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

I rise to make a contribution in the debate on the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008. Here we have another example of the government’s scattergun approach to reform and legislation since they came to government late last year. The government told us that they would be indulging in evidence based policy.

Kim Carr (Victoria, Australian Labor Party, Minister for Innovation, Industry, Science and Research) Share this | Link to this | Hansard source

Indulging!

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

They told us that that would be the approach that they would be taking. As we have heard a number of times, they have set up in the order of 140 or 150 reviews of policy since they came to government and one of the major reviews that they put in place was the Health and Hospitals Reform Commission. The Health and Hospitals Reform Commission is to inform the government on its approach going forward to health policy. It is also to inform the government on its approach to the renegotiation of the Commonwealth-state health agreements, which is obviously a very important arrangement between the Commonwealth and the states underpinning the funding particularly of our public hospital systems. It sets out the arrangements and responsibilities between the Commonwealth and states with respect to the funding of health between each of the two bodies.

Having established the Health and Hospitals Reform Commission—and that announcement was made in March this year—they have made the change to the Medicare levy surcharge threshold without any reference to that very important body that is informing the government on its approach to health. You would have thought that having established a body that was going to consult around Australia—and I know that the Health and Hospitals Reform Commission has been consulting around the country and the submissions are available to have a look at if the public wish to do so—such a major reform that would have a broad impact on the delivery of health services would have been referred to the Health and Hospitals Reform Commission for an opinion. Yet it was not. So a fundamental change, one that has far-reaching effects, has not been referred to the major body that the government has put in place to look at health reform in the country.

It is not just the opposition that is saying that this is not a reasonable approach, that it is a scattergun approach, that it is not a considered approach in health reform. In fact the ACT government in its submission to the inquiry conducted by the Senate said:

The commonwealth should avoid further ad hoc policy tinkering and cherry picking of isolated reforms in private health insurance.

That is what the ACT government submission to the Senate inquiry said. So it is not just the government saying that this is an ad hoc approach; it is also what is being said by other governments, even those of the same political persuasion as the Labor Party.

Having not referred this to the commission, when the government started to do its costings on the process all the Treasury did was look at how many people they thought might resign or relinquish their membership of private health insurance, and their initial estimate was 485,000 people. During the estimates process when we started to analyse the calculations that the Treasury had made, it became apparent that they had only considered policyholders. They had not considered the entire impact of the measure on the health system and the potential users of the health system. So instead of 485,000 that was the initial forecast provided by the Treasury, once you included dependants into the calculation the number rose significantly—closer to 700,000 people.

There are a range of other estimates from industry that have been submitted to the Senate inquiry and to members on both sides of the chamber as part of the lobbying process this bill has been through to this date. Instead of the 485,000, the estimates from the government are now closer to 700,000. The private health insurance industry estimates something like 617,000 individuals will exit their cover and when you round that up to include dependants it is closer to 900,000 people. So in any person’s language this is going to have a significant impact on the health system in this country, particularly the health insurance sector in this country. And as I will outline as my presentation continues, it will have a significant impact on the delivery of health in this country.

Interestingly, the government’s consultation with respect to this process again was minimal, as we have heard with a range of other measures. They did not consult with state governments, even though state governments fund or half-fund the delivery of health services through the public health system in Australia. There has been no consultation with state governments. But then, that is another concern and I think it provokes the response that we saw from the ACT, where they suggested that the government should avoid this ad hoc policy tinkering approach.

The Labor members will come in here and tell us that this is about giving low-income earners a tax break. They will tell us that there has been no indexation and they will tell us: ‘We are looking after those who need a tax break and we are providing assistance to those people, so we have taken this number of $100,000’. If you earn over $100,000 as a single or $150,000 as a couple, you will be subject to the Medicare levy surcharge. This seems to be a number that the Labor Party have decided upon. It is a threshold that they have applied across a number of measures. What they are saying to people is: ‘If you earn over $100,000 as a single or $150,000 as a couple, you are rich, so you do not deserve to participate in a number of the programs that the government runs.’

There is no justification for this figure. If they are talking about indexation, and that is the intent of the government, then indexation of this measure would have put the threshold at about $75,000 or $76,000. So I do not see how the government can claim that this is an indexation of the threshold. It is basically a decision that the government have made. They have decided on these arbitrary numbers of $100,000 and $150,000 which, if you earn over them, as a single or a couple, you are rich and you do not qualify for the assistance. That is what the Labor Party will tell you when they come in here and make their presentations. But what they do not tell you is what they told the industry before the election.

When Kevin Rudd, the Prime Minister, wrote to the industry before the election, he made a number of promises to them. He said in his letter to them: ‘Labor will maintain the existing framework for regulating private health insurance, including the process for approving premium increases. Zero per cent premium adjustment is not Labor policy. I understand that Nicola Roxon’s office has also confirmed with you that federal Labor has no plans to require private health insurance funds to make equivalent payments to the public hospitals of patients who elect to be treated as private patients.’ He also said: ‘Federal Labor will also maintain lifetime health cover and the Medicare levy surcharge.’ We might revisit that a little bit later on.

It is interesting that Mr Rudd said in his letter that Labor will maintain the existing framework for regulating private health insurance. I think it is reasonable, having received that letter, that the private health insurance industry would have some comfort that there are not going to be major changes to the parameters within which their industry operates—that they can look at setting their premiums appropriately and that they can move forward with the comfort that life will go on essentially as normal—yet obviously that is not the case. I go back to a statement that has often been made to me: do not listen to what Labor say; watch what Labor do. Again, Labor has given the impression that things will remain the same, but obviously in practice that is not the case. We saw it with respect to grocery prices. The Prime Minister led us to believe before the election that he would bring grocery prices down; that has not happened. He led us to believe that he could bring petrol prices down, and that has not happened. He led the health insurance industry to believe that life would be continuing as normal, and of course we now know that will not happen.

