Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

I am pleased to make a contribution to the important issue of the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008. At the outset, it is important to note the underlying strength of Australia’s healthcare system. We do indeed live in a lucky country and it is often easy to forget that and, occasionally, it is easy on this side of the chamber for those of us who are not in government to overlook the strengths of our healthcare system. Australians enjoy ready access to health care that is in most instances of a very high standard. It is of a standard that people around the world would wish to be able to access. Certainly, if you ask many Australians where else in the world they would rather go, they struggle to name somewhere with a comparable standard of health care.

We are not without our problems. We regularly see tragic and terrible stories of a lack of access, of waiting lists, of problems in public hospitals in particular and of unfortunate instances of malpractice. These rightly concern the public, because whilst we have a great system we should always be striving for that great system to be even better—to be a system that the world continues to look to with great envy. And the world does look to the Australian healthcare system with great envy because we have been a nation that, in recent times in particular, has sought to get the balance of how we deliver a world-class health system right.

We deliver it by ensuring that we cater for the mix of needs—that we cater for those who are less fortunate in society and that we have a strong safety net in our healthcare system, as we do in our social welfare system, which ensures ready access to people who could otherwise not afford it. That is the strength of Medicare and of our public hospitals system: being there to support those who otherwise may not be able to access it.

But we also strive to get the balance right here in Australia because we support and have supported and have worked to develop a private system that runs in tandem with and is complementary to the public system of health care. It is a private system that ensures that those who can afford to pay that little bit more not only choose to do so but are encouraged to do so. In doing so, they make a greater contribution towards their own healthcare costs and ease the burden and the requirements on the public healthcare system.

Regrettably, this is a bill that harms that system. This bill hurts the private system and in doing so it hurts the public system. It knocks out of balance what we have sought in Australia to build up over many years—and particularly what the former government sought to build up. Upon coming to office in 1996, the former government recognised that, although Medicare was important and was operating strongly, there was scope to improve both Medicare and, in particular, our private healthcare system. We worked on Medicare through the course of our period in government to improve it by introducing the Medicare safety net as time went on. We ensured, of course, that we were a true and good friend to Medicare and that we supported those who needed support—those who were less fortunate in society and faced higher medical costs.

But we also worked very hard to develop and strengthen the private health insurance industry. We did that through a multifaceted approach. We recognised that there had to be, if you like, carrots and sticks applied to ensure that those who could afford to be in the private healthcare system had every incentive to do so and every support to do so. There was a mix of measures. We introduced the 30 per cent rebate on private health insurance, which has been grasped by many Australians and is seen by so many people as being the difference between keeping private health insurance and not keeping it.

For older Australians in particular—for whom it was a matter of balance, of juggling their budgets, but who held on to their private health insurance because they value the choice of doctor and the safety in the knowledge that they will be able to get a hospital bed or the treatment they seek when required—the 30 per cent rebate has been a critical component in ensuring the right balance between private and public health care in Australia.

We introduced lifetime coverage to ensure that there was an incentive, particularly for younger Australians—people, dare I say it, of my generation—to think about taking out private health insurance earlier in their lives and maintaining it throughout their lives. This was a recognition that a private healthcare system purely made up of older Australians would be an unsustainable private healthcare system. We need the spread of ages encouraged into the marketplace, incentivised into the private healthcare system. Consequently, lifetime coverage does that. It makes younger people think about it, it makes them consider making the choice and it has been one of the three key factors in our success.

The third was the Medicare levy surcharge. The third, if you like, was the stick. We had the carrot. The carrot, of course, was the 30 per cent rebate. We had some practical measures, but we also had a threshold—the Medicare levy surcharge that comes in at a threshold of income. That is important as well. It is important to make sure that we recognise that society says, ‘Actually, just as we have a progressive tax system that recognises that those who earn more contribute more in taxation, those who are a little bit wealthier in society should be encouraged to contribute a bit more towards their healthcare needs, to play a role in supporting the balance, Senator McLucas, of private and public health care.’ And so we had these three pillars. From that, we saw great, strong growth in private health insurance over the years the previous government were in office.

Some 44.6 per cent of the population are covered by private hospital coverage, according to the Private Health Insurance Administration Council. That is nearly 9½ million Australians who are covered and who recognise, through the mix of incentives and encouragements to get people supporting private health care, the need to make that contribution. That is a vast number of Australians who see the need for balance and who are contributing to that balance in our system between private and public treatments.

