Richard Colbeck (Tasmania, Liberal Party, Shadow Parliamentary Secretary for Health) Share this | Link to this | Hansard source

The Senate is considering the Tax Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2008. This bill increases the Medicare levy low-income threshold for individuals and families and the low-income threshold of the Medicare levy surcharge to ensure that low-income individuals and families will continue not to be required to pay the Medicare levy or surcharge. The arrangements to ensure that low-income families are not inadvertently required to pay the Medicare levy, by linking the low-income threshold to the consumer price index, have been in place since the Medicare levy itself was introduced, by the Hawke government, in 1984. The taxable income levels below which no Medicare levy is payable are regularly adjusted to take account of the movements in the CPI. Different low-income thresholds are set for individuals, couples, families and pensioners who are under age pension age.

The bill proposes that the low-income exemption threshold be set at $17,309 for an individual without dependants and whose income does not exceed this amount. The threshold for a pensioner under the age pension age will commence at $22,922. An escalating scale of levels of the low-income threshold will be introduced for families, according to the number of children and/or eligible dependent students in the family unit and according to the level of income. The opposition supports this bill, consistent with the bipartisan approach which has been taken to ensure those on low incomes are not required to pay the full levy.

Jan McLucas (Queensland, Australian Labor Party, Parliamentary Secretary to the Minister for Health and Ageing) Share this | Link to this | Hansard source

I thank Senator Colbeck and other senators for their contribution to the debate on the Tax Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2008. The bill will increase the Medicare levy low-income thresholds for individuals and families in line with increases in the consumer price index. The low-income thresholds and the Medicare levy surcharge provisions will similarly be increased. These changes will ensure that low-income individuals and families will continue to be exempt from the Medicare levy or surcharge. I note that indexation of the Medicare levy has enjoyed bipartisan support for a number of years. The bill will also increase the Medicare levy threshold for pensioners below age pension age to ensure that where these pensioners do not have an income tax liability they will also not have a Medicare levy liability. The amendments will apply to the 2007-08 year of income and later income years. Again, I would like to thank Senator Colbeck for his contribution. I commend the bill to the Senate.

Lyn Allison (Victoria, Australian Democrats) Share this | Link to this | Hansard source

I did intend to speak and I am sorry I did not make it to the chamber in time. I seek leave to have my speech in the second reading debate incorporated in Hansard.

Leave granted.

The speech read as follows—

I rise to speak on the Tax Laws Amendment (Medicare Levy and Medicare Levy surcharge) Bill 2008.

Although this Bill relates strongly to another Bill—the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008, the Senate is not considering them jointly.

The changes in these Bills are intended to make sure that low income individuals are paying the right amount, given their circumstances, when it comes to levies and surcharges.

Since its introduction Medicare has always been part-funded by a Medicare Levy.

And there has always been a low income cut-off threshold below which no levy is payable.

These thresholds have always been regularly adjusted to take into account increases in the CPI. This adjustment has never been contentious and has enjoyed support across the Chamber.

And the Democrats support it again. As we support the proposed increases to the thresholds for the Medicare Surcharge levy.

The Medicare Levy Surcharge was brought in by the Howard Government in 1996. This additional 1% surcharge on taxable income only applies to those people that are classed as ‘high-income’ earners and that do not have private health insurance.

The Howard Government brought this extra tax in as part of its rescue package for the private health insurance industry.

As we all know, when it was first introduced the threshold for the Medicare Levy Surcharge were set at $50 000 for individuals and $100 000 for couples and families.

The current Government is proposing to adjust these thresholds to $100 000 for individuals and $150 000 for couples and families.

This is a notable jump in the threshold values but as they have not moved for 10 years that is to be expected. These thresholds have not changed since they were first introduced. They have been frozen for a decade. When most other similar measures have been adjusted for the changing circumstances, these have stood still.

Indeed if we want to avoid this situation arising again in the future – where more and more people get caught up and have to pay this extra tax until the Government of the day brings in a big change to the thresholds so that they can look magnanimous - then it would be sensible to put in place a system that regularly adjusts the Medicare Levy Surcharge thresholds in line with CPI as we do for the standard Medicare Levy.

The Democrats would welcome amendments to the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008, when it eventually comes before the Senate which do exactly that.

Threshold limits should be set at the right position so that they target the right people and they should be adjusted regularly to take into account changing circumstances.

It is true that the proposed changes to the Medicare Levy Surcharge thresholds have attracted some criticism.

The Private Health Insurance Industry and the AMA have been highly critical of these changes—suggesting that there will be a dramatic reduction in the number of individuals either taking up or maintaining their private health insurance.

In contrast the Australian Private Hospitals Association sees private health insurance membership `growing strongly’ in the next few years.

