Rachel Siewert (WA, Australian Greens) Share this | Hansard source

The Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008 introduces measures that directly and indirectly go to the heart of health policy in this country. The Greens support the intention of this bill, but note that the debate on its impacts has raised critical issues about healthcare provision in Australia. The bill redresses some of the inequity of policies brought in by the Howard government in its ideological efforts to promote and build a private health sector at the expense of public health care.

The ‘stick’ of the Medicare levy surcharge introduced by the previous government in 1997 to encourage middle-income earners to purchase private health insurance is without indexation. This means that it is now capturing people on much lower relative incomes who can less afford private health insurance. The Greens agree that, in the interests of fairness, this issue should be addressed. Raising the threshold, however, has resulted in an outcry from the private health insurance industry, claiming that the sky will fall in, public hospital waiting lists will grow, private health insurance premiums will rise and the Australian health sector will be in chaos. The Greens do not buy all those claims.

This bill has focused attention on the question of private health insurance, the notion of a ‘balanced health sector’ and, importantly, the role of a strong, viable and properly resourced public health system as the best way to provide health care in Australia. This is a key policy concern for the Greens. We believe in a strong public health system. Written submissions and presentations to the Senate Economics Committee inquiry have restored this health debate to centre stage and raised important issues that we believe this place needs to consider.

Raising the thresholds is an equity issue. Firstly, I will look at the thresholds. Yes, the Greens agree that the levy surcharge threshold should reflect the increases in average income over the previous 11 years. Individuals and families on lower incomes should be given a choice about whether to purchase private health insurance or opt for the public health system. They should be able to make the choice based on their own budget and life priorities and not be forced to make a choice between expensive health insurance or a punitive one per cent levy on their limited income. It is fair and equitable to restore the intention of the policy by lifting the threshold on income levels.

Of course, the fairest outcome would be to remove the Medicare levy surcharge altogether so that all Australians had the same choice about private health insurance. However, within the current context, lifting the threshold removes an unfair burden on lower-income Australians. The arguments against this measure have been predominantly from the private health insurance industry—hey, that is no surprise. Their argument is that this will force people into an already struggling public health sector and that the only way to balance the illness burden between public and private health is to continue the carrot-and-stick approach of forcing people into private health insurance.

The Greens have a number of problems with these arguments. As the committee found, there is no conclusive modelling to gauge the impact of these measures on the public health sector and, in fact, the department admitted during the inquiry that they had done no modelling on the impacts on public hospitals. We simply do not know how many people would choose to exit private health insurance. There are Treasury estimates and there are estimates based on modelling commissioned by the private health insurance industry. The figures differ dramatically. In fact, it is a question of duelling models and which one you believe. In evidence to the committee, Professor John Deeble, emeritus fellow of the Australian National University and the father of Medibank, calculates that the overall income impact on the public health system is likely to be an increase of approximately two per cent per annum. Others point out that those most likely to be affected by this measure are the young and healthy, those who are least likely to require hospitalisation. The fact is that it is not possible to accurately estimate the impact because, as Dr Woodroff, President of the Doctors Reform Society, pointed out in his presentation to the committee, the purchase of private health insurance is not an objective, rational or measurable act. It is highly subjective, and research shows that the cost, as a premium or as a tax incentive or disincentive, is rated lower than perceptions of security and safety. This simply means that the removal of the surcharge will have less of an impact on people’s choices about private health insurance than their age, their general health and their perception of risk and security in general and in relation to their health and wellbeing.

This brings me to the principal concern of the Greens about this debate. The Greens have long argued for an end to the Howard government’s massive subsidy to the private health insurance industry. Approximately $3.2 billion is effectively poured straight into insurance industry pockets through this massive subsidy. Imagine what $3.2 billion over 12 years could have done if it had not been directed to the private sector but to the public health sector for public hospitals, nurses, better facilities, health technologies and better preventative and health promotion measures. The substantial changes introduced by the Howard government since 1996 have seen the erosion of funding to the public health sector, with a consequent massive injection of funds into the promotion of private health insurance membership.

It is important to note that it was the Howard government policy narrative that, at the time, linked the decline of private health insurance membership with the burden on the public health system and then made this the central problem for the financial sustainability of the Australian healthcare system. The concept of a ‘balanced healthcare system’ has been accepted as an inarguable given, and yet the evidence suggests that there is in fact no causal link. Dr Amanda Elliot, health policy analyst at the University of New South Wales, points out in her analysis of the changes to the healthcare system under the coalition government that:

By claiming the health care system was, first, in disrepair, and secondly, in disrepair because of the weakening of Medicare through a decline in private health insurance; the Coalition constituted both the problem and the range of possible solutions.

