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Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2009 Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Bill 2009 Fairer Private Health Insurance Incentives Bill 2009 Health Insurance Amendment (Extended Medicare Safety Net) Bill 2009

CHAIR —Welcome back, Ms Kosky, and congratulations on your Australia Day award; it is most deserved and I know that the people of Western Australia were very proud to have you nominated. You have information on parliamentary privilege and the protection of witnesses. Would you like to make opening statements?

Ms Kosky —In case senators do not know about the extremely famous Health Consumers’ Council, I may give you some background about what we do and what we know. We have been established for 15 years and we have a role in advising government on policies and processes to do with consumers and patients. We are, in Western Australia, the patients’ voice in the health system. We provide advocacy services directly to the public, training and support for patient representatives and review of policy and legislation for both the state government and, sometimes, the Commonwealth government.

We have not surveyed our members around the issue of private health insurance and the means testing suggestion. I would say that we have quite a divided community of members; we would have members with private health insurance and members who rely on the public system. What we do have as an organisation is a very strong commitment to equity and access based on clinical need and not on capacity to pay.

That concludes my opening statement. Tim may have some comments to make.

Mr Benson —First, I want to thank the committee for the opportunity to present to you this morning. As Michelle said, whilst we are here representing the council, we have not surveyed our members in detail, but many of the comments I want to make in my opening statement are based on anecdotal evidence from a number of members we have spoken to.

My concerns are fivefold. One is the obvious increase in pressure on the already stretched public hospital system. As more people move out of a situation where they have private health insurance, due to the increased costs, those people are going to have to go to the public system for treatment. Depending on whose surveys you look at, I think the number of people who will move out of the private health area could be up to a quarter of a million and there may be up to three-quarters of a million people who may downgrade the level of cover they have. Then there are other figures saying that it is only going to be 25,000. Like lots of estimates, you never really know until it happens. When one considers that something in excess of half of surgical admissions during the last 12 months were funded via the private health system, it does make you wonder where that money is going to come from and where the beds are going to come from in the public system.

Secondly, I think that the people who remain in the system are inevitably going to incur some increase in the costs of their health cover by staying in the system. I think the Treasury estimate was somewhere between 10 and 40 per cent. By definition, because seniors currently have access to a 40 per cent rebate, they are going to be the people most affected, so, in some ways those who are least able to afford it are going to be penalised the most. As a sort of rights based organisation, as Michelle said, I would see that as a concern.

Thirdly, there is obviously going to be a loss of funding into the health system. Again, the public purse is probably going to have to be opened to fill that gap. That is of major concern—probably.

Timing, I think, is another thing which concerns us, as a fourth point. We have a National Health and Hospitals Reform Commission with a report that I think is currently before the minister and shortly to be released. There is also the Productivity Commission inquiry that has been going on over recent times into the performance of public and private hospitals. This legislation has been put on the table before either of those reports, which could have a significant bearing on the legislation that has come before parliament. I find that interesting.

The final area that concerns me is some of the omissions from the proposed legislation around issues such as financial consent; the grading, rating or whatever you would like to call it of hospitals; the efficacy of prostheses and so forth which people receive as part of their treatment. There does not seem to be any section within the acts that is going to ensure that where the public dollar is being spent on those sorts of things they are perhaps using the most efficient prostheses in that procedure.

Senator CORMANN —I was very interested in your comments about how you focus on equity and need rather than capacity to pay. Of course it is a very important principle in our health system. How important do you think private health is as part of our overall mixed health system in Australia?

Ms Kosky —I think it is an inherited historical fact, and private health certainly plays an important role in looking after patients. I do not think anyone would deny that. It is just how much the taxpayer would subsidise it, really.

Senator CORMANN —Do you think it is just a historical fact? Let me go back a step. I would put the proposition that our health policy challenge is to ensure timely and affordable access to quality health care. I suggest you would agree with that.

Ms Kosky —Absolutely.

