Nick Minchin (SA, Liberal Party, Leader of the Opposition in the Senate) Share this | Hansard source

I am honoured to follow my colleague Senator Parry in condemning this legislative attack on private health insurance. The coalition remains steadfastly opposed to the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2009 [No. 2] and the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Bill 2009 [No. 2] despite the fact that our vote on this legislation will hopefully lead to its defeat. This will, of course, give the government another mechanism by which it could dissolve both houses. That does not deter us from our determination to see this horrendous and outrageous legislation defeated. We say that because, as my colleagues have emphasised, this is one of the most extraordinary and blatant breaches of a profound and clear and unqualified election commitment by the Labor government that we have ever seen.

These changes to implement a means test for the private health insurance rebate and increase the Medicare levy surcharge for certain income levels will affect all Australians reliant on the health system in this country. This attack, as it is, on private health insurance is a clear indication of the inherent ideological contempt that the Labor Party has for private health insurance which we have seen repeatedly over the years. Most importantly, it is a breach of a fundamental election commitment made by the Labor Party to the Australian people before the last election. They promised the Australian people that they would keep the private health insurance rebate as it was. On the eve of the last election, in a letter to the Australian Health Insurance Association, then opposition leader, Kevin Rudd, said:

Both my Shadow Minister for Health, Nicola Roxon, and I have made clear on many occasions this year—

that is2007—

that Federal Labor is committed to retaining the existing private health insurance rebates, including the 30 per cent general rebate and the 35 and 45 per cent rebates for older Australians.

It could not have been clearer or more unqualified. We have never trusted Labor on this. We have always said to the Australian people, ‘You should not trust Labor on the subject of private health insurance.’ Labor has a longstanding and deeply rooted hatred of private health insurance. But, of course, in 2007 Labor accused us of running a scare campaign on the matter. Then shadow health minister, Ms Roxon, said in a press release on 26 September 2007:

The Liberals continue to try to scare people into thinking Labor will take away the rebates. This is absolutely untrue.

As we now know, it was absolutely true. Only one party has now proven that it misled the Australian people prior to the last election, and that is the Australian Labor Party. They promised the world prior to the last election, and it is now catching up with them. As we have seen, they have broken this fundamental commitment in relation to the private health system.

While in government Labor continued publicly to commit to leaving the rebate unchanged, even as late as February of last year, but we now know that the Minister for Health and Ageing was getting advice on imposing a means test on the rebate. It was only because of the coalition’s belief, when in government, that Australians should have a choice in regard to health care that the significant decline in private health fund membership brought about by Labor’s last term in government was curtailed and reversed. Through a series of measures under our government, such as the rebate on premiums and Lifetime Health Cover, the former coalition government, frankly, rescued private health insurance in this country, bringing membership levels up to a sustainable 44 per cent of the population, compared with 34 per cent under Labor when we came into office.

We as a coalition have always believed in a balance between public and private health as being fundamental to the health system in this country. We do believe that a strong and affordable private health sector eases the pressure on the state public hospital systems, which we all know are under relentless pressure. Members of private health funds contributed $10.6 billion to the Australian healthcare system in 2008, an increase of 10 per cent on the previous year. According to the Australian Health Insurance Association, its data:

. . . also demonstrates that the private health sector has contributed to a greater increase in the provision of in-hospital treatments since the introduction of the 30 per cent rebate. Since 1998-99, when the rebate was introduced, in-hospital treatments in the private sector have risen by 60 per cent, compared to a 25 per cent increase in the public sector’s capacity in the same period.

I go on to quote the AHIA:

The rebate is therefore an important policy component which assists in keeping premiums as low as possible for all Australians with private health insurance, especially the 1 million Australians who live in households where the household income is under $26,000 a year.

So there is no doubt that the private health insurance system does play a fundamental role in our healthcare system. The association stated in their submission to the Senate inquiry into this matter:

The 30% Rebate represents an effective investment in the health system by the Australian Government because every dollar that the government contributes towards the private health insurance rebate is matched by more than two dollars by the individual. The AHIA is concerned that the means‐testing of the rebate, with its projected savings-to-government of $1.9 billion over five years, could reflect a total withdrawal from the health system of up to $6.3 billion in funding over that period.

Any attempt to undermine private health insurance will inevitably have a dramatic impact on the public system as more people inevitably abandon their private health insurance to rely solely on the public system. We in the coalition are certainly not convinced by the government’s arguments in relation to the rationale for these bills. Nor are we convinced that they have acknowledged the full ramifications of this attack on the private health insurance industry.

This package of measures, as we know, imposes a decreased rebate, on a sliding scale, for singles earning over $75,000 and couples earning over $150,000. The rebate will decrease to 20 per cent for single people on incomes of $75,000 to $90,000 and for couples on combined incomes of $150,000 to $180,000. The rebate will decrease further to 10 per cent for single people on incomes of $90,000 to $120,000 and for couples on combined incomes of $180,000 to $240,000. Payments will cut out completely at $120,000 for singles and $240,000 for couples. The government, on its own figures, admits that 40,000 people will drop private cover as a result of this measure. On the government’s figures that comprises 25,000 people expected to drop their hospital and general treatment cover; 10,000 with hospital and general treatment cover expected to keep the hospital cover but drop the general cover; and 5,000 people with general treatment expected to drop that cover.