I talked earlier of evidence based policy, so let us have a bit of a look at the evidence. I did note that there had been no second-round impacts investigated by the government as part of this process. Yet they have in place, as I have said, the Australian Health and Hospitals Reform Commission, whose task it is to inform the government on changes. We know that the government have not referred this to the Health and Hospitals Reform Commission. When we started to interrogate the government about what this might cost the overall health system, they were not prepared to tell us because they had not done the work. We know this measure is going to have an impact on public hospitals around the country because state governments have told us that it will. Very conveniently, under this new world of cooperative federalism, when it got to appearing before the Senate inquiry, not too many were all that keen to present any hard figures or estimates of what they thought might be going to happen. Apparently they would rather be friends with each other and not let the public know what the impacts of these measures are going to be.

Fortunately, the Tasmanian government, before they had been reminded of their obligations under cooperative federalism, put a line item in their budget papers. That line item relates to public waiting lists. We know that the government has made an election promise to spend $600 million over the cycle to reduce public hospital waiting lists. We welcome that funding. We all know how much stress the public hospital system is under, and we have seen some of that money starting to flow. But, unfortunately, in my home state of Tasmania we have not seen the impact on public hospital waiting lists, quite probably because of the incompetence of the Tasmanian government in managing the hospital system down there.

We see in their projections for waiting lists that their target for 2007-08 was 8,323 and for 2008-09 their target is 8,950. Their explanatory note on why there is this further increase, and why there had been an increase to 8,323 in 2007-08 from 7,119 in 2006-07, says there was a significant increase in the waiting list during 2007-08 in part attributable to the theatre closures at the Royal Hobart Hospital to accommodate building works as well as an increase in demand for elective surgery. I find it amazing that the Tasmanian government make no provision for the fact that they are going to close one of their theatres or try to do something to minimise the impact of that on waiting lists, given that they have made promises to the Tasmanian people to minimise the growth of waiting lists and that they are getting about $8 million from the Commonwealth government to reduce elective surgery waiting lists. But then the note goes on to say, with respect to the increase from 2007-08 to 2008-09, that it is ‘anticipated that demand will further increase as a result of the recent changes in the Medicare levy surcharge threshold which is likely to result in a fall in participation in private health insurance and a consequent increase in the number of patients’. That increase of 627, based on the targets from 2007-08 to 2008-09, is an increase of seven per cent.

If that increase is mirrored around the country then that is going to have a major impact on the delivery of health services through the public health system across the country. There has been debate through the Senate inquiry process as to the quantum, and I will accept that that quantum has varied a bit. But here we have one government who are saying that they expect a seven per cent increase in their public hospital waiting lists as a result of this particular measure that the government is proposing.

But what of the other costs? One thing the government did not talk about, which the inquiry did consider as part of the process, is the increase in premiums and what further impact that may have on people remaining in the system. There seems to be within the reports a consensus that it will be between two and five per cent. But when you add that to what is expected to be the underlying increase—the annual increase that we have come to expect because of health inflation—we are looking at an increase of somewhere between 7½ and 10 per cent in health insurance premiums. Again, that is something that the Australian government has not told the Australian people. We will wait to see what happens with that and we trust that it is not going to have too significant an impact. But it certainly is going to have an impact on the Health and Hospitals Reform Commission process and the Commonwealth-state health agreements going forward.

The Commonwealth expects as part of this process to have a net gain of about $300 million over the next four years. That is what the budget papers tell us. But in the budget papers there is absolutely no allowance for the additional funds that the Commonwealth will have to pay the states to compensate for this measure. When you consider that this measure will take something like $2.7 billion out of the Australian health system based on the government’s proposed savings and the loss to the system of premiums that will be paid, I am sure the states are not going to want to stump up 100 per cent or even be keen to stump up 50 per cent of the increased costs of running hospitals because of a Commonwealth government measure. The states are going to want the Commonwealth to stump up the lot. But even if it is a 50-50 split, if the Commonwealth only stumps up half, that represents a $600 million loss to the Commonwealth government over the forward estimates, based on health insurance industry numbers. So there is going to be a significant cost, and we do not know what all the costs are yet. I think there is great reason for concern about this measure. And it is because of those arguments and those that I am certain my colleagues on this side will quite eloquently put as this debate continues that the opposition will be opposing this measure.

Rachel Siewert (WA, Australian Greens) Share this | Link to this | Hansard source

The Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008 introduces measures that directly and indirectly go to the heart of health policy in this country. The Greens support the intention of this bill, but note that the debate on its impacts has raised critical issues about healthcare provision in Australia. The bill redresses some of the inequity of policies brought in by the Howard government in its ideological efforts to promote and build a private health sector at the expense of public health care.

The ‘stick’ of the Medicare levy surcharge introduced by the previous government in 1997 to encourage middle-income earners to purchase private health insurance is without indexation. This means that it is now capturing people on much lower relative incomes who can less afford private health insurance. The Greens agree that, in the interests of fairness, this issue should be addressed. Raising the threshold, however, has resulted in an outcry from the private health insurance industry, claiming that the sky will fall in, public hospital waiting lists will grow, private health insurance premiums will rise and the Australian health sector will be in chaos. The Greens do not buy all those claims.

This bill has focused attention on the question of private health insurance, the notion of a ‘balanced health sector’ and, importantly, the role of a strong, viable and properly resourced public health system as the best way to provide health care in Australia. This is a key policy concern for the Greens. We believe in a strong public health system. Written submissions and presentations to the Senate Economics Committee inquiry have restored this health debate to centre stage and raised important issues that we believe this place needs to consider.

Raising the thresholds is an equity issue. Firstly, I will look at the thresholds. Yes, the Greens agree that the levy surcharge threshold should reflect the increases in average income over the previous 11 years. Individuals and families on lower incomes should be given a choice about whether to purchase private health insurance or opt for the public health system. They should be able to make the choice based on their own budget and life priorities and not be forced to make a choice between expensive health insurance or a punitive one per cent levy on their limited income. It is fair and equitable to restore the intention of the policy by lifting the threshold on income levels.

Of course, the fairest outcome would be to remove the Medicare levy surcharge altogether so that all Australians had the same choice about private health insurance. However, within the current context, lifting the threshold removes an unfair burden on lower-income Australians. The arguments against this measure have been predominantly from the private health insurance industry—hey, that is no surprise. Their argument is that this will force people into an already struggling public health sector and that the only way to balance the illness burden between public and private health is to continue the carrot-and-stick approach of forcing people into private health insurance.