Senator CORMANN —Obviously in the public system it is affordable because it is free, but there is a question as to how timely it can be at times because there are waiting lists and waiting times which are a function of limited resources versus unlimited demand. The more people decide to take additional responsibility for their own health care needs by taking on private health insurance, the less pressure there is in terms of forcing people to wait who cannot afford private health who are not a high enough priority. I guess that is the theory behind the way the Australian system, quite uniquely, is structured. How important do you think it is for your members, both those who access services in the public system as well as those that access services through private system, that the Australian health system stays in balance with both a strong public and a strong private system?

Ms Kosky —I think that is what we have inherited. We could have had a completely different health system and modelled ourselves on other countries. The fact is that people are brought up with a mixed system. As I say, our members are both very responsive to the private system and very fond of the private system, but many of our members also rely only on the public system.

Senator CORMANN —If you could start from scratch and design—

Ms Kosky —Do not ask me. It would be too awful for you to hear. I just think that we need to have this idea of access, and I appreciate that the private hospitals do play an enormously important part. Other experts say they cherry pick the easy throughput, and the more complex cases are managed in public hospitals because public hospitals are teaching hospitals. I am not an expert on hospital flow, but that is certainly something that one reads often in the literature.

Senator CORMANN —We will have Dr Shane Kelly from St John of God a little bit later. We will ask him whether he cherry picks or whether he also performs some of the complex stuff.

Ms Kosky —When Dr Kelly was CEO at Fremantle Hospital, I was in the room when he made that observation. But now he works for a different hospital he will clearly have a different observation! And being a human being, I kind of support that.

Senator CORMANN —We will ask him the question and share that observation with him. If more people leave or downgrade their private health cover, it stands to reason that more people will have to present to public hospitals, doesn’t it?

Ms Kosky —It depends what private health cover covers. If people are young and healthy and have private health cover, there is no reason that they would be going to hospital regardless of their cover. People with chronic conditions of course would drift across to the public system but many private hospitals do not even manage people’s chronic conditions in an ongoing way.

Senator CORMANN —But if the people who leave are the young and healthy, as you say who do not use hospital services, then what you are really saying is that they are leaving a system that they are paying into but not using. So the people who stay behind are the ones who are using and you have just lost a whole heap of resources. Where are you going to get those resources from?

Mr Benson —Maybe if I could just comment on that to some extent. I think Michelle is absolutely correct that the private hospital system per se does not really look at long-term care of patients. That is something that is much more handled within the teaching hospital scenario. There are a number of young people who have babies and things like that who do take out private health insurance.

Senator CORMANN —So they do access private hospital services.

Mr Benson —Yes absolutely. In the maternity area particularly, possibly far more than, logically, the chronic disease area.

Senator CORMANN —Knee reconstructions, heart attacks.

Mr Benson —Yes, all sorts of things—there are sporting injuries, car accidents, mental health, as you say. There are a number of areas where the public do go to the private system. The other thing that we should not lose sight of is the fact that even within public hospitals there are people who choose to be admitted as private patients. There is an impact in that area as well.

Senator CORMANN —You mentioned informed financial consent and that is of course a very important issue. Mr McAuley appeared before us in Canberra—he is a supporter of this particular measure incidentally. He supports means testing the private health insurance rebate. Even he said that the most rational response from people in response to this measure is to go for the cheaper policy and to cancel their ancillary cover. Going for the cheaper policy means increasing your front-end deductibles or going for exclusions, such as excluding heart or orthopaedic surgery. This would then increase the incidence of patients facing gaps or not being covered at the time of accessing the service. Is this something that concerns the Health Consumers Council? Given that financial consent has not actually been addressed as part of this package, more people will be faced with higher out-of-pocket expenses or not being covered at the time of accessing the service and will be caught up in pretty unfortunate circumstances.

Mr Benson —I think you are right. I think that the informed financial consent issue is a huge one not only in relation to this particular set of bills but—

Senator CORMANN —It is already an issue now, but it could become worse.

Mr Benson —I think it can because at the moment people, particularly with private health insurance or people who are in the public system either way, have this somewhat naive expectation that their fund is going to look after them. The fact that we do not know really when we embark on a hospital experience just how much we are actually going to be out of pocket is a huge issue. If we now get people dropping out of cover or reducing their cover, the shock to them postoperatively could be quite significant more so then if they went into it with their eyes wide open.

Senator CORMANN —In the public system it is free universal access except that you have to wait until you are a high enough priority to fit into the number of available services.