But I think there is evidence that the Treasury modelling is unduly optimistic. The Australian Private Hospitals Association said in their submission to the Senate inquiry:

Both Treasury and the Department of Health and Ageing, in providing advice to the government, have made some assumptions that are, to say the least, open to serious question.

Catholic Health Australia commissioned research by Access Economics which showed that five times the number of Australians would quit their private health insurance as a result of these changes. Their commissioned research indicated that approximately 100,000, or more, Australians would abandon private health insurance. The CEO, Martin Laverty, told the Senate inquiry that the difference in the results of the Access Economics modelling and the Treasury modelling was due to Treasury assumptions around price elasticity. Catholic Health said:

Treasury is assuming that an income earner on $75,000 a year has the same spending power as an income earner on some $250,000 a year. Treasury has applied a price elasticity formula to someone on $75,000 as it has to someone on $250,000. If you think about that for a moment, it is assuming that, if there is a 10 per cent increase in the cost of private health insurance for someone on $75,000, that would mean an average policy is going to be about $2,000. That would represent 3.4 per cent of the take-home income of someone on $75,000 as opposed to 1.2 per cent of the take-home income of someone on $250,000.

So, clearly, there are major flaws in the Treasury assumptions by which they have arrived at the numbers of people they think will drop private health cover. The CEO of the AHIA, Dr Michael Armitage, told the Senate committee examining these bills that their research indicated that significantly more would abandon their private health insurance as a result of this disastrous policy. Dr Armitage told the committee:

… up to 240,000 Australians are likely to exit their cover as a result of the legislation. This number represents a decline in membership 10 times greater than that projected by the Department of the Treasury. Further, we have calculated that 730,000 Australians are likely to downgrade their level of private hospital cover and an additional 775,000 Australians will exit their general treatment cover for matters such as dentistry as a consequence of the policy.

So this decision to means test the private health insurance rebate, representing as it does a fundamental breach of an undertaking to the Australian people, will have a dramatic effect on premiums and on public hospital waiting lists. Catholic Health Australia estimates this measure would mean another 36,000 people joining public hospital queues. Inevitably, that will mean there will be demands from the states for additional public hospital funding from the Commonwealth in the next Australian healthcare agreements to compensate for the extra pressure that this government, by dint of this disastrous policy, is going to put on the public hospital system.

It is estimated that premiums will increase at a rate of around 10 per cent, or possibly more, per year from 2010-11 rather than the five to six per cent as of now. We have just seen a six-odd per cent increase approved by this government—well, just watch this space: the increases that would result from this policy, were it to be implemented, would all be that much greater. Private health fund Bupa told the Senate committee that premium increases as a result of this policy will affect all holders of private health insurance, not just the so-called ‘higher income earners’ which this government is attacking. Further, Bupa highlights the risk that it is younger people who are expected to downgrade or abandon their cover. The Australian Private Hospitals Association, like others, are concerned about how these changes will undermine the community rating system as those least likely to make a claim drop out of the system. They highlight:

… major changes that undermine the fragile balance of the insured population—

such as these proposed changes to the PHI rebate—

will have severe effects on the capacity of health insurers to continue to pay claims without needing to raise premiums.

The Private Hospitals Association also points out, as have many others, that waiting times for public hospital waiting lists can only go up as a result of the government’s means testing of private health insurance.

And there is a double hit to these individuals and families, of course—not only does the rebate decrease but, if you drop your private health cover, the Medicare levy surcharge increases. So they get you going both ways. It will go up to 1.25 per cent for people on incomes of between $90,000 and $120,000 for singles and $180,000 to $240,000 for couples. Then it rises to 1½ per cent for single people on incomes over $120,000 and families earning over $240,000. ‘Sock it to the’—so-called—‘rich’ has been a Labor mantra from the beginning of the Australian Labor Party’s existence.

There is an overwhelming weight of evidence that this is a deeply flawed policy that will impact on the entire healthcare system in a very damaging and detrimental manner. What we have seen this government progressively do is try and impose means testing on a number of programs as a way of finding savings rather than getting into the business of addressing the core issue of its reckless spending. We have seen the recklessness of that spending on a grand scale with the disaster of the Home Insulation Program.

In relation to private health, they have sought to implement these changes with very little real and well-based analysis of the flow-on effects to all those who are privately insured and the dramatic effects that this will have on the public hospital system of this country. The opposition remains completely opposed to these unjustified policy changes. We condemn Labor for an extraordinary and blatant breach of an election commitment, for which they have given no rationale and no excuse to the Australian people. This is very bad policy. We remain steadfastly opposed to this ideological ALP attack on private health insurance.

As I said at the outset, this is the second time that the Senate has considered this disastrous package of measures. The opposition urges the whole Senate to oppose these bills yet again, despite the fact that that would give the government a second trigger for a double dissolution election. Labor has broken a fundamental promise that it made to the Australian people in a completely unqualified fashion. It is a crusade by the Labor Party to undermine the private health system and, by dint of that action, increase pressure on the public hospital system that is so important to so many Australians. These measures should not be supported. The government should find other ways to reduce the massive debt and deficits that it has created by its reckless spending in office.