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Wednesday, 1 December 1976
Page: 3034

Mr HUNT (Gwydir) (Minister for Health) - Mr Deputy Speaker,before I go on to develop my argument in support of the changes that this Government has made, I wish to answer two or three of the points that have been made in this debate. The honourable member for Maribyrnong (Dr Cass) said that everyone pays the levy. That is not correct. This may have been a sweeping statement that he made generally. But 75 per cent of our pensioners who have health benefit cards do not pay the levy. Those people on the lowest incomes do not pay the levy, so the ceiling is not a burden on the poor, because the poor do not pay the levy. Without a ceiling what would be the position? The Government looked at the possibility of applying a levy without a ceiling. We found that this would be most severe on 2-income families. Sixty per cent of Australian families would be worse off under the plan submitted by the Australian Council of Trade Unions, which proposed a 1.6 per cent levy without a ceiling. So let us not assume that the without-ceiling concept provides a more equitable system to a greater number of people. I do not believe that it does.

With respect to the increasing charges to which the honourable member has referred, I point out that even under his former Medibank scheme 70 per cent of Australians remained privately insured for hospital cover, so there was a cost in respect of the operations of those insurance schemes operated by the private health insurance funds. But one fact is certain: Now that we have a competitor in the market- I refer to Medibank Private with all its efficiency in the field- competition will be provided amongst all of the private health insurance funds. Perhaps we shall see more efficiency in the area of the administration of private health insurance.

I think the Opposition believes in the old adage that memories are short. It is rather hypocritical for the Opposition to launch a campaign against the Government on the grounds of its bad economic management. Early in January this year we began an in-depth survey of the economic prospects in this country and it became abundantly clear that we had a very grim scene in front of us. We had inherited a monumental mess. The honourable member for Oxley (Mr Hayden), who proposed this matter for discussion, was the third Treasurer in 6 months. I think he was unfortunate as a Treasurer because he too inherited a monumental mess and one of the greatest examples of economic mismanagement in our time. It soon became clear that if the expenditure rate had continued we would have had a Budget deficit of no less than $5,000m in that financial year, and the forward estimates for this financial year would have been even greater. Therefore, consistent with the Government's objective, we decided that inflation had to be checked and government expenditure reined in where possible. This required some urgent, hard and, to some extent, unpopular decisions. There was no other responsible way out.

We inherited an inflation rate of about 15 per cent and the worst unemployment since the Great Depression of the 1930s, and the business and industrial sector had been drained of confidence. In attacking the budgetary situation, which one has to attack if one is serious about trying to overcome the inflationary situation, we found that there were 4 ways of reducing the overall Budget deficit. The first was to increase taxation, but we decided that we did not want to do that. The second was to print more money. A former Treasurer tried to do that, but was not successful. The third was to reduce the rate of increase in government spending, and we chose that course. The fourth was to borrow money to try to overcome the problem. We chose the third option which meant that we would prune back the overgrown bushes of public expenditure, hoping for some self-sustained spring growth. Against the general background of economic disorder, we looked at the exploding health treatment costs and the efficiency of universal health insurance in its existing form. We set up a Medibank Review Committee which went to work in January this year. It had very wide ranging terms of reference against 3 important criteria: Medibank and universal health insurance were to be retained and there was to be no means test at the point of service to the patient. We were mindful of what such schemes had done to the economies of the United Kingdom, Canada and elsewhere where there was no restraint on costs. We wanted to ensure that Medibank did not consume the social dollar. Quite clearly, it had an appetite to do so.

As part of our overall economic appraisal we turned to health care costs in a substantial way and we found that health care costs in Australia were exploding at an even faster rate than the record inflation. Without our changes the total government and private health treatment and health care costs for this financial year were estimated to be $5,400m. That is an enormous sum when compared with the value of iron, wool, coal, wheat and meat exports, which were valued at $4,500m for the previous financial year. Hospital and medical costs were estimated to be $3,320m this year. We estimated that the cost of Medibank itself would reach the order of $2,000m which would be a direct burden upon Consolidated Revenue. We also found that over a period of 1 1 years the Commonwealth share of health costs had increased by 10 times, from $260m in 1963-64 to $2,500m in 1975-76. There were allegations of rip-offs, overuse and abuse. Some doctors were even complaining that they had doubled their incomes in the first 12 months of the operation of Medibank. We had the openended hospital cost sharing agreements with the States, with no opportunity for the Commonwealth Government to have any say in the Budgets or the variations thereto.

So Medibank Mark 1 had achieved universal health coverage, but in the characteristic style of the former Government it was at the expense of disregarding economy and efficiency. It provided few incentives to economy by individuals or the medical profession. It placed on the State and Federal governments virtually the whole burden of basic medical and hospital financing, not just for those needing assistance but also for those who could afford to make a greater contribution.

It threatened the continuance of private medical practice in hospitals. About 70 per cent of the population continued to privately insure, indicating that this was a trend that the Australian people were anxious to preserve. Public hospital charges were uneconomic and unrealistic.

After a full inquiry 2 things became clear. The first was that changes needed to be made to constrain costs, to give incentives to keep costs down, to encourage efficiency in the State hospitals and to push ahead with preventive medicine and health and community programs. The latter is something to which I hope the Government will be turning more attention in the future. Secondly, it became clear that financing other than just out of the general tax pool was absolutely necessary. I think the Government, the Australian Labor Party and the Australian Council of Trade Unions were agreed on that principle. The point at issue was the way in which we applied the levy. We decided on an optional system because we believed that we would be able to create a competitive situation, particularly with respect to private medical practitioners. We believe that, in restructuring Medibank and universal insurance in the way we have, we have not been inequitable to the lower income people. At the same time we have given an incentive to the private practitioners of this country to be careful ow they raise their fees, because if their fees rise faster than average weekly earnings quite clearly the premiums will go up and people will leave their private insurance funds and stay with Medibank Standard which will be the lowest cost, quality health care insurance.

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