Along came the budget this year and, out of the blue, as was the case with so many aspects of budget announcements, the government announced that they were going to lift the threshold on the Medicare levy surcharge from $50,000 to $100,000 for singles, and from $100,000 to $150,000 for families. When the government introduced this, did they say that these figures are simply indexed from the time of the introduction of the surcharge? No, they did not. As for many of their budget measures, they plucked the figures and the measure effectively out of thin air. They picked nice, round numbers. That is perhaps the justification they used. They were nice, round numbers, but that is the full extent of their rationale it seems for the figures they chose. Just as the government chose to introduce an increase in the luxury car tax, just as they chose to whack a tax on condensates, just as they chose to means-test solar rebates, all of these measures were plucked out of thin air and were undertaken with zero consultation with industry or the affected parties. All of these measures have a punitive effect on the industries involved and the government just charged ahead without any consideration and without any sound rationale applied to the decisions they made and to the figures in particular that they advocated.

You might think that, because this is a surcharge on the Medicare levy, the government’s move will cost them money. That might be what you think. The government have indeed tried to argue that this is somehow a tax relief measure for families. But, in reality, the government presented their budget figures and claimed it as a saving. They claimed it as a saving because they are budgeting on a whole lot of people not taking out private health insurance and therefore the government not having to part with the 30 per cent rebate for that private health insurance. So they know full well going into this measure that it is going to drive people out of the private health insurance industry and they treat it, therefore, as a savings measure.

Is it a savings measure? Of course it is not a savings measure if you consider the overall net impact on the healthcare system of Australia. It is not a savings measure because it is a cost-shifting measure. It moves costs from the private sector over to the public sector. From the government’s perspective, they are looking at it and saying, ‘It is not a direct cost to us because the states pick up the tab for public hospitals.’ So whilst it may help to prop up a little bit more the budget bottom line and the surplus that Mr Swan, Mr Rudd, Senator Conroy and others like to spend so much time talking about—the surplus that they, of course, inherited from the previous government—it is actually not a saving for the country but in fact a higher cost to the country.

It is a higher cost because Australians will need the same amount of Medicare, the same amount of health treatment and the same number of hospital admissions, but they will be looking through the solely taxpayer funded system of the public health sector to provide it rather than chipping in their bit and going into the private healthcare system. It is broadly recognised that it will cost the states more. Not all of the Labor states had the courage to admit it, but I am pretty sure they all recognise that this is a cost-shifting measure that they will have to recoup. Indeed, the outgoing Western Australian Minister for Health, Mr Jim McGinty—who I am very pleased to see will no longer be the Western Australian Minister for Health, and I note how happy my colleague Senator Cormann is about the change of government in his home state of Western Australia—was at least honest enough as a Labor minister to note:

… the real problem I think for our state hospitals is one of capacity. So even if compensation is paid, will we be able to find the extra operating theatres, the surgeons, the anaesthetists, the nurses, the beds in the state hospital system to be able to accommodate a significant increase in the number of people wanting elective surgery?

That was the hypothetical question he posed. Firstly, even if you accept that compensatory funding will be provided to the states, do they even have the capacity to meet this influx of extra people? Of course, the answer is no, not without massive additional investment in hospital infrastructure and in the healthcare systems of the public sector because, no doubt about it, this will shift large numbers of people into that sector. They do not have the capacity and, of course, they do not have the funding commitments.

My South Australian colleague the shadow minister for health in South Australia and deputy opposition leader, Vickie Chapman, has made strong pleas for our state Labor government in South Australia to have the courage to at least stand up and demand extra funds from the Commonwealth if this measure is to go through. She recognises that it is going to cost more. The fact that the state health minister has failed to secure a guarantee of any financial compensation for the extra burden is something that our state cannot afford to meet—

The lights having gone out in the chamber—

Obviously the Senate cannot afford to meet the power bills at present either.

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

It might be the weather.

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

Certainly the weather in my home state is a little like this at present.

Concetta Fierravanti-Wells (NSW, Liberal Party) Share this | Link to this | Hansard source

The lights are going out in the Senate.

Michael Ronaldson (Victoria, Liberal Party, Shadow Special Minister of State) Share this | Link to this | Hansard source

Throw some light on the subject.

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

I will attempt to—everybody can have a good snooze now that the lights are going out. I will assume that Hansard and everybody else are continuing to work. To our knowledge the government are offering no new funding. They certainly have not budgeted for it. There has been no indication in the new health care agreement that is being negotiated that there will be extra funding.

