Richard Di Natale (Victoria, Australian Greens) Share this | Hansard source

I would like to begin by explaining what this Private Health Insurance Amendment Bill (No. 1) 2014 does. Pausing the income thresholds will mean that more people will be punished for not taking out private health insurance through an increase in the Medicare levy and fewer people will qualify for the private health insurance rebate. It is pretty straight forward: you pause income thresholds; there will be inflation bracket creep; fewer people will qualify for the rebate and more people will be pushed into the higher income bracket, which means that they will be charged an additional Medicare levy.

When we look at the impact of the private health insurance rebate, the Greens believe it is a good thing that there will be a saving of $600 million over the next four years as a result of fewer people qualifying for the health insurance rebate. But when it comes to the additional Medicare levy linked to private health insurance cover, we do not think that is a good thing. Let me explain my reasoning on that issue. Private health insurance should be a choice. It is not the role of government to create incentives and penalties when it comes to whether people take out private health insurance. It should be a choice for them, not a government policy.

I think we forget the history of how we got to this point where we now spend $5 billion of public money on subsidising people who take out private health insurance. It is interesting that we are having a lot of discussion about the historic free-trade agreement with China—and there is another one touted for India. Yet here we have got one of the biggest subsidies paid by the government to an industry that is providing very little benefit when it comes to the alternative of where that money could be spent. The private health insurance industry can set its fees knowing that every time it increases its premiums, it is the taxpayer that underwrites a third of that increase in costs. What a great business. What a terrific business. Every time I increase the cost of my product, I know the government will pay one third of that increase in cost. Terrific business if you can get it.

Let's have a little history lesson here. This was introduced by the Howard government. At the time, I remember that the Labor opposition—I think it was Jenny Macklin—suggested that this was one of the greatest public policy disasters in her memory. Many people on the Labor side indicated that they believed this was a serious mistake, and yet here we are, years on, and John Howard introduced the notion of a rebate and disincentives under the guise of 'taking the pressure off our public hospital system'. We had a big debate. We had the debate for decades: hospital waiting lists, emergency departments, health system under strain—sound familiar? We are there again. At the time, the solution from the Howard government was that we needed to increase the uptake of private health insurance: 'That is the solution to the health crisis that we are facing, to the increases in waiting lists and to the time that people have to spend in emergency departments.'

John Howard introduced a system of measures. The first was Lifetime Health Cover, which basically means: the longer you wait to take out your private health insurance the more you will have to pay for it down the track. That was followed by the 30 per cent private health insurance rebate. It is true: those measures did increase uptake of private health insurance. But, when you look at the main driver for the increase in uptake of private health insurance, it was not the rebate; it was Lifetime Health Cover. You only need to look at the graphs which chart the increase in private health insurance uptake to know that Lifetime Health Cover was the driver. The rebate was a little bonus to people who had already decided that they were going to take up private health insurance.

Here we are, decades down the track, having the same debate that was the genesis for the $5 billion subsidy of the private health insurance industry and nothing has changed. People are still waiting in emergency departments and waiting lists for elective surgery continue to blow out. Where were the purported benefits of this $5 billion subsidy to private health insurance? They have not materialised. Why? There are a number of good reasons for that. The first is that a lot of people just do not use their cover when they need it. People who have private health insurance who end up in emergency departments and then have surgery in public hospitals do not use it. So the taxpayer is paying a third of their premium for a product that they do not use. It makes absolutely no sense.

We know that having a public insurer like Medicare allows us to keep prices down. Private health insurance cannot compete because it does not have the monopoly that Medicare has over what it is prepared to pay for medical services and devices. That is one of the great things about Medicare: we have a monopoly insurer that can set a price. Private health insurers do not do that. It is the doctors in the system who can set the prices for the services that they provide. When you put together the fact that people do not use it and the many things we pay for through private health insurance cover, like some of the extras—gym memberships, the opportunity for people to see complementary health practitioners, and so on—it is no wonder that we have ended up with a situation where we are spending $5 billion and not getting a return for that money. You do not have to take my word for it. Any health economist worth their salt would tell you that, if you want to talk about fixing the health system, you have to start with a massive public subsidy to the private health insurance rebate.

