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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, Dr Kelly. I let the last session go over time by 10 minutes, so I thank you for waiting and appreciate your patience.

Dr Kelly —It is my pleasure.

CHAIR —You have information on the protection of witnesses and parliamentary privilege. I invite you to make an opening statement and then we will go to questions.

Dr Kelly —Thank you for the opportunity. By way of background, St John of God Health Care employs some 8,000 working across 14 hospitals, with over 2,000 beds in WA, Victoria, New South Wales and New Zealand. We also operate a community hospice, pathology services, a major disability support service in Victoria and a wide range of social outreach and advocacy services in Australia, New Zealand and the wider Asia-Pacific region. Last year we admitted approximately 175,000 people into our hospitals. As a Catholic not-for-profit group, St John of God Health Care returns all profits to the communities it serves by updating and expanding technology and facilities, expanding existing services, developing and operating new services and providing social outreach and advocacy services to the marginalised—people who are oppressed, materially poor, powerless and disadvantaged.

Through Catholic Health Australia, of which St John of God Health Care is a member, we have assessed the likely impact of the proposed changes to the private health insurance rebate, and I must say our assessment differs significantly from that undertaken by Treasury. Clearly, the budget changes will result in substantial increases in the cost of private health insurance premiums, as we have already heard, for those who will lose access to the current 30 per cent, 35 per cent or 40 per cent rebate. In concluding that coverage of private health insurance will be around 25,000 fewer than it otherwise would have been, Treasury modelling on the impact of the changes makes a questionable assumption that the elasticity of demand for private health insurance is the same—that is, negative 0.2—for an individual on $75,000 as it is for an individual on $250,000. In other words, Treasury is suggesting that an individual on $75,000 who faces a 10 per cent increase in their health insurance premium at an average cost of $2,000, which represents 3.4 per cent of their take-home income, will react in the same way as an individual on $250,000 whose premium also cost $2,000, which represents only 1.2 per cent of take-home income.

In addition, Treasury modelling has not taken into account the likely very large downgrading in policies held by the privately insured in response to the large increases in premiums, as we have already heard this morning. Privately insured members subject to the Medicare levy surcharge can still avoid the surcharge by downgrading their membership from a comprehensive full cover style of product to one subject to high excesses and exclusions from a number of conditions. The impact of many members downgrading, especially by younger, healthier members, will be a reduction in the moneys available in the total insurance pool, resulting in higher premiums down the track, leading to a further negative impact on membership levels. This will particularly adversely impact on the one million privately insured members who earn less than $26,000 per annum.

Analysis of the changes undertaken for Catholic Health Australia by Access Economics suggests that the budget changes could result in a reduction of up to 100,000 members nationally, leading to an additional 37,000 admissions to public hospitals. The measures in this year’s budget build on the changes to the Medicare levy surcharge in last year’s budget. Those changes are still forecast to result in a reduction of 492,000 privately insured members, as I understand has been confirmed in recent Senate estimates hearings. Taken together, the changes in the last two budgets are modelled to result in a reduction of close to 600,000 members and an additional 220,000 public hospital admissions.

The Australian Institute of Health and Welfare’s latest Australian hospital statistics report shows the contribution of the private sector in Australia’s health system, and the data supports the view that the private sector plays an extremely significant role in reducing the burden on the already overstretched public sector. Forty per cent of hospital separations—that is, 3.1 million out of 7.9 million in total—occurred in the private sector. In the last year, public patient separations increased by 1.9 per cent and separations for private patients funded by private health insurance increased by 6.7 per cent. Between 1998-99 and 2007-08, total separations increased by 37.3 per cent. Separations per 1,000 persons increased by 5.2 per cent for public acute hospitals and by 39.6 per cent for private hospitals. The data indicates that private hospitals have substantially reduced the workload on the public hospitals.