The Greens have a number of problems with these arguments. As the committee found, there is no conclusive modelling to gauge the impact of these measures on the public health sector and, in fact, the department admitted during the inquiry that they had done no modelling on the impacts on public hospitals. We simply do not know how many people would choose to exit private health insurance. There are Treasury estimates and there are estimates based on modelling commissioned by the private health insurance industry. The figures differ dramatically. In fact, it is a question of duelling models and which one you believe. In evidence to the committee, Professor John Deeble, emeritus fellow of the Australian National University and the father of Medibank, calculates that the overall income impact on the public health system is likely to be an increase of approximately two per cent per annum. Others point out that those most likely to be affected by this measure are the young and healthy, those who are least likely to require hospitalisation. The fact is that it is not possible to accurately estimate the impact because, as Dr Woodroff, President of the Doctors Reform Society, pointed out in his presentation to the committee, the purchase of private health insurance is not an objective, rational or measurable act. It is highly subjective, and research shows that the cost, as a premium or as a tax incentive or disincentive, is rated lower than perceptions of security and safety. This simply means that the removal of the surcharge will have less of an impact on people’s choices about private health insurance than their age, their general health and their perception of risk and security in general and in relation to their health and wellbeing.

This brings me to the principal concern of the Greens about this debate. The Greens have long argued for an end to the Howard government’s massive subsidy to the private health insurance industry. Approximately $3.2 billion is effectively poured straight into insurance industry pockets through this massive subsidy. Imagine what $3.2 billion over 12 years could have done if it had not been directed to the private sector but to the public health sector for public hospitals, nurses, better facilities, health technologies and better preventative and health promotion measures. The substantial changes introduced by the Howard government since 1996 have seen the erosion of funding to the public health sector, with a consequent massive injection of funds into the promotion of private health insurance membership.

It is important to note that it was the Howard government policy narrative that, at the time, linked the decline of private health insurance membership with the burden on the public health system and then made this the central problem for the financial sustainability of the Australian healthcare system. The concept of a ‘balanced healthcare system’ has been accepted as an inarguable given, and yet the evidence suggests that there is in fact no causal link. Dr Amanda Elliot, health policy analyst at the University of New South Wales, points out in her analysis of the changes to the healthcare system under the coalition government that:

By claiming the health care system was, first, in disrepair, and secondly, in disrepair because of the weakening of Medicare through a decline in private health insurance; the Coalition constituted both the problem and the range of possible solutions.

The solutions were, as we know, to build private health insurance membership through a range of measures directing funding to the private health sector. This has diverted resources out of the public health system and worked very effectively to create a powerful and wealthy private health insurance industry. It has not taken pressure off the public health sector. As extensive research illustrates, the consequences of this have been dire for the public health sector. Rather than taking pressure off the public sector, the opposite has occurred, with serious consequences for staff and patients in public hospitals. We know that national hospital data shows that the pressure on public hospitals has not been reduced and that international research shows that there is no link between increased private hospital activity and reduced waiting lists in public hospitals. Indeed, Stephen Duckett finds that the more hospital care is provided by the private sector the longer are the waiting lists for public patients. And let me remind you that Stephen Duckett is no slouch when it comes to health policy. He is an economist who now heads the Queensland Health Reform Team. He was Secretary of the Australian Health Department from 1994 to 1996 and has held leadership positions in the Victorian Health Department, at La Trobe University and as chair of the boards governing the Alfred and the Brotherhood of St Laurence.

The public hospitals desperately need increased resources to provide the best possible care, to attract and retain skilled staff and to improve care and treatment options. In her evidence to the committee inquiry, Professor Leonie Segal had this to say about the impact of the private health insurance rebate:

... if we were not supporting private health insurance and those dollars were available to go into health in other ways, they could be used to increase the Commonwealth contribution to public hospitals by one third.

The Greens could not agree more with Professor Segal’s analysis.

The private health insurance industry makes a further argument that this measure will force them to increase their premiums, because low-claiming members will drop their insurance, leaving a greater proportion of higher-claiming members. They argue that private hospitals will be adversely affected by a reduction in business of between six to eight per cent and may have to close or reduce the services offered. We do acknowledge the concerns voiced by National Seniors in their submission to the committee that older Australians who are able to retain their private health insurance could bear the brunt of rising insurance premiums. If they are forced to drop their insurance, they will join the public hospital waiting lists.

The Greens find Choice’s response to the industry’s claims compelling. The consumer advocacy organisation Choice argues that the removal of the government-imposed ‘incentives’ on people to take up private health insurance membership will shift the onus onto the industry to make their product more attractive to the consumer. That means the industry will operate in a market; the industry will have to come up with its own incentives to attract consumers, rather than operating on government subsidisation, as it has for the past 11 years. No doubt the market will help the industry to keep their premiums as low as possible.

Despite a lack of certainty about the actual impact of these measures, there is no doubt that there is likely to be some increase in public hospital usage. That is of course a matter of great concern to the Greens. The Greens believe that the public health sector should not carry the financial burden of measures which are intended to bring a tax measure into line with the current economic context.

As I have stated earlier and my Greens colleagues have argued in this place for years, the Greens believe that the public health system should be properly funded and that the billions of dollars which have been diverted from it over the past decade or more should be restored. Notwithstanding the fact that we will not achieve that goal here today, we believe that if there is any impact on the public hospital system it should be compensated for by the federal government.

If, as the government claims, this bill is intended to redress an unfair consequence of a Howard government policy on low- and middle-income earners and is not a tax grab, then there is no argument to keep any money raised in consolidated revenue and to not use it to compensate an already struggling system should this measure adversely impact on public hospitals. We therefore seek a commitment from the government that it will address any adverse impacts—that is, that no public hospital will be worse off because of this measure.

In order to determine what impact, if any, this measure will have on the public hospital system, we are introducing an amendment to require a review of any of its impacts to be undertaken. The modelling, as I have said, is inconclusive in predicting both its short- and long-term effects. Close questioning of expert witnesses has failed to provide any substantive data on this question that could resolve this issue now.

