on public hospitals.

The article then apparently quotes directly from a Treasury document, which says:

This rebate represents very poor policy. There is no doubt that its $3 billion annual cost to revenue could deliver far better health outcomes if directed to additional capacity in public hospitals.

Since that advice was provided some time ago, the annual cost of the PHI rebate has risen to around $3.8 billion.

Here we have people from Treasury, some of our leading expert economists, providing advice that is in fact in line with Greens policy on the private health insurance rebate as a funding model—the same Treasury that provides advice to government on critical issues such as Australia’s approach to the global economic crisis. Yet this government seems to be ignoring this advice, and the advice of others who believe that the private health insurance rebate is bad policy and that we would be getting better health outcomes if that money was spent on a much different approach. Even the finance minister acknowledged in the article that the possible merits of the policy are debatable. But the government still continues to ignore this advice, taking what we consider to be only baby steps in terms of dealing with the private health insurance rebate. In fact, part of the debate that we are having at the moment is about the surcharge. There are two different dynamics working here, one supposedly dealing with the rebate and delivering certain outcomes. Then you have the surcharge, which is about further encouraging people into private health insurance.

According to the finance minister, one of the reasons why the policy would not be changed substantially is because it is too important to people’s financial planning to be abolished. We do not believe that that is in fact an appropriate or sufficient argument when we are talking about $3.8 billion annually of taxpayers’ money that we believe should be directed to the public health system.

We have said many times that we do not believe that the private health insurance rebate is an effective mechanism to improve our health system. In fact, we believe that it is an ineffective and inefficient use of taxpayer dollars when we are talking about the delivery of health services in the broader health system. It does not directly fund the delivery of health services and it basically supports the private insurance industry.

Compelling evidence was presented to the Senate inquiry into the Fairer Private Health Insurance Incentives Bill 2009 and related bills by Dr John Deeble. Dr Deeble was a member of the old Health Insurance Commission for 16 years and a director of Medibank Private with responsibility for premium setting. He described the PHI rebate as wasteful and divisive in the way in which it separate the public and private health systems rather than integrating them. The Greens believe that the government is being irresponsible in ignoring this range of advice from both health and economic experts.

Ian McAuley, from the Centre for Policy Development, provided evidence to the Senate inquiry that showed that the rebate in particular has minimal impact on public health insurance membership and equally has had little effect on reducing public hospital demand. He provided the committee with evidence that showed that the public and private sectors deal with very different caseloads, so this rebate could never be expected to reduce the demand on public hospitals.

Dr Deeble provided the inquiry with evidence that showed that PHI membership was not sensitive to price but sensitive to income. In fact, he discussed quite extensively the inelasticity to price. When the 30 per cent rebate was introduced in 1999, there was little effect in the following two years after its introduction. Dr Deeble felt that a subsequent rise in coverage took place was the result of considerable advertising and a promotion of the fear that Medibank might not be able to meet the needs of consumers in the future. Dr Deeble spoke of his experience in Medibank Private. He said that it was possible to vary premiums without any discernible effect on membership and that there could be significant differences between insurers without any noticeable change in market share. He felt that it was almost impossible for people to understand all the various products that insurers offer and to be in any position to determine whether in fact they were being offered value for money.

We believe that there needs to be a more rigorous national debate in Australia on the kind of health care we expect and how we are willing and able to pay for it. Professionals and dedicated people in the health sector are often demoralised by and their communities dissatisfied with the current approach to health care. Australian expenditure on health care, as we all know, is rising rapidly. Ten years ago, it represented 8.1 per cent of GDP and now it is 10 per cent. The states have dramatically increased their health expenditures to the extent that in some cases it is almost 30 per cent of their budgets.

Taxpayers, we believe, have a legitimate right to ask, ‘Are we getting value for our money?’ We know that countries that grant significant public subsidies to private health insurance, such as Australia, France and the United States, have faced considerable pressures on their public budgets. We are concerned that all that the PHI rebate does is rearrange the queues, promoting some and shifting others to the back of the queue and that, even though it may help some with low-priority needs, it may lengthen waiting lists for those with greater needs. We believe that this is bad public policy and also that it promotes queue-jumping.

Ian McAuley presented evidence to the Senate Standing Committee on Community Affairs inquiry into these bills which argued that while the tax systems are far from perfect—and I think most people in Australia would agree with that—they do achieve a degree of equity. He pointed out that PHI is essentially a stealth tax which builds in inequities. He also says that there is little incentive to provide ‘public good’ services, such as promotion of healthy lifestyles, and that the costs of collecting tax through a single system are more effective than doing so by means of individual insurers. In fact, he is essentially arguing that we would be better off taking another approach.

The private health insurance industry has been successful, however, in conveying the impression that without private health insurance there would be a collapse of the private system and that Australia would be on the path to the madness of so-called ‘socialised medicine’. We should be asking, ‘Is this really the case?’ They have got away with making these claims are untested for years and it is time that we stood up and challenged them. John Menadue is one of those that do challenge them. John, who is from the Centre for Policy Development, calls private health insurance a ‘cancerous growth’ and says that it is not a health program, and we agree; it is corporate welfare.