Whilst any reduction in private health insurance membership will have a detrimental impact on our private not-for-profit hospitals and our ability to provide high-level care with quality equipment in facilities of a contemporary standard, it is the negative impact on public hospitals and Australians generally that is of concern. Logically, the decline in patient admissions and procedures in private hospitals will correlate with an increase in admissions to public hospitals. Waiting times for public elective surgery will therefore increase. Public hospitals are already struggling to meet their current workloads. The recently released Australian hospital statistics 2007-08 report shows public hospital elective surgery waiting times have increased from a mean of 32 to 34 days. Additional demand from patients that were previously privately insured will only exacerbate this trend.

We also note that waiting times for elective surgery have increased, notwithstanding the additional resources provided by the Commonwealth for the last half of the year. Longer waiting times will impact on those with low incomes and impact most on those with low incomes, as it is low-income earners who face the longest waits for public elective surgery. These waiting times will particularly occur in specialties where the private sector plays a very large role, areas such as orthopaedics, involving hip and knee replacements, and ophthalmology, involving cataract removals and lens insertions, to name but a couple.

It is well recognised that the public hospital sector has insufficient staffed beds to cope with existing demand, and, at least in WA, population growth will continue to outstrip any growth in staffed beds for the foreseeable future, with the hospital reform program having a very long lead time, particularly in relation to constructing hospitals. Public elective surgery waiting list trends are clear evidence of the fact that there is no capacity to deal with the transfer of admissions from private hospitals to public hospitals that will occur if the private health insurance rebate changes are implemented.

I conclude and summarise by saying to the committee that the proposed changes should not be implemented. The existing private health insurance rebate should remain in place to maintain private health insurance coverage and the critical balance between private and public healthcare provision in Australia. Whilst acknowledging the difficulty in predicting human behaviour and factoring in all of the other variables that can influence private health insurance coverage and therefore being precise about the quantitative impacts of the proposed changes with respect to drop-out rates for private health insurance and the consequent changes in public and private hospital admission rates, it is clear that application of the rebate changes will have a detrimental impact on both the private hospital industry and the public hospital sector and ultimately therefore on the people in our communities who are served by one or other of these. The changes proposed in this legislation, as we have heard several times already this morning, breach the government’s pre-election commitment to retaining the rebate in its current form. Thank you.

Senator CORMANN —Dr Kelly, did you believe the Prime Minister when in opposition he made an emphatic commitment that a Labor government would retain the existing private health insurance rebates? Did your organisation take the Prime Minister at his word?

Dr Kelly —Yes, of course we did.

Senator CORMANN —You would have heard that commitment repeated many times since the change of government.

Dr Kelly —Yes, we did.

Senator CORMANN —So did you see this measure coming?

Dr Kelly —No, because a number of parties sought reassurance on a number of occasions that that pre-election commitment was solid, and they received that reassurance.

Senator CORMANN —Policy changes like this at the federal level have the potential to have significant impact on your very sizeable operation and a flow-on effect on the people that you serve, don’t they?

Dr Kelly —Absolutely, and it leaves us with a lack of confidence going forward for capital investment in private facilities.

Senator CORMANN —Can you just talk us through the impact that it potentially has on capital investment across your hospitals.

Dr Kelly —Clearly our ability to invest in capital to continue to provide the services in contemporary facilities and to expand those services to meet demand is reliant on how well our business is tracking. If we get to the point where we do not have sufficient capital to invest in capital, then obviously we cannot do that.

Senator CORMANN —In that context, perhaps you can talk us through the experiences, as far as you are aware of them, of the private hospital sector in Western Australia in the eighties and early nineties in terms of utilisation and viability as compared to what they are now. And perhaps you could look forward—what the impact is likely to be if changes like this continue to be introduced.

Dr Kelly —The private hospital sector was in dire straits in the mid- to late eighties and, really, capital investment was unheard of. There was not really the possibility or opportunity to invest or reinvest, and it was only the trilogy of changes to private health insurance that reinvigorated the industry and enabled it to once again invest in contemporary facilities. There has been considerable investment. For example, St John of God Health Care, even at my campuses, made a very substantial investment in upgrading the hospital and providing services to Western Australians, something that is now in doubt for the future.