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

Senator McLucas interjecting—

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

There may be extra funding, but is that extra funding targeted to address the measure, Senator McLucas, that you are introducing in this budget? Will it actually overcome the impact of this measure on the public health system?

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

It will not have an impact.

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

You do not believe it will have an impact? Well, there is the admission from the government: they do not believe that this measure will have any impact at all. I do not know where they think that people who are exiting the private health care system will go. Maybe they are hoping that that they will not seek medical treatment any more. Maybe that is the government’s preferred option—that people will simply stay home and suffer. Frankly, that is not good enough. It is not good enough to hurt one side of the Medicare system—the private side—by stripping people out of it and to not compensate the public side, who will face the increased demand and the increased costs that come with it. For all of the shaking of the head, it defies logic to say that there will not be an impact.

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

There is no evidence to support what you are saying.

Mathias Cormann (WA, Liberal Party) Share this | Link to this | Hansard source

Because you are not looking for it, that is why. You are not looking for it; you are hiding it under the federal-state Labor carpet.

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

It is quite remarkable that the government denies that there will be any impact, that it claims that there is no evidence when it is quite clear and quite logical that people will still seek medical treatment—unless the government is claiming that the only people who will exit the private health industry will be the healthy ones.

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

Probably.

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

Probably, Senator McLucas says: probably only the healthy people will exit the private health insurance industry. We all know what that will then do to private health costs going forward. That will drive private health insurance costs upwards and upwards. That is right: if the healthy people get out, then those left will be those with high costs. Like any insurance, it only works if the cost is spread widely. It only works if you have a broad and critical mass of people to support it, and the government is undermining that broad and critical mass of people with this measure.

Modelling, including that undertaken by Access Economics, PricewaterhouseCoopers and others, shows that anywhere up to one million people will leave the private health insurance industry—one million out of those 9½ million Australians who have private health insurance. They may well be Senator McLucas’s one million fighting fit, probably young, healthy Australians who leave the industry and that just further accentuates, further highlights the pain and damage that this government is causing by this measure.

The government, if it had any credibility with these measures, would at least have undertaken some of their own modelling and some of their own consideration before introducing them. It would have at least consulted with the affected parties. It would have spoken to the private health insurance industry, to the private health hospital sector, to their state government colleagues even, about the ramifications or the implications. But no, like so many budget matters, this one was plucked out of thin air. It is not good enough to make policy like that. It is not good enough to offset the balance of the public health sector and the private health sector. This bill should quite clearly be defeated.

Mathias Cormann (WA, Liberal Party) Share this | Link to this | Hansard source

The Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008 demonstrates the short-sightedness of this new Labor administration. At best, this bill points to a government that does not understand the flow-on implications of its actions. At worst, this is an ideologically driven attack on private health, an ideologically driven attack on those Australians who take additional responsibility for their healthcare needs. It is unbelievable that a federal government would introduce a measure like this without properly assessing the flow-on implications for our health system. The government introduced what they soothingly call a tax relief measure, without conducting any proper assessment of the overall health policy implications. So much for the pre-election rhetoric that Labor would fix the health system, that they would end the blame game, that they were committed to private health, that the buck stopped with the Prime Minister and that we would have a new era of cooperative federalism in health.

If passed in the Senate, this measure will undermine the whole health system. Senators on the other side might think it is only targeted at the private health system, but let us be very clear that this measure will undermine our whole health system. The measures in this bill will end up hurting those Australians who are most likely to need timely access to quality hospital care—all those Australians who make the sacrifice every year to find the funds necessary to pay for their private health insurance so that they can have the peace of mind of having timely access to quality hospital care when they need it and not when the system tells them that they are a high enough priority. They have the private hospital option to complement their public hospital entitlement. Older Australians will find it even harder than it is now to afford private health insurance. Many of them will be forced to join the long queues in our public hospital system, which is already under serious pressure.

This measure demonstrates the clear lack of understanding by the Rudd Labor government of the policy framework that has underpinned the successful efforts over the past decade to restore balance to our health system. To assess the merits of this measure, of course, we will need to separate the government’s spin from the facts, as revealed during the Senate inquiry. The government tells us that this is a measure to provide tax relief to Australians who are doing it tough. If the government takes the view that Australians in those income brackets are doing it tough and deserve tax relief, why is it discriminating against Australians in those same income brackets who are also taking out private health insurance? Why doesn’t it think that Australians who take additional responsibility for their healthcare needs are equally deserving of tax relief?