We believe it is incumbent on the government to undertake a review of the impact of this bill on the health sector generally, the public and private sectors and not-for-profit hospitals, which could also be affected. The government should ensure that an evaluation is undertaken as part of this legislation. To that end, the Greens will be introducing an amendment that calls for a review of the operation of the act each year for the next three years. This will determine if there is an impact and whether the government needs to compensate the public health system.

In addition to that key concern, the Greens have identified another measure that we believe will improve this bill. The amendment we propose is also consistent with the articulated concerns of the government that brought about the introduction of this bill. The Greens want to ensure that the income threshold level for the levy surcharge is indexed to the consumer price index to ensure that it remains in line with the contemporary economic climate. The Greens will be introducing an amendment to index this measure, which the Howard government failed to do when it introduced it in 1997.

We believe it is up to the government to demonstrate their commitment to a strong public health system and to guarantee to the Australian community that this measure will have positive effects on our public health system, that it will not have negative effects on our public health system and that if there are any negative effects they are compensated for by the government so that no public hospital is worse off.

We do not believe the modelling that the private health insurance industry has put forward, but if it is proven that there is an impact on the public health system we need to address that. The government need to commit to the Australian community that they will ensure that public hospitals and the public health system will be no worse off because of this measure. I see no reason why the government cannot issue that guarantee to the Australian community.

Barnaby Joyce (Queensland, National Party) Share this | Link to this | Hansard source

The Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008 is yet another mechanism in which the Labor Party has got its figures wrong, and the cost to the Australian people will become quite evident if it is to go forward. Insurance starts from a simple premise—that if everybody in the street insures their house and one house burns down then the costs are covered. But if no-one insures their house you either have a total win or a total loss.

This bill is obviously going to push people out of private health insurance. The Treasurer said that that is not a concern because it is only the young and the healthy who will leave. Of course the other side of that argument is that only the old and the infirm will remain behind. As your pool of potential payers to your insurance premium reduces, the cost for those who are left behind has to go up. That is the only way it can work.

If you go through the figures, realising the sorts of people who are going to leave, we are probably looking at in excess of 900,000 people who are now out. That is going to require about another 1,000 beds in the public health system. That is the equivalent of the Royal Children’s Hospital in Victoria or the Brisbane and Women’s Hospital in Queensland.

That would not be a problem if the public health system was screaming along. But the public health system has in many cases come to a screaming halt. It is an absolute basket case. This legislation from the Labor government is going to take people from an asset that is working, the private health system, and move them into an asset that is not. So we will have excess capacity in the private health system and an overburdened public health system.

If the government want to put forward the argument that they think the public health system is working fine, then I welcome the debate on that. We could have a debate on that issue. We could walk up and down the coast of Queensland talking about it. We could go to some interesting towns—Bundaberg would be a good place to go. We could have the debate there; they have some good ideas about the public health system. This is the sort of logic that the Labor Party have.

Let’s look at some of the costings in this bill. If it goes through, the budget papers show that there will be savings from the rebate of $231.6 million in 2008-09 because of the changes to the thresholds. PricewaterhouseCoopers, as an independent auditor, calculated that the number of rebate payments that would be required to achieve that budget estimate is 613,757 rebate payers. That equates to 613,757 financial units, which equates to 908,163 persons, taking into account families and children. That represents 9.7 per cent of the insured population dropping out, which is a very large component. It would make an incredible difference if that portion of your insurance pool all of a sudden removed itself.

In deriving the cost-benefit of the members who potentially will leave private health insurance, they have excluded from the calculations the over-65 private health insurance population—whose claims represent half of all benefit claims. The cost of this cohort of members is around $484 per annum. On this assumption, if we believe the budget papers are correct in asserting $231.6 million in private health insurance rebate outlays, there will be an additional 900,000 people relying on public hospital cover. Let us look at that. That is—what?—Hobart, Canberra and a few other towns thrown in. This is the financial wizardry of the Labor government. Let us go through the costings. The state governments will require an extra $439 million just in 2008-09 to cover the hospital costs of the newly reliant people—that is, 908,000 people by $484. Over four years this would be an extra $1.76 billion, not accounting for health inflation. The Labor government wants to foist that back onto the Australian taxpayer—because that is who will end up paying for it. You go from the people who want to pay it and back to the taxpayers—that is, the people who have to pay it. Then there will be the lag time as they construct the necessary beds. We will have on our hands a complete and utter fiasco. It will be bigger than the public health fiasco we have at the moment.

Let us look at their track record. We are relying on the Labor government—and Labor governments currently administer the state health systems—to oversight this new nirvana of a public health system. I would love to know which state they see as the shining light of the public health system, which model they are going to follow. To their colleagues in which state government are they going to say, ‘Well, yours is the example we want to follow’? Do they want to follow the example of Queensland? Do they want to follow the example of New South Wales? Unfortunately, with increasing regularity there are graphic stories on our televisions at night of ladies having babies in toilets, of people having their child on the road between Rockhampton and Emerald. And there was the Dr Death scandal. The public health system is a sign of absolute incompetence. Why would we take this philosophical approach and put more pressure on a system that is already at breaking point?

The smart money would be on fixing up the system you have and alleviating the pressure on it by encouraging more people into the excess capacity in the private health system. We should do that regardless of philosophies about private or public; we should just work on the philosophy of what is best for the Australian people. What is the appropriate asset to provide the most Australian people with the ability to deal with their health requirements? How do we logically and methodically spread the numbers across the health care assets in our nation? That requires that we do not tear down the impetus for people to enter the private health system and be covered by private health insurance but that we increase the logic for people to be part of that process.

As more people who are ‘young and healthy’—to quote Mr Swan—move out of the private health system, the premiums for those who are left are going to have to go up. They will have to. If the young and healthy are moving out, the old and infirm are obviously staying behind. The old and infirm will make a greater claim than the young and the healthy. Premiums will have to cover that, and to cover that premiums will have to go up. Then we will get to the really cruel part. The cruel part is this. It is those who have a sense of insecurity, more than anything else, who attach themselves to a private health premium. I especially refer to people who in their former lives have been nurses. The thing they want the most is the security that, if they get sick, they will get the best care. They can struggle without a plasma TV. They can live without that. They can be frugal in how they deal with their domestic requirements. But, if you go to the essence of their fear, it is that if they get sick—if something goes wrong—they will not have the capacity, the security blanket, of having appropriate health cover immediately.

