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Wednesday, 25 November 1998
Page: 638

Dr SOUTHCOTT (3:50 PM) —Thank you, Mr Speaker, for your wise choice. I often meet from time to time with Dr Jim Forbes, who was the Minister for Health under the Holt and Gorton ministries. Reflecting on earlier times, he said that, while he was the Minister for Health, he often used to discuss different health proposals with the cabinet of the time. He always said that it was very hard to attract interest, that people's eyes would glaze over when he discussed health because there were much bigger issues going on—Australia was fighting the Vietnam War and there were Australian troops throughout South-East Asia, which reflects a different focus that politics had 30 years ago.

But, in 1998, as important as we see defence issues, no-one would argue that health is one of the major issues and one of the major determinants of electoral opinion. For as long as I can remember, it has always been in the top three. Now more recent surveys show that it is in the top one or top two. By way of declaring a personal interest, I myself have private health insurance and believe that people on my sort of income should have private health insurance.

By way of declaring a personal interest, I have to say that I, unlike most of the members of the ALP, actually worked in the public hospital system. Members of the ALP come in here and talk about Medicare and the public hospital system as if they have a mortgage on them. The difference between the Liberal and National parties and the ALP is that we believe in both systems. We believe in a public hospital system side by side with a strong private hospital system.

Members of the ALP represent only two-thirds of the health system. They do not represent the private health system, they do not represent people with private health insurance and they have an ideological opposition to those with private health insurance. The ALP needs some balance. They need to look at a stable and sustainable health system—and that includes both the private and public health systems.

I began work in the public hospital system. I worked until the 1996 election in the public hospital system. I would have liked to have continued to work in Casualty in my local hospital, but unfortunately, not wishing to fall foul of the provisions of section 44 of the constitution in holding office of profit under the Crown, I had to resign when the election was called.

The private system plays a critical role in taking pressure off the public system. It provides half the operations, one-third of the admissions and a quarter of the bed days. That is the sector in health that the opposition do not represent. It has been estimated by Access Economics that a two per cent drop in private health insurance costs the public system the equivalent of 325,000 hospital bed days. That is the equivalent of two major teaching hospitals running all year round. Now under the Medicare agreements a one per cent drop in private health insurance means that we are obliged to give the states and territories an extra $83 million. What that means is that, if the drop-out continues at the present rate, we will have to pay the states and territories $500 million a year by the year 2000. Medicare was always designed to work side by side with a strong private system.

We need to look at the major reason why private health insurance levels are dropping. The major reason is rising premiums. Premiums are rising almost 3½ times faster than inflation. Before 1990 there were a number of decisions that the previous Labor government took which directly contributed something like 39 per cent to the cost of premiums now. There was a 40 per cent explosion in premiums between 1986 and 1988 and there were four government decisions that were taken. They were the removal of the bed day subsidy, the removal of the reinsurance pool, the reduction of the Medicare rebate for in-patients from 85 per cent to 75 per cent; and then later the Medicare agreements, which encouraged public patients to be pushed through public hospitals.

Since September 1996, the government has said that premium rises will occur only if it is due to solvency requirements. Some requests from funds to raise the premiums have been rejected by the committee consisting of the Treasurer, the Minister for Health and Aged Care and the Prime Minister. Premiums probably will rise—there are the costs of technology and the process of adverse selection which is adding to premium rises—but having a 30 per cent rebate of the cost of your premium is much better than the incentives scheme because the incentives scheme is fixed. If the premiums rise, the rebate will be 30 per cent of whatever the premium is.

Some people have suggested that the private health sector is somehow inefficient. The Industry Commission commented:

The rapid growth in premiums has been interpreted by some as showing that the private system is either increasingly inefficient or anti-competitive or both. But the facts are inconvenient to such an interpretation.

The Industry Commission, the Productivity Commission, rejected that assertion which we have heard continuously from Labor members in this debate. In fact, they said that there is competition between the funds and the main reason that the premiums are rising is that the payouts are rising.

The Institute of Actuaries of Australia said that the health system is inherently unstable. What you have is a process of adverse selection. As the premiums rise, young fit and healthy people drop out. That means that there are more people in the fund more likely to make a claim and so the premiums rise, and that is going on as a circle. The government's rebate attempts to address that by making premiums 30 per cent cheaper.

To say that the funds are inefficient is wrong. The health funds already try to discourage overuse through step-down contracts with the hospitals which reduce the payments after several treatments, co-payments and benefit ceilings. We believe that reducing the premiums by 30 per cent will help people stay in private health insurance and will also encourage people back.

The 30 per cent rebate is the equivalent of the support that existed before Labor was elected in 1983. There were always levels of subsidy for private health insurance. What we are doing is restoring the level of support that was there when Medicare was introduced in 1984. It also allows time for the government's reforms in private health insurance to have effect. We have not heard much about them from the opposition. We are allowing the funds to offer loyalty bonuses and group discounts for groups of employees. We are setting up a consumer information service to help people choose between the wide number of products. We are also encouraging simplified billing. That is very important. Sportsmed in South Australia is now offering people—with the agreement of all the health care providers—one bill. There is also no gap. They are looking at the problem of out-of-pocket expenses. The National Society of Obstetricians and Gynaecologists are encouraging no gap. The Melbourne Private Hospital has simplified billing and there is no gap. The government is trying to get more of these agreements for the out-of-pocket expenses and the simplified billing.