The government complain that the Medicare levy surcharge thresholds have not been indexed since they were first introduced in 1997. If that is the complaint, why is the government not indexing the thresholds? Why are they doubling the Medicare levy surcharge threshold for singles, with the disastrous consequences that became very obvious during the inquiry? There is absolutely no doubt that, if implemented, this measure will lead to many Australians abandoning private health insurance. Treasury tells us 644,000 people are expected to leave private health insurance, 57,000 of whom are expected to be Australians above the age of 65. Obtaining that information took quite a bit of prodding and inquiring, because to start off with it was 485,000 people, until Treasury finally conceded that they had forgotten to take children into account.

Private health insurance premiums will go up as a result of this measure, if it is implemented. Don’t take my word for it—Professor John Deeble, the father of Medicare, says there will be an additional five per cent increase in private health insurance premiums over and above what the usual increase is already expected to be. Access Economics equally says that there will be at least a five per cent additional increase in private health insurance premiums over and above what the normal expectation would be. They are not the vested interests that the government dismisses. The government says, ‘You can’t really believe what the Australian Health Insurance Association are saying because they have a vested interest.’ Well, here is Professor Deeble saying there will be a five per cent additional increase in private health insurance premiums over and above the normally expected increase.

So what have we got? We have 644,000 to a million Australians expected to leave private health insurance. There will be a five per cent additional increase over and above the normal increase. This will lead to a second, third and fourth wave of people leaving private health insurance. The government, the Treasury and the Department of Health and Ageing were trying to tell us how this would be a one-off shock to the system. Those are the words that were used: ‘This will be a one-off shock to the system.’ But the reality is this: this will be the beginning of a new downward spiral, equivalent to the downward spiral in private health insurance membership that we experienced between 1983 and 1996, when Labor was last in government.

Make no mistake: this will result in additional pressure on public hospitals. There is absolutely no doubt about it. I invite the parliamentary secretary—through you, Madam Acting Deputy President—to have a look at the evidence that the Treasury and the health department gave during the inquiry. They were not prepared to put numbers to it and they were not prepared to quantify it, but they very clearly said, ‘Yes, we do expect that there will be additional pressure on public hospitals.’ So I am quite surprised that the Parliamentary Secretary to the Minister for Health and Ageing would come into this chamber today, interject and say, ‘No, there’s no evidence at all that there will be any additional pressure.’ Every state and territory health minister across Australia has said there would be additional pressure, but of course in this conspiracy of silence, which thankfully came to an end last Saturday, no state or territory administration was prepared to prod too deeply or to commission any independent modelling to properly assess and cost the impact of this measure on their public hospitals. Hopefully, that conspiracy of silence will be coming to an end very soon.

The public health policy objective of any government is to ensure that all Australians can have timely and affordable access to quality hospital care. In Australia we have been seeking to achieve that through a mixed health system, and our health system works best when we have a strong and well-funded public system and a strong and well-supported private health system. That is the way the Australian system, in quite a unique fashion, has been able to get as close as possible to achieving that objective.

The reality is this: in 1996, when we last came to government, private health insurance membership was in absolute freefall. It went down to 30 per cent before we were actually able to turn this around through a range of policy measures. The Australian health system in 1996 was totally out of balance and, through measures like the private health insurance rebate, Lifetime Health Cover and the Medicare levy surcharge, we were able to turn that around. If you look at the evidence given by Mr Kalisch, the Deputy Secretary of the Department of Health and Ageing, you will see that he said that the Medicare levy surcharge when it was introduced in 1997 was not actually all that effective. Well, of course it was not—because, do you know what, as a new measure it was probably pitched at a threshold that was too high to be immediately effective. This was a three-pillar policy where you had Lifetime Health Cover, the private health insurance rebate and the Medicare levy surcharge. Over time all three of them together were able to achieve the significant increase in private health insurance membership that we have experienced over the last 10 or 12 years and which has been able to restore some balance into the Australian health system.