Senator CORMANN —I just want to focus on utilisation. In the late eighties and early nineties, what was utilisation in private hospitals in Western Australia on average compared to now? What was the circumstance in terms of utilisation in public hospitals and waiting lists in public hospitals then compared to now?

Dr Kelly —I do not know the exact figures about the late eighties because I was in the public sector then, but I was certainly aware that the public sector was overflowing and the waiting lists were very long. But the private sector was underutilised.

Senator CORMANN —If it is too hard, tell us, but how difficult would it be for you to give us on notice the average utilisation in, say, the years 1991, 1992 and 1993 and compare that to utilisation in your hospital in 2007, 2008 and 2009? Would that be difficult?

Dr Kelly —I expect those figures are available. You have to take into account the utilisation measures of percentage occupancy and, of course, you have to factor in how many beds were available at the time. It is quite likely that there has been a significant increase in the number of beds in the private sector over that time.

Senator CORMANN —Let’s get to that. Essentially, we have received evidence that increasing private health insurance membership has not contributed at all to taking pressure off the public hospital system. Would you comment on that from your point of view.

Dr Kelly —I think I already have by quoting those figures from the Australian hospitals report and the Australian Institute of Health and Welfare report. It has been a very significant impact. As you well know, up to 50 per cent of surgery is undertaken in private hospitals.

Senator CORMANN —Earlier Ms Kosky quoted a conversation she had with you when you were the head of the Fremantle hospital and I promised to relate the details. Essentially, she made the point that private hospitals cherry-pick and take the easy cases whereas public hospitals take all of the complex stuff and that that is the view that you might have held in the past when you are running a public hospital. Would you care to tell us about the circumstances from your point of view.

Dr Kelly —I am humbled that Ms Kosky would take notice of something I said to her many years ago. I think it would be true to say that, once upon a time in the dark past, private hospitals did the less complex work in the community. That has certainly changed over the last decade and, compared to 10 years ago, we certainly provide high complex surgery and high complex medical care at a par with the state public hospitals. It would be fair to say that the state hospitals do some things that are not done in the private sector, for obvious reasons such as logistical reasons and low-volume reasons such as transplant work, but they are the exception to the rule these days.

Senator CORMANN —Did you mention in your opening statement—I might have missed it—the cumulative effect in terms of additional public hospital admissions of the two measures, last year’s measure and this year’s measure?

Dr Kelly —Yes.

Senator CORMANN —What was that figure?

Dr Kelly —The cumulative effect is anticipated to be about 600,000 fewer members than would otherwise have been, with about 220,000 additional admissions to public hospitals.

Senator CORMANN —Have you done any work locally as to what that means for Western Australia?

Dr Kelly —No, but as a rule of thumb Western Australia is normally impacted about 10 per cent of the national figure—so we would expect about 22,000.

Senator CORMANN —There seems to be general agreement, including from those that support this measure, that the most rational response for people with private insurance who will be affected by this directly because their premiums will go up—and they are also faced with the Medicare levy surcharge stick—will be to downgrade to a cheaper policy, which of course means additional exclusions, higher out-of-pocket expenses. Can you talk us through what that will mean practically, on the coalface, in your private hospitals.

Dr Kelly —Practically it means that, with the exclusions, they will not be able to be admitted to our hospitals, so they will go to public hospitals and add to the waiting lists there. There will be greater out-of-pockets, which drives further disincentive for maintaining private health insurance. Their total contribution to the insurance costs will be less, meaning that premiums will inevitably increase. These things have been assessed as well by the Access Economics review that was undertaken.

Senator CORMANN —Did the Access Economics review include an assumption on how many people would downgrade their cover?

Dr Kelly —Yes.

Senator CORMANN —There is a big discrepancy between the figures. The federal government says 8,000 additional as a result of this measure, so that is not taking into account the Medicare levy surcharge change. You say 220,000 as a result of both, but that includes an assumption that people will downgrade their cover and the effect of that.

Dr Kelly —That is right.

Senator CORMANN —Do you think there will be only a one-off effect or do you think there will be a series of effects over a period of time as a result of measures like these?

