Mark Bishop (WA, Australian Labor Party) Share this | Hansard source

I rise in support of the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008. As we all know, the intention of the bill is to increase the Medicare levy surcharge thresholds for both individuals and families—an increase from $50,000 to $100,000 for singles and from $100,000 to $150,000 for couples and families. That is before the imposition of an additional one per cent in tax payable by workers who have chosen not to take out private health insurance. If this bill is about one thing, it is about choice—the choice of whether or not to take out private health cover.

By way of background, the previous government introduced the Medicare levy surcharge in the late 1990s. The surcharge was part of a ‘carrot and stick’ approach to entice Australians back into the private health system, which at that stage—those of us who were around remember the complaint—was verging on becoming dysfunctional because of high dropout rates and, hence, lack of funding to private healthcare providers to provide rebates to those who chose to use their services. As I say, the surcharge was part of a carrot and stick approach to entice Australians back into the private health system. The carrot was then and remains very generous: a 30 per cent general rebate for most Australians and, for older Australians, a 35 to 40 per cent rebate. The rebate was paid by the government to private health insurance groups to mitigate the cost of premiums, which then, as now, were rising, one suspects, almost exponentially.

As well as the carrot approach to rebates, there were two sticks to the policy. The first stick, as it has become characterised, is known as Lifetime Health Cover. Unless taken out before the age of 30, premiums for new members of Lifetime Health Cover increased on the basis of age. It increased at a rate of two per cent for each year after a person’s 30th birthday. The second stick was the Medicare levy surcharge, aimed at capturing avoiders or those who chose not to take the hint with the first stick—that is, to target high-income earners who could afford to purchase health insurance but decided to play the lottery and chose to not take out private health insurance, to rely on the hope that their health would continue to be good and, hence, to rely in a health emergency on what was left in the public health system.

When the surcharge was introduced in the 1997-98 financial year, 8½ per cent of single taxpayers were captured by the surcharge levy. In evidence to a recent Senate inquiry, Treasury officials estimated that in the 2008-09 financial year 36 per cent of single taxpayers will exceed the threshold. By the 2011-12 financial year, current estimates are that that figure will jump to 45 per cent of taxpayers. So what started back in 1997-98 as general policy by the then government of having almost universal coverage—that is, only eight per cent of single taxpayers were captured—has increased in the current financial year to 36 per cent and, within two or three years, will go to 45 per cent of taxpayers, which is almost half of Australia’s taxpayers.

The new thresholds will restore the percentage of people captured by the surcharge to 8½ per cent of taxpayers. So, as well as this legislation being about choice and, as Senator Hurley said, about equity, it is about returning to the a priori position established by the previous government when it introduced those major reforms in 1997-98. One asks the question: why did the previous government fail to include indexation in surcharge thresholds? In 1997, a high income was deemed to be $50,000 for singles and $100,000 for couples and families. There has been no change to the threshold since that time. However, over the last 11 years, average annual earnings have increased and, in some cases, have increased quite significantly. An average annual income today is $58,000. So a full-time wage earner on the second lowest marginal tax rate of 30 per cent exceeds the current threshold. The surcharge, designed to provide a financial incentive for high-income earners to join private health insurance funds, is now a tax trap for average Australians. Indeed, returning to the figures I referred to earlier, within two years some 45 per cent of all Australian taxpayers will be caught by this threshold mess if the proposals before the chair do not become legislation in due course.

It is a tax that, if left in its present form, will eventually force all but the lowest-wage earners to take out private health insurance. That, if it does come to pass, is a fundamental shift in the concept of universal health coverage. And it was done without decision and without policy discussion. It has emerged over time and it has been done by stealth.

The proposed changes to the Medicare levy surcharge will restore balance and fairness to what is now an additional tax burden on working families. Indeed, if the legislation is passed and proclaimed in due course, we will return, as I said earlier, to the situation in 1997 where only eight or 8½ per cent of taxpayers were affected by the surcharge. This reversion to what was the case and what, we think, was the original intent of the Howard government in 1997-98 will honour the original intent of the surcharge: to target high-income earners, who can afford to make provision for their own health care.

Why all the delays? Why all the histrionics? Why the constant monitoring of this issue in the press? Why all the doom and gloom? It is a fact, as we all know, that healthcare costs right around the world—but particularly in the Western world, where in most advanced industrial democracies there is a form of universal health care—are rising and, indeed, it can fairly be said, rising well in excess of general movements in the CPI in particular domestic economies. Reasons vary, from breakthroughs in technology to increases in capital costs of medical equipment and facilities, to increases in demand with growing populations, to lack of supply adjustment, to, in some cases, excess supply adjustment—and by that I mean more and more doctors and more and more facilities shifting into well-off suburbs and hence competing to attract aged and well-off people as customers. Of course, we have that very difficult situation that is emerging with the decline in GPs, whereby large numbers of people now regard a GP as an optional extra, do not use a GP and, for routine medical demands, use the public hospital system—and the system we built over the last 10 or 15 years has in-built perverse incentives that indeed encourage such behaviour.

It is also clear—and fair to say—that, as consumers, we have an expectation that our health system can, and often does, provide miracles. Healthcare professionals have also experienced increases in income, and this has also contributed to the overall cost of healthcare services and medical services and, if we are not kidding ourselves, is likely to contribute to ongoing serious increases in healthcare costs over the coming decades.