The solutions were, as we know, to build private health insurance membership through a range of measures directing funding to the private health sector. This has diverted resources out of the public health system and worked very effectively to create a powerful and wealthy private health insurance industry. It has not taken pressure off the public health sector. As extensive research illustrates, the consequences of this have been dire for the public health sector. Rather than taking pressure off the public sector, the opposite has occurred, with serious consequences for staff and patients in public hospitals. We know that national hospital data shows that the pressure on public hospitals has not been reduced and that international research shows that there is no link between increased private hospital activity and reduced waiting lists in public hospitals. Indeed, Stephen Duckett finds that the more hospital care is provided by the private sector the longer are the waiting lists for public patients. And let me remind you that Stephen Duckett is no slouch when it comes to health policy. He is an economist who now heads the Queensland Health Reform Team. He was Secretary of the Australian Health Department from 1994 to 1996 and has held leadership positions in the Victorian Health Department, at La Trobe University and as chair of the boards governing the Alfred and the Brotherhood of St Laurence.

The public hospitals desperately need increased resources to provide the best possible care, to attract and retain skilled staff and to improve care and treatment options. In her evidence to the committee inquiry, Professor Leonie Segal had this to say about the impact of the private health insurance rebate:

... if we were not supporting private health insurance and those dollars were available to go into health in other ways, they could be used to increase the Commonwealth contribution to public hospitals by one third.

The Greens could not agree more with Professor Segal’s analysis.

The private health insurance industry makes a further argument that this measure will force them to increase their premiums, because low-claiming members will drop their insurance, leaving a greater proportion of higher-claiming members. They argue that private hospitals will be adversely affected by a reduction in business of between six to eight per cent and may have to close or reduce the services offered. We do acknowledge the concerns voiced by National Seniors in their submission to the committee that older Australians who are able to retain their private health insurance could bear the brunt of rising insurance premiums. If they are forced to drop their insurance, they will join the public hospital waiting lists.

The Greens find Choice’s response to the industry’s claims compelling. The consumer advocacy organisation Choice argues that the removal of the government-imposed ‘incentives’ on people to take up private health insurance membership will shift the onus onto the industry to make their product more attractive to the consumer. That means the industry will operate in a market; the industry will have to come up with its own incentives to attract consumers, rather than operating on government subsidisation, as it has for the past 11 years. No doubt the market will help the industry to keep their premiums as low as possible.

Despite a lack of certainty about the actual impact of these measures, there is no doubt that there is likely to be some increase in public hospital usage. That is of course a matter of great concern to the Greens. The Greens believe that the public health sector should not carry the financial burden of measures which are intended to bring a tax measure into line with the current economic context.

As I have stated earlier and my Greens colleagues have argued in this place for years, the Greens believe that the public health system should be properly funded and that the billions of dollars which have been diverted from it over the past decade or more should be restored. Notwithstanding the fact that we will not achieve that goal here today, we believe that if there is any impact on the public hospital system it should be compensated for by the federal government.

If, as the government claims, this bill is intended to redress an unfair consequence of a Howard government policy on low- and middle-income earners and is not a tax grab, then there is no argument to keep any money raised in consolidated revenue and to not use it to compensate an already struggling system should this measure adversely impact on public hospitals. We therefore seek a commitment from the government that it will address any adverse impacts—that is, that no public hospital will be worse off because of this measure.

In order to determine what impact, if any, this measure will have on the public hospital system, we are introducing an amendment to require a review of any of its impacts to be undertaken. The modelling, as I have said, is inconclusive in predicting both its short- and long-term effects. Close questioning of expert witnesses has failed to provide any substantive data on this question that could resolve this issue now.

We believe it is incumbent on the government to undertake a review of the impact of this bill on the health sector generally, the public and private sectors and not-for-profit hospitals, which could also be affected. The government should ensure that an evaluation is undertaken as part of this legislation. To that end, the Greens will be introducing an amendment that calls for a review of the operation of the act each year for the next three years. This will determine if there is an impact and whether the government needs to compensate the public health system.

In addition to that key concern, the Greens have identified another measure that we believe will improve this bill. The amendment we propose is also consistent with the articulated concerns of the government that brought about the introduction of this bill. The Greens want to ensure that the income threshold level for the levy surcharge is indexed to the consumer price index to ensure that it remains in line with the contemporary economic climate. The Greens will be introducing an amendment to index this measure, which the Howard government failed to do when it introduced it in 1997.

We believe it is up to the government to demonstrate their commitment to a strong public health system and to guarantee to the Australian community that this measure will have positive effects on our public health system, that it will not have negative effects on our public health system and that if there are any negative effects they are compensated for by the government so that no public hospital is worse off.

We do not believe the modelling that the private health insurance industry has put forward, but if it is proven that there is an impact on the public health system we need to address that. The government need to commit to the Australian community that they will ensure that public hospitals and the public health system will be no worse off because of this measure. I see no reason why the government cannot issue that guarantee to the Australian community.