Dr Kelly —I think it is likely to be the latter. You can look at the history, in the graph that was given to you by Mr Jennings from the AMA. Typically what happens with these sorts of changes is that there are progressive changes over time.

Senator CORMANN —There will be additional increases in premiums that will build on each other; there will be additional drops in membership.

Dr Kelly —Yes.

Senator CORMANN —And there will be additional pressure then on public hospitals as a result.

Dr Kelly —Yes.

Senator CORMANN —And you will be impacted in terms of your investment in your private hospital infrastructure. Have you been asked by the department to participate in any implementation processes in relation to this?

Dr Kelly —No.

Senator CORMANN —Do you know whether your peak body has been asked to participate in any implementation processes?

Dr Kelly —No, I am not aware of that.

Senator CORMANN —Since the measure was announced, have you been consulted in any way by the federal Department of Health and Ageing about practical implementation?

Dr Kelly —No, there has been no consultation.

Senator CORMANN —I might leave it at that and perhaps come back after others have asked some questions.

Senator SIEWERT —Dr Kelly, is the Access Economics report that you are referring to the recent one that Catholic Health Australia has done?

Dr Kelly —That is right.

Senator SIEWERT —My reading of it—and maybe I am misinterpreting it—is that they are broadly supportive of the Treasury modelling, other than the issues that we have been talking about, around possible downgrade, and the ancillary cover issue. The final conclusion in their executive summary says:

The broadening definition of MLS income will have a minor positive (thus offsetting) impact on PHI coverage as well as lifting MLS revenue.

I suppose the interpretation of that is in the eye of the reader, because you said you do not agree with Treasury modelling, whereas this report has found that they broadly agree with it, and, secondly, they are saying it looks like it will be a relatively minor impact.

Dr Kelly —Perhaps it is in the eye of the reader. I did not read it as them saying they broadly agreed with it. I think they said it was within the realms of possibility. Yes, I agree that they said the changes to the MLS will have a slightly positive effect, but they did not quantify it. They still came to the conclusion that up to 100,000 people would be adversely affected—people who would otherwise have private health insurance would drop that cover.

Senator SIEWERT —They say:

… we reached broadly the same conclusions regarding coverage as the Treasury based on our conceptually quite different scenario analysis.

So they have come from a different angle but have come to the same conclusions.

Dr Kelly —Except they have come to different figures in terms of the impact.

Senator SIEWERT —My interpretation of their final sentence is that they are interpreting that to say that there is a relatively minor impact because one will offset the other. Now, that is the position that Treasury are putting as well because the increase in the MLS will force more higher-income earners into private health insurance, which is a carrot-and-stick approach.

Dr Kelly —The Access Economics report did indicate that there would be a small increase as a consequence of the increase to the MLS.

Senator SIEWERT —Treasury are saying that that will be around 130,000 people.

Senator FURNER —Not increased; they will be impacted.

Senator SIEWERT —I beg your pardon, they will be impacted and could be encouraged into private health insurance. The other proposition that is pointed out by people who are supporting this measure—such as Ian McAuley and Dr Deeble—is that the maximum increase is the difference of three cups of coffee per week. In other words, it is not going to have such a significant impact that it would force people. Because the response to price is fairly inelastic people will not be jumping out of private health insurance—because of the value they place on it.

Dr Kelly —That was one of the issues that the Access Economics report raised: the assumption that the price inelasticity was as low as it was.

Senator SIEWERT —But I think they largely agree with that.

Dr Kelly —That was not my interpretation.

Senator SIEWERT —Well, I thought that they broadly agreed with the inelasticity to price. I also found it interesting that the private health insurance industry—I think it was the association—was quoting figures about response to insurance that were based on general insurance. I must admit I was quite surprised about that, given that I thought they would have a pretty good understanding of consumers’ response to private health insurance, which I think is fairly well known to be much more inelastic than general insurance. Are you basing your assumptions on the Australian Health Insurance Association’s assumption of a broader elasticity to price or on inelasticity to price?

Dr Kelly —Well, I was basing them on the Access Economics report.