If you actually look at the membership trends over that period then you will see that there was an initial spike in membership of about 13 to 14 per cent, then it started to plateau and it hovered around 43 to 44 per cent over a couple of years and then over the last two or three years it started to increase again. Some 400,000 additional Australians took out private health insurance in the 12 months to the end of June 2008. Why do you think that was? It is because the Medicare levy surcharge at its current thresholds is becoming increasingly effective. At a time when it is becoming increasingly effective, and without any proper assessment of the flow-on consequences for our health system, the government just sort of draws a line in the sand and says: ‘We might have complained that it had not been indexed but let’s not worry about that; let’s just double it. Let’s not worry about what the flow-on consequences to the public health system overall may or may not be.’

What does this measure actually do? What does the government expect to happen? What are the government’s assumptions in all of this? It took quite a bit of work to get that out of Treasury and out of the health department. We now know that the government expects 644,000 people to leave private health insurance. It expects to save $960 million over the forward estimates from not having to pay the private health insurance rebate to those people it expects to leave. The parliamentary secretary earlier was interjecting about how these people will be the young and healthy and there will be hardly any impact on public hospitals because those who are leaving would not be accessing services anyway. But, do you know what: if the government expects to save $960 million because it no longer has to pay the private health insurance rebate—particularly if those people are young people—that $960 million only represents 30 per cent of the total funding of hospital treatment that will be lost to the health system.

Does anybody here expect that demand for hospital treatment is going to reduce over the next couple of years? I do not think so. If $960 million is only 30 per cent of the funding that is lost to the health system to fund hospital treatment then what is the total amount of funding that is going to be lost to the system? It is $3.2 billion. When I brought that up at a committee inquiry the deputy secretary of the health department said, ‘Oh, well, there are the profits of the health funds. They might not spend it all on funding hospital treatment.’ Yes, that is true; they do not. If you had bothered to have a look at the Private Health Insurance Administration Council website—it is a very good website with a lot of facts and figures and industry statistics. The Treasury never even looked at it; the Treasury never consulted with PHIAC—you would have found that only 15 per cent goes into either the cost of administration or a small net surplus to fund future claims.

If we are saying that out of $3.2 billion 15 per cent goes into the cost of administration and a small surplus to cover the cost of future claims then we are talking about more than $2.7 billion being lost to the Australian health system as a result of this measure. And the government is trying to tell us that there will not be an impact on the level of services available to the Australian people. Who is going to fund this? Where is the funding going to come from as we move forward? This is the biggest cost shift from the Commonwealth and the privately insured to the states and territories and to the public hospital system and nobody has done a proper assessment of it. Nobody has done an assessment of how much additional pressure public hospitals will face, nobody has made an assessment of how much it will cost and nobody has put their hand up to say: ‘Okay, we acknowledge that there is going to be an additional cost that you are faced with. We acknowledge that you are going to have some additional pressure in terms of meeting the demands of Australians who need access to quality hospital care. So we will compensate you for it.’

There is a huge politically motivated conspiracy of silence across Australia. It is a case of, ‘I won’t blame you if you don’t blame me; let’s just keep quiet about it.’ If the previous government had introduced a measure like this 12 to 14 months ago, I am pretty sure that all of the state and territory Labor governments would have come together and commissioned some independent research. They would have gone to Access Economics and said, ‘Here’s a public policy measure at the federal level which is going to have an impact on us at the state level. Please tell us how much it is going to cost to deal with the impact of this.’ But what have we had? Just some token resistance at the state level where they say: ‘Oh, well, we think there’s going to be some additional pressure. We don’t really know how much. In the papers they say that 485,000 people will leave private health insurance but they are all young, so it will not be so bad.’

What else do we know? The Treasury in their evidence said to us, ‘We expect to save $960 million because we no longer have to pay private health insurance rebates to those who will leave.’ Is that really true? Because Treasury also tell us that they have not made any assumptions whatsoever when they calculated that figure on whether there is going to be any impact in terms of future health insurance premium increases as a result of this measure. Professor Deeble says that there will be a five per cent increase in premiums, over and above any normal increase, as a result of this measure. The Commonwealth has allocated more than $14 billion over the forward estimates for the private health insurance rebate. A five per cent additional increase is in excess of $700 million. When I asked questions about that of the health department officials they said, ‘No, we haven’t costed that as part of the savings in the budget but we’ve allocated that into the contingency reserve.’ When I asked, ‘So how much have you allocated in the contingency reserve to cater for this?’ they said: ‘We can’t tell you. That’s secret; it is commercial-in-confidence.’

