Lyn Allison (Victoria, Australian Democrats) Share this | Hansard source

This package of seven bills makes changes to the current regulatory regime for private health insurance. Of these, the Private Health Insurance Bill 2006 is by far the most significant. It represents the most significant change to private health insurance since the government introduced its 30 per cent rebate and Lifetime Health Cover back in 2000-01. It has implications not only for the privately insured population but also for the 56 per cent of the population who are dependent on the public system—indeed, on our health system as a whole.

The government’s oft repeated claim of being ‘the best friend that Medicare has ever had’ becomes more implausible with this latest insidious step in the white-anting of the health system. This bill does not address the real problems in our health system: inefficiencies and duplication; waste cost, particularly in the private sector; a failure to make the best use of our workforce; neglect of quality and safety issues; and of course the ever-present cost shifting and buck-passing between the Commonwealth and state and territory governments. Rather than tackling any of these, the government has spent billions of dollars on cosmetic solutions, leaving the foundations to crumble.

The measures in this bill have the potential to accelerate that deterioration. The bill allows private health insurance funds to provide what the government has called Broader Health Cover. This means that for the first time private health insurance will be able to cover medical services outside the hospital environment. Health funds will be able to cover services which are classed as part of an episode of hospital care or can substitute for an episode of hospital care—services such as home nursing, dialysis and chemotherapy. They will also be able to provide insurance for services designed to prevent people from needing to go to hospital—programs such as chronic disease management and health promotion.

The Democrats have always been advocates for more prevention and early intervention in our health system. Clearly, preventing people from needing hospitalisation is a very admirable goal. Under most circumstances we would strongly support moves in that direction. Similarly, the Democrats support broader access to non-hospital based care. Health care should be provided in the most appropriate and safest setting possible and funding mechanisms should be designed to support that.

But—and it is a big but—these new arrangements will increase the inequalities which already exist within the health system and threaten universalism, which is at the core of an efficient and equitable health system. An individual’s health care, and indeed their health status, should not be determined by virtue of their financial status or their ability to buy or maintain health insurance. A universal healthcare system means that services and benefits are available to everyone on the same terms.

Under the broader healthcare arrangements, services will be available to people with private health insurance that are not equally available to those without it. Under these arrangements, there will be a range of preventive and disease management services available to those with private health insurance. The Democrats say that Australians who do not have private health insurance should have the same access to and the same options for medical treatment, out-of-hospital care and preventive programs as those with private health insurance.

It is not easy to predict the effects of changes to health insurance. This is a very complicated area. But if the government’s goal was to encourage the decay of the public health insurance system then expanding the role of private health insurance while neglecting Medicare and publicly available services would certainly be a good start.

It is true that this legislation offers potential benefits to the quality of health care for the privately insured and may make private health insurance more attractive to some, but we must consider these potential benefits within the context of the broader health system. At the very least it is likely that this bill would exacerbate workforce shortages in public services through further syphoning of a wider range of healthcare professionals into the private sector. The government’s argument that this will reduce premiums is doubtful to say the least. Providing services to patients in the community is not necessarily less expensive, and administration costs for managing these new processes may well be substantial.

In its submission to the inquiry into this bill, MBF noted:

... any potential for health cost control through more innovative models of care are unlikely to be reflected in premiums over the short term.

MBF suggested:

... costs of covering preventive programs will be upfront, resulting in a potential upward pressure on prices in the short to medium term.

The government does not have a good record on keeping premiums down. They have all gone up by 40 per cent since the introduction of the 30 per cent rebate.

It is also notable that this legislation removes the objective of the Private Health Insurance Administration Council to ‘minimise the level of health insurance premiums’ and replaces it with ‘protect the interests of consumers’. It would seem to be the case that the government does not believe its own assertions about premiums not going up.

The Democrats will be moving an amendment during the committee stage to restore the objective of the Private Health Insurance Administration Council to minimise the level of health insurance premiums. We will also be moving our standard appointments on merit amendment, in this case for the appointment of the Private Health Insurance Ombudsman and the appointments of the Private Health Insurance Administration Council’s CEO and members. This is essentially an accountability and probity amendment, which is very timely since we are considering aged care. We have moved it before on many occasions and we will no doubt move it again in the future. We think it is an appropriate protective mechanism.

The Democrats are not opposed to private health care and indeed see some value in a private healthcare sector that complements the public health system, but we do not support the extent of public funding for the private sector that has developed under the Howard government. Nor do we support the escalating commitment of the government to subsidising the private health insurance industry. As part of his evidence to the committee, Mr Ian McAuley from the University of Canberra said:

What we have had in private health insurance when we count measures such as the rebate, the one per cent tax penalty and the Lifetime Health Cover et cetera are five rounds of increasing industry assistance now costing about $4 billion a year. That is $3 billion in direct outlays and at least $1 billion in forgone revenue because of the one per cent incentive.

The 30 per cent rebate to prop up private health insurance is highly inefficient and it undermines the health system as a whole. Private health insurance is clearly inflationary; it misallocates resources and it undermines equitable access to health care. A national public health insurer will always be the most efficient and equitable way to fund health care. We are not saying that all health care should be free or delivered by public organisations but that a single national insurer has the ability to contain costs and unnecessary usage. If the government wants to support private service providers and individual choice then there are much more efficient ways than providing what is little more than industry protection to private health insurance.