For those people who are under stress, this will put their premium up. It will put their premium up when they are already under immense stress. This goes especially for pensioners. Pensioners are doing it so tough, and this will put them under stress. They do not have the extra money to spend. These people are at a time in their life—if they are retired and if they are pensioners—when they do not have the capacity to access an increased income stream. If people are already severely financially constrained and you go to one of their greatest security blankets—that is, their private health insurance—and you put it outside their reach, what message are you sending to them? I know that they are the people who are affected by this. I will not quote them, but I can think of people who have been involved in the public health system and it is funny: nurses in the public health system are the ones with private health insurance. They vote with their wallets. They know what is in store for them otherwise.

Why are we doing that? What is the logic of putting extra pressure where pressure already exists? I do not see anything in this that mitigates it. I do not see the Labor Party even addressing the issue. They have not even considered the issue. They have not thought around the issue. This is another one like the luxury car tax of yesterday and today: it is a philosophical issue—when philosophy stands in proxy for good judgement and proper modelling.

The other thing that disturbs me about this bill is the modelling itself. The modelling talks about savings but it does not talk about the extra costs to the Australian taxpayer in having to build an extra 1,000 public beds. Where is that in your modelling? Or do you think some miraculous occurrence will happen and these beds will just appear? Where is that in what you have delivered to us? Everything that the Labor Party has done lately just shows one side of an equation. I do not know whether it is ineptness, laziness or whether they are trying to be mischievous, but it is completely and utterly shoddy.

I am going through these figures that you have put before us: in 2007-08, 2008-09, no cost; in 2009-10, $195 million; in 2010-11, $235 million; in 2011-12, $230 million. The explanatory memorandum then says:

This measure will also result in a decrease in Government expenditure on the private health insurance rebate. As such, the overall financial impact over the forward estimates is a net saving of approximately $299 million.

Compliance cost impact: Negligible.

When do we start taking you guys seriously? When are we actually going to get something delivered to us in the economics committee which is a true indication of what the cost is to the Australian people? This is bad process—this delivery of half the facts, half the issues. This is taking the Australian people for a ride, believing that you can actually bring it into this chamber—into the Senate of the nation—and think you are going to get away with it. We will hold you to account. I hear what Senator Siewert has said, and I concur with some of what she says—we need to get more detail on the table.

I look forward to asking questions in the committee stage—as we did yesterday. Yesterday was amazing. There were times of incredible silence after questions were asked during the committee stage of the luxury car tax bill. I saw Senator Conroy in quiet moments of prayer every time a question was asked of him, as he went diving through papers trying to find the figures to ascertain the financial impact on Treasury. It will be another case of that today. I forewarn you: once we get to the committee stage there will be some questions asked to make up for the completely vacuous state of the information that you have provided the Australian people through your tabling of figures so far.

I am even interested in how we came up with these arbitrary changes to the levy. Where did these magic numbers come from, where the threshold jumped from $50,000 to $100,000 for individuals and from $100,000 to $150,000 for families? There is a $50,000 jump. Why? Why did we pick $50,000? Why not $25,000, why not $10,000? Where did that number come from? Was that just another miraculous pop-up number? The pop-up numbers of the Labor Party—when things fail, you just make them up! I am happy to forewarn you that there will be questions about that.

The argument is so simple it is a no-brainer. The argument is: if we move people out of the private health system, they end up in the public health system and the public health system does not have the capacity to deal with them. Therefore, they will not be treated properly. Therefore, you take people from a position of protection where they are looked after to a position of exposure. That is an irresponsible thing to do, so you don’t do it. The logic is a no-brainer.

But putting that aside, in your desire to prosecute this argument, what is the information that you have delivered to the Australian people? Have you delivered to the Australian people only half the information? It looks awfully like once more you have. It is yet another example of the Labor Party’s complete lack of detail when it comes to anything pertaining to the finances of this nation. Are you endeavouring at a future stage to deliver to us the figures of how much it is going to cost to build ourselves another couple of major hospitals for these new public beds that will be required? To give you an example, there are about 500 beds in Canberra, which covers about 520,000 people. There are about 550 beds in Hobart, which is for 240,000 people, so you are doing all right. This will be like creating public beds for Hobart and Canberra. Where is that in the budget? How are we going to cover that cost? Who is going to table that for us and how quickly can you cover those costs for these people who are going to end up in the public health system—or do you think we can get away with not covering that cost? Are you going to show to us where the excess capacity currently is for these people? One of the things the nation has got to provide them with is appropriate health cover. Are you going to show us how you are going to do that with the capacity you currently have?

These are the questions that have to be answered. If you cannot answer them, the only right thing for the Senate to do is block this legislation so as to, first and foremost, save the government some money, because as we have already noted there is about $1.7 billion that we will be saving if we block this. So we will help you out. Secondly, we do it to make sure that we deliver to the Australian people the appropriate health care consequent to their needs with the most effective use of the public health asset and the private health asset that are currently at our disposal. I would be suggesting that this would have to be voted down. That would be the only appropriate decision that people can make premised on where the state hospital system is, premised that so far with Labor management under the states the whole thing is a complete and utter fiasco. This would just exacerbate the fiasco that your state colleagues are currently managing. You have not provided us with any mechanism, rhyme or reason for the figures we have before us or any path of progression of how we are going to deal with the thousand beds that will be required.

Sue Boyce (Queensland, Liberal Party) Share this | Link to this | Hansard source

We have in front of us right now a great example of fiscal conservatism meeting Labor ideology head on. What a shemozzle! The coalition very successfully reformed the tax laws in 1997 to provide incentive and choice in the health system. And, most importantly, we have made the health system more sustainable and more available to more Australians. As the shadow minister, Mr Hockey, at the time said:

The coalition is an advocate of choice for Australians.