Senator FURNER —With respect to the Access Economics report, on page 9—

CHAIR —Do you have a copy, Dr Kelly? As Senator Furner is quoting it might be useful if you had your comments as well. Read it into Hansard, Senator Furner.

Senator FURNER —On page 9, half way down, under the heading, ‘Price inelasticity assumption’ it says that ‘Treasury’s assumption does not appear unreasonable’. It is referring to that upper bracket of higher-income earners and the effect on their capacity.

Dr Kelly —It then goes on to say that it is a reflection of a judgment as opposed to being based on strong empirical evidence.

Senator FURNER —That is right. So I guess it comes down to how you model something. That is the basis of some of the arguments in the modelling of Access Economics as opposed to Treasury’s processes. It also indicates, on page 5, in terms of the downgrading effects, that it reduces rebate expenditure. I guess that is a plausible argument, because if people do downgrade that is naturally going to be a reduction in the access to ancillary matters as a result of a policy holder. And in turn it will not have such an impact on the overall fund and in general have bearings on reductions all around. I would be interested in your comment on that.

Dr Kelly —I think that is a reasonable conclusion.

Senator FURNER —Have you had an opportunity to have a look at some of the other submissions to this inquiry—like those from Mr Wells, Mr McAuley and Dr Deeble?

Dr Kelly —No, I have not.

Senator FURNER —They draw conclusions on a variety of things. In particular, Mr Wells refers to the Roy Morgan research data indicating that you get the answer to the question you asked based on how you ask that question. He goes on further to indicate that it certainly does prejudice the overall findings in that research data.

Mr Wells also indicates that there is no real evidence on premiums going up or down. If you refer to the likes of what you have just concurred with the downgrades, it is plausible—it has not been determined—that there will be no reduction or increase in premiums as a result of that occurring. Over the last couple of days, we have also heard—and I think Senator Siewert touched on this—that about 130,000 people will be affected by the changes to the Medicare levy surcharge and that there is a likelihood that some of those people will move to private health insurance as opposed to continuing to pay the surcharge.

Dr Kelly —You would expect that there would be some. They also have the option of taking up the lower products.

Senator FURNER —Of course. Naturally, they will take up some form of health insurance as a result of getting out of paying the surcharge.

Dr Kelly —The Access Economics report indicated that there would be a small impact as a consequence of that. But I do not recall it quantifying it to the extent that it would offset entirely or to any great degree the impact of the rebate changes.

Senator FURNER —You indicated in your introduction that you have 8,000 employees throughout your 14 hospitals?

Dr Kelly —That is right.

Senator FURNER —Are the 8,000 in Australia or does that figure also include New Zealand?

Dr Kelly —It includes New Zealand, but that is a very small service.

Senator FURNER —How many people would be employed in New Zealand?

Dr Kelly —Probably only a couple of hundred.

Senator FURNER —In general, would those employees in Australia be on enterprise agreements? What sort of employment instrument would they be on?

Dr Kelly —It varies from professional to professional.

Senator FURNER —Are you able to give me some indication of what they might be employed on?

Dr Kelly —I am curious as to the reason why this question is being asked in this context?

CHAIR —Dr Kelly, the questions flow. If you choose not to answer it that is your prerogative, but there is no problem with the senator asking the question.

Dr Kelly —We use a variety of instruments. Some are on AWAs, some are on EBAs and some are under awards.

Senator FURNER —We would no longer employ anyone on AWAs. Certainly there is a time lag there.

Dr Kelly —Historically, there are a small number of people on AWAs.

Senator FURNER —But, in general, if you had to give an answer, would the majority be employed on enterprise agreements?

Dr Kelly —Yes.

Senator FURNER —I am just looking at your submission with regard to your capacity as an organisation to remain sustainable into the future. You put up as an argument that, should these things be implemented, there might be circumstances whereby your capacity could be limited.

The minister, in summing up her second reading speech on the legislation to parliament, indicated that last year COAG had undertaken to put $64 billion into the public hospital system. That is an increase of 50 per cent over and above the old Australian Health Care Agreements negotiated by the previous government. There was a further historical $872 million investment in preventative health. If we are going to argue that there will be an impost on the public health system as a result of these proposals, surely those types of initiatives will to some extent go towards addressing the issues that you and other people have raised before this committee.

