Paul Fletcher (Bradfield, Liberal Party) Share this | Hansard source

I am very pleased to rise to speak on the Private Health Insurance Amendment (Lifetime Health Cover Loading and Other Measures) Bill 2013 and the Private Health Insurance Legislation Amendment (Base Premium) Bill 2013. This package of measures is part of the Labor Party's relentless and ideologically driven attack on private health insurance. As the cost to the Commonwealth of the health system continues to increase, Labor's curious response is to consistently weaken and erode one of the most effective public policy tools to address and contain that cost explosion, namely, private health insurance and measures to encourage take-up of it.

In the time available to me today, I want to make three points about the measures before the House this afternoon. The first point is that there are good policy reasons to support private health insurance and that is what the coalition has consistently done. Secondly, I want to contrast that with the record of relentless hostility to private health insurance that we have seen from the Labor Party and, thirdly, I want to argue that these two bills are bad policy driven by Labor's agenda of hostility to private health insurance.

Let me turn to the first proposition, that there are good policy reasons to support private health-insurance. The coalition believes that we should encourage every Australian who is able to do so to provide for his or her own medical expenses through taking out private health insurance. The more people who have private health-insurance the better the prospect we have of containing the cost to the budget and to taxpayers of the health system. Let us remind ourselves that this cost is relentlessly expanding and that in 2013-14 it will be $65 billion or some 16 per cent of the entire Commonwealth budget.

The coalition also believes in Australians being able to make choices about their health care and choosing, should they wish to do so and should they wish to be insured to do so, to go, for example, to private hospitals. In my electorate of Bradfield, according to data provided to me by the industry group Private Healthcare Australia, over 96 per cent of my constituents have chosen to have private health insurance. They have taken the decision to incur out of their household budgets expenditure against their future health needs. They are seeking to make sure that they do what they can to provide for the cost of their health needs, rather than simply leaving it to the public purse. I commend them and congratulate them for doing that.

We hear quite regularly the misleading claim from Labor that private health insurance is the preserve of wealthy of Australians. The numbers show otherwise: 5.6 million people with private health insurance have an annual household income of less than $50,000; 3.4 million have an annual household income of less than $35,000.

Unfortunately, what we have consistently seen from the Labor Party is a track record of mismanagement in this very important area of public policy. When Medicare was introduced in 1984 a decline began in the percentage of the population covered by private health insurance. By 1998, only 30.4 per cent of the population was covered by private health insurance, leaving the vast majority of Australians drawing on the publicly funded system and putting it under substantial pressure.

The Howard government inherited a health insurance crisis, and it tackled the crisis with measures that were well designed and which achieved their desired outcome of increasing the proportion of Australians with private health insurance cover—that is, increasing the proportion of people who took upon themselves the burden of funding their own health needs rather than simply leaving it to the public purse. The measures introduced by the Howard government involved a mixture of carrot and stick. The carrot, of course, was the introduction of a tax rebate—the one which has subsequently been weakened by the Rudd-Gillard Labor government.

One of the sticks was that, if you did not take out private health insurance above certain income thresholds, you were required to pay the one per cent Medicare levy surcharge. Another stick was the introduction of the lifetime healthcare loading mechanism. That measure was introduced by the Howard government in 2000. It is designed to encourage Australians to take out private health insurance at an early age. It does this by providing a loading on private health insurance premiums that steps up at the rate of two per cent for every year over the age of 30 at which the individual is when he or she takes out private health insurance. The maximum loading that can be applied is 70 per cent. These measures were successful in achieving their policy objective, and by 2007 private health insurance coverage had climbed to 44.6 per cent of the population.

I turn now to my second proposition, which is the relentless hostility of the Labor Party towards private health insurance. Labor is hostile to private health insurance. Labor is hostile to private hospitals. Labor is hostile to the notion of Australians seeking to rely on their own resources, seeking to make provision for themselves and their families, rather than relying solely and exclusively on the public system. Consistent with that ingrained and deep-rooted hostility to private health insurance that we see on the other side of the chamber, the Labor Party has consistently acted to make private health insurance less attractive to Australians.

We saw the Labor Party act in this way in 2012 when it legislated to impose a more onerous means test governing the payment of the private health insurance rebate. Health minister Plibersek likes to claim that the changes that were introduced in 2012 have had no effect on the proportion of people with private health insurance. There are, however, two powerful responses to this misleading claim and both of them are based on data and evidence from the government's own regulator, the Private Health Insurance Administration Council, known as PHIAC.

The first response is that many Australians responded to the changes introduced in 2012 by prepaying at the old rates before 30 June 2012; hence deferring the true effect of the changes introduced last year. In fact, PHIAC reported $1.2 billion of prepayments in the June quarter of 2012 as Australians sought to defer the resulting premium increases. Indeed, many policyholders prepaid for 12 months or more. The second piece of evidence is that it is clear that many Australians have responded to the reduction in the scope of the rebate by reducing the level of the health insurance cover they have taken out. Indeed, PHIAC has found that, in the five years to 2012, 'exclusions and restrictions have become much more prevalent' and the increased use of exclusions, it goes on to note, 'may work against the policy objective of private health insurance in easing the burden on public hospitals'.

