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Thursday, 25 November 1999
Page: 12705

Ms MACKLIN (3:23 PM) —As my colleagues point out, the Minister for Health and Aged Care does not even have the decency to come in and debate this matter, so all those hospitals and pharmacies out there which are going to have to implement this iniquitous tax should know that this minister will not even come into this chamber and debate this matter of public importance. As all of the hospitals—public, private and non-profit—know and as all of the pharmacies know, this GST is a time bomb ticking away. It is set to go off in all of those institutions and pharmacies around the country on 1 July next year. Its impact will be felt across the community and it will certainly be unpalatable in all of those health institutions. It will reverberate loudly in our hospital system.

You might recall that the government went to the last election promising that health services would be GST free, meaning, you would think, that there was not going to be any GST on any health services: another promise made to be broken—a non-core promise. The reality is that the GST will turn up in thousands of ways and impose a huge administrative burden on our hospital system. The total implementation cost across all types of hospitals will be several hundreds of millions of dollars. No-one yet knows the exact figure, because it keeps growing the more the issues are examined.

Over the last year we have seen the detailed design of the GST on health emerge through various processes. We have seen frequent changes determining what is going to have a GST and what is not. The government have now had three goes at trying to define what types of medicines will be taxed and which ones will not be taxed. They have left us with the latest version where, for things like Strepsils, for example, some types of Strepsils will have a GST and others will not have a GST. We have many other similar absurdities. The government have managed to design a tax system that taxes the frames of glasses but not the lenses. Can you figure out the sense of that?

We are still waiting, months after the so-called final announcement of the GST and what it is going to apply to, for these special items that the Minister for Health and Aged Care says he is going to exempt on public health grounds. We still do not know which ones they are going to be and neither do the pharmacists who are going to sell them. Over the next 12 months every Australian business will suffer as they grapple with the very complex task of working out how to implement this tax. The anomalies built into the original scheme have been magnified by the deal and compromises that the government and the Democrats arrived at. Nowhere will that be more complex, as it turns out, than in our public, non-profit and private hospitals. All of them already face a huge array of problems generated by the government's failure to properly fund our public hospitals in particular.

The press has increasingly been reporting the number of adverse events where patients are suffering avoidable illnesses and even death as a result of their treatment but in that area as well the government continues to delay effective action. Amidst this air of crisis in funding, what do we have from this government? What is their response when it comes to the massive administrative burden on hospitals that is going to come about as a result of the need to implement the GST and establish the new accounting procedures in hospitals that have never been subject to sales tax before? That is the critical thing. Public hospitals have never had to deal with this issue before. It is not as if they are replacing any previous taxes. These hospitals have never been subject to sales taxes in the past and now they face the huge task of re-examining every aspect of their operation and establishing systems to monitor all purchases and payment of GST.

In the future, hospitals will have to pay the GST on various support services provided by private operators and then claim the rebates back for those parts of the hospital's activities which are free of GST. Out in the community, we all know what the nightmare on food is going to be like. Some food will be taxable and some will not, as a result of the deal done by the government and the Democrats. Hospitals feed people three times a day. They are going to have to track the food from the kitchen to the dinner plate and figure out what food they can claim a rebate on, for all the food that is eaten by patients. There are different tax arrangements for the food that is eaten by the staff. The poor people having to work out that mess in the hospitals will certainly confront a massive task. In future, the hospitals will have to add a GST component to the total bill that every patient gets who buys something from the hospital—uses a phone, hires a television, arranges for a haircut and all the sorts of things that people in hospital have to do.

In Treasury jargon what this means is that input tax credits are not available for non-deductible expenses. It is going to be necessary for hospitals to figure out what is non-deductible. There are no simple boundaries and the government has totally underestimated how diverse the activities of our hospitals are. This will impose a significant cash flow delay on hospitals as they pay for the GST up-front and recoup it on a monthly or quarterly basis.

The emergence of hospital co-locations, where you have a public hospital and a private hospital on the same site, and outsourcing of service provisions through shared service centres are going to make the task for all of our hospitals extremely difficult indeed. The invoices are going to have to be apportioned, with the allocation of tax credits between the different hospitals being worked out in partnerships. It is going to be an out and out mess. Of course, all the hard-pressed staff are going to be taken from their normal tasks—which are supposed to involve looking after patients—to undertake training to figure out how to do this job and to work on the implementation of these complex new procedures. Remember that the staff in our hospitals have never had to do this before because they did not have to pay sales tax.

