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

Earlier this year in the Senate the Greens successfully moved to split these fairer private health insurance incentives bills so that we could talk about the increase in the Medicare levy surcharge and means testing the rebate separately and allow a separate vote on the bills. This is because we have a different opinion on the bills. We have flagged that we do support means testing for the Medicare rebate—and we will talk about this in more detail when we debate that bill—because we did not support the rebate in the first place. So a move to remove at least some of it and generate more income for the public health system, in our minds, is at least a step in the right direction.

However, the government’s Medicare levy surcharge is a stick to compel people to take out private health insurance, forcing people who are not on high incomes—$75,000 for singles and $150,000 for families—to purchase a market product that is expensive and over which the government has no true and proper legislative control. Health insurance premiums are again about to rise by an estimated six to seven per cent, which is around $195 per family. People often buy the cheapest product available even though it does not service their needs, because they feel compelled to.

The Medicare levy surcharge, we believe, unfairly penalises people who make a conscientious choice about private health insurance. As departmental officials at the recent Senate estimates hearings on 10 February pointed out, people on higher incomes who do not have private health insurance are not influenced by either the rebate or the levy surcharge. Those on high incomes who do not take out private health insurance—estimated at around 130,000—who pay the surcharge were described by officials as ‘unpredictable’. In the past people have described them as not making an economically rational decision. These people have not been included, we were told at estimates, in the Treasury modelling.

These people make a choice not to take out private health insurance for not just economic reasons. In other words, they are not being forced into it by the surcharge. These people take care of their health costs themselves. The Greens believe that this group should not be subject to extra financial penalties for no obvious financial gain to them, as they are unlikely to take out private health insurance and, if they did, they would probably take out basic packages that they would barely use.

The Medicare levy surcharge was introduced by the Howard government following their election in 1996. The Medicare Levy Amendment Act introduced a one per cent Medicare levy surcharge for individuals with a taxable income above $50,000 and for families with a combined taxable income of more than $100,000 who did not have private health insurance cover for themselves and all their dependants.

It is impossible to consider reform of the Australian health care system without considering the role of private health insurance. The government makes a significant contribution to the cost of private health insurance through the 30 per cent private health insurance rebate, or the PHI. It also provides other incentives for people to take out private cover, including Lifetime Health Cover and the Medicare levy surcharge, which is what we are debating now.

The government progressively introduced these policies in the late 1990s in response to dwindling private health insurance membership. The Medicare levy surcharge was introduced in 1997, the Lifetime Health Cover in 1999 and the 30 per cent private health insurance rebate in 2000. These policies increased private health insurance membership from 30 per cent in 1997 to 44 per cent in 2000, although most of this occurred in the six months before June 2000.

The introduction of these measures by the Howard government was accompanied by a concurrent reduction in the level of expenditure provided by the federal government to public hospitals. A fall of about $1 billion each year pushed public hospitals to crisis in most states and territories, amid claims from the federal government that the state and territory governments were misusing the funds and counterclaims by the states and territories that there was underfunding from the Commonwealth—the classic state versus federal debate. The point here is that these policies were introduced in the then government’s philosophical belief that private health insurance would save our hospital system and public health system. The Greens do not share that belief.

While the Private Health Insurance Administration Council collects a large amount of data on the operations of the private health insurance industry, there is little in the way of performance information. This is in contrast with recent efforts to improve accountability and transparency of performance in the public hospital system. If the government is to continue subsidising the private health insurance industry by nearly $4 billion a year, it must take steps to demand more accountability and transparency from the private health insurance funds and private hospitals. Despite the fact that we will be debating means testing the rebate over the coming day, we are currently debating the increase in the Medicare levy surcharge. The fact is, here the government is still supporting the private health insurance industry and will still be channelling millions of taxpayers’ dollars into private health insurance.

The stated intention of the then government’s policies was to increase private health insurance and, supposedly, to take pressure off the public system. We do not believe there is evidence that these policies have done that. We do not believe it has reduced the burden on our public hospitals, and in fact the situation continues to worsen. There is also evidence to suggest that the policy has led to a preference for privately insured patients to use the public system. This is detrimental for the people without private health insurance and does little to take pressure off the public health system, which is what the philosophy of the government of the time was supposed to achieve. The Medicare levy surcharge is, we believe, a clumsy way of taking money from people on high incomes if they do not have private health insurance and it penalises those people that are in fact trying to take care of their health insurance costs themselves and do not believe in private health insurance. There are easier ways, we believe, to fund the public hospital system—that is, get rid of the rebate.

The Medicare levy surcharge is now set at a level where it applies to those who are most likely to have the means to pay their way in a private hospital and pay for ancillary services without the need to depend on insurers. In fact, those people have consciously made that choice. People do not necessarily buy private health insurance because it represents good value for money. Indeed, in most cases we do not believe it does. Many people will avoid declaring their private health insurance on admission to hospital to avoid paying the large gaps and out-of-pocket expenses associated with many private health insurance plans. In fact, when the Senate inquiry looked into the previous bills concerning this matter we took evidence which suggested that those rates were going up. In other words, more people with private health insurance were still using public hospitals. That undermines the previous government’s assertion that private health insurance encourages people out of the public hospital system and takes pressure off the public hospital system.

The surge in membership following the introduction of Lifetime Health Cover shows people buy only if there is a sufficient threat associated with failing to do so, not because it necessarily delivers good health outcomes. Health economist and National Health and Hospitals Reform Commission Commissioner Stephen Duckett, and others, estimated back in 2000 that if all government subsidies to the private health sector were redirected to public hospitals an additional 1.5 million cases could be treated in Australia’s public hospitals.

Why do federal governments believe it is their responsibility to boost private health insurance membership? If the industry was selling something that represented good value, perhaps they would not have had the same level of difficulty in maintaining fund membership. The policy of subsidising private health insurers undermines Medicare and takes funds away from public hospitals. Consumer advocates Choice have said that the antagonistic response of the private health industry to any changes to the status quo shows how dependent they are on government policy to force customers to take up private health insurance, arguing that if the industry provided a product that offers customers value, it would not require a government subsidy. The loss of members from private health insurance may be a loss for private health insurers but is unlikely to have profound impacts on public hospitals as many of those affected are young people who are less likely to need hospital care, and if they do need hospital care they are likely to use a public hospital rather than bear the surcharges and excess payments associated with private health insurance products. Thus the viability of private hospitals is not threatened by the decline in the number of people with private health insurance; it is threatened by the private health insurance companies failing to provide insurance products that people want.

The Greens have repeatedly expressed our concern about this surcharge and the fact that it is impacting on people that have made a conscious decision not to take out private health insurance. We believe that the money this surcharge would raise should be invested directly back into the public system, and specifically into mental health programs. There is compelling evidence that proper investment in early intervention mental health services can have dramatic health and financial benefits, for example, reducing the estimated $10 billion to $30 billion costs associated with mental ill health in young people. In other words, if we invest early we can (a) provide a much-needed service to young people and (b) we actually save on those longer term health costs. There are many early intervention mental health programs which could benefit from immediate funding, and I suspect that if people knew that the extra money they were being forced to pay through the surcharge was being directly invested in helping to pay for mental health programs they would be more supportive of that particular program. We believe that $145 million that the government say that they are going to raise over four years from the Medicare levy surcharge—and, by the way, we could not get access to the modelling for that—