Karen Andrews (McPherson, Liberal Party) Share this | Hansard source

I rise today to speak on the Private Health Insurance Amendment (Lifetime Health Cover Loading and Other Measures) Bill 2012 and the Private Health Insurance Legislation Amendment (Base Premium) Bill 2013. I support private health insurance and the coalition supports private health insurance. Over a year ago this House debated changes to the private health insurance rebate, a rebate that benefited millions of Australians. For years, Labor denied that they would tamper with the 30 per cent rebate, yet last year they imposed means testing on a program that affects just over 50 per cent of Australians.

The full effect of Labor's changes to the private health insurance rebate are yet to be felt. This is because, as the Private Health Insurance Administration Council has reported, $1.2 billion in prepayments were made in the June quarter of last year, with many policyholders prepaying for 12 months or more to defer the resulting premium increases caused by the changes. We also know that the means testing has resulted in 12 pricing structures for premiums and has certainly made the system far more complicated. These changes were made even though figures show that the private health insurance rebate saw an additional eight million patients treated in private hospitals over the past 10 years, saving taxpayers $26 billion because of the pressure it relieved from the public health system.

This is an important function of private health insurance and therefore helps to ensure the overall wellbeing of our health system. To highlight its importance, it needs to be remembered that in Australia over 10.6 million people have private hospital cover. In my electorate of McPherson alone there are over 72,000 people who have private-health cover—an astonishing number. These are strong numbers which demonstrate that the private health sector does some fairly heavy lifting to reduce demand on the public sector.

When considering who has private health insurance in Australia, it is encouraging to note that 5.6 million Australians with private health insurance have an annual household income of less than $50,000 whilst 3.4 million have an annual income under $35,000. Clearly, private health insurance is not a scheme just for the wealthy. Many Australians are making the choice to take out private health insurance. The private health insurance rebate was an important step in helping these Australians protect themselves when times get tough, as was lifetime health cover, the central aspect of one of the bills being debated today.

The bill being debated will further modify the private health insurance rebate so that it will restrict the rebate from being payable on the lifetime health cover loading that is attached to a person's private health insurance premium. This measure was announced in the 2012-13 Mid-Year Economic and Fiscal Outlook and if this legislation is passed by the parliament it is set to come into effect on 1 July this year. Lifetime health cover was first introduced by the Howard government and came into effect on 1 July 2000 as part of reforms to private health insurance. As a result of these reforms, private health coverage increased dramatically from 6.1 million Australians to over 10.7 million, a 75 per cent increase. As it currently stands, lifetime health cover places a two per cent loading on a person's premium for every year that an individual is over the age of 30 when they decide to take out private health cover. For example, if a person is 40 when they take out cover they would pay a 20 per cent loading on top of their premium. However, this bill will restrict the private health insurance rebate, which, as I have mentioned, has now been means tested from being payable on this component. Reports indicate that premiums may increase by up to 27 per cent on 1 July as a result of these changes. This may well force some individuals and families to reduce or stop their level of cover for private health insurance. Only after 10 years of an individual holding hospital cover will the lifetime health cover component of a person's premium be removed.

There would be a sizeable number of policyholders in the community who have been paying their premiums, including the lifetime health cover component, as required for a number of years and who have been assisted in their payments by the rebate. However, if this bill passes through the parliament these policyholders will now find themselves having to pay for the full cost of the loading without any assistance from the rebate.

When these new changes come into effect it would be disappointing, at the very least, if they resulted in policyholders being forced to make the choice between continuing their private health insurance or having to opt out so that they cater for the other competing and rising costs that they face such as groceries, fuel and electricity. Implementing such changes to lifetime health coverage on the tight time frame being contemplated today will increase the administrative burden on private health insurers, who may have barely a month to make sure their systems are in order.

Encouraging people to take up private health insurance, as I mentioned previously, is important to help ease the burden on our public health system. Not only does this help patients in getting the medical treatment they need but it also assists our doctors, nurses and allied health professionals who do a fantastic job across the country but who are under workload pressures in many instances. Nonetheless, the Private Health Insurance Administration Council has noted that for the five years leading to 2012 exclusions and restrictions have become much more prevalent in private health insurance, with such increased use of exclusions perhaps working against decreasing the burden on public hospitals. If such changes as those being discussed today further affect the number of people taking out policies this may also work contrary to alleviating the pressure on the public system.

The gravity attached to easing the burden off the public system becomes more apparent when taking into consideration that $1.6 billion had been cut out of hospital funding in last year's Mid-Year Economic and Fiscal Outlook, including retrospective cuts to public hospital funding that had already been spent and allocated in 2011-12 and 2012-13. These cuts have already resulted in the closure of beds and operating theatres and in delays to surgery.

In an effort to try and salvage its budgetary position the government has been focusing its scalpels on areas which, when cut, will detrimentally affect millions of Australians, rather than refocusing the scalpel towards its wasteful spending, which has resulted in debt reaching over a quarter of a trillion dollars and another consecutive deficit. I will just note that one such program that got caught by the government's scalpel was the Medicare Chronic Disease Dental Scheme. Taking away that scheme meant the loss of a Howard government legacy, which had assisted over a million patients since 2007, and the introduction of a replacement program that will leave some of the most vulnerable dental patients in this country with a year-long plus wait to get the assistance that they need.

Private health insurance is crucial to the preservation of our health system. Further strengthening it can only be a good thing. I fear that the changes to lifetime health cover may not achieve that objective, and will make the system more complex and expensive for Australians looking to do what is in the best interests of their health and wellbeing.

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