Joe Hockey (North Sydney, Liberal Party, Manager of Opposition Business in the House) Share this | Hansard source

The coalition is an advocate of choice for Australians. That is why in government the coalition was, and still remains, committed to private health insurance. We are committed to increasing healthcare choices for Australians and to taking the burden off the state-run, dysfunctional public hospital system. In government the coalition used three pillars of key policy reform to improve the uptake of private health insurance. These are the private health insurance rebate, the Medicare levy surcharge and Lifetime Health Cover. I will now explain these policies in full and show how they have changed the healthcare landscape for Australians. This will enable me to highlight how this government’s policy vandalism threatens the very delicate balance between public and private health care that has been built up over the last decade and a half.

When we came to office in 1996, health fund membership was around 35 per cent and falling fast after 13 years of Labor neglect. Quick steps were needed to halt the slide and turn it around. In 1997, the then coalition government introduced the Medicare levy surcharge. The Medicare levy surcharge, or MLS, is an additional one per cent surcharge of taxable income. It is imposed on those earning above a certain threshold income who are eligible for Medicare but who do not have hospital insurance with a registered health insurer. The MLS is in addition to the normal 1.5 per cent Medicare levy. As is now well known, the income thresholds above which the MLS kicks in are currently set at $50,000 for singles and $100,000 for families. It is an incentive for those who can afford to contribute to their own health care to take out private health insurance and alleviate some of the pressure on the public hospital system. This measure had an immediate impact on the number of Australians prepared to take out private health insurance. It set in train a pattern of increases in memberships that has continued to this day, but it is part of a wider package.

In January 1999, the government introduced the 30 per cent private health insurance rebate. In return for making a big contribution to the cost of their own health care, the coalition subsidised almost one-third of the total private health insurance premiums of Australians. In 2004 we introduced loadings on the rebates for older Australians. The amendment saw the rebate increase from 30 per cent to 35 per cent for persons aged 65 to 69 and 40 per cent for persons aged 70 and over. This measure again saw a further increase in the uptake of private health insurance, but the coalition recognised the need to do more.

Therefore the third pillar, Lifetime Health Cover, was introduced in July 2000. This measure made it worth people’s while to join health funds earlier and to remain members. Under Lifetime Health Cover, Australians aged over 30 who remained uninsured after July 2000 had their future insurance premiums subject to a two per cent surcharge for each year of age they remained uncovered. So, for example, a person aged 40 who purchased health insurance for the first time in 2004 became subject to a 20 per cent surcharge on their current and future premiums. This is the difference between the age of 30, which the lifetime health cover sets as the base, and the actual age of assumption of cover. If this same person delayed purchasing health insurance for a further 10 years, the surcharge would grow to 40 per cent. The Lifetime Health Cover surcharge is capped at a maximum loading of 70 per cent and Australians born prior to 1934 are exempt. In addition, people in Lifetime Health Cover can take a two-year period of absence without incurring a higher premium.

Together these policy pillars led to the highest number of Australians in private health insurance in the history of the country. From less than one in three in 1998 it is now almost one in two. Indeed, on the Friday of budget week the latest data from the Private Health Insurance Administration Council showed that 9.477 million Australians, or 44.6 per cent of the population, were covered by private health hospital cover. That is almost 10 million Australians who have willingly given themselves a choice of hospital and doctor when they need treatment and care. Significantly, in the 12 months from March 2007, the biggest growth of any age group was among 25- to 29-year-olds with an increase of 57,500 people. That week the Minister for Health and Ageing saw fit to issue a press release about members of parliament participating in Australia’s Biggest Morning Tea. Of course the minister said absolutely nothing about this great piece of news. It is no wonder; she must be embarrassed and ashamed that, because of what her government is doing, it will never be the same again.

Let me now turn to that act of policy vandalism. On 13 May the government handed down its first budget, but the Treasurer gave the game away the weekend before. The government announced plans to revise the Medicare levy surcharge thresholds to $100,000 for singles and $150,000 for couples and families. To grab a pre-budget headline it was dressed up by the Treasurer as a Robin Hood style tax handback to battlers. In reality it is another revenue raiser tipped to save $960 million in rebates over four years to a government trying desperately to rein in its immense expenditure. All the more evidence that this is a savings grab, and it is not really savings; it is a tax grab, cutting spending on the private health insurance rebate that conveniently slots into Labor’s anti-private health ideology. It is the announcement, in case we ever doubted it, that this government does not really believe in private health care. This government announced that it does not believe in private health insurance in a speech delivered at that time.

Through this measure the government has breached election promises to leave private health alone. What the Prime Minister, Treasurer and Minister for Health and Ageing are saying to you and me is that private health insurance is a waste of money, that it is not worth having, that the only way to get good health care is through the public system. What dangerous ideological tosh. Australia is a wealthy country. We can afford to provide high-level health care to those who cannot afford to pay for it themselves. But those who can afford to contribute to their own health care should be urged to do so. This ensures a fair, high-quality healthcare system for those who need it. To suggest that the Australian government can provide high-quality hospital care without a significant co-contribution of a private healthcare sector is misleading.