So this $300 million saving over the forward estimates is a fraud; the true cost of this measure has been hidden in the contingency reserve. You tell us that you are going to have a $960 million saving over here offset by a $660 million loss in revenue. So you say, ‘We have a $300 million saving over the forward estimates.’ This is a fraud, because you have hidden the true cost of this measure in the contingency reserve. You know that private health insurance premiums are going to go up as a result of this measure. Professor Deeble says the increase will be five per cent. Access Economics says it will be five per cent. Health funds tell you that it will be up to 10 per cent. Let us be conservative; let us say that there will be a five per cent increase. That means it will cost more than $700 million to actually cope with that additional premium increase that you have not made public in your budget papers.

So where are we now? Is it going to be the young and healthy leaving? If it is the young and healthy leaving does that mean there is not going to be an impact on public hospitals? What does it mean for community rating? The reality is this: the more young people we can attract into the private health system the more affordable it is for everyone and the more affordable it is for older Australians. If you discourage young people from taking out private health insurance you force up premiums for everyone, in particular for those older Australians who need that access so desperately.

The government then tells us, ‘But we have allocated $600 million to an elective surgery reduction strategy package, which was a pre-election promise.’ That was another fraud. Essentially this was a pre-election commitment that was made before the government ever spoke about this particular measure. All of a sudden, as they come under pressure over the impact on public hospitals as a result of this measure, they say, ‘But we have got this $600 million that we are providing to ensure that we reduce elective surgery waiting lists.’ Now, have a look at the fine print to make sure what is actually on the table. If you look at the fine print you will see that there is only $150 million as a one-off payment to fund additional services and to reduce waiting lists. So you hear ‘$600 million package’—a big headline—but only $150 million has actually been committed to fund additional services across Australia. Put that against the $2.7 billion loss in funding for hospital treatment as a result of this, and this is clearly inadequate. The parliamentary secretary is shaking her head but I just find it unbelievable.

Before the election Labor said: ‘We are committed to fixing health. We are committed to ending the blame game. We are committed to working with the states and territories. We are committed to private health,’ but everything they do when they came into government is totally different. If they were committed to cooperative federalism on health, why would they not give to the states and territories access to the modelling they have done on the impact of this measure? Why would they not provide access to that modelling so that the states and territories can make a proper assessment of the impact on them to make sure that they can run their public hospitals in a way that properly caters for the demand that is likely to come their way? I still have not received an answer to this. Not one state and territory government has actually asked for additional funding. How come? Everybody is out there saying, ‘There is all this demand that is coming our way,’ but when I ask questions on notice as to whether any state or territory administration has asked the federal government for some additional funding to compensate for this measure, the answer is, ‘No, not one.’ Not one single one! It is just incredible that we are all saying that there is going to be all this additional demand but we are not going to try to find out how much it is.

This measure is bad news. It will result in hundreds of thousands of Australians leaving private health insurance. It will push up premiums, which will hurt in particular older Australians who are already struggling every year to find the necessary funds to afford their private health insurance. You, as a government, are pushing up the price of premiums for those older Australians. You are forcing them out of health insurance. You are forcing them into those public hospital queues and you are not offering any proper compensation for it. At the first opportunity you had to work with the states and territories to make sure that the flow-on implications of a policy measure at your level were properly catered for at the state and territory level, you failed to do so. As a closing remark, now that we have had a change of government in Western Australia, I would urge the Barnett government to commission a proper assessment of the impact of this measure—to commission a proper analysis of the costs that are likely to come their way as a result of this measure should it pass the Senate—so that they can make an informed claim to the Commonwealth for additional funding. (Time expired)

Doug Cameron (NSW, Australian Labor Party) Share this | Link to this | Hansard source

The Liberals do not change their spots. It is quite clear that on the one hand the argument is for looking after Howard’s battlers but, when they have an opportunity to actually look after ordinary Australians, what do they do? They impose a tax on them—a tax that is actually $586 a year for ordinary Australians. Five hundred and eighty-six dollars is significant tax relief for taxpayers who choose not to join a private health insurance fund. Where is this argument that I have heard for years from the Liberals about choice? There is no real choice for ordinary Australians as to whether they want to access private health insurance. The carrots are far outweighed by the sticks in the legislation, and the biggest stick is the tax imposition on ordinary Australians in this country. Average income earners are bearing a disproportionate amount of the Medicare levy surcharge. It is not equitable. It is not in keeping with the original intent of the policy.

