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Wednesday, 14 March 2012
Page: 1688


Senator DI NATALE (Victoria) (11:10): The basic objective of health policy is reasonably straightforward. A health system should be designed to keep people healthy. Then, when they get sick, it should give everyone access to health care at the lowest possible cost. Australia's health system goes some way to achieving this, but there is plenty of room for improvement. We continue to ignore straightforward public health measures such as effective food labelling and alcohol pricing. We do not spend enough of our healthcare budget on health promotion. There are serious problems with decent access to health care for rural and Indigenous Australians. There are still alarmingly high rates of infection and iatrogenic disease in our hospitals, and our primary care system is fragmented and poorly integrated. There is much more work to be done.

However, one of the greatest failings of our health system is the glaring inequity that results from the enormous subsidies directed at the private health insurance industry. These are subsidies that, on average, benefit the well-off and those living in urban centres at the expense of low-income Australians and people living in regional communities. These subsidies mean that, for the first time since the introduction of Medicare, we have a government funded, two-tiered, American-style health system that results in one level of care for those with private health cover and another for the many millions of Australians who cannot afford it.

This is not just a problem of fairness. These subsidies come at an enormous price to the nation because they raise the overall cost of health care. In short, the combination of private health insurance incentives fail the tests of both equity and economic efficiency. The Greens will support the Fairer Private Health Insurance Incentives Bill 2012 and the two related bills because they go some way to addressing this glaring problem in our health system, but in our view these changes do not go far enough. Despite what happens today in this chamber, Australia will continue to have an approach to health financing that is unfair and expensive.

Let me put these changes in their proper context. The purpose of Medibank—and later that of Medicare—when it was introduced in 1975 was that a single, national, tax funded health insurance scheme would reduce the need for private health insurance. It is no secret that former Prime Minister Howard was no fan of universal health insurance. After a few false starts he was finally able to put in place changes that would undermine the universality enshrined in Medicare. He did this by introducing a system of reforms to the private health insurance industry that, he claimed, would encourage many Australians to take out private health insurance and thereby relieve the pressure on the public hospital system. This was done as an article of faith rather than with any clear evaluation of its merits. The most basic of questions was never asked: what would these changes mean for both the cost and equity of health care in this country? It was not asked because this was a case of ideology before evidence from a Prime Minister who would combine his disdain for Medicare with his proclivity for middle-class welfare in order to implement changes that would take many years to unwind. I am pleased that today we are making a start.

Even if we were to accept the flawed premise that increasing the number of people in private health insurance is a desirable outcome—and that is something that the evidence now clearly rejects—the private health insurance rebate still made no sense. The evidence is pretty clear that Lifetime Health Cover, not the private health insurance rebate, was the responsible driver for the increase in private health insurance uptake. Private health insurance membership rose from about 30 per cent to about 45 per cent when lifetime rating was introduced. In essence, the rebate was just a little thank you present to those people who had already taken out private health insurance. I find it fascinating that the opposition—the party of free enterprise; the party of the market; the party of small government—is so keen to protect this enormous government subsidy. Surely they know that when the government provides such a massive subsidy to an industry it benefits that industry much more than it benefits the individual. Private health funds are doing very well thanks to the government's largess but consumers have not benefited from this windfall.

The private health insurance rebate has no support from health economists nor, indeed, from members of the public health community. It is a subsidy to an industry that comes at the expense of public health care rather than complementing it.

The arguments for why private health insurance subsidies increase the overall cost of health care are reasonably straightforward, and I commend the excellent report done for the Centre for Policy Development by John Menadue and Ian McAuley on this issue. Modelling shows that by removing the $4½ billion subsidy in private health insurance we would only need to increase expenditure on our public hospital network by about $1.38 billion, leaving over $3 billion that could be spent as a direct additional investment in our public hospital system.

It is fairly clear why health care delivered by subsidising private insurance is more expensive and inefficient than utilising a single national insurer like Medicare. Firstly, private health insurance results in an additional administrative burden of around 10 per cent when compared to a single insurer such as Medicare. These costs are largely unavoidable because they include costs associated with competition, such as advertising. There is also the public-good problem, which means that there is little incentive for individual companies to investment in activities such as health promotion and research. But the greatest cost, by far, associated with the subsidies given to the private health insurance, results from the inability of individual insurers to control healthcare provider costs. What this means in practice is that in some cases consultant fees within the private system are five times higher than those in the public system.

I recently had quite an animated discussion with some of my colleagues about this bill. They were a group of friends who happened to be medical specialists that I trained with several decades ago. Some of them work long hours in the private system, and I think it would be an understatement to say that they were not particularly happy with my position on this bill. It proved to me the truism in politics: whether it be an issue like the mining tax, poker machine reform or private health insurance, the most vocal opposition to reform always comes from those who have the most to lose.

Rather than taking pressure off the public system the huge subsidies directed towards private health insurance have in many respects made things worse. Private hospitals compete with the public system for nurses, doctors and other resources crucial to providing the best care to the general public. It is self-evident that workforce follows funding. Furthermore, Australia's public hospitals are experts at providing quality emergency care and treating complicating, chronic disease. Many private hospitals simply cannot match this service. This is why the myth of relieving pressure will never be a reality. A dollar spent on the rebate simply does not make the wait in an emergency room any shorter.

The private health insurance rebate is one of the most inequitable expenditures of public money ever conceived. It is no surprise that former Minister Jenny Macklin described it as 'the worst case of public policy ever seen in this parliament'. Every year, $4½ billion is spent subsidising the health care of those most able to pay at the expense of those least able to pay.

