Ms Catherine King (Ballarat, Australian Labor Party, Shadow Minister for Health) Share this | Hansard source

This bill seeks to amend the way the indexation of the private health insurance rebate is calculated. People will remember that Labor introduced changes to the Private Health Insurance Act in May last year. These changes created a base premium for each individual health policy. This was to be indexed annually by the lesser of the consumer price index and the actual increase in premiums by insurers. The changes were to come into effect in April.

The change made the government's expenditure on the rebate more sustainable and made more funds available to be invested in other areas within the health portfolio. The original bill introduced by Labor did not alter the premium-setting process. Rather the bill introduced a base premium amount that changed the way the rebate itself was calculated, ending its link to rise automatically with the commercial increases in premiums. Instead the base premium was linked to cost-of-living increases. The changes resulted in the indexation factor being the lesser of CPI and the actual commercial premium increase.

The change the government is proposing in this amendment has no effect on the substantive objective of the measure Labor introduced in government. The changes Labor made were about sustainability of health expenditure, with expected savings of around $700 million over the next four years. They will still be realised in this bill. At the time the original bill was presented by my colleague the member for Sydney, she quoted the then-Treasurer that the 'rebate currently costs around $5 billion a year and its growth rate of 6.3 per cent over the forwards is unsustainable'.

Despite the concerns raised by those opposite, the changes Labor made when in government to the private health insurance rebate, particularly in relation to means-testing, did not see more than a million people getting rid of their policies. Indeed, what we have seen is more people taking out private health insurance than ever before. The most recent data available from the Private Health Insurance Administrative Council demonstrates that more than 105,000 people took out private health insurance between June and September last year, and compared to the same time the previous year more than 255,000 Australians had private health insurance cover. In percentage terms, that represents the highest rate of insurance cover ever, with 47 per cent of Australians having hospital cover and 55 per cent having general cover. As a matter of principle, Labor believes it is very important that there is a sustainable private health insurance industry in Australia. It is important that we have the public-private mix to provide health insurance for Australians. As I have said, despite opposition raised at the time and comments that more than a million people would give up their cover, that simply did not happen.

The intent of this bill is to change the way insurers calculate how the rebate is applied. Instead of insurers calculating the application of the indexation based on each of their individual products, it will be applied based on a formula calculated using the average industry premium increase and the consumer price index. Labor believes that there should be greater competition in the private health insurance sector and that consumers should have access to information they can understand and that best enables them to select a policy representing value for money and providing the level of service they seek. To date the government has not demonstrated it shares the belief in promoting competition and doing what is right for Australian consumers.

Since the coalition came to government, the minister has announced the highest increase to private health insurance premiums in almost a decade. This decision was announced by the minister two days before Christmas, in what I would assume was a fairly cynical move designed to avoid public scrutiny. When Labor was in government, ministers would routinely take several months to approve increases to private health insurance premiums, often going back to insurers many times to ensure that premium increases were justified and that Australian consumers were getting the very best deal possible. Industry has put to me and other members of the opposition that with the changes proposed in this bill less administration will be required and, in turn, less cost which would otherwise be passed on to consumers.

The principal concern of Labor is that any changes not have a detrimental effect on a consumer's ability to understand their policy and that it should not become less affordable. It is also important that there continues to be strong competition in the private health insurance market, and that consumers are able to seek out the best possible policy for them and to move between products when that is not the case. I acknowledge representations from insurers that this amendment will require less administration and therefore less cost to consumers. Having talked to the peak body and to a number of private health insurance companies, I understand that this is a position now shared across the entire industry.

When Labor introduced this change last year, there was debate around the best implementation methodology and some insurers argued indexing the premium at an industry level would be easier to implement. From this bill, that is an argument that the government has accepted. One of the principal concerns put by the Department of Health at that time was that implementing the indexation at an industry level, as is proposed in this bill, would put small insurers at a competitive disadvantage. Having received representations from smaller insurers, including their peak body, I have accepted these representations and am satisfied that smaller insurers have stated that they should not be disadvantaged by these changes. I acknowledge that changes required with any legislative change will of course be more difficult to implement from an administrative perspective for smaller insurers than for larger insurers, which have more staff and more resources to make the changes.

