Mathias Cormann (WA, Liberal Party, Shadow Parliamentary Secretary for Health Administration) Share this | Link to this | Hansard source

I move:

That the Senate take note of the answer given by the Minister for Human Services (Senator Ludwig) to questions without notice asked by senators Cormann and Boyce today relating to private health insurance.

Australians have been deceived by this government; they have been conned. The 11 million Australians who take additional responsibility for their healthcare needs by taking out private cover have been conned. And I say to those 11 million Australians: you cannot believe a word this government say when they make public policy commitments on private health insurance.

Today we heard Senator Ludwig’s answers, and it was very clear that he had no idea whatsoever as to what the impact of his government’s policy would be on the 11 million Australians taking additional responsibility for their own healthcare needs. He tried to use a figure of 25,000 Australians, and was sneering at me for asking a supplementary question. He said: ‘You didn’t listen to the answer; you just read your supplementary.’ And all he did was read out a pre-prepared question time brief without having any idea what he was advising the Senate about. There are 1.8 million Australians who will face automatic increases in the cost of their private health insurance premiums.

Joe Ludwig (Queensland, Australian Labor Party, Manager of Government Business in the Senate) Share this | Link to this | Hansard source

I said 1.7 million.

Mathias Cormann (WA, Liberal Party, Shadow Parliamentary Secretary for Health Administration) Share this | Link to this | Hansard source

So 1.7 million? I am pleased to hear that the minister is still listening. There are 1.7 million Australians facing an automatic increase in the cost of their private health insurance—up to 42 per cent—as a result of the government’s actions.

Labor has form on this, of course. Labor has been waging an ideological war on Australians with private health insurance for decades. From Whitlam to Hawke to Keating, they have been at it. After the Hawke and Keating governments, the proportion of Australians with private health insurance plummeted from 63 per cent to 30 per cent before the Howard government was able to turn the ship around and restore some balance in our health system. This government, in opposition, said they were going to be different, that they had learnt from their mistakes of the past, they knew that what Whitlam and Hawke and Keating had done to our health system by undermining Australians with private health insurance was the wrong thing to do. They made an absolutely clear and unequivocal commitment that they were going to retain the private health insurance rebate. They said, ‘We won’t touch it.’

Those of us on this side of the chamber were a bit suspicious as to how genuine that commitment was. We asked questions in the lead-up to the last election. We raised doubts. We were not quite sure that the Labor Party really meant it when they said they would retain the existing private health insurance rebate. Do you know what the then opposition health spokeswoman, Nicola Roxon, said it was? She said it was a Liberal scare campaign. She put out a press release on 26 September 2007 that said:

Federal Labor rejects the Liberal scare campaign around the Private Health Insurance rebates.

The Liberal Party scare campaign this morning reared its head …

On many occasions for many months, Federal Labor has made it crystal clear that we are committed to retaining all of the existing Private Health Insurance rebates…

The now Prime Minister, the then Leader of the Opposition, wrote to the Australian Health Insurance Association. He said:

Both my Shadow Minister for Health, Nicola Roxon, and I have made it clear that we are totally committed to retaining the existing private health insurance rebate.

That was before the election. We asked questions, being suspicious in the context of Peter Garrett’s remarks: ‘Once we get in, we will just change it all.’ We asked questions again and again in estimates. We asked: ‘Are you sure? Are you really committed?’ Leo Shanahan from the Age did some good investigative journalistic work. He wrote an article about Treasury advice recommending to the government that it should scrap the rebate. So questions were asked. And what did the health minister, Nicola Roxon, say only in February this year? She said that the government was firmly committed to retaining the existing private health insurance rebate. Now of course we know that at that time the government was busily working on plans to scrap the rebate.

This is a blatant broken promise that will hurt not only Australians with private health insurance, but all Australians who need timely and affordable access to quality hospital care. By pushing people out of private health insurance, by pushing people into public hospitals that are already overburdened and overstretched, the government is going to make it harder for people who currently have to rely on the public system by forcing them to compete with people who have left their private cover.