As we all know, since 1984 Medicare has been the mainstay, the building block, if you like, of our health industry. Its purpose is to provide health services to all members of the Australian community right across our continent. It can be accessed by pensioners, the unemployed, the disadvantaged and the chronically ill, whether they are low-, middle-, or high-income earners or people who have no income at all. Taxpayers already pay a Medicare levy of 1½ per cent on their taxable income. It is this ownership, this belief in Medicare, that means clients of the private health system will continue using public health services. So where is the best place to invest our taxpayer dollars within the current health system and the health system we hope to maintain over the next 10 or 15 years? It is clear that we need a private healthcare system that supports, complements and provides a buttress to our own public system—and there is strong support right across Australia within a whole range of communities for choice in healthcare providers. So we need a public system, we need a private system and we need choice.

Today there are approximately, I am told, 11 million Australians in private health insurance funds. But we must ask ourselves: how many people are members of those funds through their own fully informed choice? Or: how many are members because they have become ensnared in a tax trap devised and allowed to grow by government over the last 10 years in this country—a tax trap created by the failure of the previous government to index surcharge thresholds? The previous government did not forget to index the luxury car tax. There is support, as we know, even amongst healthcare fund managers, for an indexation of the surcharge threshold. The hysteria appears to have arisen from the initial increase in the threshold. The Australian Health Insurance Association, in evidence given to the recent Senate inquiry, said that one-third of those with private health insurance live in households with an income of less than $48,000 per year. If that is the case—and there is no real reason to doubt that—those people presumably are at least satisfied with the product that is offered by private health funds. I emphasise that these are individuals and families who are not required to pay the surcharge under the current threshold arrangements.

There is no doubt that there will always be a market for private health insurers who are able to provide a comprehensive range of services attractive to the clients in the market in which they seek to attract business. Current public campaigns would have you believe that, when the thresholds increase, those most likely to withdraw from private health funds will be younger, healthier people. That is an argument worthy of examination. If this is true, the impact on the public health system should be absolutely minimal. After all, the young and the healthy do not draw on the private health system, so one would assume that they are unlikely to draw on the public health system, or, if some are going to shift over to the public health system, one would suggest that there is going to be an absolutely minimal number. Many who have been caught in the tax trap pay into private health funds but continue to use the public system. In cases of serious trauma, emergency surgery or long-term chronic illness care, the burden inevitably falls to the public health and the public hospital system. As a result, our public health and hospital system is crying out and will continue in the years ahead to cry out for additional funds to meet demand because the structural changes needed to change the perverse behaviour that occurs were not allowed to occur over the last 10 or 15 years by the previous government.

There is broad agreement that the increase in thresholds will lead to an exodus of members, an exodus largely of those who have taken out private health insurance. Why? Because they were caught in the tax trap. If so, there will be a corresponding reduction in government funding of the Medicare rebate. Treasury estimates put this at $960 million over the next four years. Those savings will enable the government to direct taxpayer dollars to our public health system, a public system which, for years, suffered the burden of underinvestment by previous governments. The current surcharge arrangement undermines—goes to the heart of destroying—the notion of a comprehensive universal healthcare system by directing taxpayer dollars in some cases to publicly listed funds, driven by a different endgame, that operate in a market environment.

This government supports a strong private health sector which complements our public health system. We need both. We acknowledge the contributions that both the public health system and the private health system make to the welfare and the medical health of Australians right across our country, a contribution to meeting, as I say, the health needs of our communities. The government continues to support the private health sector with the Lifetime Health Cover and the Medicare rebate schemes. There is no change to those two elements of the current system. There is also additional support for the private sector through Medicare rebates for procedures performed by medical staff. Additionally, we have the Pharmaceutical Benefits Scheme, a scheme which provides medications at a significantly reduced cost to both private and public health fund patients.

In a perverse way, through the Medicare levy surcharge the government of the day effectively imposed a penalty on those it deemed wealthy—a penalty on those who choose not to take out private health insurance. It does not allow individuals or families to choose the public health system. The penalty was imposed, is maintained and continues to be imposed to stop people making effective choices about the type of health system they wish to involve themselves and their families in. The penalty is imposed to stop you choosing wrongly, with the choice made by the government, without information, and not by the individual, family or consumer.

The current threshold is an unfair tax on what today are no more than average-income earners. In my home state of Western Australia, an estimated 27,000 persons pay the surcharge and yet continue to rely on the public health system day in and day out. A further 117,000 households are above the threshold and pay for private health insurance. Nevertheless, many of them, if not a very, very significant majority, continue to access the public health system. It is the government’s view that changes to the Medicare threshold will provide much-needed relief to average income earners.

There are always going to be lobby groups and interest groups who benefit from the way things are currently structured and who therefore will oppose any change, no matter how well intentioned or how much needed, just like those who are fundamentally opposed to the idea of a universal healthcare system. Indeed, at least until 1996 the opposition parties were opposed to a universal healthcare system in this country, which was one of the hurdles Mr Howard had to overcome when the government changed in 1996.

Through practice, usage, opinion polls and research, Australians show their continued support for a public health system and for Medicare. They have made that support known to successive governments since the Medicare system was created back in 1984. Indeed, the maintenance of a universal, well-funded and adequate public healthcare system goes to the heart of having an effective medical system in this country, and it goes to the heart of the fair go. Indeed, the entire principle that has driven the current government to bring these reforms into the parliament this week and in coming weeks is to change the threshold so that we can get some equity, some fairness and a fair go back into the system that delivers results to consumers, the public and those who most need it—that is, a well-maintained and well-funded universal healthcare system. That is manifest, as it has been manifest now since 1984— (Time expired)