House debates

Thursday, 29 May 2008

Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008

Second Reading

1:08 pm

Photo of Gary GrayGary Gray (Brand, Australian Labor Party, Parliamentary Secretary for Regional Development and Northern Australia) Share this | Hansard source

I rise to speak in favour of the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008. Labor has always accepted and supported a balance between public and private when it comes to delivering hospital services, GP services, specialist services and other services. It is a balance that traditionally has cut the cost of health care in our country by delivering excellent health care of a very high quality. Over the years, we have been able to lower the cost and deliver a better service than those generally available in countries to which we like to compare ourselves: the US, the UK and Canada. It is a great achievement. It is an achievement that has been arrived at through a system that blends public and private.

Let me put a bit of history on the record to provide a bit of context. In the early 1980s, Labor was elected to power on a promise to deliver Medicare. It was a promise which Labor delivered because we said we would do it. This is a concept foreign to those opposite, but it is what we do. A system was created that won not only massive support but also, inevitably, the opprobrium, the hatred, of those opposite. At the 1984 federal election, the Liberals opposed Medicare. Andrew Peacock campaigned up and down the country to oppose Medicare, to rub it out. At the 1987 election, the then leader, John Howard, did the same thing: he campaigned up and down the country to get rid of Medicare. At the 1990 election, we were back to Andrew Peacock. He campaigned up and down the country to get rid of Medicare. At the 1993 election, John Hewson campaigned to get rid of Medicare.

Suddenly, by 1996, the new leader of the Liberal Party—that is, the old leader of the Liberal Party—had achieved a status that those opposite have failed to understand. John Howard understood the importance of trial and error learning. By 1996 he made a commitment. Astonishingly for the Liberal Party, they funded radio ads in all markets across our country, telling us that the Liberals in 1996 would support Medicare, telling us that Medicare would not be changed and telling us that the position of the then opposition and the then government on Medicare was identical. Why did he do that? He did that because Medicare was held in high regard by the Australian community and by the OECD. By any international comparison, healthcare delivery costs in Australia were substantially lower than those in other comparable OECD economies—and they were not just lower cost; they were actually a better service.

Policy experts—Professor Deeble and Professor Swerissen—all argued for the integrity of the Medicare system. After 13 years of opposing Medicare in opposition, the then Leader of the Opposition sought to neutralise the issue by saying there was no difference between the then opposition and the government. But he planned to damage Medicare through insurance, through a tax. How? Through the surcharge. Let me explain. The surcharge was put in place to drive people, by tax, into private health insurance. In so doing, he also shifted funding from the public sector into the health insurance sector. It was not about healthcare delivery; it was actually about insurance companies.

Earlier today, we had hours of the parliament’s time taken up while those opposite argued for the big oil companies. Now we see the arguments for the big insurance companies. It is not an argument about health care; it is an argument about the health insurance companies. Let me tell you: they are big enough to look after themselves.

While you are in bed with the insurance companies, look at who else you are in bed with: the AMA. The last time the AMA engaged in political processes in my home state of Western Australia, it was under the guise of Liberals for Forests. They did that in the guise of Liberals for Forests because they did not like the then position of the coalition government. You need to pay more attention to the people you are in bed with: health insurance companies and the AMA. No wonder you all look tired. No wonder you cannot sleep.

This bill has been attacked by those opposite, but it is good public policy. It is policy to remove a tax trap that was catching hundreds of thousands of Australians, particularly many thousands of Australians who did not earn the average wage. We pursue a balance in public policy and health care—a mix between public and private.

Former health minister Michael Wooldridge had some very strong points. On medical research, he is simply outstanding. I believe he also understood when he introduced the surcharge that it should have been indexed to wage movements. But it was not because those opposite saw a cash cow that had to be driven into the hands of the private health insurance companies.

Let me explain how that works. Those opposite talk about a million people being driven into the public hospital system. You know full well that that million people are younger Australians. You know full well that that younger cohort generally has less need for high-cost healthcare measures. Some have specific needs, and they need to be looked after, but in general the younger, healthier cohort does not need the kind of health insurance which is offered at such high cost. So if they make the choice to opt out of that health insurance, they make that choice in an informed and understanding way. The problem with the tax, which those opposite support, is that it drives young people into private health insurance. Of course it will. We on our side of the House have always argued that human behaviours can be changed by tax. We would like them changed for the better. That is why we will introduce legislation and take measures to increase tax on highly alcoholic drinks that are drunk by younger people. Tax drives behaviours.