Mr Benson —Correct.

Senator CORMANN —But in the private system—and it is already a problem now, potentially, to get access when you think you need it rather than when the system says you are a high enough priority, paying extra is both a combination of the premium and whatever out-of-pocket expenses there are, depending on your level of cover. If more and more people will downgrade their level of cover, is that not a hidden problem that is going to become worse?

You are either in the public or in the private system, that is very clear-cut. But if you stay in private health and, as you say, you have this naive perception that you are covered for things that perhaps you are not, isn’t this going to lead to more complications for more people who think they are covered, who think that they will not have any out-of-pocket expenses, but then have to pay $500 out of pocket or find that they are not covered for knee or heart surgery? Surely, as a health consumers organisation it would be of concern to you that that is an increasing problem.

Ms Kosky —It is an increasing problem, but I am glad that you go to a doctor who when you say that you think you should go somewhere says, ‘Right’. First of all the patient does not decide when they need the surgery or the intervention, your specialist does and, oddly enough, if you have private health insurance, somehow you fast track. That strikes me as deeply inequitable because it is not on the basis of your clinical condition but on the basis of your capacity to pay.

I agree with you, but also there is an obligation amongst the private health insurance industry to better inform their members of the products that those members have paid for. We have had many concerns over the years that people are not clear about what it is they are insured for and what it is that they are not insured for. I have to say that in this state the largest health insurer has taken on board that view of getting a much better quality of health information and insurance information out to their members. So it is a problem but—

Senator CORMANN —I can hear that you are of the view that perhaps we should have a public system across the board. Are you nodding? Hansard cannot pick up your nod, so I am reading into the Hansard the fact that you nodded.

Ms Kosky —If Senator Cormann says I nodded, I nodded! Sure.

Senator CORMANN —I go back to the point that, because of government action, because of government going back on the promise they made before the last election of not changing the private health insurance rebate, one of the most likely things to happen, according even to people who support this measure, is that people will downgrade their cover. So a problem that already exists and that you think is a bad problem—that is, people not being sufficiently aware as to the additional out-of-pocket expenses they face and the things that they may not be covered for—will actually get worse. Is it something that is of concern to you that, as a result of this measure, more people will get caught up with out-of-pocket expenses they would potentially be unaware of and that more people will be not covered for things they thought they would have been covered for?

Mr Benson —Yes I think that is true, but with or without these amendments the issue is still the issue of people not being aware of their liabilities. Because there are going to be more people who do not have the cover or who have chosen to reduce the cover then the potential damage, the gap, is going to be a lot greater, yes.

Senator CORMANN —Going back to your original statement, and I will leave it there, do you think it is inequitable that some people choose to pay extra through private health insurance to get immediate access at a time when their specialist tells them that they need access rather than to have to wait in the queue until there is enough available space in the public system to let them in? Do you think that is an inequitable thing.?

Mr Benson —The inequity comes about because of the fact that people cannot get into the public system when they need to get into the public system.

Senator CORMANN —Okay. But if fewer people pay extra in the private system then they will displace further people from the public system who otherwise would be able to get access. You are nodding.

Mr Benson —Yes, I am. I totally agree with you. We already have the inequity that we cannot treat all people through the public system when they need to be treated and if we are going to put more people into the public system without resourcing it adequately, we are only going to compound the problem.

Senator CORMANN —So it is a good thing that people take additional responsibility and pay extra to get access to the private system because that means more people that need it and cannot afford to pay extra can get access to the public system?

Ms Kosky —I have no problem at all with taking the view that people who can afford it should have private health insurance to enable people who cannot afford it to access the public hospital system. But I still think it should be one equitable health system, not a two-tiered system—one for the wealthy and one for the poor. I think that there is a major problem when the capacity to pay moves you along a clinical list. So there is something about medicine and surgery that we need to address, because if we have a health system that is looking after everyone then we should really be treating sick people. I also think that means-testing a private health insurance rebate for wealthy people is not an unreasonable attitude for government to take at this time. By wealthy, I suppose I mean people on over $100,000 a year.

Senator CORMANN —Thank you. I take note of that. Just going back to the beginning of your comments, do you think that if we had a completely universal public system it would be able to handle all of the demands for public hospital services out there in the absence of a private system?

