Nick Xenophon (SA, Independent) Share this | Hansard source

I will confine my remarks this evening to this particular bill, the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2009 [No. 2]. Then I will have more to say in the context of the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Bill 2009 [No. 2]. As I indicated during last year’s debate on the fairer private health insurance incentives package of bills, I do not believe that there is adequate evidence to support changes to the private health insurance rebate nor changes to the Medicare levy surcharge. This package of bills effectively penalises those Australians who choose to have private health insurance, by making it more costly, and then seeks to make them retain their more expensive coverage because, if they cancel their policy, they will be penalised with a higher Medicare levy surcharge. It is almost a case of lose-lose. And it reminds me of that great song by the Clash—I know that Senator Conroy was a fan of the Clash—Should I stay or should I go, which had the following lyrics:

Should I stay or should I go now

If I go there will be trouble

An’ if I stay it will be double

That reminds me of what these bills are about.

The government concedes that Australians will be impacted if the private health insurance rebate is means tested and that many will choose to drop their cover as a result. But it claims the numbers that will be insignificant and says increases to the Medicare levy surcharge will deter this occurrence. Those assertions are worth analysing. Treasury estimates, in fact, that 2.3 million Australians with annual incomes above $75,000 for singles and $150,000 for couples will be impacted by means testing the rebate.

The Australian Health Insurance Association forecasts that up to one million Australians will abandon or downgrade their private health cover. The issue of downgrading health cover is key here. Indeed, what the government is not accounting for in their assessment of the numbers—which they call insignificant—are those who will reduce their level of cover in response to these measures. If this package of bills is passed, many Australians will reduce their private health insurance cover to just the bare minimum so that their premiums stay low but they are not subject to the Medicare levy surcharge. The effect of that will be that you will have people with ancillary cover no longer taking that out. There will be pressure on the public system as a result of that and it will cause an upward pressure on premiums for private health insurance.

The one per cent Medicare levy surcharge was first introduced in 1997 and, in line with other measures, including the private health insurance rebate, was designed to ease the pressure on the public hospital system by encouraging greater uptake of private health insurance by those who could afford to do so, based on their annual incomes. Changes to the Medicare levy surcharge passed in late 2008 saw the first change to the income thresholds in July last year, increasing them for individuals from $70,000 to $73,000 and for families from $140,000 to $146,000, and increased them by $1,500 for the second and each subsequent dependent child. The proposed changes were much more significant, effectively in line with inflation. I acknowledge the negotiations that I had in good faith with the minister to bring the changes to the initially proposed thresholds to a more realistic level. The thresholds were introduced back in 1997, when Peter Costello was Treasurer. Initially, the they were $50,000 and $75,000. Clearly, there needed to be change. I thought that a satisfactory compromise was arrived at to allow for CPI increases. It was agreed that the Productivity Commission should look at the whole issue of the public-private hospital mix. That final report was handed down in December of last year. I propose to go into further detail in the context of the other package of bills relating to this issue. Now is not the appropriate time.

The government seeks to increase the Medicare levy surcharge by 0.25 and 0.5 percentage points based on a three tier system. I do not believe there is adequate evidence to suggest that increasing the Medicare levy surcharge percentage now will encourage more Australians to take up private health insurance cover and I believe that means testing the rebate will only result in those with insurance policies reducing their levels of coverage to just ancillaries cover in many cases.

I admire the intent behind the second reading amendment moved by Senator Siewert on behalf of the Australian Greens, which was that the moneys raised by these changes to the Medicare levy surcharge, if successful, should be invested in mental health programs. But that begs a bigger question about the funding of mental health services in this country. Funding mental health services should be a priority for any government. We as citizens should expect to have a system in place so that if anyone needs assistance with a mental problem they can get the standard of care that is necessary and deserved. My concern is that hypothecating this revenue would be a get-out-of-jail card for the government. Seeking this pool of money absolves them, in a sense. This is money that should come out of consolidated revenue in the context of mental health programs. I agree that mental health is an area which needs more funding and improved services. However, seeking to do that through this mechanism and through what I consider to be a flawed piece of legislation, given the impact that it could have on the mix between the public and private systems, is not the appropriate way to go.

The potential for unintended consequences from these bills is quite significant. Either way, neither these proposed changes to the Medicare levy surcharge nor means testing the private health insurance rebate will effectively assist our heavily pressured public health system. As such, I cannot support this package of bills.