Joe Ludwig (Queensland, Australian Labor Party, Manager of Government Business in the Senate) Share this | Hansard source

in reply—I thank senators for their contributions and appreciate the opportunity to sum up the debate and respond to the points raised. 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] will amend various acts to give effect to our 2009-10 budget measure to introduce three new private health insurance incentive tiers. They are part of a package with the Fairer Private Health Insurance Incentives Bill 2009 [No. 2]. We believe that these reforms are needed to make the rebate fairer and more sustainable for the future.

These bills were defeated by the Senate at the second reading on 9 September 2009. When defeating these bills last September, the Senate dismissed one of the government’s key measures to deal with the fiscal impact of the global financial crisis. If these bills and associated legislation are defeated again today by the Senate, it will have a $2 billion impact on the budget over the forward estimates. Taking a longer view, Treasury advises that the private health insurance rebate will be the fastest-growing part of our health expenditure over the next 10 years, growing by more than 50 per cent above inflation. If this measure is not passed it will increase health spending by 0.15 per cent of GDP, or around $100 billion, over the period 2049 to 2050.

The Minister for Health and Ageing has announced that in 2010 private health insurance premiums will increase by an average of 5.78 per cent. This is after the government had sought resubmissions that reduced premiums for 8.5 million Australians, or 75 per cent of the people covered by private health insurance. While the government acknowledges that any increase may place pressure on insured people, careful scrutiny of private health insurers’ applications has kept increases to the minimum necessary. This is unlike the opposition’s policy as put forward by the shadow Treasurer at the National Press Club last week where he said that he preferred a pure market and criticised that the minister has the power to set rate increases. The rate rise reflects that in 2008-09 private health insurers paid more than $11 billion in benefits to members—an increase of 10 per cent—compared with the previous year’s $10 billion. Benefits paid to members were around 87 per cent of total premiums paid by members. This increase in benefits is highlighted in the Intergenerational report findings that the private health insurance rebate is going to be the fastest-growing aspect of our health expenditure. Spending on the private health insurance rebate has grown from $2.1 billion in 2000-01, the first full year of operation, to $4.2 billion last financial year. This spending is unsustainable, particularly in light of the global financial crisis and since the 2008-09 budget tax receipts were revised down by around $170 million. This is why the government has reintroduced these bills and is firmly committed to seeking their passage in this form.

The government does not support a mixed model of financing and delivery for health services in Australia and recognises the essential role of the private health sector. However, government support for private health insurance must be directed to those hard-working Australians who need the assistance most, not the high-income earners who clearly do not. Hairdressers, secretaries and taxi drivers will continue to receive benefits, but not the millionaires and politicians who, quite frankly, do not need it. Under the fairer private health insurance budget measure, those who most need the rebate will be completely unaffected and the overwhelming majority of insured Australians will not see any change to their rebate. An estimated 75 per cent of Australians with private hospital cover will be totally unaffected by these changes, but high-income earners who have a greater capacity to contribute to the costs of their health care will no longer have their premiums subsidised by those on much lower incomes.

In designing the reforms a key element has been to ensure Australians maintain a high level of private health insurance membership. Already almost 475,000 more people have taken out private hospital cover since this government was elected. This is not something we want to see reversed. The opposition predictions that previous changes to the Medicare levy surcharge were going to lead to a massive exodus of people from private health cover have been shown to be false. To maintain this high level of insurance we need to use the complementary levers of the Medicare levy surcharge, lifetime health cover and continued support of private health insurance rebates for those who need it. Treasury advises the government that by balancing the measures we can ensure that 99.7 per cent of privately insured Australians keep their cover. Treasury estimates that only 25,000 people will drop out of private health insurance. These Treasury estimates have been supported by the independent Ipsos private health insurance survey where the results show only 15,900 people would drop their hospital cover, based on members’ responses when the package was explained to them.