Ms Kosky —We have never experienced that, so I cannot prophesy what it would be—

Senator CORMANN —There are experiences around the world that do it. I put it to you—

Ms Kosky —Yes, and there are varying views, Senator Cormann, about how well the national health service in the United Kingdom works. There are varying views so—

Senator CORMANN —Having experienced it I can tell you that people have to wait for a very long time for services that would otherwise be quite necessary.

Ms Kosky —Right, and one hears a different view: that other people—

Senator CORMANN —Mr Benson was nodding when I was saying that.

Ms Kosky —have experienced that they have not had to wait. So it is difficult to know.

Senator CORMANN —All right, I will leave it at that.

Ms Kosky —Thank you very much for your questions. We appreciate it.

Senator SIEWERT —I am just wondering. Where have you got the information from regarding your comments around the number of people who are going to drop out of private health insurance or be affected?

Mr Benson —Thank you for the question. The information comes from three sources, I guess. One is from polls that have been conducted by independent research organisations such as the Roy Morgan group and others. There has also been some information that has been provided out of Treasury estimates and there is other information that has come from within the industry. So there is a sort of independent-government-industry mix.

Senator SIEWERT —One of the underlying problems with this is in being able to access data. For example, one of the things I am finding extremely frustrating is that none of the funds has access to—or they cannot compare, or do not know—what people’s income is. So when they are looking at how this is going to affect people, they cannot do that because they do not know how many people are over the threshold and will fit into the various tiers.

Mr Benson —That is right.

Senator SIEWERT —Catholic Health Australia has commissioned an Access Economics review and basically they agree with Treasury’s analysis which indicates the number of people who are likely to be affected. They do then comment on the ancillary issue, and I want to come back to that. I also want to touch on the fact that what Treasury are also saying is that there are about 130,000 extra people who will get caught up with the increase in the surcharge. There will be increased pressure on them to take out private health insurance. I am wondering whether you have a view on that. And I wonder what your view is on the use of ancillary cover, which the industry in the hearing in Melbourne admitted that a lot of people do not use. The industry uses the funds generated from that to cross-subsidise some of their other policies. So I wonder whether you have looked at that and whether you have views on those issues.

Mr Benson —I guess I have a view, particularly about the use or lack of use of ancillary services. I think as people get older perhaps they use the ancillary part more than they do when they are younge as they get more problems with their oral health and their eyes and they have a need for physio and things in that sort of arena. But in real terms of how much cross subsidy there is, I would not be privy to that information and would not even hazard a guess. I think there will be an impact on people who do have ancillary benefits, because I think that that will probably be one of the first things, as a percentage of the total premium, that will be dropped—particularly by the younger section of the community, unless they have a known need for retaining it.

Senator SIEWERT —What sparked my question yesterday was the comment that people would be dropping it. I said, ‘Well, there are a lot of people actually maybe looking at it and thinking they do not get value for money so they will in fact drop it.’ Have you had experience with that? Have any of your members talked about whether they use it or get value for money?

Mr Benson —I have certainly heard the comment from people that if they are going to do something as a result of this legislation that will be the sort of thing that will go first. One of the other interesting comments which I did not mention in the opening address but which I find quite fascinating is that a number of elderly people or people at the older end of the spectrum are saying that because they have such a large need to use the system—with hips, knees and some of the other conditions that become more prevalent as we get older—they are really looking at how they can make savings in other parts of their life rather than drop that particular cover. They recognise the need to maintain that ability to receive treatment when they need it and not necessarily have to wait for 12 months or something within the public system.

Senator SIEWERT —I suppose my question is—it is more a philosophical question—should older Australians in particular be required to pay out of their fairly meagre savings for private health insurance or should we have a system that is robust enough to actually be able to pay for those services so they do not feel like they have to have insurance to enable them to access effective and efficient hospital care?

Mr Benson —I think the short answer is yes, we should have a system that is equitable in the sense that those people who have a need should be able to get access as and when they need it.

Senator SIEWERT —And the $3 billion that we are currently investing in private health insurance, some argue—and I must declare, including me—would be better invested in helping those people.