The legislation does nothing to address the inefficiency and sustainability of the private health sector. There are some aspects in which this package has merit. I have no doubt that the move to provide standard product information to make comparisons between different insurance plans easier will be welcomed by many people. Working out what is and what is not covered and how much it will cost with the many different health insurance products that are available is a daunting task indeed, and adding out-of-hospital options will increase the complexity. It is unfortunate, however, that the government has seen fit to only provide resources for a website to display this comparative information. This will mean that this information is not easily available to the very many people who still do not have access or good access to the internet—and we should be thinking in particular here about the aged population. Given that the government could find $50 million in the last budget to give to the private health insurance industry to advertise its products, it is surely sensible to find money to make useful information available to the public.

The legislation implements changes to streamline the administration of and regulatory arrangements for the sector, and that too seems to us to be a sensible thing to do. However, it is a problem that these bills will allow a health insurance business to operate other health related businesses—for instance, clinics, hospitals and health related financial products—without requiring the health insurer to advise consumers of its links to these other health related business activities. We think this has substantial potential for conflict of interest.

The legislation introduces a change to the Lifetime Health Cover scheme. Under the current scheme, private health insurance gets more expensive as you get older if you join after you turn 31. Currently, people pay a two per cent loading on top of their premium for every year they are over 30 when they first take out hospital cover. Not surprisingly, this is a major disincentive to join for older Australians. This legislation puts in place a system so that people who have retained their private health insurance for over 10 years will no longer have to pay the Lifetime Health Cover loadings. In our view, Lifetime Health Cover erodes the policy of community rating—something which is a central tenet of the private health insurance system in Australia.

The introduction of Lifetime Health Cover frightened many Australians into taking out private health insurance, and it still does. They are unwilling participants in the system. The Democrats would like to see Lifetime Health Cover removed. This would free up millions of dollars which currently go into the rebate—dollars which, we say, could be spent on areas of real need, such as dental care—and it would also release people from a system that is expensive to be part of.

During the committee stage we will be moving an amendment to remove Lifetime Health Cover for everyone, not just for people who have paid loaded premiums for 10 years. Indeed the Democrats are concerned that the broad health cover measures in this legislation will lead to a further erosion of the principle of community rating. Broader Health Cover will give health insurers greater flexibility in designing products targeted at specific populations and the ability to set different prices for different products. As was pointed out in submissions to the inquiry, this will increase the ability of insurers to engage in reducing the risk profile of the insured population. That is known as cream skimming—in other words, attracting low-risk, low-cost members through financial and other incentives not available to high-risk, high-cost members. Will we see higher risk members priced out of the private health insurance market? I think so.

The Democrats are also concerned that this legislation allows for a 15-month lag between the implementation of Broader Health Cover in April 2007 and the implementation of the standards and quality provisions in July next year. What assurances do holders of private health insurance cover have about standards and quality of service within that time? This represents a completely unacceptable risk to consumers of private health insurance. As I said, the exact outcomes of these bills are unknown but there are very substantial risks involved. This is why there must be a review of the impact of the legislation, if it passes.

We will be moving an amendment calling for an independent review of the act, a review which looks at the extent to which broader health cover has eroded universalism in health care and further contributed to inequality in access to services between those with and without private health insurance. The review would also look at whether the new health insurance products that are developed as a result of this legislation are contrary to the principle of community rating, and it would look at the adequacy of the standard information statements arrangements in assisting consumers to compare private health insurance products.

Given the increasing amount of public funding directed to private health insurance, we should be reforming it and making it a better product. But, of course, we should be doing much more than that. We should be reassessing its role in a mixed public-private system that should provide equitable and efficient health care. We should be reassessing the degree of support the government provides to what is essentially an inefficient intermediary service. So this is another wasted opportunity.

My second reading amendment will condemn the government for: escalating commitment to subsidising private health insurance while failing to explore more efficient methods of supporting the private health sector; providing mechanisms which will increase access to services for those with private health insurance while failing to equivalently increase access for those without private health insurance; and failing to invest in the public health system and undertake substantial reorientation of the public health system towards prevention and early intervention.

This amendment also calls on the government to limit the use of taxpayer subsidies of private health insurance by replacing the 30 per cent private health insurance rebate with a capped and means-tested rebate. The Democrats have always deplored the many billions of dollars spent on the private health insurance rebate, because it could have been much better spent.

I move:

At the end of the motion, add:

                 “but the Senate:

             (a)    condemns the Government for:

                   (i)    escalating its commitment to subsidising private health insurance while failing to explore more efficient methods of supporting the private health sector,

                  (ii)    providing mechanisms which will increase access to services to those with private health insurance, while failing to equivalently increase access for those without private health insurance, and 

                 (iii)    failing to invest in the public health system and to undertake substantial reorientation of the public health system towards prevention and early intervention; and

             (b)    calls on the Government to limit the use of taxpayer subsidies of private health insurance by replacing the 30 per cent private health insurance rebate with a capped and means-tested rebate”.