The Department of Health and Ageing estimates that the small reduction in hospital cover will only result in 8,000 extra admissions to public hospitals over two years. The President of the Australian Medical Association, Dr Andrew Pesce, agreed, saying that their modelling showed that ‘there isn’t going to be a huge dropout at this stage.’ The peak public hospital body, the Australian Healthcare and Hospitals Association, has said that there will be ‘little or no impact on the numbers of people with private health insurance’.

There is one politician on the opposition side in this chamber who has spoken honestly about this legislation: Senator Joyce. He said that the opposition should consider the legislation with ‘an open mind’. He said, ‘If there is a net saving, you would have to positively consider it.’ I call on Senator Joyce and all members of the coalition to look at the evidence of the net saving to budget, to be financially responsible and to support this measure. The ministers for health and finance have written to Senator Joyce offering him evidence and further information if he needs it on how this is a net saving to budget.

In relation to the position of other members of this chamber, I am aware that the Greens have proposed two positions. Their first was that they support the rebate reduction but not the Medicare levy surcharge changes, which is why we are now dealing with these three bills separately and not as a package. The government’s position on this is very clear. These bills need to be agreed to as a package which is how we can ensure that the membership rate of private health insurance will stay high. Ensuring this high level of participation requires increased Medicare levy surcharge rates for higher income earners so that the increased costs of insurance for high-income earners after the reduction in the rebate is balanced by an increase in tax penalties for those high-income earners who drop out of or refuse to take out private health insurance. It is important to note that this measure is not being introduced in isolation. It is just one element of the reforms that the government has been implementing. Since coming to office, the government has been working hard to reform Australia’s health system, including a $64 billion package on health and hospital funding.

I would also like to deal with a number of issues that have been raised by senators during this debate. Senator Fierravanti-Wells—it is fortunate that she is in the chamber today—accused the Prime Minister of misleading the public by saying that the cost of not passing this package is $2 billion over four years, $9 billion over 10 years and $100 billion over 40 years. I can explain this to the Senate. The cost of the program grows over time. All of those figures are correct; they have been verified by Treasury. If the opposition does not pass this package, the cost will continue to go up. Not passing the package will cost the budget $2 billion over the forward estimates, $9 billion over the next 10 years and a whopping $100 billion over the next 40 years. This is why you need to rethink your outright opposition and particularly how it will impact on the nation’s finances.

Senator Siewert raised in her speech a suggestion, and has tabled an amendment, that the total cost of the increase in the surcharge should be devoted to mental health. The government agrees that mental health is a priority and has been increasing funding in this area since coming to office in addition to the 50 per cent increase in the Health and Hospitals Fund. However, I will be clear with the senator that we cannot support her amendment. This measure is part of the budget package; it is not an additional available pool of expenditure. Further, we need to reform our health system in a methodical and strategic way, not on the run.

Senator Bernardi made the bold claim that the Howard government delivered the record high participation rate of private health insurance. I can assure the senator, although I know he is loyal to the Howard government past, that this is not the case. Firstly, rates of private health insurance before the introduction of Medicare were much higher as there was no universal scheme. Secondly, we now have a higher rate of participation than the Howard government did: 0.5 per cent higher than when the previous government left office; almost 475,000 extra people have private hospital cover. And just this morning the shadow health minister said to reporters:

The $1.9 billion in this measure, in this attack by the Rudd government on private health, comes from people dropping out of private health.

This is clearly not correct. It is a concoction by the opposition and typical of their ability to be very liberal with the truth on these bills. As we have said many times before, 99.7 per cent of members are estimated to retain their membership. The savings come from the increase in the surcharge under this bill and the reduction in the rebate under the other bills—certainly not from any dropout beyond 0.3 per cent of members. To continue to reform our health system and to cope with the ageing of the population, we will have to spend smarter, putting the health dollars where they are needed most. These bills will help the government to do just that.

In summing up, by maintaining a carefully designed system of carrots and sticks, the government’s budget measure will have a negligible effect on both premiums and the public hospital system while increasing the sustainability of the rebate and the fairness with which it is applied. With that contribution, I thank all of the speakers in the debate and commend these bills to the Senate.

Question put:

That the amendment (Senator Siewert’s) be agreed to.