Mr Benson —I think $3 million—

Senator SIEWERT —Billion.

Mr Benson —Sorry, $3 billion. I was going to say that $3 million is not going to make much of a difference. Obviously $3 billion will be far more significant. Maybe that is true, but I think if we do that we really have to have a look at it. Providing the money is one thing. Providing the rest of the infrastructure, whether it be people, beds or whatever, is another thing. Money does not buy everything.

Senator SIEWERT —Mr Ian McAuley argues that if you reallocate those financial resources then the other resources will go. So, if you prioritise the public health system and put more funding into that, you will get a shift in emphasis from the medical profession. That is his argument now. I have not heard that from the medical profession. We can ask the AMA. His argument is that you will find that there is a shift in the system when the resources are there. My other question is around the NSL and the increase in the number of people that may go into the system. Have you had a look at the arguments there, from Treasury?

Mr Benson —Not really, no.

Ms Kosky —I could not make any comment.

Senator SIEWERT —Obviously they are going to be the higher income earners. The argument is that they are higher income earners and there will be extreme pressure on them to take out private health insurance through the increase.

Mr Benson —I think that is probably true but from our organisation’s perspective we have not looked at so much of that because the majority of our membership are not in that sort of bracket.

Senator SIEWERT —I appreciate that. I have one other question. Part of this inquiry is looking at the extended Medicare safety net provisions. This is the legislation that allows the minister to impose a cap on certain procedures. At the moment there is the IVF procedure and potentially fixing cataracts. This bill basically allows the minister in the future to put a cap on other services. Have you had a look at that? I am not actually referring to the specific issues at the moment. We heard about IVF access and the doctors working on fertility yesterday. At this stage, are more interested in the concept of applying the cap to the safety net.

Mr Benson —I have concerns not only directly related to your question but that it is not in the interests of the public or patients generally to have politicians or even bureaucrats sitting down and saying to a medical practitioner that they cannot provide the best treatment because the funding is not going to be available from the government to pay it out of Medicare. If the patients are not in a position to pay the shortfall then that puts a huge impost on their health and wellbeing.

Senator SIEWERT —The PBS has an independent expert mob that does the advising, complaints and things like that. I forget the exact name off the top of my head. But if you had an independent expert body looking into that, would you be more comfortable with it?

Mr Benson —I would certainly be more comfortable.

Ms Kosky —To say you can have 15 cycles of IVF but we cannot give water to some Aboriginal communities in Western Australia is preposterous. I find that it is that kind of inequity where the government completely lets the people down, I am sorry. I think there does need to be sensible resource allocation. I think it is entirely appropriate for parliamentarians elected by the people to make some decisions around how taxpayers’ dollars are going to be spent and invested in health over the next 20 to 30 years. Otherwise, we are not going to have a sustainable health and hospital system.

Senator SIEWERT —That partly goes to my next question. The issue that has come up a number of times is runaway medical expenses, the increasing cost, for some procedures in particular because they have an emotional context. Are you saying an increase in those fees is not proportional to other medical procedures? Other than the cap, so far no-one has really come up with a sensible suggestion, as far as I can see, about how you deal with those excessive fees that do seem to be out of proportion with inflation and the increases for other medical procedures. What is your opinion on that and have you got any suggestions on how it could be dealt with?

Ms Kosky —No. That is why we pay you so much! I have not got any brilliant suggestions. I do think that there needs to be some community discussion around what it is we can and cannot afford in this country in terms of investment in health technology and medical procedures. Moving away from consumers to citizens, and to the public good away from self-interest, I think most citizens may well say that there needs to be an independent body set up and authorised by government to give government some advice about capping certain procedures. I think it is a really good initiative.

Senator SIEWERT —The obstetrics measures that have been brought in have been discussed. Whilst some of the other changes have not been discussed with the medical profession, I understand that one has been. As I understand it, there has been a lot of cooperation with the profession. It is not quite going to an independent body, it is working it out with the profession, but it seems to me that we do need some expert advice on what is appropriate expenditure.

Ms Kosky —Yes.

