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Thursday, 14 June 1984
Page: 3005

Senator Dame MARGARET GUILFOYLE(12.27) —Am I to understand that there is to be a cognate debate on the States (Tax Sharing and Health Grants) Amendment Bill and the Local Government (Personal Income Tax Sharing) Amendment Bill?

The ACTING DEPUTY PRESIDENT (Senator Colston) —Is that the wish of the Senate? There being no objection, it is so ordered.

Senator Dame MARGARET GUILFOYLE — As I understand it, the cognate debate is simply for the purpose of handling the business of the Senate. The Opposition has no objection to debating these Bills in a cognate manner although there is very little relationship between them.

The States (Tax Sharing and Health Grants) Amendment Bill has two separate purposes. It amends the States (Tax Sharing and Health Grants) Act 1981 under which is determined the amount of general purpose payments to the States in the form of tax sharing grants and identified health grants until 30 June 1985. It provides for the distribution of the total amount of those grants among the States. The history of the Bill is that, at the May 1981 Premiers Conference, the Commonwealth announced its intention to transfer to the States certain pathology laboratories which it operated and to increase the States' tax sharing grants by an amount representing the estimated cost of operating the laboratories. Except for Western Australia, the States have not taken over the laboratories, as had been thought at that Premiers Conference. At the June-July 1983 Premiers Conference, the Commonwealth indicated its intention to remove the anomaly. It was agreed with the States that an appropriate adjustment would be made to apply from 1 July 1984. Subsequently, it was agreed that the adjustment should be made by decreasing the amount of the identified health grants to which the affected States are entitled. This Bill puts that decision into effect.

The Bill amends the tax sharing grants with the States to give effect to that agreement in relation to the 1984-85 financial year. The amount of the adjustment comprises amounts which were agreed at the June-July 1983 Premiers Conference as representing the value in 1983-84 of the 1981 increase in payments increased in accordance with the increase in the consumer price index in 1984-85 . The indexation arrangements applied are the same as apply to other amounts adjusted for price increases under the principal Act. The arrangements for tax sharing and identified health grants embodied in the principal Act cease to operate on 30 June 1985. The principal Act requires that the Commonwealth shall consult with the States to review the provisions of the Act. It is anticipated that new legislation to give effect to the results of those consultations is unlikely to be enacted until some time after June 1985. This Bill, therefore, amends the principal Act to allow the Treasurer to continue the regular payments to the States-in other words, it is a Supply type of Bill-until the new legislation comes into force. This amendment Bill allows for the payment to each State during the six months from 1 July 1985 of one-half of the sum of the guaranteed minimum amount of the tax sharing grant and the identified health grant payable to each State in 1984-85.

The Opposition does not oppose the Bills that are before us. However, this debate gives us an opportunity to make some comments with regard to the tax sharing arrangements with the States and the provisions of the Medicare agreements. The basis of the arrangements between the States and the Commonwealth Government when Medicare was introduced was the that the Commonwealth would pay a substantial sum-about $700m-to the States if they would agree to provide free out-patient services regardless of people's means and to provide free hospital beds for Medicare patients regardless of their means. The bed day charges for privately insured patients were to be reduced from an average $120 a day to $80 a day for a bed in a public hospital. We argue that that is not a particularly fair proposal but it is a proposal that is embodied in the Medicare arrangements.

The Commonwealth Government estimated that there would be an increase of about 4 per cent in out-patient services and a drop of about 4 per cent in the number of privately insured patients in public hospitals. Those patients are financially significant for hospital revenue. The State health Ministers estimated that the drop in revenues from privately insured patients would be in the order of 14 per cent or 15 per cent. Evidence available to us suggests that out-patient numbers in private hospitals have risen by about 15 per cent, as predicated by the State Ministers, and the number of insured in-patients has fallen by about 10 per cent.

Medicare arrangements require, in relation to a privately insured patient who is in some great difficulty in a public hospital, a certificate at the end of 35 days-previously this was 60 days-declaring that the patient requires acute care. It is public knowledge that many doctors are reluctant to risk a $10,000 fine or five years in gaol by signing such certificates. The effect of that is that many patients who would previously have stayed for more than 35 days at the full reimbursement rate from the private funds have now had their rates of reimbursement reduced, further reducing the revenues of the public hospitals. The end result is that the public hospitals now have a larger proportion of non- paying patients and many more patients are sent out after 35 days who would previously have stayed a little longer and paid through private funds. The States are still incurring the cost of treating those patients but are losing revenue at a far greater rate than was estimated by the Federal Government under its Medicare plans.

It is reported that State Ministers feel that they will be seeking greatly increased revenue grants from the Commonwealth over the ensuing year. The supply that is to be granted under this Bill will doubtless be insufficient for the full costs that they will incur. Of course, this is another instance of Medicare arrangements resulting in costings that have, perhaps, not been dealt with accurately in the first instance. We may find in the case of the States grants for their hospital arrangements that there will need to be further upward adjustments to cover the actual experience as against what had been thought would be the outcome of the changes. It has been said with regard to other Bills that the Medicare levy of one per cent is raising about 12.5 per cent of the cost of Medicare. It is nothing more than a contribution towards it, because health care costs are about $8 billion and the Medicare levy of one per cent is raising about $1 billion. So it can easily be seen that the Medicare levy must be increased so that it is a more realistic contribution, or the general tax must be increased, or other changes in financial arrangements must be made in order to make contributions relate more closely to the cost of health care.

I think it is fair to say in regard to the Bills that are before us that one of the objectives of Medicare was to affect the private hospitals. This has been achieved by offering people a bed in a public hospital, without choice of doctor , free of charge, regardless of their means. It has also been achieved by charging privately insured patients $80 a day for a bed in a public hospital, which would cost an uninsured person nothing under Medicare arrangements. The privately insured patient is further disadvantaged by the Government's categorisation of all the private hospitals to reduce the refund a patient can obtain through insurance and, of course, the application of the 35-day rule that I mentioned earlier. There certainly has been in most cases a drop of some 30 per cent in occupancy rates in private hospitals since the introduction of Medicare. This has resulted in long waiting periods in public hospitals. It may be recalled that quite recently in Victoria the private hospitals were offering about 1,000 beds to the Government in that State to cover the difficulties that people were having in gaining admission to public hospitals in Victoria.

I say on behalf of the Opposition that we do not oppose the tax sharing arrangements that are to give effect to the supply of funds to the States, pending the arrangements and consultations that must be held with them by the Government. But we use this opportunity to point out some of the difficulties, particularly in the private and public hospital systems as a result of the introduction of the Medicare arrangements.

The other Bill that is being dealt with cognately on this occasion is the Local Government (Personal Income Tax Sharing) Amendment Bill 1984. Quite shortly, the purpose of this Bill is to seek amendments consequential upon the introduction of the prescribed payments system to allow payments made under that system to be taken into account in the amount of personal income tax which formulates the basis of local government tax sharing. As I understand it, an extra $2m to $3m will be available for distribution to local governments as a result of the measures that are contained in the Bill before us. Again, the Opposition does not oppose the Government's measure which will share with the local governments in the States the effects of the prescribed payments tax system. But at the end of the second reading debate on the Bill I will move an amendment to the effect that the Senate notes the Government's failure to honour its pre-election promise in regard to the level of funding of general grants to local government. I commend that proposed amendment to the Senate as a statement of the disappointment of local governments at the failure of the Government to honour its pre-election promise and their expectations with regard to the level of funding that they would have secured after the change of government in view of the promises that had been made.