Scott Ryan (Victoria, Liberal Party, Parliamentary Secretary to the Minister for Education and Training) Share this | Hansard source

The Tax and Superannuation Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2015 increases the Medicare levy low-income threshold for singles, families and single seniors and pensioners for 2014-15 and future income years in line with movements of the consumer price index. This ensures that low-income households generally do not begin to pay the Medicare levy if their income has increased in line with or by less than the CPI. The low-income thresholds have generally been increased in line with positive movements in the CPI each year since 1996-97. This is not a legislative requirement but a decision taken by government each time the thresholds are increased. The threshold for couple seniors and pensioners is not being increased as the current threshold is already sufficient to ensure that these households will not be liable to pay the Medicare levy when they are otherwise not liable to pay tax. The Medicare levy low-income thresholds ensure that people who paid no personal income tax because of the tax-free threshold and structural offsets, such as the low-income tax offset or the seniors and pensioners tax offset, do not incur the Medicare levy.

As part of the former government's carbon tax compensation package, in 2012-13 the tax-free threshold was substantially increased and the low-income tax offset was reduced. The net impact of these changes significantly increased the income level at which people started paying tax. In keeping with the principle that people who do not otherwise pay income tax should not pay the Medicare levy, the Medicare levy thresholds will also increase by significantly more than the CPI, except for the family threshold which was indexed to the CPI. Last year, only the family threshold was increased. The other thresholds remained higher than they would have been if they had been indexed to the CPI. This year the government has decided to maintain a range of Medicare low-income thresholds to ensure they remain consistent with what they would have been if indexed to CPI from 2011-12.

I will take the opportunity to respond to a number of the issues raised by my colleague Senator Cameron—some of the more political points. Medicare is indeed a very strong system and one that is valued by Australians. Senator Cameron falls for the trap that so many people do when attempting to position people who might have a slightly different view of Medicare priorities by comparing it, once again, to the American health system. The Australian health system has never had and never will have any substantial connection with the American health system. It is indeed something that Australians do not have a huge aspiration for.

Senator Cameron interjecting—

Senator Cameron, I will take your interjection. One of the great challenges of the American health system is the employer based contributions to health insurance. There is indeed an interesting historical legacy to this. Employment based health contributions to the American health system have had a significant impact on the lack of competitiveness of American industry. In a survey done at the start of last decade, just after the turn of the century, I recall seeing that the health obligations for General Motors for their current and former employees—and it was mainly former employees—added $1,000 to the cost of production of a car in the United States. Competitors to General Motors, whether they were imported or whether they were produced by factories that did not have those legacy employment and health issues, did not face that competition. That was a massive competitive barrier that harmed some of the legacy car manufacturers in America and it was common across the older American industries and the older American industrial states.

One of the reasons that employers got into the health insurance industry in the United States flowed from price controls on labour in World War II. It was one of the few ways in which companies could compete for labour. It is a very good example of the unintended consequence of attempted economic regulation. Companies competed for Labor by offering health insurance. Of course, in the United States there is that longstanding inconsistency where a company can purchase health insurance for an employee and that effectively comes out of untaxed income, but an employee who receives that and wants to take care of their own health does not get that tax benefit, which provides a further disincentive to an individual being able to look after their health needs or seek out health needs that are more appropriate to them and places another burden on the corporation.

There are many flaws in the American health system, particularly around access. I think most people would agree with this. One of the great things about Medicare is that it is not like the National Health Service in the UK. The National Health Service in the UK is not something to model a health system on. Firstly, it spends roughly two-thirds of national income that we do on health and gets much worse outcomes. I remember many years ago that, because of the fact that in health, as well as any other area of public policy, you have inertia of funding—funding goes where funding has always gone—if you went into a National Health Service hospital in your senior years you had a much grater risk of not coming out alive compared with that of a hospital outside the NHS. One of reasons was that money kept going to fund hospitals, and they did not have the incentive to set up out-of-hospital care and they did not have the same incentive for home care.

I think one of the great strengths of Medicare has always been its uniquely Australian blend of public and private provision, public and private funding and, effectively, a public and private insurance model. We cannot forget that one of the things that underpins healthcare in Australia—and access for those who do not necessarily have the same means as those of us in this chamber—is that there are substantial numbers of Australians who make significant contributions to their own health care. They are people who do not bulk-bill. They are people who pay private health insurance. They are people who contribute out of their income, where they can afford it. I think that is one of the strengths.

With regard to the cost of insurance, many years ago when the litigation costs rose we saw doctors leave private practice. We had problems with access to certain services, particularly services for women who were pregnant. One of challenges has always been to maintain this public and private balance. Rather than vilify private sources of health funding, rather than attack those who wish to support people who want to invest in their own health care, the idea that we have a private health insurance rebate—which has long been supported by this side of politics and which has been under constant attack from the Labor side of politics—is to support that public and private blend.

I want to take this opportunity to again make a point that is so often forgotten by those opposite: the reason a flat private health insurance rebate of 30 per cent was introduced by the former coalition government—it meant that those on higher incomes got a 30 per cent rebate but so did those on lower incomes—was to not use a tax deductibility approach that has been used in the past. The reason for that was one of equity. The reason for that was that tax deducibility will mean more to people on higher incomes and in higher tax brackets. A flat rebate is worth more to someone on a lower income, in terms of tax and in terms of what comes out of their pocket when they purchase insurance, because the tax deduction would not necessarily be worth it. We all know that when you overlay the purchase of health insurance, it does not reflect income or age. Many, many people who are on low incomes, particularly those on fixed incomes, have long been purchasers of health insurance, and they do it to support access to their doctor of choice. They make a significant contribution to our health system by not joining the queues at public hospitals, because we do not ration by price in Australia. There is no free point-of-entry health service in the world that does not have waiting lists. So people who use their own money and do not join those waiting lists are assisting other people who might not have the means or the ability to purchase private health insurance. They are supporting those people to move faster through the queue.

This government is a strong supporter of Medicare. Medicare and the great success of our health system is the blended public and private provision and the blended sources of public and private funds. It is not the UK National Health Service. What people on the other side of this chamber forget is that the Australian people would never support a national health service. They would never support the approach used in some European nations, which leads to much worse health outcomes, which leads to much longer waiting lists and leads to much less access to health care for all Australian citizens. I commend the bill to the Senate.

Question agreed to

Bill read a second time.