Mr Benson —I think that is true and I think the other thing that goes with it is that some procedures are obviously life enhancing and life saving; other procedures perhaps could be classified as not so crucial to the patient’s wellbeing. If we are going to introduce a capping system—and I think a capping system is probably the best that we have available on the table at the moment—Michelle has pointed out we have to look again at this equity word. How much do you spend on a particular procedure for a particular patient when you have communities that are suffering?

Senator SIEWERT —I do understand that is the point that you employ to make some of those tough decisions. It is more the expertise around what is appropriate for a specific procedure that I think we probably do need some independent advice on. Thank you.

Senator FURNER —Firstly, can I just get a quick understanding of what your membership is in terms of age demographics. I think you pointed out that you do not have research or data on their earnings or income.

Ms Kosky —We currently have 800 individual members. We have 260 non-government not-for-profit organisations in Western Australia as members. Our individual members, by and large, would be over 50. Many of them are on pensions, many also are still in the workforce and some of them have had very considerable difficulties with the health system. Because we have provided them with a service, they have come and joined and wish to make a contribution in some small or big way to make the health system operate more effectively. We do not have millionaires, Senator, as our members. We would like to, and we are always looking for extra funding. But we do not have people with large incomes as our members. I could assert that truthfully.

Senator FURNER —So it could very well be the case that those out of that 800 that are over 50 may not be affected by these changes whatsoever given the introduction of the new tier arrangement for the changes.

Mr Benson —They may not be directly affected, but if we put more people back into the public system, which significantly they rely on, then they will be indirectly affected because the weight of this will get bigger and the quality of care potentially will decrease as more pressure is put upon commissions to increase their throughput or whatever else to try to meet that need.

Ms Kosky —If the community could be assured that the savings are going to be reinvested back into the public hospital system in a new and glorious future for Australian health then I think people would feel less anxious about this whole proposition.

Senator FURNER —Ms Kosky, I think you made a philosophical statement about the view of your organisation being based on equity and I think you started to answer this question earlier about the proposals. Do you think they go towards fulfilling that philosophical statement that those that can afford to fund private health insurance will be more greatly captured to assist those that necessarily cannot?

Ms Kosky —As I have already said, we have not asked our members about the means testing of the private health insurance tax rebate. I personally strongly support it, I have to say. I will show my bias now. I think it is a reasonable way for a government—I appreciate that the election promise was to maintain it but I do not think it is sustainable for the Australian health system over the next 10 to 20 years.

Senator CORMANN —Was that your view before the last election?

CHAIR —Ms Kosky, you can choose whether or not to answer that question about whether you had a longstanding view about public hospitals.

Senator CORMANN —That the rebate should be means tested.

Ms Kosky —No. I have had it ever since it was introduced. It is not something that—

CHAIR —It is a longstanding view.

Ms Kosky —Yes.

Senator FURNER —You used the definition of young people for some of the people that you represent. How do you define young people? This started yesterday in Melbourne, where we had some debate about what you determine as young.

Ms Kosky —We would probably not have many members under 40. We do not have many adolescents or young married people as member of the Health Consumers Council of Western Australia—that is mostly probably because they have not had much to do with the health system. They have not run into problems. Once you hit 40 and over you can run into problems with the health system—you might get sick or something may happen.

Senator FURNER —So in your experience most of those people you would consider as young have had little or no exposure to the health system at this stage?

Ms Kosky —Of course we welcome the involvement of young people—occasionally there are young people with cancer, young people with chronic conditions, young people with diabetes and young people with asthma or chronic respiratory conditions. We assist those people but they do not tend to join the council. That is the observation I would make.

Senator FURNER —You made the point about insurance industries, and I think it is quite relevant, however you qualified it in terms of WA, about the information to their membership being shared. Certainly something that was shared yesterday in Melbourne with the majority of industry bodies was that there is a lack of understanding about what a policyholder has access to. Is that your experience?

Ms Kosky —Yes, absolutely. I think it is a challenge for the health insurance industry. How do you make the information sexy and interesting? People say, ‘Oh, insurance. I’m not going to read the fine print.’ And they do not actually understand the nature of their cover. So we have to think of more imaginative communication strategies to get the information to the consumers—the members.

Senator FURNER —It is a bit like most insurance though, isn’t it? You only go to the fine print or have a look at your policy when you need to make a claim.

