Janelle Saffin (Page, Australian Labor Party) Share this | Hansard source

The Fairer Private Health Insurance Incentives Bill 2009 and cognate bills will amend a number of acts to give effect to the 2008-09 budget measure that will see three new private health insurance incentive tiers. The Minister for Health and Ageing in her second reading speech said that the government supports a mixed model of balanced public and private health services. I agree, and say that the strength or backbone of our system is the health architecture which is Medicare. Medicare is the health infrastructure architecture that our health system builds on. It allows the mixed model of public-private that the minister referred to to do its job. The minister also said, correctly, in her second reading speech:

The government is also committed to a sustainable private health system, and to ensure it remains sustainable, the government will rebalance support for private health insurance to provide a fairer distribution of benefits.

These bills give expression to this fairer distribution in a number of ways. First, couples and families earning $150,000 or less will receive the same rebate as they currently enjoy and will not be adversely affected. Secondly, singles earning $75,000 or less will also receive the same rebate as they currently enjoy and will not be adversely affected.

The minister further drew our attention to the percentages of the private health insurance rebate paid to couples/families and singles, and it cuts up in the following way. Twelve per cent of couples/families taxpayers with incomes above $150,000 receive approximately 21 per cent of the total PHI rebate paid to couples/families, almost twice the particular population share. Fourteen per cent of singles taxpayers with incomes above $75,000 receive about 28 per cent of the total PHI rebate paid to singles, twice their particular population share. Under the government’s reforms, couples/families will receive approximately nine per cent of total PHI rebate paid to couples. Under the government’s reforms singles will receive approximately 12 per cent of the total PHI rebate paid to singles. Further, the minister in her contribution in the second reading speech told the House:

These reforms will bring government support for private health insurance in line with the principle underpinning the Australian tax-transfer system—that the largest benefits are provided to those on lower incomes.

Who could argue with that? Rebates for eight million low- and middle-income earners will remain the same, and the government will pay 30 per cent of the premium. The existing higher rebates for older Australians will remain in place for people earning below these thresholds: 35 per cent for people aged 65 to 69 years, and 40 per cent for people 70 years and over. These people will continue to have no surcharge liability if they decide not to take out the appropriate private health insurance.

The reforms are necessary for the following reasons. The first one that I outlined concerned the Australian tax transfer system, where the largest benefits are provided to the lowest income earners and so on. We know that health spending on the current private health insurance rebate is growing rapidly and is expected to double as a proportion of health expenditure within the next 40 years. This presents a predictable yet real challenge, made even more pressing in the fiscal environment that we are in and which the government has to respond to. It is an environment in which we are facing a global recession, the worst that we have seen in our lifetimes. This is very real. The budget indicates that, if this is distributed in fairer ways, it will save $1.9 billion over four years. The government says that this will help to ensure that private health insurance remains fair and sustainable. That is what it is about: having a fair and sustainable health system.

We are also talking about Medicare here. I was listening to the member for Paterson, who was saying that the coalition had a really good track record on health. For the record, their track record in government was to rip over a billion dollars out of the public health system. That was with the Australian healthcare agreements, which used to be 50 per cent from the federal government and 50 per cent from the states. According to the Australian Health and Welfare Institute figures, it was around 42 per cent to 43 per cent when they were in government. That is the period that the honourable member for Paterson is talking about. Yes, they do have a track record, but it is a very sorry one; one of ripping the guts out of the public health system.

I will turn back to how the three-tier system will work and describe it in a little bit more detail. Tier 1 will apply to singles with an income of more than $75,000 and couples and families with an income of more than $150,000. For these people, the private health insurance rebate will be 20 per cent for those up to 65 years in age, 25 per cent for those aged 65 to 69 and 30 per cent for those aged 70 and over. The Medicare levy surcharge for people in this tier who do not hold the appropriate private health insurance will remain at one per cent.

Tier 2 applies to singles earning more than $90,000 and couples and families earning more than $180,000. The rebate will be 10 per cent for those up to 65 years in age, 15 per cent for those aged 65 to 69 and 20 per cent for those aged 70 and over. The surcharge for people in this tier who do not have appropriate private health insurance will be increased to 1.25 per cent of income. Tier 3 affects singles earning more than $120,000 and couples and families earning more than $240,000. No private health insurance rebate will be provided for people who fall within the third tier and the surcharge for avoiding private health insurance will be increased to 1.5 per cent of income for these people.

The new tiered system that sets up the three tiers of rebate and surcharge levels based on income and age is designed to fairly calibrate what the minister refers to as the carrot and stick approach, the carrot by reducing some of it and the stick by increasing some of it to ensure that those who can afford to contribute for their health insurance do so. I agree with the government’s rationale, put so clearly by the minister, that it is not appropriate for low-income earners to subsidise the private health insurance of high-income earners.

We have heard in this place a lot of talk about what the impact will be. Annual indexation to average weekly earnings will ensure that these changes remain equitable and can be maintained into the future. The increased surcharge for people on higher incomes will help ensure that about 99.7 per cent of insured people remain in private health insurance. This is because those high-income earners who receive a lower rebate will face a higher tax penalty for avoiding private health insurance.

It is estimated also that approximately 25,000 people may no longer be covered by private health insurance. Remember that over the last two years that there has been in increase—people have been joining—and that it might therefore result in some 8,000 additional public hospital admissions over two years. I know that, with the pressures on the public health system, we do not want too many more. When that 8,000 is weighed against the fact that nationally public hospitals have about 4.7 million admissions per year, the impact of the measure will be insignificant. The measure will be particularly insignificant for public hospitals given the government’s investment under the new $64 billion COAG agreement, with hospitals receiving 50 per cent over and above what they received under the old Australian healthcare agreements—the ones that the coalition, when they were in government, ripped the money out of and therefore put huge pressure on the public health system. Further, there is the $872 million investment in preventative health that will assist in keeping people out of hospitals in the first place.

In summary, this measure is designed to make private health fairer, more balanced and more sustainable in the long term by creating a carefully designed system of carrots and sticks, and it will have a negligible effect on both premiums and the public health system. At the same time, the eight million low- and middle-income earners who I referred to earlier in my contribution who choose to have private health insurance will continue to enjoy the benefit of a significant government rebate. I commend the bills.

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