Labor accepts that smaller insurers have argued this change will be easier for them to implement and will result in less administration. However, I remain concerned that the government has not indicated in the second reading speech, the explanatory memorandum of the bill or the briefing the minister was kind enough to allow me to have from the department how it will promote competition or better competition in the private health insurance sector, how it will ensure the interests of Australian consumers are protected and how this change in particular does that versus what was proposed originally.

It is worth reiterating the advice of the department last year which was contained in the letter from the secretary to the Senate legislative affairs committee inquiring into the original bill. The department's advice at the time was that the implementation method put by the Labor government in the bill was one that increased transparency and provided greater competition and certainty for consumers. The government does need to better explain how the new method proposed in this bill will improve competition and the capacity for consumers to get value for money. That being said, Labor will not oppose the bill. However, at the end of my contribution I will be moving a second reading amendment that highlights the opposition's concerns around the issue of competition.

The broader issue is of course what the government's longer term intention is in health and in private health insurance in particular. As is well known, the government has begun a scoping study as part of its plan to sell Medibank Private. The government is so confident of the benefits to the Australian public and Australian consumers of private health insurance and the sale of Medibank Private that it has engaged a public affairs consultant at a cost of $2,000 a day, as reported in the media today, to sell the benefits of the sale of Medibank Private. It has engaged independent PR consultants and has been paying them $2,000 a day since January, despite the fact that the scoping study into whether to sell Medibank Private is not due to be handed down to the government for several weeks, let alone it being made available to the public.

The other issue that is of concern is that the government have committed to reverse Labor's means-testing of the private health insurance rebate. They strenuously opposed it at the time and have said that they will now reverse that. That is a substantial cost within the health portfolio and I remain concerned about that commitment.

The other area that I remain concerned about in relation to private health insurance is the tacit approval and apparent support for the move by private health insurers into primary care. There is a trial currently being undertaken in Queensland and I am informed by the private health insurer undertaking the trial that it does not believe it is breaching current legislation. I think it is getting very close to entering into the private health insurance market where there is the potential for those people who have private health insurance to be provided with a better opportunity to access a GP than those people in the community who do not have the means for private health insurance. It is an area that I remain most concerned about.

As stated previously, this bill does not change the amount of money the government will save by indexing the private health insurance rebate—some $700 million. The question of course remains what the government will do with the savings that the original bill actually realised. The minister has yet to make any statements about what the government's priorities are in health or what the government plans to do to improve the health of all Australians. So far we have only seen concessions to industry that are to the detriment of consumers, cuts to the health portfolio, cuts to very important health infrastructure projects, cuts to front-line services that Labor committed to such as cancer nurses in integrated cancer centres, and also cuts to smaller organisations like the Alcohol and Other Drugs Council—the body that has been providing advice to governments, including on such matters as alcohol fuelled violence, since Robert Menzies was Prime Minister.

I remain concerned on two further matters in relation to this bill. Whilst accepting the propositions put to it by the private health insurance industry—and I have no reason to doubt that those propositions are correct—that the changes to the method of calculating the indexation will put significant administrative pressure on private health insurers, the government has not made the case for why this change in particular will improve competition and the circumstances for consumers.

I would certainly ask the minister, in his summing up speech, to make a stronger case, understanding the administrative complexities, for why this particular change will be better for consumers as well. I also remain concerned as to what the government's intentions are in relation to private insurance overall and certainly what the government's intentions are to do with the savings that Labor was realising through the implementation of these changes. That being said, I reiterate that the opposition will not oppose the bill and I move:

That all the words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the bill a second reading the House note that the bill does not adequately demonstrate what additional competition will be achieved that is in the interests of Australian consumers”

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