The Rudd Labor government is not. We believe that as many Australians as possible should be able to have a realistic choice about private health insurance to cover them against unforeseen medical needs. As Senator Joyce pointed out, that is one of the great fears of our elderly in particular.

Today we are debating what I think is probably one of the worst pieces of public policy that the Rudd government has managed to produce in its fairly short, nine-month career. There is no other piece of legislation they have so far attempted to introduce that would have a more detrimental effect on our public health service and no other piece of legislation that will be more inequitable in its effect on health services than this government proposal to significantly increase—double—the threshold for the Medicare levy surcharge.

As far as I am concerned, this bill is blindly driven by ideology. Their view of equity is to make everyone less equal, to destroy choice for as many as possible. In 1997, with private health insurance membership sitting at about 35 per cent of the population, the then Howard government made one of its best long-term decisions: to amend the laws to give incentive to middle-class Australians—all of Australia—to make provision for their own hospital cover. The then government brought in a 30 per cent rebate and a Medicare levy surcharge of 1.5 per cent on income for singles who earned more than $50,000 and families who earned more than $100,000, which was designed to give robustness to the system. That meant that for the very first time there was an incentive for many Australian families to take out private health insurance to cover potential hospital expenses. Coupled with the 30 per cent rebate, it put private health insurance within the reach of millions of Australians and their families.

In fact, the most recent figures that we have from the Private Health Insurance Administration Council show that 9.477 million Australians—nearly 45 per cent of the Australian population—are covered by private health insurance. This ensures that they can get access to quality health care when they most need it, at a reduced cost to the Australian taxpayer. I very strongly believe that this was one of the most important achievements of our government in terms of equity. I believe that it is one area of public policy that the Rudd government will most definitely come to regret as time goes on. By raising the thresholds before the surcharge must be paid, the government is opening up the floodgates to many people to leave the private health insurance system, as Senator Joyce pointed out to us.

In my view, there will be three results from this. It will leave many Australians without private health insurance and without hospital cover at all at the time when they most need those health funds. It will add great pressure to the health funds to spread the loss of revenue that they will suffer, and that will increase premiums to remaining policyholders. It will also force hundreds of thousands of people who no longer have private hospital cover back into the public hospitals at greater expense to the federal and state governments, who will have to pick up the cost of those now uninsured Australians. There will be an inevitable decrease in the membership of the health funds. As Senator Joyce pointed out, it is impossible to get to an accurate figure on this. Certainly one of the first things that came to light was that the Treasury modelling underestimated the numbers that would be involved. But we can assume that we are talking about more than three-quarters of a million people—perhaps a million.

Why would ordinary Australians who earn over $50,000 a year and have relatively good health join a fund unless there is an incentive? Why wouldn’t they pull out of the fund and then, at the expense of the Australian taxpayer, use the public health system? The people who will let their policy lapse are the young and healthy. As Senator Joyce pointed out, the Treasurer, Mr Swan, also made that comment as did the Minister for Health and Ageing, Nicola Roxon. Minister Roxon did not think it was a problem if the young and healthy pulled out of private health insurance. But, of course, it leaves the old and the unhealthy as the only ones who are still covered by health insurance with the inevitable premium rises that this will produce. This is just another example of this government’s ‘empathise and ignore’ policy.

We have a report from Minister Roxon entitled The state of our public hospitals, in which she says:

Our commitment now is to work together to reform Australia’s health and hospital system to meet future challenges – such as our ageing population and the rising burden of chronic disease.

There is no way this government can claim they are not aware of the pressures that are going to develop within the health system. It is just that they are going to let ideology overcome any commonsense, any good public policy, in regard to how you deal with that issue.

The country needs people to make provision for themselves in order to relieve the burden on the public health system. If the young and the healthy let their policies lapse then the health funds will have fewer people amongst which to spread the risk. It is pretty basic economics, as Senator Joyce pointed out to us. The health costs for senior Australians will be borne more and more by the public system and by those senior Australians themselves. Of course the government continues to say, ‘We know it’s tough for senior Australians and we’ll do something about it anytime in the next 12 months or so.’ It is good old empathise and ignore.

There will be an ongoing downward spiral, and the government knows there will be. With fewer and fewer people in the health funds, the state public hospitals will have to find more and more beds for those who do not have private health insurance. The state treasuries know this. It will end up costing hundreds of millions of dollars in extra expenditure, as Senator Joyce explained to us. The equivalent of two major Australian hospitals will be needed straightaway to deal with the extra burden on the public hospital system. The state of our public hospital system in Australia is already at breaking point without the added costs of millions of uninsured Australians needing to use the system.

The Rudd government made a virtue throughout last year of attempting to sound and act like the former Howard government. They tried to make the Australian public think that there was no substantial difference between the coalition and the Labor Party. They kept telling everyone about how fiscally conservative they were. I have some news for the Labor government: fiscal conservatives do not jeopardise the funding of public health for all Australians, fiscal conservatives do not deliberately cause a blow-out in government expenditure by removing incentives from the tax system.

In my state of Queensland, the public hospital system is in a shambles. I was horrified—although, unfortunately, not very surprised—to read in the Sunday Mail a few days ago that the Queensland state government has been fudging the numbers in the public hospital system. There are, according to Queensland Health, 10,234 public hospital beds in Queensland. The only problem with that figure is that 1,370 of those beds—that is, 14 per cent—are not beds at all. It turns out that almost 1,400 ‘things’ that the state government called beds are really chairs, trolleys, cots, stretchers and, in some cases, lounge suites. If the Queensland state government is going to be passing off chairs and lounge suites as beds, the state public hospital system is absolutely in crisis.

We need to do everything we can to relieve the pressure on Australia’s public hospitals, not to make it worse. We need to get as many Australians as possible into health funds. We need to ensure that there is both incentive and affordability about having private health insurance for middle Australia. These are the people who, with incentive and with help, will get into private health funds. As I said, and I think as Senator Joyce has pointed out and as Senator Siewert has alluded to, the state of our public hospitals in Australia is at breaking point. This federal government know it but they do not want to act on that knowledge; they want to continue with their ideological game.

