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Health insurer slams Govt for broken election -

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Health insurer slams Govt for broken election promise

The World Today - Monday, 12 May , 2008 13:14:00

Reporter: Emma Alberici

ELEANOR HALL: The health insurance industry is today accusing the Federal Government of breaking a
key election promise with its first budget.

As we've been hearing, tomorrow's budget is set to remove the Medicare surcharge from single people
earning between 50 and $100,000 and from families with an income of between 100 and 150,000.

The surcharge was introduced by the previous government to encourage more Australians to take out
private health insurance.

Now the Health Insurance Association is warning that premiums for those people who remain in the
private system will have to rise, as Emma Alberici reports.

EMMA ALBERICI: The Medicare surcharge is essentially a penalty on those who choose not to have
health insurance.

It currently kicks in for singles earning more than $50,000 and for families bringing in more than
$100,000.

It's been hugely successful in encouraging young healthy customers, the industry's most profitable,
to sign up to private insurance.

The Government says lifting those thresholds to 100 and 150,000 respectively will save some
families up to $1,500 a year.

But the Australian Health Insurance Association executive director Michael Armitage, says that
saving will come at a hefty price.

MICHAEL ARMITAGE: It will penalise Australians who are at present on public hospital waiting lists
because it will mean that about another 400,000 people who'll become reliant on public sector. And
it will penalise those people who choose to remain privately insured, many of whom have got incomes
less than $24,000.

A million of those people are like that, because their private health insurance premiums are going
up. So it seems to me to be a most unfortunate decision which disadvantages people trying to get
health care, whether they're in the public or the private sector.

EMMA ALBERICI: How did you calculate the 400,000 extra who will fall into the public health system?

MICHAEL ARMITAGE: Yes, we did some research on this question last year because there were always
rumours, I guess, about Medicare levy surcharge changes. So we're confident that our figures are
about the mark.

EMMA ALBERICI: Federal Health Minister Nicola Roxon defended the Government's budget initiative on
the AM program this morning.

NICOLA ROXON: We support the private health insurance industry and we believe as a government that
you need both a strong public health system and a strong private health system. But we're not
prepared to give working families a whack in the process and that's what the previous government
did.

They didn't adjust the rates and it now means that people who are earning less than average incomes
were stuck with this choice of either paying a tax or taking out private health insurance.

EMMA ALBERICI: The surcharge has not been changed since it was introduced in 1997. The Minister
says the budget move simply assumes that, like bracket creep in the tax system, people's salaries
have gone up with inflation and that that should be reflected in the surcharge.

MICHAEL ARMITAGE: Well, I think there are two really important points about that. The first is that
it hasn't been CPI'd, it's been greatly more that CPI'd. The CPI figure of $50,000 when this was
brought in is now something like $73,300. That might not be exact. But it's certainly under
$75,000, and they've moved it up to a $100,000.

So, they've gone way above CPI. This whole argument of the Treasurer's falls down. He's actually
not acknowledging that there will be increased pressure on the public sector and our survey by
asking the very people in this bracket, indicates that there will be people. What is the Treasurer
going to do about that? He can't just shrug his shoulders and say, "Well, we think it won't
happen."

EMMA ALBERICI: It's estimated up to 2 million people have been caught in what the Government calls
this "tax trap" which was supposed to be a surcharge on high income earners.

The Minister has committed $1 billion to the country's public hospitals, is in the process of
swelling staff numbers and has already announced $600 million in measures to improve waiting lists
for elective surgery.

The Health Insurance Association represents 23 health funds throughout Australia. Its executive
director Michael Armitage says the Government is fooling itself if it thinks it will be that simple
to fix the country's ailing public health system.

MICHAEL ARMITAGE: Does any Australian think that there's going to be no waiting lists with another
$600 million into the public sector for that(phonetic)? That's clearly not the case. All people
with private health insurance will pay more. I mean I think this is the philosophy of a socialist
government, which belies all of the fiscal conservatism and so on which has previously been touted
by the Government.

It's also, may I say, completely in contradistinction to a letter which the then leader of the
Opposition and now prime minister wrote to the industry four days before the election. So, it's
clearly a breaking of an election promise. We would have to regard then, other commitments in his
letter as being somewhat on shaky grounds.

ELEANOR HALL: That's Michael Armitage, the executive director of the Health Insurance Association.
That report by Emma Alberici.