To achieve this, they will be given virtually no compensation. Not-for-profit hospitals and for-profit hospitals will be eligible for $200. They will be able to get the voucher. Of course, if small businesses around Australia understandably feel offended by the offer of that $200 gift voucher from our so generous Treasurer to meet the GST implementation costs, imagine how these hospitals, with turnovers of many millions of dollars, feel about this ridiculous sum of $200. Public hospitals will get nothing from the Commonwealth.

You will be pleased to know that the government has allocated $170,000—for all of Australia—to provide for training of staff in the not-for-profit sector. Just in the not-for-profit sector they will get $170,000, which is a relatively tiny amount when you consider the hundreds of hospitals and the tens of thousands of staff involved in this task. This is going to provide only for the setting up of the training sessions. Nothing is going to be provided for the huge cost to the hospitals of lost staff time for taking part in training, arranging the implementation of new accounting systems and so on. What we know is that these costs will run into many millions of dollars. The reality is that, inevitably, other important projects will be dropped or delayed to allow staff to devote their energies to coping with the GST. The capacities of our hospitals will be reduced and the quality of services will be compromised.

One of the most detailed analyses of the costs involved has been carried out by the accounting firm Arthur Andersen for Catholic Health Australia. Their report concluded that the additional costs caused by the GST within Catholic hospitals alone would add between $36 million and $56 million in the first year and about $5 million a year extra from then on. That is an increase of about four per cent in the total costs of running those hospitals in the first year.

Mr Lee —How will they pay for that?

Ms MACKLIN —There are only two ways they will be able to pay for that. They will be forced to either increase their charges or reduce the quality of care that is provided. They are the only options that will be available to these hospitals: to increase the charges, which patients will have to pay, or to reduce the quality of care, which the hospitals will not want to do. It is an ongoing cost of about 2½ per cent.

The Catholic hospitals represent about 15 per cent of the total hospital sector. Therefore, the total cost for the whole hospital sector will be several hundred million dollars initially. Of course, the ongoing costs will be tens of millions of dollars. As we know, this government has no intention whatsoever of compensating hospitals for these huge additional costs. The only consequences will be, as I have just said, that services will be reduced or, in the private or non-profit sector, that the price to the patient will have to rise.

The story gets even worse when you combine it with the lack of willingness by this government to properly pay for our public hospitals. Not only does the government not intend to compensate our public hospitals, private hospitals and non-profit hospitals but it is also short-changing the public hospitals on future funding. We now know this because there has been a very detailed study into the indexation of hospital grants under the Australian health care agreements. The Commonwealth only signed these agreements one year ago, and they are already trying to welsh on the deal.

The health care agreements bind the Commonwealth to indexing their annual payments to hospitals in line with population, growing utilisation of hospitals, the growth in medical costs due to inflation and the application of new technology. What do you think the Commonwealth offered this year? It offered 0.5 per cent to account for the indexation of hospital costs, which is well below the inflation rate of 1.25 per cent. There is no recognition of the fact that medical costs are rising much higher than the CPI. The Australian Bureau of Statistics produces a special index, and they say that health costs have risen by 4.1 per cent—way higher than the 0.5 per cent the government is offering the states.

Fortunately for the states, there is a clause in the agreements which provides for the appointment of an arbiter where a dispute arises over these indexation provisions. Fortunately, that arbiter has provided some independent advice. He has concluded that the states are entitled to an increase of one per cent above the CPI, which would go some way to reducing the pressure on hospitals due to the Howard government's cutbacks.

A very important thing that the arbiter has also disclosed is that he has given the lie to the minister's frequent claims, which we have all heard in here time after time, that the government has been generous—can you believe it?—in that it is giving $17 billion more over the next five years than was given over the past five years. We now discover that this apparent increase, this seemingly large amount, is nothing more than growth of population and inflation, that in fact there is nothing extra at all for our public hospitals, even when it comes to dealing with the GST. So not only are the public hospitals facing a government that is offering a miserly increase in indexation that does nothing to keep up with costs and the use of our public hospitals but, on top of that, the public hospitals, the private hospitals and the non-profit hospitals are all expected to meet the massive increase in costs coming from the administration of the GST.

Of course, the Minister for Health and Aged Care does not have the courage to come in and defend himself against these facts that have been worked out by the public hospitals, the Catholic hospitals and the private hospitals, all demonstrating the massive increases in costs that are going to be imposed on our hospital system by this minister. He does not even have the courage or the courtesy, as far as the hospitals are concerned, to answer the questions. He will not answer the facts that have been exposed by the Catholic hospitals. He will not even come into this House and defend the GST, because he knows what the real impact is going to be on the patients of Australia. (Time expired)