It is interesting to note that the proposed acquisition by health insurer BUPA Australia of its competitor MBF remains on-track, despite the announced changes to the Medicare Levy Surcharge—suggesting that longer-term damage to private health insurance is not envisaged by all in the sector.

It is possible that some people will make different decisions about private health insurance because of these changes.

But there are still several disincentives to stop individuals from opting out of private health cover or delaying taking out membership of private health insurance.

The Rudd Government has left untouched the Lifetime Health Cover Loading and the 30% private health insurance rebate introduced by the previous Government.

Lifetime Health Cover Loading in particular is a nasty stick that the Howard Government introduced and research has shown that between 42% and 75% of the overall increase in PHI membership that resulted from the Howard Government’s industry rescue package was because of Lifetime Health Cover Loadings.

It has been suggested that if people drop out of private health insurance because of the changes to the thresholds this will put more pressure on our public hospitals.

However, there is little evidence to suggest that these measures take pressure off the public health system.

Research indicates that those people who enrol in private health insurance in response to the so-called incentives that the Howard Government introduced

• the 30% rebate, Lifetime Health Cover Loading and the Medicare Surcharge
• actually behave more like people without private health insurance.

That is, they use public hospitals rather than private ones so that they don’t have to pay the out-of-pocket expenses that they would be subject to if they used their private health insurance.

Also individuals who purchase private health insurance in order to avoid the ‘penalty’ of the MLS tend to be young and healthy and tend to have low rates of hospital use in any case.

The reality is that private health insurance has always been primarily the domain of the wealthier parts of the population.

The increase in the number of people with private health insurance because of the various carrot and stick incentives was mainly in the richest 20%. Among the poorest 40% of the population there was little if any impact on the number of people who could afford PHI—even with the rebate.

And the less well-off continue to stay out of PHI.

If some people exit the private health insurance system because of changes to the Medicare Levy Surcharge thresholds or do not enter it in the first place, this is a better reflection of their attitude to PHI in any case.

The opposition keeps trumpeting that they are advocates for choice for Australians.

If that is true then they would support the changes proposed in these Bills.

Increasing the thresholds for the levies gives more people a real choice about whether they want PHI—about whether they think it is value for money.

Fewer people will be forced into it by penalties.

The Democrats only wish that the Rudd Government had the courage to tackle the other so-called reform measures introduced by the previous Government.

Despite costing billions of dollars every year and almost universal agreement among health experts that the rebate, and indeed private health insurance, is inequitable and inefficient, the Rudd Government seems intent on continuing with the 30% rebate.

And there has been no indication of their intent with regard to the Lifetime Health Cover Loading.

The Democrats have moved amendments in the past to undo both of these measures.

That doesn’t mean the Democrats are opposed to a private health sector.

Private health services are an important part of our system but funding private sector providers directly—rather than going through the inefficient and inequitable private health insurance industry—would still provide support to the private health sector and it would save the administration costs.

It would also give the Government some control over costs—something that private health insurance has not been able to do.

As far back as 2004 the OECD paper examining private health insurance in Australia reported that private funds do not exercise control over the quality, quantity or appropriateness of care provided and private health insurance has led to an overall increase in health utilisation as there are few limits on expenditure growth. This situation has changed very little in subsequent years.

There is a wealth of evidence that demonstrates that the larger the private health sector the higher the overall health costs to the community.

If the Rudd government intends to continue supporting the Howard Government’s private health care liabilities, it has a responsibility to make sure that costs are contained.

It also has a responsibility to limit the use of taxpayer subsidies.

Measures such as the PHI rebate do not improve access to health care—either in the public or private system—they are simply a subsidy for the PHI industry—a subsidy worth billions of dollars every year.

Much of this money does not make it to the private hospitals—which is why a direct subsidy to private hospitals is a more efficient and equitable means of supporting private health care delivery—and would save millions of dollars a year

Private health insurance will continue to play a part in people’s health choices should they wish to pay for it but the Government has a responsibility to ensure that our public system is well funded and accessible by all.

We do not want to go back to a time when people had to have private health insurance to make sure they could get decent services.

Nor do we want to see even greater erosion of the principles that underlie our health system.

Universality of access on the basis of need not ability to pay has been an underlying principle of the National Medicines Policy, the PBS and Medicare since their inception.

Yet the precedent set in this year’s budget for means testing PBS listed items and Medicare benefits raises serious concerns about what direction we may see health care reform take under the Rudd Government.

There are tough questions that need to be addressed about the rationing of health care but these are debates that should be had with the community.

And they should be had out in the open—not introduced by stealth.

If the Rudd Government intends to move away from universality and towards a means tested public health care system, this should be made explicit.

Question agreed to.

Bill read a second time.