The minister today said, ‘Last year you said a million people would leave.’ No, actually Treasury modelling said that 660,000 Australians would leave private health insurance’—and their savings were based on it. He knows that it is much too early to assess the impact. We have not even had one quarter of membership data since the watered down version of their attack last year was implemented. This is a government that has form in its ideological war on private health and people cannot trust a word it is saying on private health insurance. (Time expired)

Carol Brown (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

I want to take a moment to talk about the context in which the budget was framed before I move on to the private health insurance issue. The Rudd Labor government has crafted its second budget, and it contains the building blocks of Australia’s future productivity and prosperity.

Mathias Cormann (WA, Liberal Party, Shadow Parliamentary Secretary for Health Administration) Share this | Link to this | Hansard source

Senator Cormann interjecting—

Carol Brown (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

I listened to you in silence, Senator Cormann. The budget has been designed to support jobs and small businesses by investing in the infrastructure we need for tomorrow. As the Treasurer has reiterated on many occasions, this budget was framed in the most challenging economic conditions since the Great Depression. We have seen the global financial crisis contribute to the write-down of government revenues to the tune of $210 billion. This, of course, has had a major impact on the budget, so the Treasurer has made some tough choices. Those tough choices involve significant savings measures which the government knows may not be very popular. But they are the right choices and they will help us to steer the budget back into surplus in the future. The budget will help deliver growth to Australia so that the economy is ready and in a position to capitalise when the global recession turns around and a recovery takes place.

The changes to private health insurance are about a rebalance so that those who have the greater capacity to pay for their own health insurance do so. It is consistent with the government’s commitment to maintaining the balance between public and private health systems that high-income earners will receive less in government payments for their private health insurance but will face an increase in cost should they opt out of their health cover. From 1 July 2010, the government will introduce three new private health insurance tiers so that the higher income earners receive less carrot and more stick to be insured. All income thresholds will continue to remain indexed to wages, keeping these changes fair and sustainable into the future. These changes will affect around 10 per cent of Australian adults. For low- and middle-income earners, the existing 30, 35 and 40 per cent private health insurance rebates will remain in place.

I would like to take a moment to repeat some of the comments made yesterday by the Minister for Health and Ageing, Nicola Roxon. She said:

We are maintaining a very hefty public supplement for those people who take out private health insurance, but what we have done is said that those who are high-income earners should pull their weight a little bit more. So it is basically what it is all about and, as you have heard, the Treasurer and the Prime Minister have been discussing this across the board not just for private health insurance. We think that people who are earning higher incomes should have private health insurance. We do not think the taxpayer should pay even more for their rebate than they pay for lower income earners.

She also went on to discuss the projections. She is on record as saying that the projection for the number of people that will pull out is very small. It is about 25,000 people. When you have nearly 10 million people insured, that is a tiny number—and you have to remember that the industry, when we made the small changes to the surcharge last year, were out speculating that hundreds of thousands, if not millions, of people would pull out of private health insurance. Those opposite were also, of course, a part of that dishonest scare campaign about those changes made last year, saying out there in the community that hundreds of thousands of people would pull out.

What we have seen is that the rebate, as it currently stands, has become unsustainable. Minister Ludwig said today, in his answers to questions from those opposite, that the policy has been changed because the private health rebate was becoming unsustainable in the budget that has taken a $200 billion hit as a result of the biggest global financial crisis since the Great Depression. The government is making important structural reforms in this area to rebalance support for private health insurance and to put expenditure onto a sustainable footing for the future. (Time expired)

Judith Adams (WA, Liberal Party) Share this | Link to this | Hansard source

I rise to take note of answers given by Senator Ludwig. I would like to bring to the attention of the Senate the decision by the Rudd government to reduce or remove the 30 per cent private health insurance rebate. The idea that singles earning over $74,000 and couples earning over $150,000 will have their 30 per cent rebate reduced or removed is an insult to the Australian people. If you ask any member of the public who is currently earning $74,000 whether they consider themselves to be the wealthy that the Rudd government is targeting, I can assure you that their answer would be a resounding ‘no’. These people are paying mortgages, loans, rates and bills, and they are trying to get ahead in life. Their private health insurance allows them the security of knowing that if they require medical treatment it is available to them. In turn, this frees up the public health system, which is currently struggling to cope with increased waiting lists. Instead, the Rudd government has made the decision to reduce the 30 per cent rebate, which I have no doubt will mean that many people will leave the private health system or drop their ancillary cover. This is a very important issue and I will speak about it later.