The increase in the surcharge is the carrot to the industry. The government is introducing the rebate in an attempt to deal with some parts of an ineffective private health insurance rebate system and the subsidies to the private health insurance rebate. Of course, we have all heard the claims that membership will go down. To balance this, the government has decided to give to the insurance industry the carrot of increasing the surcharge on those with higher incomes. Bear in mind that those on higher incomes that do not have private health insurance are essentially conscientious objectors—they have already been pushed and pushed and pushed to take out private health insurance, and they have not done it. As I say, they are conscientious objectors; they are saying: ‘No, we do not believe in private health insurance. We would rather be part of the public system.’ But the government, by increasing the surcharge, is saying, ‘No, we will hit you conscientious objectors; we will still force you into private health insurance.’ These people effectively self-insure, and they are now being pushed into either paying a higher surcharge or taking out a rudimentary health insurance product, which is what a lot of people have been doing.

We do not believe that this is an appropriate approach to private health insurance. Why should the more than 100,000 people who are currently not taking out private health insurance be obliged to take up a rudimentary insurance product—a small policy with few benefits—which is what happens in some cases where people feel they are obliged to take out private health insurance? We do not believe that this is of benefit to either consumers or taxpayers. More health dollars are going to be spent by people who feel obliged to take out health insurance and who will then feel obliged to make the best use of the private health insurance that they have taken out. These health dollars will not be spent on dealing with necessary or life-saving interventions, and these are people who, understandably, feel that they should get something out of forking out for an insurance policy that they never really wanted in the first place. In other words, there is a potential that they will be using services that they do not really need, which, of course, leads to higher costs to our health system.

As the Productivity Commission has put it, increased levels of private health insurance ‘have been associated with a marked increase in the number of services performed and reimbursements for their services’. That has to lead us to question whether these services are necessary and whether the money that was put into the system to promote private health insurance is then in a vicious cycle of promoting the unnecessary use of services. People who may benefit from private health insurance—such as older people—cannot afford to pay their premiums and have to rely on the public health system. The winners in this system, of course, are the insurers—the ones that tell us that we cannot live without private health insurance. These are the people who say that, without their involvement, our entire health system would collapse around us. These are the same people whose administrative costs are double that of Medicare and who continue to push up their premiums every year.

We believe that private health insurance has failed to take the pressure off public hospitals. We know that it has allowed private hospitals to attract highly professional staff away from public hospitals, we know that it weakens Medicare’s capacity to control costs and quality and we believe that it is an inefficient way of promoting so-called choice. We also know so much about why it is unfair and inequitable, but here we are once again patching up bad policy.

As I have stated already, the Greens deep belief and policy is that we should be removing the private health insurance rebate and redirecting that $3.8 billion to the public health system. Look at the news just recently where the private health insurance profits are up—so much for them doing it hard! Ian McAuley calls this ‘the power of policy privilege’, and we believe that he is on the right track. We do not need subsidies to private health insurance firms to promote private health delivery. Private health insurance companies are not, in fact, health care providers. They are part of a financial world. There is evidence to suggest that private hospitals would be up to $2 billion year better off if they were receiving money as part of a subsidy paid to them, for example, and not receiving funds by financial intermediaries.

As I said, notwithstanding our position on the private health insurance rebate, it is simply inequitable that high-income earners should receive the same rebate as those on a lower income. While we are concerned and we do not believe that this is a fair system, we do believe that it is a small step in the right direction to introduce the means test that removes the rebate for high-income earners. It puts a little bit more equity into the private health insurance rebate. We will be supporting the rebate because, as I said, we believe it is a small step in the right direction. We believe that the resources saved should be injected into the public health system. We have made that comment repeatedly.

The Greens are deeply concerned that the government, during the budget, made cuts to health in what we believe are quite important areas, such as the work of the excellent National Prescribing Service and the Public Health Education and Research Program. We believe the money saved through this rebate scheme should be invested in improving our public health insurance system. We believe that programs such as those should have been supported.

The Greens will be supporting the private health insurance rebate means testing approach, but we do not support the increase in the surcharge. Unfortunately, the government have put these bills together in a cognate debate, so we are unable to vote separately on the rebate and the surcharge. I am putting on record here that we believe that the bills should have been separated so that we could vote separately on these two issues. The government are trying to have a bet each way. They are trying to means test the rebate to bring a bit more equity into it, but at the same time they are saying to industry, ‘Don’t worry. We’re going to encourage more people in by increasing the surcharge.’ We do not believe that that is an appropriate approach. We believe the government need to be taking a much more fundamental approach to our healthcare system. They are tinkering around the edges with some of these things and not making the fundamental changes that we need. They are not addressing the overall negative impact that the private health insurance rebate has on our healthcare system and the fact that that money would be better injected directly into our health system rather than being filtered through private health insurance companies and distorting the way it can influence good health outcomes.

The Greens do support the rebate. We do not support the surcharge. We encourage the government to split the bills to enable us to vote in a way that reflects the true opinion of the Greens—that is, support for one bill and not the other. The government may, in fact, by putting them together, force us to vote no for the whole package. That is what will happen if they do not put the question separately on the specific bills, because we will not be voting to support the surcharge.