Mike Symon (Deakin, Australian Labor Party) Share this | Hansard source

I speak in support of the Fairer Private Health Insurance Incentives Bill 2011, Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2011 and Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Bill 2011. Together, these bills will proportionally lower the private health insurance rebate for those in higher income tiers and increase the Medicare levy surcharge for those on higher incomes who elect not to purchase private health insurance. Through these measures, the government is seeking to rebalance a range of policies supporting the private health insurance industry, as promised and taken to the 2010 election—a fact that many people in this chamber just recently have chosen to neglect. These new means-testing arrangements will make the private health insurance rebate fairer.

At the moment, more than 45 per cent of the Australian population is covered by some form of private hospital cover. This figure is at a 10-year high. In total, over 10.4 million Australians have private health insurance. Currently, consumers who purchase private health insurance receive a 30 per cent government rebate on the cost of the premium. This is not means tested. Those aged over 65 receive a 35 per cent rebate on their private health insurance costs and those over 70 receive a 40 per cent rebate. These rebates were introduced under the Howard Liberal government and the expenditure on the rebate has grown substantially over the last decade. In 2001-02, government expenditure on the private insurance rebate totalled $2.1 billion. In the 2010-11 financial year, the total expenditure on this rebate had increased to $4.7 billion. That is more than double the amount from 2001-02.

The 2010 Intergenerational report published on the Department of the Treasury website on 1 February that year states that the private health insurance rebate is the fastest-growing component of the Australian government's health expenditure and is forecast to increase by over 50 per cent in real terms per person over the period 2012-13 to 2022-23. The private health insurance rebate is the fastest-growing element of health expenditure and, if not capped, will cost the taxpayer $100 billion over the next 40 years. The fact that the fastest-growing element of health expenditure is not infrastructure, primary health care or pharmaceuticals but is the subsidising of private health insurance shows why these bills are so important.

In the 2009-10 budget, the government announced it would introduce measures to limit the growing cost of the private health insurance rebate. We tried twice to implement changes to the rebate during the last parliament, but the legislation was rejected both times by the Senate.

These bills create three tiers of support for private health insurance based progressively on the annual income of an individual or a family. For singles, there is no change unless a person earns over $83,000 per annum. Once they go over that, then the rebate reduces from 30 to 20 per cent. Going further up the income scale, once a single person earns over $96,000 per year, there is still a rebate, but it is reduced to 10 per cent. Once they get to $129,000 per year, the rebate cuts out.

For families and couples, the bills propose that the cut-off amounts be doubled. Therefore, following that figure, the rebate for a family or couple is 20 per cent once their combined income exceeds $166,000 per year. Once that couple or family receives an income of more than $192,000 per year taxable income, the rebate is 10 per cent. There is no rebate beyond $258,000 annual taxable income. If there are children involved, then there is an extra $1500 in the threshold for each tier per child. For example, a family with two dependent children would have to earn a combined taxable income of over $169,000 before they lost the rebate. There is no change to the private health insurance rebate for those individuals earning below $83,000 as singles or $169,000 for two-child families. They retain the full rebate.

Nearly eight million policyholders will retain the full rebate on private health insurance. The important figure to remember, I think, in this debate is that nine out of 10 Australians will not be affected at all. With the average yearly wage for 2011-12 trending to around $68,790, the average wage earner will not be affected by these changes. Those opposite are suggesting that an administration assistant, an apprentice, a retail worker and maybe a teacher not only in my electorate of Deakin but right across the country should be subsidising those who have substantially more income than themselves.

I believe the current expenditure on the private health insurance rebate can and should be better allocated to other ways of supporting our health system. The big problem with private health insurance rebates is that this money, rather than being spent in our hospitals for everyone, goes into the pockets of consumers or purchasers of health insurance to subsidise that product. I think it is an inefficient way of supporting our health system.

The other problem with the rebate is that the more that is spent on private health insurance the bigger the subsidy received. So this rebate gives the biggest benefit to those on the highest incomes rather than the money being delivered directly to the health system. The rebate gives more money to those who are well off and less to those who take out basic policies.

Recent data shows that 45 per cent of the population have private health insurance, but this figure is higher for higher income households—for example, 91.3 per cent of couples earning between $240,000 and $300,000 a year have private health insurance. Those on low incomes have lower rates of health insurance—for example, only 25.6 per cent of singles earning less than $50,000 take out private health insurance. Proportionately more of this rebate, which is now costing $4.7 billion a year, is being paid to higher income households. The question that I have to ask—and I have asked it in this chamber before—is: 'Is welfare for the wealthy a good use of health funding dollars?' My answer is I do not think so. The other impact of this legislation is to increase the Medicare levy surcharge, increasing the penalty for those on higher incomes not taking out private health insurance. When the government lifted income thresholds for the Medicare levy surcharge in 2008 in order to apply indexation, the Liberal Party and the private health insurance industry ran around like headless chooks, warning that thousands of people would abandon their private cover. They said it would increase the number of people not purchasing private health insurance. They said it would increase demand for public hospital services as well as push up premiums for private health insurance. But these arguments have been proven wrong.

I remember speaking on the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill of 2008 in the last parliament and making the point that people should take out private health insurance if the product and service is good and relevant to the individual's or family's circumstances. As I have said, time has passed and the evidence is now in. A report by KPMG conducted after the introduction of the higher Medicare levy surcharge found that private hospital activity following the changes to the Medicare levy surcharge actually grew at a faster rate than public hospital activity, which also grew.

The facts are there. The current percentage of those taking out private health insurance is at a 10-year high. Treasury modelling estimates 99.7 per cent of people will keep their private health cover, with only about 27,000 people dropping out because of these proposed changes. This would lead to an increase of approximately 8,500 additional public hospital admissions over two years, which is an increase of around 0.1 per cent. This is a very small number indeed and is nothing like the fearmongering predictions that we hear so often from those opposite. These bills will reduce government subsidies for high-income earners and increase the penalty if they opt not to take out insurance. This ensures that most, but not all, high-income earners will still opt to stay in. Indexation will ensure that, over time, the tiers are raised as national incomes rise.

It is important to note that nearly eight million policy holders will not feel any difference at all. There will be no effect on the cost of hospital or general treatment policies because well over 99 per cent of people who have cover will retain their cover. Treasury analysis advises that the combination of reducing the subsidy while increasing the Medicare levy for those on higher incomes will ensure that policyholders retain their private health insurance. The Australian Healthcare and Hospitals Association said that it:

… supports changes to the Medicare levy surcharge and private health insurance (PHI) rebates based on income. The Association has, for many years, known that the PHI rebate is not an effective mechanism to attract and retain members in the health funds. Not only is the mechanism itself ineffective, it is also an extremely inefficient use of taxpayer dollars …

These bills will help Australia get the best value for its health dollar as there is an urgent need to manage this rebate, which is the fastest growing health cost in the nation. I commend these bills to the House.

See this speech in context