Dr Kelly —As a taxpayer, I would certainly hope that they are going to have some positive impact. I would expect, though, that a number of them and particularly things like the preventative health measures have a very long lead time and, in the meantime, we need to have a critical balance between the private and the public health industries to ensure that people have access to services.

Senator FURNER —Earlier today, we heard from the Health Consumers Council of Western Australia. Their philosophy is that the proposal for this bill restores equity in the system. What is your point of view on that sort of statement?

Dr Kelly —I think I have made our position fairly clear: we do not believe this is in the interests of the Australian public. It is going to have an adverse impact on both the private health industry and on the public health industry. So we do not think that is an equitable outcome at all.

Senator CORMANN —Just going back to the Treasury modelling, Senator Siewert mentioned how access Economics broadly agreed, but of course, that was conditioned by the reference to the number of people downgrading cover. That is a pretty significant condition on the assessment of it, isn’t it?

Dr Kelly —I think it was one of the key observations that the Access Economics folk gave to Treasury’s assumptions: they did not take into account the downgrading of policies.

Senator CORMANN —Treasury told us that 2.3 million people will be impacted by this directly, because they will have a reduced rebate or the rebate abolished altogether. So to think that none of them would downgrade their cover is a very heroic assumption, isn’t it?

Dr Kelly —The effective increase in the premiums as a consequence of losing the rebate in its entirety, or partially losing the rebate that they currently get, is clearly going to result in people looking to find cheaper measures—the obvious way is to downgrade your policy.

Senator CORMANN —Treasury also excluded 1.4 million people with private health insurance from the modelling because they did not have income data on it. That is more than 10 per cent of the privately insured population. That is a significant number of people who were not taken into account.

Dr Kelly —Yes, they are big numbers.

Senator CORMANN —Over the last 10 years, St John of God has invested quite significantly in additional capacity, certainly in Western Australia—I am not so aware of what has happened in other states. Can you just talk us through how many additional beds and what sorts of sums of money we are talking about in terms of your investment in private hospital infrastructure in Western Australia?

Dr Kelly —In Western Australia in recent times there has been about $120 million of investment at St John of God Hospital in Subiaco, which has created additional infrastructure in terms of beds, theatre capacity and endoscopy room capacity. There have also been expansions and investments at the next largest of our hospitals—at St John of God, Murdoch—again resulting in increased capacity in beds and theatres. There have also been significant investments in some of our eastern states hospitals—such as St John of God Ballarat, with a $65 million investment in recent times. There has been investment in a number of other hospitals as well.

Senator CORMANN —And that was to cater for growing demand in what you anticipated to be the growth trends into the future.

Dr Kelly —Correct.

Senator CORMANN —The changes in federal government policy will now have an impact on those utilisation trends, moving forward

Dr Kelly —Yes, and when we made our capital investments we had to make an assumption that the trilogy of measures in place to maintain private health insurance would continue as they were. So it is disappointing that, having made those investments to serve the people of Western Australia and Australia, these changes are now looking to come in.

Senator CORMANN —Across your two major private hospitals in Western Australia—at Subiaco and Murdoch—what is your utilisation at present?

Dr Kelly —Our mean occupancy at Subiaco is about 75 per cent and our mean occupancy at Murdoch, which has an emergency department, is about 85 per cent.

Senator CORMANN —I know we have gone on about this before, and I will leave it at that after this, but it is fair to say that this is higher, even though you have additional capacity now, than what it would have been in the late eighties and early nineties?

Dr Kelly —Certainly; yes.

CHAIR —Dr Kelly, could we have your annual reports for the last four or five years, just to have a look at the financial process in your organisation?

Dr Kelly —Sure.

CHAIR —Is that something that you could provide to us, so that we could see the growth and also the profit in terms of investment?

Dr Kelly —Yes.