Here in Australia we have a counterbalance system of private and public health care. Private hospitals currently provide almost 60 per cent of hospital admissions, and not just for simple procedures and operations. The growth rate of private admissions has well outstripped that of public admissions since Lifetime Health Cover completed the private health insurance rescue mission in 2000. Several years ago Professor Ian Harper of the Melbourne Business School and Chris Murphy of Econtech calculated that every dollar spent on the rebate brings in two dollars of private health spending. That is two dollars of public money that does not have to be spent. It is not a bad deal, really. State premiers and ministers have been queueing up since the Treasurer’s announcement only a few weeks ago demanding hundreds of millions of dollars of extra funding for the anticipated surge in public hospital demand.

State Labor premiers demanding compensation speaks volumes. This is because, if passed, this measure will see a dramatic decline in private health insurance membership numbers in this country and less choice for Australians. It is not hard to predict who will be the first to drop out of insurance: people who feel they are not getting an immediate pay-off for staying with health insurance. Many Australian families are hurting. Petrol and grocery prices have never been higher, mortgages are sucking up more and more of the household income. With incentives to retain private health insurance under attack, many young, fit Australians will move to drop their private health insurance coverage. With large losses of good-risk members the whole sector becomes less viable. Its policies become unaffordable, the range of products becomes narrower and less relevant to consumers, and the death spiral is back. Indeed, Access Economics predicts a snowball effect. Their report forecasts higher premiums, which will see more people driven from private health insurance, because the incentives to stay with this product are being pared back.

This measure comes at a difficult time for insurance generally. While premiums are important to the ongoing viability of the private health insurance industry, the main source of revenue is investments. Roughly half the income of insurance firms comes from investments in the stock market and property and various other financial instruments. The stock market corrections both here and overseas and the slowdown of the property market have seen and will see incomes for prudential entities fall. Currently the health industry’s net margin is 5.6 per cent. Raising the Medicare surcharge levy will put a lot of pressure on funds’ reserves and hence their investment portfolios to cover the gaps left by departing members. The only publicly listed health insurance company is NIB. The Monday after the member for Gellibrand announced the intended MLS changes in the media, the company’s listed share price tumbled to a 52-week low. It is now trading at half its former share price. This is a measure of the confidence of the market in the effect this measure will have on the sustainability of private health insurance. The effect of the announcement on private hospital shares was just as bad, as the market knows they depend very significantly on insured patients using their facilities.

There is no doubt that the private health insurance industry is generally offering a high-quality product with good choice for Australians. Just a look at some of the high-cost claims paid by funds shows how well they do. But the industry must continue to strive for efficiency and relevance, and I urge insurers to keep innovating around their products and services, in particular to introduce the broader health cover made possible by the 2007 reforms. If good risk members see true value for themselves then they may well keep their cover, even though it will become more expensive under this government. But this measure will undermine the industry as a whole. One of the reasons that Labor has fastened onto this measure is that private health insurers are a politically soft target. They may not be regarded as the most popular of all industries. However, like most forms of business, health funds can always do some things better. But this is not just about private health insurance; it is about the long-term viability of what private health insurance purchases—that is, access to private hospitals, choice of doctor and hospital, timely access to the best hospital care and, thanks to the reforms introduced by the coalition last year, better access to early intervention, chronic care management and hospital in the home type services.

This measure will place an enormous financial burden on the public hospital system. Hospitals in this country are under strain. Today’s Sydney Morning Herald reports the story of two-year-old Zara. She suffers from cerebral palsy and vomits six times a day. The constant vomiting is not only distressing but is giving her pneumonia as the vomit goes down the wrong tube into the lungs. This condition could be fixed by surgery, but Zara’s surgery was cancelled for the third time yesterday after waiting around at the hospital all day. How will adding more people to the waiting lists at public hospitals help little girls like Zara?

What about people like 28-year-old Chris Planer? Chris contracted carcinoma on the floor of his nose and the roof of his mouth. After surviving a gruelling 16-hour operation and basically having his face reconstructed, Chris needed reconstructive dental therapy. Contrary to the statements made in this chamber by the member for Gellibrand that Chris would not qualify for the coalition’s Medicare dental, Chris was lucky enough to get his treatment before the scheme was axed by the Rudd government. People like Mr Planer have now been delivered a double whammy by this government. With access to private health insurance under threat, how will they access dental care? Not through Medicare. That has been dismantled—dismantled, might I add, by a minister who did not even understand the system she was attacking. Instead, people like Mr Planer will have to rely once again on the state dental clinics.

Public hospitals are staffed by high-quality professionals, but they retain long waiting lists for surgery and for specialist visits. Access to allied health through the public system is limited. If Australians want access to dentists, physiotherapists, occupational therapists or dieticians, they will simply have to wait and wait and wait. Like all insurance, health insurance is a safety net for those who wish to have choice in how their health care is managed. It is the gateway to a wonderful private system which shares with the public sector the responsibility of meeting our healthcare needs. If private health insurance collapses, so will private health as a whole. It is that simple. At the end of the day, the public system will have to pick up what the private system is unable to deliver. That means longer queues at hospitals and greater strain on the public hospital system, with no solution yet offered by state Labor governments.

In contrast to Labor, the coalition stands for choice. This is a fundamental principle of the Liberal and National parties—the opportunity for individuals to choose the type of health cover that they want. We want private investment in our health care. We do not believe it wrong to provide strong incentives to encourage that participation and investment. The policy contained in this bill is bad policy for Australians. It will lead to higher private health insurance premiums. They will become known in the years ahead as the Rudd insurance premiums. We oppose this bill; we will vote against this bill. We look forward to the debate continuing in the other place but, ultimately, bad policy needs strong opposition, and we will oppose it all the way.

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