Yvette D'Ath (Petrie, Australian Labor Party) Share this | Hansard source

I rise in support of the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008. In supporting this bill, I do not question the merits of the Medicare levy surcharge, but I certainly do not agree with the member for North Sydney’s comment that this is a strong incentive. What this bill seeks to do is to bring equity back into the system. The Medicare levy surcharge is levied on Australian taxpayers who do not have private health cover and who earn above a certain income. The surcharge aims to encourage individuals to take out private hospital cover and, where possible, to use the private health system to reduce the demand on the public health system.

The surcharge is calculated at one per cent of taxable income. This is in addition to the Medicare levy of 1½ per cent, which is paid by most Australian taxpayers. Currently the threshold is $50,000 for individuals and $100,000 for families. For example, for somebody on $55,000 per annum one per cent equates to $550, and for a couple on $110,000 it equates to $1,100. Although these figures are not insignificant for an individual or a family, realistically, at today’s rates, private health insurance per annum would be greater. This being the case, it is unrealistic to assume that an individual or a family would choose to spend more to obtain private health insurance than they would otherwise pay with the Medicare levy surcharge for no other reason than to avoid paying this surcharge. The more probable situation is that people are choosing to invest in private health for reasons beyond avoiding the Medicare levy surcharge. The Medicare levy surcharge does act as an incentive, but not as the sole incentive, for moving to private health insurance.

Having said this, I say that what the Medicare levy surcharge does is to penalise people who can afford neither private health insurance nor the Medicare levy surcharge. When the Medicare levy surcharge was first introduced, the policy was targeted at high-income earners. At that time, $50,000 was considered a high income for an individual and $100,000 was considered high for a combined income. However, just as the previous government remained stagnant and failed to move over the years, so did the Medicare levy surcharge. It just sat there, not moving. So, despite average weekly earnings having increased by nearly 50 per cent over the period from 1997-98 to 2007-08, the Howard government neglected the Australian people by failing to adjust the threshold on the Medicare levy surcharge. This left low-income individuals and families under ever-increasing pressure—and these are the families who, the previous government claimed, have never been better off. This is just another example of the previous government’s failure to move with the times.

This bill is not about removing the incentive to join private health insurance. This bill is about ensuring that a scheme that was put in place over 10 years ago is adapted to suit changing circumstances. Just as my electorate saw a 21 per cent reduction in bulk-billing rates between 1996 and 2007 due to the neglect by the Howard government of health, the country has unnecessarily paid the cost of an inactive government on this surcharge. This bill seeks to rectify that neglect. It seeks to ensure that the original intent of the surcharge is honoured. When the surcharge was introduced by the previous government, the then Minister for Health and Family Services, Michael Wooldridge, said:

High income earners will be asked to pay a Medicare Levy surcharge if they do not have private health insurance … These are the people who can afford to purchase health insurance …

If the opposition seek to oppose this bill then they are saying that this surcharge is no longer targeted at high-income earners; it is now focused on everyday working families on low and middle incomes who are finding it increasingly tough to balance the rising costs of living. This bill seeks to ensure that those individuals on wages between $50,000 and $100,000 are no longer penalised if they cannot afford private health insurance and those couples on combined incomes under $150,000 are equally not penalised. These figures reflect what this government considers to be the threshold for the means test in many areas of our policies. It is an approach that we believe delivers consistency in our application of those policies. We also believe that these earnings are a more accurate reflection of what are considered high incomes in today’s terms.

On the argument, however, that increasing the threshold for the Medicare levy surcharge will lead to a mass exodus from the private health system, I have already outlined one reason why that argument does not factually stand up. In most cases private health premiums are equal to or greater than the surcharge. In addition, there are still incentives for individuals and families to join private health insurance.

The private health insurance rebate still provides a government rebate of at least 30 per cent on the insurance costs. In addition, Lifetime Health Cover is an initiative that encourages people to join private health insurance by the time they are 31 years of age. To fail to join leads individuals to incur a significant premium that increases with age. It has already been acknowledged by the member for North Sydney that these are significant incentives.