The health economist Terence Cheng at Melbourne university did a study of this and said, basically, if you take the $5 billion that we now have going into private health insurance and invest that in the public health system, you get a dividend of about 2½. Let me give you an example. Dr Cheng says that, if you reduce the subsidy, you will generate a huge reduction for the taxpayer. Regarding direct savings from reducing the subsidy—let's say by 10 per cent, in his words, which is $359 million—if you needed to spend money directly on the health system through the public hospital system, you would spend $144 million. So, instead of spending $359 million in subsidising private health insurance, you could spend $144 million directly through public hospitals. On the whole, savings from reducing spending on rebates outweigh the predicted increase in public hospital costs by a factor of 2.5. So we are blowing good money after bad. There are a number of health economists who have done the same analysis. It makes sense when you understand the way the health system works and when you understand the monopoly that Medicare has as an insurer over the cost of services. It makes sense when you understand that a lot of people do not use their cover, and when they use their cover they use it on a range of benefits that do not add much value to the health system.

If private health insurance were an appropriate vehicle through which to get good value for money and fairness, I would be all for it. I do not have an ideological view that says we should or should not spend money on private health insurance; I just think we want to get value for money out of it, and we are not. We had John Howard, over a decade ago, telling us that the reason to introduce this policy was that we had a public health system under strain and we needed to spend $5 billion of public money on private health insurance to increase private health insurance uptake in order to fix the system, and we are having the same debate here now. In fact, with this policy we are going in the opposite direction, which is why the Greens will support this bill. It is not just an issue of value for money; it is an issue of fairness. Why should every taxpayer in the country have to subsidise the people who take out private health insurance? Why should somebody who makes a decision, based on their level of income, not to take out private health insurance contribute to the private health insurance cover of someone who does?

When we look at people who take out private health insurance cover the data is very clear. People who take out cover, on average, are much wealthier than those who do not. So we also have this massive redistribution of wealth. We have wealth being funnelled away from people on low incomes to people on high incomes to pay for a third of the cost of their premiums. What benefit do we get? We do not get one. If that money was spent directly in the public health system we would get a dividend of 2.5. For every additional $10 that we spent on private health insurance we would get $25 worth of the value out of the public system.

We have got ourselves caught in this idea that increasing private health insurance cover—that is, more people taking out private health insurance—is a de facto indicator of a health system that is functioning well. It is not. Private health insurance should be a choice. Anybody who wants to take out private health insurance cover should be afforded that choice, but it is not the role of government to create a system of incentives and penalties to allow that to happen, because we do not get the value that we would get if that money was spent directly in the public system.

What is worse is that we are now on a path that is taking us towards not just allowing private health insurance to cover services delivered in a hospital but the rollout now of trials that would allow people to use their private health insurance to cover services delivered in primary care—that is, when they go and see a GP. If you have private health insurance cover that might sound like a good thing; if you do not have private health insurance you are part of the 50 per cent of Australians who will be disadvantaged because of the implementation of a two-tiered, American-style health system, where you get one level of care if you can afford it, and another level of care if you cannot.

In closing, if we want to make use of the private sector in health then we should be engaging our private hospitals—there are many of them—directly. We should not use private health insurance as the vehicle for doing that. A government could easily contract a number of services through private hospitals—in fact, it does in many instances. That is the best way of guaranteeing value for money. But, when we are having a debate about the sustainability of the health system, to embark on a course that says the way to fix the problem is with a solution that failed 10 years ago is a mistake. It is ludicrous. It is nonsense thinking.

We should be looking at the $5 billion we now spend subsidising private health insurance cover for those people who decide to take it out and we should recognise that rather than spending our money in an area that fails both the fairness and value-for-money proposition and we should be redirecting that money directly into the public health system and our public hospitals. We know that for $5 billion we can get $10 billion of value. That is the proposition that faces us. It is a proposition that is backed by research.

If we are going to have a meaningful debate here let's not talk about freezing income thresholds. Let's be a little bolder, let's be a little more ambitious, and let's start talking about the sort of value for money we are getting out of this huge subsidy to the private health insurance industry, which knows that every time they decide to put up their premiums every sucker in this place is going to be paying for it. Every person in the country will be underwriting the increased cost of that premium. What a great business that is to be in! Increase your costs and charges and know that the taxpayer is going to be footing a third of the bill. Good work if you can get it!

We have a big choice in this country. The question now is: are we going to tackle the question of what a sustainable and fair health system looks like? If we going to do that we have to take on this inequitable, inefficient, unfair subsidy that delivers very poor value for money for the Australian consumer.