The Liberal Party wants to reduce taxes for the Lamborghini and Maserati drivers of this country but they want to impose an inequitable tax on ordinary Australians. After 11½ years of economic mismanagement by Costello and Howard, many Australians are battling to keep their heads above water. This is a Liberal Party that wants to keep an unjustifiable and unconscionable subsidy for the big end of town. It wants to keep tax breaks for the North West Shelf consortium and to slug ordinary Australians with a Medicare levy surcharge—tax breaks for the rich and powerful and tax penalties for the ordinary worker; that is the reality of the Liberal approach. This is an opposition that masquerades as the defender of the poor and defenceless, when it is doing exactly the opposite with this legislation.

In government, the Liberals presided over massive transfers of wealth from ordinary workers to the corporate sector. The transfer of wealth was squandered on outrageous executive salaries and corporate greed. Productivity fell, manufacturing exports declined, jobs were lost, workers’ rights were stripped and the politics of fear were the politics portrayed by the Howard government. Now we have the politics of fear all over again—the fear that the health industry will be gone, that we will not be able to go to a hospital and that workers will not be able to afford decent health care because of this policy of giving ordinary workers tax relief. It is the politics of fear; it is not based on any evidence that came before the inquiry. No evidence justified what has been put forward here by the Liberal speakers.

It is absolutely essential that this bill is passed in order to provide justice for ordinary Australians. The Medicare levy surcharge is a unique tax, not only in Australian terms but in global terms. It is not the progressive tax that we heard Senator Birmingham talk about when he was lauding progressive taxation. This is what is called a reversionary tax. It hurts people more the more money they earn and it makes a real problem for ordinary Australians who are around that tax threshold area. It is absolutely essential that this tax is a progressive tax and does not act in that reversionary manner.

As we debate the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008, I think it is appropriate to have a look at how the private health industry operates. What we have here is a great defence of the private health insurance industry. Surely the defence should be for ordinary Australians who want decent health services, not the defence of a private health insurance industry, an industry that comes to the Senate inquiry and argues for a massive public subsidy for what is essentially a private business. It is an industry that seems happy to accept massive public funding at the expense of ordinary workers. The private health industry is a complex industry. It is a unique and somewhat bizarre industry, I must say. It is an industry that fails all the tests that the Liberals would apply for market forces. It relies on government support to remain viable and produce ‘profits’.

In 2006, the 30 per cent refund cost taxpayers $980 million. With such a massive public subsidy, the government of the day is entitled to make changes that bring about fairness for taxpayers, something that those on the other side seem to have forgotten about—fairness for ordinary, battling Australian families; fairness for workers who are battling to keep their heads above water; fairness for workers who are battling to pay their bills and their mortgages because of the incapacity of the previous Howard and Costello government to really make a strong economy for this country.

This is an industry that is so complex that it spawned a client industry that relies on the complexity of the health insurance system to establish a business and make profits. Companies like iSelect are doing so well that they can afford to go to the most expensive econometric modellers in the country, on public funds, in a feeble attempt to build a case against reducing taxes for battling Australians. This is a company that relies on taxpayers’ dollars to survive and make a profit, and it has the gall to spend profits arising from taxpayers’ subsidies to deny ordinary Australians a tax break. Despite the best efforts of Access Economics, a report for iSelect was forced to concede:

The complexity of the private health insurance market and the interaction of several different types of subsidies and regulations within health insurance and healthcare delivery make it a challenge for a model to capture the entire spectrum of likely impacts from a Medicare levy surcharge threshold change. In addition, underlying changes to the economy such as income growth and population change add to the complexity.

All these arguments from the other side about the economic models are thrown out by the economic model that has been put forward by Access Economics. Access Economics concede that they cannot model the outcome. How can you model the complexity of human behaviour? That is what you are trying to model here, human behaviour, and economic models cannot do that.

In my view, the model that has been used by Access Economics cannot predict with any accuracy public behaviour and therefore there is no basis to the doom and gloom scenarios espoused by the Liberals, the private health industry and some doctors with vested interests.

There have been many contributions from those opposite, but we did not hear any contributions about the public funds that are being used to subsidise massive bonus payments to the private health insurance industry—bonus payments of over $1 million to privatise the private health insurance industry, picked up by executives in the industry. I take the view that we need to make sure that public funds are not used to line the pockets of health executives in the private health insurance industry.