CHAIR —That would be very useful. One of the difficulties I have in this process is in trying to come down to the actual amount that people are going to have to pay. The Australian Health Insurance Association has done some modelling on this. It is very difficult because every private health insurance package is different.

Dr Kelly —Yes.

CHAIR —It surprises me that they claim that it is not complex. In terms of process I am looking at their figure for an average premium—and I take that basis. If you are earning between $75,000 and $250,000 as a single person, their perspective is that the increase ranges from $181 a year to $544 over a year. The maximum possible impact is $544 for the year, which, over a 12 month period on an income of $250,000 does not seem to be such a major impact.

When you go into families, it ranges from $150,000 up to $500,000 and the change in the premium is from $363 to $1,088. The absolute maximum increase under this proposal, for an income of over $500,000, is $1,088. Allowing that we are talking averages, I am interested to know, from your perspective, with the cost of medical processes and gap costs, why those figures are seen as so high, from a perspective of arguing why people would drop out.

Dr Kelly —I think it comes back to the issue of the community rating we have in place in our industry and the fact that it relies very heavily on the relatively young and well to be insured. If you are hit with another $1,000 why wouldn’t you question whether or not you need that product?

CHAIR —When, as a single person, you earn more than $120,000 per year.

Dr Kelly —Potentially.

CHAIR —Actually, there is no way a single person would be hit with another $1,000 because on this impact the highest is $544. If you have a combined income and you are a young, healthy person, it would go to an extra $1,000 per year at an income of $244,000.

Dr Kelly —And they are the ones who are likely, if they hang on to their insurance, to go to a lower product. I hope you are right; I hope the impact is minimal.

CHAIR —I am not making a statement; I am just trying to understand the process.

Dr Kelly —The information we have, having looked at the Access Economics report, is that it will have an impact.

CHAIR —I have no doubt that there will be people who will make different choices. That is the whole basis of our system—that people have information on which basis they can make a choice. It is just that the discussion around the introduction of a means test for people earning over $75,000—that is, the lowest income that this can impact is $75,000—seems almost to be on the basis that the whole of the rebate is gone and that this is not a removal of the rebate; it is actually an imposition of a means test on a segment of people who are impacted.

Dr Kelly —I understand that.

CHAIR —The arguments we have heard seem to be premised on the fact that it is going to end the whole involvement. I am fascinated by the discussion around the impact on private hospitals. Do you, as a private hospital administrative organisation, know the income basis of the people who come into the hospital?

Dr Kelly —No. We do not collect income information from our patients.

CHAIR —In terms of the interaction between the hospital and the people using the service, you would know when people have private health insurance because the first question you are asked, almost as you come in the door, is, ‘Do you have private health insurance?’ The fact that people do not does not stop them having the service; is that right? It is just that they have to pay for it.

Dr Kelly —That is correct.

CHAIR —From your records, do you have any indication of how many people who do not have private health insurance actually use your system?

Dr Kelly —About five per cent of our admissions.

CHAIR —And that is across the board?

Dr Kelly —That is right; yes.

CHAIR —These are certainly some of the questions I am putting on notice for the private hospitals group as well. We ran out of time with them. In the study you have done of the whole issue—I know it is deeply important to you—have you had any discussion about or do you have any understanding of the personal impact in terms of dollars?

Dr Kelly —Personal impact?

CHAIR —For people. In our discussion, percentages have been thrown around: 43 per cent, 60 per cent and those types of figures. Have you or your organisation been able to bring that back to a dollar amount? I know you are part of the Catholic health network as well. Has the individual aspect of it—by how many dollars a week it is going to impact on people—been something you have looked at?

Dr Kelly —I think it is fairly easy to translate the percentages into dollar terms, knowing what an average premium costs.

CHAIR —And allowing for the variation in premiums, because there is a great variation.

Dr Kelly —There is a great variation.

CHAIR —Okay. Thank you very much for your patience. I have also been asked by Senator Adams to let you know that she would have been here if she had not been elsewhere with the medical system.

Senator CORMANN —I think she may have been in your establishment, actually, Dr Kelly.

Committee adjourned at 12.30 pm