Debate interrupted; adjournment proposed and negatived.

As I was saying, the member for North Sydney has already acknowledged that the 30 per cent rebate and the Lifetime Health Cover are in fact significant incentives. I would suggest these are much greater incentives than the Medicare levy surcharge. On top of these incentives, private health insurers may offer discounts on premiums for people who pay their premiums at least three months in advance, who pay by payroll deduction, who pay by pre-arranged automatic transfer from an account, who have agreed to undertake their health insurance claims by electronic means or who belong to a contribution group under the rules of the insurer; for example, the health insurance product is organised through a workplace or an organisation the person belongs to—although I know that the Howard government tried hard to stop this incentive through workplaces by making it unlawful under Work Choices for employers to enter into arrangements to make contributions to third parties under collective agreements. So it was the opposition when in government who put at risk the ability for discounts to be offered in relation to contribution groups such as workplaces.

These discounts, of course, are all part of competition. At the end of the day, a private health insurer has an obligation to offer a quality package to its potential customers if it wishes to attract business over other private health insurers. This competition is healthy not just for the industry but for the general public to ensure that the community gets the best product for the best price. I note that the member for North Sydney in his comments tonight encouraged private health funds to continue to ensure that they offer their customers good value and to be aware that they can always do better. For all these reasons I submit that there remain many incentives for individuals and families to join private health insurance.

We should not ignore, however, other reasons why people are considering leaving private health insurance, and these have nothing to do with the surcharge. It is the growing gap that people are paying. A couple in my electorate came to me last week about their concerns on this issue. Now both in their 60s, they spoke about how they have been in private health insurance since approximately 1984. Rarely have they claimed on their health insurance. The wife recently had to undergo major dental work due to problems she had with her teeth as a child. Originally this woman was looking at getting a full jaw reconstruction but thankfully that was avoided. What the woman did require was major dental work that cost her $5,000. This was required to be paid up front. The couple’s private health insurance reimbursed $500 of that cost. The woman has now withdrawn the last $3600 from her superannuation to try to cover the cost. Her husband still works two days a week to keep some money coming in.

These are the true disincentives to private health insurance. This is also why there are people in private health insurance now—in Petrie approximately 35 per cent of the electorate are in private health insurance—who, when the time comes for needing health care, still turn to the public health system. This is due in large part to the gap payment required to be made. It cannot be assumed that merely because a family or an individual has been fortunate enough to find sufficient funds to pay for private health insurance they then can afford to use private health when the need arises. This is an area that requires further consideration if we are to avoid people moving away from the private health system.

This bill does not remove the incentive for joining health insurance and any arguments that the opposition seek to rely on in opposing this bill are baseless and, once again, further evidence of how out of touch the opposition are with the community. What this bill does is remove a burden on low- and middle-income families who can afford neither private health insurance nor the Medicare levy surcharge. These people deserve the right to have a public health system that provides a service to them if they choose.

That is why the Rudd Labor government has invested, through the announcements made in the budget, $3.2 billion in national health and a hospitals reform plan to revitalise the public health system. The initial allocation of $10 billion will ensure long-term funding for hospitals, medical technology, research facilities and projects. These include: improving patient care through GP superclinics; fighting preventable diseases, such as those caused by binge drinking among young Australians; a national cancer plan; a fairer Medicare levy surcharge, to be delivered through the passing of this bill; and boosting the health workforce.

This government supports a mixed-use health system, with both public and private sectors working in tandem to meet the health needs of the community. I understand the benefits of this system, because in some situations, even with the best intentions, someone on private health cover may need to use the public health system. That happened with my family, due to the unavailability of a specialist on a Sunday. The private hospital had to transfer my son to the public hospital so he could get treatment for an injury. We must accept that these systems do not work in isolation from each other. This government is about getting the balance right and providing a fair go for all Australians. The balance is between the private and public health systems. We need to support low- and middle-income families and create the right incentives for those who can afford it to join private health insurance. This bill achieves that balance. That is why I commend this bill to the House.

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