In the lead-up to the 2007 election, of course, the Labor Party made every effort to conceal its ideological hostility towards private health insurance, and so effective was its concealment that it made a series of commitments which it has since systematically failed to live up to. For example, in the lead-up to the 2007 election, the then shadow health minister and member for Gellibrand had this to say:

On many occasions for many months, Federal Labor has made it crystal clear that we are committed to retaining all of the existing Private Health Insurance rebates, including the 30 per cent general rebate and the 35 and 40 per cent rebates for older Australians.

Then opposition leader Kevin Rudd, just before the 2007 election, made this written commitment in a letter to the industry peak body:

Both my Shadow Minister for Health, Nicola Roxon, and I have made clear on many occasions this year that Federal Labor is committed to retaining the existing private health insurance rebates, including the 30 per cent general rebate and the 35 and 40 per cent rebates for older Australians.

As the historical record shows, these specific commitments were abandoned last year when the government, after previous failed attempts, passed legislation to break these commitments and impose significantly more onerous means tests on the availability of the private health insurance rebates.

I turn to my third proposition, which is that the two bills before the House this afternoon are bad policy driven by Labor's agenda of relentless hostility to private health insurance, because the measures contained within both of these bills are designed to erode the value of the private health insurance rebate to Australians.

The first bill before us is the Private Health Insurance Amendment (Lifetime Health Cover Loading and Other Measures) Bill, and its effect is to restrict the rebate so that it is not paid on the Lifetime Health Cover loading component. As the arrangements currently stand, if a rebate on private health insurance is payable to an individual, then the rebate is calculated on the total premium, including any Lifetime Health Cover loading component. What the government announced in the Mid-Year Economic and Fiscal Outlook was a change to take effect from 1 July this year designed to remove the rebate from the loading component, therefore significantly reducing the value of the rebate. Now, we are told that this is a savings measure, but the savings need to be weighed up against the likely impact on health expenditure of a reduction in the number of people with private health insurance and hence the imposition of a greater load on the public hospital system.

The measures in this bill bring with them some very nasty side-effects. They add further substantial complexity to the private health insurance system, and it is estimated that they will cause a further increase in premiums for 1.1 million Australians. Indeed, they will be a disproportionate increase in premiums for low-income earners because the means-testing changes which have already been implemented have already reduced and, in some cases, removed the rebate for higher income earners. It is estimated that changes to the Lifetime Health Cover arrangements proposed in this bill will increase premiums by up to an amount as high as 27.5 per cent from 1 July 2013 and, troublingly, this is likely to have a direct impact on lower income Australians who have or wish to have private health insurance.

It will also materially increase the administrative burden on private health insurance. It leaves a very short time frame in which to change systems so that the new arrangements are in place by 1 July 2013. The means-testing changes have already created around 12 different pricing structures for premiums, and changes to the Lifetime Health Cover loading will further increase the administrative burden on private health insurers. That is why the coalition has indicated its opposition to the bill.

The second bill, the Private Health Insurance Legislation Amendment (Base Premium) Bill 2013, will have the effect of reducing the amount paid in the private health insurance rebate, because, rather than the rebate being calculated on the actual premium paid by Australians each year, it will now be calculated based on a lower amount called the base premium. The base premium will be indexed annually by whichever is lower—the CPI or the actual increase in premiums imposed by insurers. After a few years, what this is likely to mean is that the base premium will be considerably lower than the actual premium. In turn, a rebate calculated based on the base premium will be less valuable over time in relation to the true cost incurred by the holder of the policy.

The minister in her second reading speech argued that this is necessary because the number of people with private health insurance has grown and the rebate is costing too much. Again I make the point that if the minister were really concerned with minimising cost to the Commonwealth over the long term she would be pleased to see the growth in private health insurance, because the more people who have such insurance the more cost pressure is taken off the public hospital system.

As we have made clear, the coalition does not like the measures contained in this bill at all. But we are also conscious that, thanks to the sustained fiscal mismanagement of the government, Australia, or the federal government, is facing a budget emergency. We will inherit a fiscal position, should the coalition come to government at the next election, in which gross debt is heading towards $400 billion. On that basis, we are reluctantly not opposing this measure—because of the urgent need to return the budget to surplus—but we do reiterate that we do not like this attack on private health insurance and we do not like the attack contained in the other bill on private health insurance. It has always been the coalition's view that there are good policy reasons to support private health insurance. That is what the coalition has consistently done. I conclude by once again congratulating my constituents, who, in almost all cases, choose to pay for private health insurance and take responsibility for their own healthcare expenditures.

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