I would like to draw the Senate’s attention to the report—a very lovely glossy report—entitled The state of our public hospitals, published by Minister Roxon in June 2008. As I said, it is a beautiful glossy publication, although the lights are out in half the windows of the public hospital used in the photograph on the cover of this publication. It is a lovely glossy publication, with lots of pictures of happy smiling faces and with lots of happy hospital patients in it. It has lots of charts examining the state of the public hospitals in each state and territory—or what appear to be charts examining the state of the public hospitals. There are lots of ticks and lots of tables. But, when you look at it more closely, all those ticks are not about how good the system is; they are about measuring the system—tick, waiting lists; tick, elective surgery; tick, quality assurance. Yes, the hospitals apparently measured them, so we have lots of nice ticks saying that they are measured, but there is no information in there about what those measurements tell us because the governments would be far too embarrassed for that information to come out. We have to rely on stories in the newspapers.

The Courier-Mail, the major newspaper in Queensland, now has a standard page with the heading ‘The hospitals crisis’. Every day they fill a page with the hospitals crisis in Queensland. It goes on and on. So, whilst we have this beautiful glossy report, it is based on information provided by the state governments. For instance, on page 5 this report tells us that there are 758 public hospitals in Australia with 55,904 available hospital beds. Let us just think about that in terms of the information we have from Queensland. Fourteen per cent of the hospital beds in Queensland are not actually beds. They are chairs, they are lounge suites, they are trolleys and they are stretchers.

Guy Barnett (Tasmania, Liberal Party) Share this | Link to this | Hansard source

That’s disgraceful.

Sue Boyce (Queensland, Liberal Party) Share this | Link to this | Hansard source

It is completely disgraceful, as you say, Senator Barnett. Poor ignorant me: like most ordinary Australians I thought that a bed was something you got to lie down on, but that is not the case within the hospital system in Queensland—and we have exactly the same issue throughout Australia. So it is a beautiful report with lots of ticks, but for what? The report is not worth the glossy paper that it is printed on. The federal government, by their very own admission, have no idea about the true state of Australia’s public hospitals and they have no idea about what impact this measure will have on what is already a dying system. They have no idea about the huge or growing cost of running them, not just to meet the needs that we know about but to meet the needs that this bill will push further into the system. If they do not know how many beds there are in Australia’s hospitals, they are certainly not in a position to financially secure the running costs of the nation’s public hospitals.

I am afraid I do not have Senator Siewert’s faith that, if the public hospital system gets worse—although it is pretty hard to imagine how that might happen—the government would find ways to repair that and to allow for that. I hope that Senator Siewert is right in having faith that the government can do something about the hospital system, but I am afraid I do not share her faith.

By dramatically lifting the Medicare levy surcharge thresholds, as this legislation would, the federal government is forcing the cost of finding even more chairs and trolleys back onto the state governments. As we all know, the state governments, given their record to date, given their history, certainly cannot afford and cannot administer, and cannot hope to cope with, growth in the public hospital system. By increasing the number of patients, the Rudd government is simply blowing out the problem even more.

So this is an issue that will need to be addressed again and again. I think there is a very real chance that, down the track, a future Rudd government or—let us hope, for the sake of the Australian health system—a future coalition government will find that they have no alternative but to adjust the Medicare levy surcharge threshold to put an incentive back into the public policy mix around health and health insurance.

This bill is terrible public policy. I know the Prime Minister, Mr Rudd, is a man who takes a lot of pride in the time he spent as a senior public servant in Queensland—a man who told us that his public policy skills would be an important component of the way he would go about governing this country. You would hope that he would know that, if you have a huge decrease in private health insurance funds, the people who will suffer the most are those who really do need to rely on the public health system.

What we have here is an old ideology, an old class warfare argument, being dressed up as some sort of fiscal conservatism, some sort of responsible government. The Labor Party has always worked against those who had the foresight and the resources to provide for themselves, particularly with regard to private health. The Labor Party has always wanted to drag everyone down to the same, lower level and ensure that as many people as possible are forced into the public hospital system—a hospital system that is collapsing even without these extra people being forced into it. The Labor government cannot get past its welfare mentality and instead reward those who are able to take care of themselves, by assisting them to free up resources within the public system.

This bill needs to be opposed. It has horrendous public policy consequences and they will not be easy to fix. If a dysfunctional system is put under even more pressure, the consequences for ordinary Australians will be particularly dire. Fixing the problem of the number of people who will flee private health funds if this legislation passes will take years and years. It will take years to repair confidence in that sector. It will take years to get private health funds back to a situation where they relieve the pressure on the public system.

The Medicare levy surcharge was a very positive and important reform introduced by the former government in 1997. Future generations of Australians and future Australian governments will very much regret rolling back these reforms. Sick and elderly Australians, and families who have members with chronic disease—the people who apparently do not matter that much to Minister Roxon, to the Treasurer or to Minister Macklin, who has suggested that she will have it all fixed by 2020 for older Australians—are the ones who will end up paying the price as our public hospitals clog up more and more. This is poor policy now and it will be poor policy for generations to come.

Guy Barnett (Tasmania, Liberal Party) Share this | Link to this | Hansard source

I stand in opposition to this bill, the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008, and concur with the statements of Senator Boyce, Senator Joyce, Senator Colbeck and others on this side of the chamber who have expressed extreme concern about the impact of this proposal on, firstly, public hospitals and public hospital waiting lists and, secondly, private health insurance premiums—the upward pressure that this will be putting on premiums across the country. Let us go to the nub of this bill before I look at some of the reports and evidence about its impact and consequences, particularly in my home state of Queensland.

The nub of this amendment bill is that it is underpinned by the ideological antagonism that the Labor Party have for private health insurance. They are fixed in their views and have historically held a position that opposes the benefits of private health insurance. This has been demonstrated by their voting record, their public comments and their policies over decades. The Labor Party are ideologically fixated on this—against private health insurance. On this side of the chamber we believe there is a need for a balance between private and public hospitals, between the private and public health systems. It is very important that we get the balance right. The Medicare levy surcharge—thanks to the former, coalition government led by John Howard—is an excellent initiative in terms of supporting private health insurance. It has delivered the goods in terms of getting that balance right. But now Labor want to try and turn the clock back; that is the impact of this bill. This bill from the Labor government is the thin edge of the wedge, and it should be opposed. It should be strongly opposed because, firstly, it has consequences for waiting lists across the public hospital system throughout the country and, secondly, it has consequences for private health insurance premiums—that is, upward pressure on premiums.