This inequality is particularly bad for people living in regional and rural areas, both because there are fewer private services in regional areas and because people from those communities, on average, have lower incomes. On this issue of the inequity within the system, I need to address something that Senator Abetz said previously. He seems to think that the only funding mechanism for the health sector is the Medicare levy. What Senator Abetz clearly does not understand is that the Medicare levy only contributes a very small proportion to healthcare costs. In fact, the greatest funder of health services is money coming from income tax. And it is true to say that people on low incomes who pay income tax—even if those people are not paying the Medicare levy—are very clearly subsidising those on higher incomes.

A glaring example of this inequality is dental care. Millions of Australians cannot afford to see a dentist. Many Australians languish on waiting lists that stretch into years. Most simply put off going to the dentist until problems land them in an emergency room. It is a national crisis. Denticare, the Greens plan for universal dental care, is designed to fix this problem. But it will require a major investment of public funds. At the moment we have $400 million of public funds every year directed toward the dental care of those with private health insurance. Surely our first priority should be to spend that $400 million of public money on dental services for those who cannot afford to see a dentist. Instead, we are left with the absurd situation where low-income earners with no teeth are paying for cosmetic dentistry for the wealthy. That is the reality of a two-tiered health system.

This bill is a small step to righting this inequity. It introduces a means test, so that high-income earners will no longer benefit from government largesse at the expense of those who cannot afford or do not want private insurance. Individuals who earn over $80,000 per annum will have their rebate reduced to 20 per cent. Those who earn over $93,000 will have it reduced to 10 per cent, and those earning over $124,000 will no longer receive a rebate. The same thresholds apply, doubled, for couples. These measures are forecast to save the budget $2.4 billion in the next three years. It is imperative that these funds are reinvested in the health system. I call on the government to commit these savings to the health sector. In particular, I would like to see these funds address the gaping need for better dental care. If these funds were reserved as the first step towards universal dental coverage, it would be a great step forward for the health of all Australians.

However, there is one component of this package that is difficult for me to support: the increase in the Medicare levy surcharge. The Medicare levy surcharge is an additional tax that is paid by those over the threshold who do not have private health insurance. If the rebate is the carrot, this is the stick. It is designed solely to create new customers for the health funds. This measure in the bills increases the penalty that those without insurance must pay to 1.25 per cent and 1.5 per cent in the two income tiers. I support it reluctantly for two reasons. Firstly, the Greens managed to secure $165 million for public dental care, which will go some way to addressing the huge unmet need in this area. Much more is needed, but it is a good start. I am proud that in our short time in this chamber we have managed to introduce such an important amount of funding for dental health. Secondly, we support this element of the package because, on balance, means-testing the rebate is a significant positive measure and we did not want to risk its defeat.

One would have thought that one of the first jobs of a new Labor government would have been to scrap all the incentives that have led to this expensive, two-tiered health system. Unfortunately, this Labor government has shown itself to be little different from its predecessor. The National Health and Hospitals Reform Commission, introduced with much fanfare by Prime Minister Rudd, ignored this issue completely despite the fact that health financing is one of the most critical elements of any health system. It is just another sign that the ideological differences between the two sides are becoming narrower and narrower. Yes, it is true that these changes make the system a little fairer, but the basic premise remains. The government continues to accept the flawed notion that the aim of health policy should be to increase the uptake of private health insurance. The only difference is that this government's focus is on the stick rather than on the carrot.

Recently I was shocked to hear the newly elected president of the Labor Party go so far as to describe Medicare as a safety net. Let's be very clear about this: Medicare is not a safety net. It is a universal system of health insurance that is paid for by everyone. The more you earn the more you pay. Nobody should be penalised or made to feel guilty for using our public hospitals. One of the great battlegrounds that once existed between the two old parties—that is, the notion of universal health care—has all but disappeared. It seems that the Greens are now the only party prepared to fight for it. The great tragedy is that both the old parties are prepared to spend billions in public money to drive people away from the health care they have paid for through their taxes. We do not penalise high-income earners who choose to send their child to a public school, because we accept that it is their right as taxpayers to do so and, indeed, they should feel welcome to do so. Health care is no different.

Health policy should be based on evidence, not on ideology. This is not a Left-Right question, and anyone who views this issue through that prism misunderstands it. People who choose to take out private health insurance should have the freedom to do so—we accept that—but the evidence is very clear. If we want to provide health care to the entire population in the most economically efficient and equitable way then a single national insurance scheme is the way to do it. That is not to say that the government should ignore the role of private healthcare providers. Private hospitals have an important role to play in Australia. Calling for an end to the inequitable rebate is not a call for the abolition of private hospitals—far from it. There are better and far more efficient ways of utilising the capacity of private providers than subsidising the health insurance sector. For example, direct contracting with private hospitals to perform services that would otherwise be done in public hospitals is one option worth exploring. There are tentative moves afoot in this direction in some places, such as in Queensland, where the Surgery Connect model shows some promise.

The truth is that Medicare occupies a very special place in the hearts of most Australians. They regard it as much more than a technical mechanism for funding health care. It is a reflection of our egalitarian traditions—the idea that we are all entitled to a decent level of health care regardless of who we are or where we come from. Fortunately, this is one area of public policy where the idea of a fair go coincides with our aim of economic efficiency. For several decades we have had a health system that has been the envy of the world. The time has come to start reinvesting in our public health system if we are to keep it that way.