In the budget papers, section 2, ‘Department outcomes, program 9.1, key performance indicators’ at page 256 states that the number of people currently covered by private health insurance hospital treatment cover will be maintained at 9.7 million. This target has been set for three years of the budget up until 2012-13. I would ask how a target set at 9.7 million will remain the same for three years. What this means is that the government has decided that the number of people who have private health insurance will not increase; it will remain the same. If these targets forecast by the government are maintained, and private health insurance membership does not increase over 9.7 million, then the proportion of the population insured will decline to 41.7 per cent. Compare this to the current trend in private health insurance membership of the last two years. If this were to continue, the proportion of the population with hospital cover would increase to 50.2 per cent. The difference in the proportion of the population forecast by the government to be covered by hospital insurance against current trends in 2012-13 will be almost 1.8 million people. To put this into perspective, Western Australia has a population of two million and if the whole of Western Australia had to rely on the public health system, there would be a meltdown. The system is not coping at the moment and it certainly could not cope with this extra group of people.

The projected cost of these 1.8 million people—the same amount that would be expended in the private hospital sector if these people were insured—would mean that the public hospital systems would require an additional $4.8 billion over the four-year period from 2009-10 to 2012-13 to cover in-hospital costs. I would like to know where the current government is going to find an extra $4.8 billion. How will Mr Rudd and Mr Swan be able to come up with this extra $4.8 billion to ensure the public health system is able to look after the extra 1.8 million people?

I would now like to speak about the ancillary cover. It is not just our public health system that is at risk; it is also the public dental system. For example, if people were to drop their current ancillary cover, this would mean that their current cover of $3,000 per year would reduce to $2,000 per year, but their health provider would have the same outgoings with a reduced amount of revenue. To cover this, everyone’s premium would have to increase, including for ancillary cover. If the amount for ancillary cover is increased, further people will drop their cover. This would result in a huge drop in the number of people covered. Considering that currently 50 per cent of ancillary cover is dental, if people were to drop their dental cover this would do one thing: it would flood the public dental service, which is already at crisis point.

At present, dental decay is the most common disease in Australia, with 19 million people having existing decayed teeth and 11 million people with newly-decayed teeth each year. If more people were to transfer from the private to the public dental system, we can guess at how these numbers would increase. The drop in dental cover due to the reduction in the rebate currently available to many Australians would drive a stake through the heart of the public dental system. Did Mr Swan or Mr Rudd think about this as they reduced the rebate? I do not think they did. (Time expired)

Don Farrell (SA, Australian Labor Party) Share this | Link to this | Hansard source

I respect Senator Adams’s genuine concerns about the operation of the Australian health system, but I think it is important to point out the circumstances in which the government has found itself in dealing with these issues. As Senator Carol Brown noted, we face the worst financial crisis in this country since the Great Depression. As much as the government would like to do all things for all people, the practical reality of the circumstances in which we find ourselves is that it is simply not going to be possible. The Treasurer pointed out that we have had something like a $20 billion drop in our receipts in the framing of this budget. We know where that is coming from. It is coming from Senator Adams’s home state, it is coming from the mining industry, and businesses generally are finding it far more difficult to operate. That is affecting the amount of money that the government has available to spend on health. As a result of that, we need to rebalance the way in which we provide support for the private health system. In particular, we have to ensure that any changes we make to the system provide for a fairer distribution of benefits. That is really the underpinning basis upon which this government has approached the issue and, in particular, how it looks at the way in which lower income earners are treated through the system.