In the lead-up to the federal election, we heard the Rudd Labor government’s views that their policies would put downward pressure on grocery prices, downward pressure on interest rates and downward pressure on fuel prices. But before the election they did not say anything about this policy, which of course is going to put upward pressure on private health insurance premiums. And what have we seen with respect to grocery prices? Up. With respect to petrol prices? Up. Interest rates? Since the election of the Rudd Labor government, they have gone up. That is the nub of this bill; that is the background to it.

Now let us have a look at some of the impacts that this is going to have on Tasmania, my home state, and indeed across the country. Firstly, it is a Rudd Labor government initiative which was announced in the May budget that the threshold for the Medicare levy surcharge paid by those living without private health insurance would be raised from $50,000 to $100,000 for singles and from $100,000 to $150,000 for families. What did the government’s own figures say about the consequences of that in people dropping out of private health insurance? We know that the government’s own figures were that some 400,000 Australians would drop out, but that was a gross underestimation compared to figures from the Australian Medical Association and the Australian Health Insurance Association. The latter estimated a drop in health insurance membership of some 913,000 and an extraordinary premium increase of some 10 per cent. Battling Australians cannot afford that type of increase any day of the week, let alone over a longer period of time.

The AHIA report—a report made to the Senate committee of inquiry looking into this matter; it is a public document, and I commend it to senators and, indeed, to members of the public—says that in my home state of Tasmania these changes will increase the cost burden on the state health system by an additional $56 million, Madam Acting Deputy President Brown. I alert you to that particular report, and I draw your attention to it. I know that as a Tasmanian senator you would have an interest in it. The report also says that there will be an expected 627 extra Tasmanians on the public hospital waiting list next year. In their submission to the Senate, the Australian Health Insurance Association say that the changes will have a likely total additional cost impact on the public hospital system across the country of $2.6 billion over five years, with the Tasmanian health system to bear the brunt of the $56 million of this cost that applies to Tasmania. That is what they say in their submission, and it is very disturbing, so why isn’t the government listening? Why isn’t it responding to these concerns that have been expressed—and they are not just concerns; these are legitimate predictions of the impact of federal Labor government policy?

In an interesting twist, the state Labor government predicts a planned increase in the public hospital waiting list from 8,323 this year to 8,950 in 2008-09. So they are predicting an increase in the waiting list. That is in the state government documents—their budget papers. That is what they say—an increase of 627 Tasmanians as a result of federal Labor’s Medicare levy surcharge proposal. That is the impact. In fact, the Tasmanian state budget papers for the year 2008-09 attribute the increase in public hospital waiting lists directly to the proposed Medicare levy surcharge threshold changes. I quote from the state government budget papers:

It is anticipated demand will further increase … which is likely to result in a fall in participation in private health insurance and a consequent increase in the number of public patients.

Goodness! That is on the public record; it is in the state government papers. They are saying on the record what the consequences are, and they are very adverse and severe for Tasmania—for the public hospital system and in their impact on private health insurance premiums.

Secondly, in June this year the St.LukesHealth insurance organisation, headed by Colleen McGann—and I want to commend Colleen McGann for her leadership and the board of St.LukesHealth for standing up not only for their members but for Tasmania; I alert Tasmanian senators across the chamber to their views—estimated that the Launceston General Hospital could face up to an additional 10,000 patients under the new changes, with similar pressures to affect other Tasmanian hospitals. On a population share basis—and these predictions are very concerning—up to 50,000 Tasmanians could transfer to the public hospital system. Hospital waiting lists have grown almost 50 per cent since Labor took office in Tasmania some 10 years ago. That is why Will Hodgman and the state Liberals have it right when they call to account the performance of the Bartlett Labor government and the Minister for Health and Human Services, Lara Giddings, for, indeed, their lack of performance in this regard—for the lack of ability to stand up to federal Labor and say, ‘This is wrong; this is against Tasmania’s best interests.’

Tasmania has the poorest hospital indicators of any state in the country. This is a disgraceful performance that we have in Tasmania, particularly in waiting times for elective surgery. The report referred to by Senator Boyce, The state of our public hospitals, certainly refers to some of the indicators but not to very many of the key performance indicators. It should. But certainly that document highlights Tasmania’s performance, and it is not good. So Minister Lara Giddings needs either to get on a plane, get up here to Canberra and express her views or to express them in some other way to her federal Labor colleagues. Indeed, Minister Giddings wasted the opportunity to go into bat for Tasmania when she refused to speak out against her federal Labor colleagues on the negative effects that these changes would have on Tasmania.

Indeed, the federal member for Bass, Ms Jodie Campbell, has refused to speak out on this. Why hasn’t she spoken out? She knows the views of St.LukesHealth, which is based in Launceston, that it will put 10,000 extra people onto the public hospital waiting lists. Those are big numbers for Launceston, her local community, but what has she done? She has done nothing to stand up for the people in her local community, and this is what we need in Tasmania. We need representatives in the federal parliament who will stand up for their communities, not let them down and let federal Labor and the federal government roll over them. Of course, people are saying that she is the federal member from Canberra based in Launceston rather than the federal member for Bass and Launceston based there and representing their interests in Canberra. I think she has the shoe on the wrong foot. So it is important for Tasmania, and as I say I commend St.LukesHealth for their efforts and initiatives to show leadership in this area with regard to the adverse consequences.

The changes are being introduced despite a lack of any consultation with any state health minister. Even Western Australian Minister for Health Jim McGinty admitted it would put real pressure on elective surgery and emergency departments. He has said that on the public record. In fact, Ms Giddings refused to even acknowledge an invitation to appear before the Senate Standing Committee on Economics, which was due to take—

Debate interrupted.