There are two million people in Australia with private health insurance on incomes below $30,000. There are 700,000 people on incomes below $20,000. The ALP try to say that private health insurance is just for affluent people. That is not true. In fact, they are not even representing their own electorates. In each of their own electorates there are, on average, 39,000 voters who hold private health insurance.

Mr Cadman interjecting

Dr SOUTHCOTT —I will get to that in a second. The rebate is available as a tax rebate, as a cheaper premium or it is available from a Medicare office or can be paid directly into your bank account. The rebate will be equivalent to or better than a tax deduction for everyone on incomes below $50,000 after we have our new tax scales in place from 1 July 2000. Tony Quinn and Associates estimate that a 25 to 30 per cent reduction in price is needed to bring people back into private health insurance.

We need to address some of the untruths that are being told by the Labor Party in this debate. The Labor Party needs to stand on its record. First of all, it has said that this measure redirects funds away from public hospitals. That is wrong. The government is spending $32 billion over five years, which is a 17.6 per cent real increase. When Jenny Macklin, the member for Jagajaga, was chairing the National Health Strategy, in the 1991 report, Hospital Services in Australia, she recognised that just pouring more money into public hospitals was likely to make things worse. She said:

. . . increased funding to public hospitals is also likely to lead to a change in the equilibrium between public hospitals, private hospitals and private health insurance, without necessarily achieving the level of impact intended. If increased funding to public hospitals reduces the perceived pressure on public hospitals through smaller waiting lists and shorter waiting times, it is likely that private health insurance levels will drop. This could result in increased demand for public hospitals and reduced revenue from private patients. The result may be a return to the situation which existed prior to the provision of extra resources.

The Labor Party have said that this measure does nothing to increase the efficiency of the funds. There is already competition between the funds. I have already addressed that. They say it is poorly targeted. Medicare is not targeted. There is no income test or assets test for Medicare. You say that it is all right for a millionaire to get bulk-billed and it is all right for a millionaire to go to a public hospital, but you object to two million people on incomes below $30,000 getting the 30 per cent rebate for private health insurance.

The Labor Party also do not recognise that the people who have dropped their private health insurance are the ones on the top 60 per cent of incomes. They are the ones that are wanted back because, when they are in the public system, they have influence and wealth and they push the less affluent out of the way. Labor also think we are not addressing multiple bills and out-of-pocket costs. Well, we are. They say it will not increase the proportion of people privately insured. I hope it will. So that is the Labor Party.

We need to ask: what is the natural conclusion of all of this? What is the Labor Party's vision for the health system in Australia? They used to come in in the last parliament and criticise the private health insurance incentives scheme, then they adopted it as their policy. The Labor Party are not concerned with the level of private health insurance being 30 per cent. They probably think it should be lower. The Labor vision for the Australian health system is to have a small private sector—probably 10 per cent or 15 per cent—and everyone else in Medicare. That is the Labor vision. And if it is not, they should tell us why it is not and why they do not support the rebate and why they do not support increasing the level of assistance to where it was before Medicare was introduced.

That is a two-tier system. It is Labor Party policy to introduce a two-tier system into Australia. If you want to know what that looks like, go to the UK, go to the National Health Service. There will always be people privately insured but it will be only the elite. We need to look at Labor's record. When they came to power in 1983, 65 per cent of people were privately insured. In 1984, when Medicare was introduced, 50 per cent were privately insured. When they left office, it was just over 30 per cent. Morgan Research has shown that 67 per cent of people want the 30 per cent rebate.

I believe the opposition are very short-sighted on this. They are not representing their constituents. They are representing only those constituents who do not have private health insurance. We represent them all. It is worth going through the electorates of Labor Party people to see the number of people holding private health insurance. The Leader of the Opposition has 45,820 voters with private health insurance in his electorate. The Deputy Leader of the Opposition has 32,424 voters with private health insurance in his electorate. The member for Jagajaga, the ALP spokeswoman for health, has 36,719 voters with private health insurance in her electorate.

I see the member for Paterson is sitting at the table. I hope he will be contributing to this debate because the member for Paterson won his seat by 936 votes at the last election. If 936 people change their vote, you are out. There are 41,764 voters in Paterson with private health insurance. The member for Paterson knows what this means because he has had it before. In 1993-96 he was in this parliament and he voted for all of Labor's indirect tax rises without any compensation and in 1996 he stood on his record, he saw the ads about his voting record and what happened? He lost.

The member for Paterson needs to stand on his voting record at the next election. This is about the fifth sitting day. It is the second week. We have had the first division and already the member for Paterson has clocked up a vote where he has disenfranchised 41,764 voters in his electorate. I will go through some of the seats: Bass has 24,692 voters with private health insurance; Dickson, 30,000; Kingston, 38,000; McMillan, 23,000; Northern Territory, 34,000; Stirling, 58,000; Chisholm, 39,000; Griffith, 33,000; and Swan, 54,000. All of those people need only 2,000 or fewer votes to change and they are out.

The Labor Party think this is like 1969. Kim Beazley is like Gough Whitlam, and they are just going to keep on increasing it. For these people in the marginal seats it is more like 1984; you do not know what you stand for. You need to stand on your voting record and you need to clock up more votes like this, because you are not representing half of your electorate. Half of your electorate were disenfranchised by your vote today in the House of Representatives. (Time expired)