The fear factor that is being used is that increased surcharges will increase waiting lists in the public hospital system—that there will be a flood of Australians out of the private health system and that that system will collapse. There has been analysis done on this. Professor Stephen Duckett, from the School of Public Health, La Trobe University, says that legislators must be very careful about the rhetoric that the private health system reduces waiting lists. There is much analysis to be done on that. None has been done by those opposite. There was Canadian Health Services Research Foundation analysis done that showed absolutely no evidence that pouring money into the private system reduces waiting lists in the public system. There has also been analysis done by Duckett and Jackson that says that the subsidy cannot be justified on efficiency grounds. They did analysis of the technical efficiency of the public and private health systems, of the allocative efficiency and of the dynamic efficiency, which is how quickly you can respond to change. On the available evidence, it was clear that hospital care in the public sector is at a higher level of technical, allocative and dynamic efficiency than in the private sector. So all of these arguments that if the private sector is diminished then we will have all of these problems are just denying the effectiveness of the public health system in this country.

I would take Professor Deeble’s point of view before any of the arguments that I have heard from the other side today. Professor Deeble has had 51 years of experience in hospital management. He became a PhD 40 years ago. Professor Deeble says that the proportion of people in the public and private sectors has not changed much since the sixties. So all of the funding that the public has put into the private industry has not delivered what you on the other side would wish for. Professor Deeble also argues that the public system gives better access to technology. Where do you go for your heart? You do not roll up to emergency at a private hospital; you go straight to the public system, and that is where you get looked after. Professor Deeble also said that funding in public hospitals has always been tight, but it has got a lot worse over the last 10 years—the last 10 years under Howard and Costello and that lot over there; that is when it got tighter and that is where the problems in the public health system emanate from. They emanate from the cutting back of costs and the privatisation of the public health system by the Liberal Party. In fact, in 2000 the Liberals withdrew $700 million from the public health system.

In his argument, Professor Deeble destroys the assertions being made from across the floor—that is, if you simply put the price up then people will leave. Professor Deeble and others have argued that membership in the private health system is dependent on income, not prices, and that membership has to be looked at in relation to habit, social reasons, risk aversion and preference for private services over public ones. No-one can model them. Neither Access Economics, a state government, nor the Treasury can assess these human foibles. In summary, what Professor Deeble argues is that ignorance, apathy and uncertainty mean that no-one can actually model what is going to happen. I would accept Professor Deeble’s position before I would accept Senator Cormann’s position. Professor Deeble, in his submission to the Senate Standing Committee on Economics inquiry into the bill, states:

• the economic effect of the proposed changes will be to reduce the cost of public hospital care by 40% for single people with incomes between $50,000 and $100,000 per annum, and for families with combined incomes of between $100,000 and $150,000 a year.

Professor Deeble is saying that you can reduce health costs for ordinary Australians—and the Liberals do not want to do it. You would prefer to subsidise the Maserati drivers of Australia than do anything about this. Professor Deeble’s submission goes on to state:

• that will have some effect on the membership of private health insurance and on the private hospitals and doctors that private insurance supports. The shift in membership is most likely to occur amongst younger people whose use of hospital services is lower than the average.
• however the effects will be quite small. Based on hospital usage in the relevant age groups, the number of people covered by private insurance is expected to fall by about 8% but benefits paid would fall by only 3%. Premiums for the remaining members would rise by just over 5%. That would not threaten the viability of private insurance.

So the doom and gloom merchants on the other side, those who would pander to the fear factor, are really not in this debate when you listen to someone who knows what they are talking about. You can only say, ultimately—

Opposition Senators:

Opposition senators interjecting—

Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

Order! Senator Cameron, resume your seat for a moment, please. The level of noise from senators on my left is totally unacceptable. I would like Senator Cameron to make his remaining remarks in comparative silence. Senator Cameron.

Doug Cameron (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Thank you, Madam Acting Deputy President. This is the fear-factor opposition, who have peddled fear for the last 11½ years. They are peddling fear about what is going to happen to an ordinary punter who simply wants to get out of this inequitable levy and who wants to save $500-odd a year. And what do this lot over on the other side do? They argue that the public health system will fall apart and that our whole system will be in desperate need. That is so far from the truth. They need to listen to Professor Deeble, who is the father of Medicare in this country. He knows what he is talking about and understands the issues. He shoots down every one of the opposition’s arguments. You have no modelling that backs up your arguments. You are the fear-factor group. You want to push fear on Australians. Thankfully, the Labor Party are in government and we will not govern in fear. We will govern on facts and we will govern on the basis of what is in the interests of ordinary workers and of our health system in this country.

Debate interrupted.