Mr Benson —And there certainly seems to be a lack of communication between the treating physicians, the patient and the health insurance industry. It is sort of a triangle which does not seem to be closed on any side.

Ms Kosky —The other thing that strikes me around private health insurance generally is that the press are very interested every time there is an increase in the premium. They seem to think that premiums are quarantined from market forces in this country. They are mostly pretty bright, intelligent people. I have been responding to the rises in premiums for 10 years publicly now and I always say, ‘But, don’t you understand that we live in a market economy and premiums are not quarantined from being raised.’ It goes back to informing the public. There is this misunderstanding by the public that somehow the premiums are quarantined and that is reinforced by the press. It is slightly misleading I think and I do not know how the industry should and could sensibly address it.

Senator FURNER —I do not know where that comes from. Certainly the previous witness indicated that there have been premium increases over the last three consecutive years ranging from a bit over seven per cent and on average four per cent in the previous two years. Have you had an opportunity to look at the other submissions that are on the website at all for this inquiry?

Ms Kosky —I have had a look at the one from Dr McAuley, but I would because I kind of agree with him so that is where my prejudice naturally lies. That is the only one.

Senator FURNER —I encourage you to look at the others. We will had the opportunity to hear from Dr McAuley the other day in Canberra. There are also submissions from Dr Deeble and Mr Wells which, in summary, seemed to come from the one page. For example, Dr McAuley indicated that there would be little or no reduction in membership in the private health insurance sector due to what he terms as the endowment phenomenon—where people tend to hold on to health insurance as opposed to maybe car insurance or household insurance. If things get tight, they might consider dropping one of those. People tend to decide not to drop their health insurance because of the fact that you are gambling with your own health. Do you agree with those sorts of analogies that have been put forward?

Mr Benson —I think it is true that it is something that may not be dropped at the rate that some of the surveys have indicated. But what concerns me about that is, as I have mentioned before, that people will retain their health insurance for all the very valid reasons you have just mentioned but what that will do is impact upon other aspects of their life like maybe the quality of their food, their clothing or their other environmental conditions which will consequentially impact upon their health. They have to make a decision about the dollar, if they are going to use it to pay for their health insurance or for their heating. This is particularly so for those people in the older age group or those people who are on limited incomes. So I think that, whilst the numbers may not drop off at the rate that some of the pundits are quoting, there will be a consequential effect on people’s health.

Senator FURNER —I think however that will always be the case regarding human nature. You would not defer an illness as a result of not deciding to deal with it as opposed to purchasing something that you do not necessarily need or would rather afford to put your life and your health before any other household accessories.

Mr Benson —I totally accept that. But for people with limited incomes some of the things that they have to defer are things that perhaps you and I would consider to be actually very important to our wellbeing, like food, clothing, heating and other stuff.

CHAIR —I know that there have been a lot of submissions on this issue but I am still not convinced that a lot of people out in the community have got across it yet. That is what happens with all these things. In evidence we have heard there has been a lot of talk about percentage increases and tables as to people. Do either of you have any idea of what is exactly the dollar figure of how much we are talking about? Percentages have been thrown around but I do not think there has been a lot of awareness of this. If you have an income of $80,000 and you are single how much vaguely is it going to cost you? It all depends on whichever fund you belong to of course. Do you have any idea whether your members or the people who are interested in this issue have got any concept of exactly what the dollar figure is?

Mr Benson —My guess—and it truly is a guess because, as we have said a few times, we have not surveyed our members—is that most people do not really understand what that dollar impact would be. We as an organisation certainly have not done any financial modelling, nor are we really in a position to because we do not have access to the information that the funds have available to them.

CHAIR —There has been some general work done but of course it has been general because each individual fund is talking about its own packages, of which there are so very many. But I think it is very important for people who are looking at this to understand what it is going to mean as to their own pocket, rather than to have generalities. So that is why I was wondering if you did. Mr Benson and Ms Kosky, you will get a copy of Hansard, as you always do. If there is anything that you want to change or add or if you think of things we should know over the next period, please let us know by contacting the secretariat. We have deeply appreciated, as always, having your input.

Proceedings suspended from 10.34 am to 10.52 am