Senator Adams raised a number of issues about the possibility of people leaving the system as a result of the changes that are being proposed by the government. But we heard all of that last year, when the opposition was opposing the changes the government was then making—

Mathias Cormann (WA, Liberal Party, Shadow Parliamentary Secretary for Health Administration) Share this | Link to this | Hansard source

They were watered down twice—

Don Farrell (SA, Australian Labor Party) Share this | Link to this | Hansard source

We have heard all of these arguments before by the opposition, and to some extent it is simply a case of—

Mathias Cormann (WA, Liberal Party, Shadow Parliamentary Secretary for Health Administration) Share this | Link to this | Hansard source

Treasury modelling!

Don Farrell (SA, Australian Labor Party) Share this | Link to this | Hansard source

I sat and listened to Senator Adams in silence. I would appreciate the same courtesy, Senator Cormann. We have heard all of these arguments before. They did not come to fruition last time. In fact, my understanding is that maybe the change has actually resulted in a slight increase in the number of people taking out private health benefits.

I think there are some important facts that need to be brought to the table in this debate. I have talked about some of the difficult economic circumstances that we find ourselves in. Currently approximately 14 per cent of single taxpayers who have incomes above $74,000 receive about 28 per cent of the total public health insurance rebate paid to singles. Under the new reforms that we are proposing, these single taxpayers will receive about 12 per cent of the total public health rebate paid to singles. Similarly, approximately 12 per cent of couple taxpayers who have incomes above $150,000 currently receive approximately 21 per cent of the total public health insurance rebate paid to couples. Under the new reforms, these couple taxpayers will receive about nine per cent of the total public health rebate paid to couples.

Another important factor in this debate is the Treasury modelling. It estimates that, under the reforms that the government is proposing as part of the current budget, 99.7 per cent of people are expected to remain in private health insurance. So there is almost no change to the system, based on the Treasury modelling that the government has done on this issue. The reason for this is that the higher income earners who receive a lower rebate will face a higher tax penalty avoiding— (Time expired)

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

I would like to take note of answers given by Senator Ludwig during question time, particularly in relation to some further comments he made about the question that I asked him. Senator Ludwig claimed that it was not legitimate to use comments that he had made during a debate around the privatisation of Medibank Private in the current situation, which—using Labor-speak—is not the privatisation of Medibank Private but the turning of Medibank Private into a hollow log for the government. It will still be a for-profit company. It will be owned by the government. It may not be owned by the public as it would be if it were a private company. It will just be paying out to the government.

I mention again the comments made at the time by Senator Ludwig, who said during a discussion about whether Medibank Private should be a private company—that is, a for-profit company—that it stands to reason that if you have to generate a profit that places an additional burden on premiums. That was said by Senator Ludwig in 2006. He wants to obfuscate now and claim that that related only to privatising Medibank Private, not to creating a Medibank Private government owned business enterprise which—guess what?—will pay taxes and distribute dividends. I thought that this would have suggested that the two were not entirely dissimilar. And we are told that Medibank Private is to become a government owned business enterprise in the name of competitive neutrality—that is, that this enterprise will do exactly what private, for-profit insurers in this market are required to do. It will pay taxes and it will distribute dividends. So I am still a little puzzled what the difference in market forces on the premiums of Medibank Private in its new guise might be that would make it any different from any other company in this space or different from a privatised Medibank Private.

Let us look at why the government would not want to turn Medibank Private into a private company. It is about who gets the dividends.

…This is an exercise that has been turned into a fine and high art by the state Labor governments of Australia: ripping the profits out of government owned enterprises to prop up their own inadequate, deficit-ridden economies. Time after time, successful organisations have been ruined, leaving states with energy crises because so much money was ripped out of the electricity providers. States have had water crises because no funds were left in the government owned enterprises to build the infrastructure necessary to maintain population growth.

Now we have another hollow log that the Labor government has created in the name of competitive neutrality so it can rip some of the profits out of Medibank Private, out of the hands of private patients and private medical practitioners in Australia, and stick them in its own little pocket in an attempt to mitigate the worst excesses of the deficit that it has allowed to develop. There is only one reason this has become a government owned enterprise and not a not-for-profit company. We also had Senator Ludwig telling us that only 25,000 people will drop out. This is yet another example of the politics of envy that the government practises. Only 12,000 people lost the baby bonus—the numbers go on and on. The government is cherry picking people who deserve better treatment. (Time expired)

Question agreed to.