In this context those opposite want to use tax to drive healthy young people into a product which otherwise they do not need—private health insurance. They want to use healthy young Australians simply as cash cows. There will not be a tsunami of people descending into public hospitals. Those opposite know that. The healthy insured certainly know that because they are the cash cows. They do not use the system that they are being asked or forced to pay for under this ridiculous and punitive tax surcharge. In 1997 when it was introduced it was intended to get high-income earners into private insurance. It was to drive them into private insurance through the surcharge. The choice: insure or pay the tax.

You would have expected it to be indexed. It was not. We propose through this bill to effectively restore the intent that the former government had when it introduced the levy in 1997. So this bill will increase the Medicare levy surcharge thresholds for individuals and families. It will shift the threshold because that is the answer to bracket creep. The Medicare levy surcharge imposes a one per cent increase in Medicare levy liability on certain individuals who do not have appropriate private patient hospital cover. If we do nothing for the 2007-08 income year, individuals with taxable incomes over $50,000 and couples with a combined income of $100,000 may well be liable for that surcharge. Those opposite think that is fair. The government does not.

This bill increases the threshold to $100,000 for singles and $150,000 for couples and families. It is reasonable. It is thoughtful. It is good public policy, and it is a reasonable threshold. The Medicare levy surcharge imposes an additional one per cent Medicare levy on taxpayers who do not have private patient hospital cover. When the Medicare levy surcharge was introduced the policy at the time was targeted at high-income earners. At the time the then health minister, 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 people who can afford to purchase health insurance.

Shortly afterwards, Australians paid hundreds of millions of dollars into private health insurance. The government at that time then launched a massive advertising campaign to back up the stick which it had introduced with advertising. So it was not just a carrot and a stick; it was all stick—a punitive tax measure matched up with a massive barrage of television advertising.

But the income thresholds for the Medicare levy surcharge have not been increased since 1997, and since 1997 of course average weekly earnings have increased significantly. This measure simply increases the thresholds to an income level around that which originally applied in 1997. That is to say, if the original levels had been indexed, it is fair. In his address in reply to the budget the honourable Leader of the Opposition, Dr Nelson, addressed a whole part of his budget speech to the issue of bracket creep. He said:

We know that, as incomes rise over time and workers move into higher tax brackets, the value of today’s tax cuts will be eroded in the future. Economists call it ‘bracket creep’. We call it tax increases on the sly.

Those opposite do not refer to their current measures to keep this tax in place as a ‘tax on the sly’. Of course they do not. They think that it is about standing up for people who need hospital care. It is not. It is standing up for the private health insurers in the same way as those opposite have been standing up for big oil companies.

What the honourable Leader of the Opposition has ignored in this debate is that more and more people on average wages have also been required to pay the Medicare surcharge. Bracket creep has done massive financial damage to Australian families who have been struggling under the burden of higher food prices, higher cost of living and interest rate increases and a former government which did not seem to understand that relieving pressure on the family budget was a reasonable and proper thing to do. To put this into perspective, around eight per cent of single taxpayers are estimated to have exceeded the Medicare levy surcharge threshold in 1997-98 when it was introduced. Under the changes announced in this budget, the proportion will be restored to around 8½ per cent. At the end of the forward estimates a single taxpayer is likely to exceed the new singles threshold in years 3 to 4, which is eight per cent in 1997 and eight per cent in 2008. If we did not act, the proportion would be much closer to 50 per cent. So by acting we make the proportion close to 8½ per cent; by not acting—by doing what those opposite wish us to do—it would be 50 per cent.

The increase in the threshold will help reduce financial pressure on many working families who have previously been subject to the Medicare levy surcharge. And yet we still support the public-private reality and the same relativity that has been established a decade ago.

We often hear that the Liberals are the party of choice. We heard that repeatedly from the previous speaker. I would have thought that the party of choice would support lifting a tax on people who are not high-income earners that is designed to force them into certain behaviour. People on $50,000 a year should have a choice about how they spend their money and not be taxed because of an ideological policy. Those on the government side have been accused of having ideology in this debate. Those opposite have the ideology and the baggage, and simply read from the script prepared by the AMA and the private health insurers. People should have a choice: there should be a choice as to whether they are insured or not and a choice between the insurers that they select. This measure does provide real choice. Taxpayers can choose whether to take out private health insurance without the imposition of higher penalty rates unless they are on high incomes.

The amendments that we propose today will apply to the years 2008 and 2009, and later income years. Full details of the measures are of course contained in the explanatory memorandum. But the detail of the bill is only part of the story. The real story is that those on the government side are acting to restore not just choice to families in Australia but to lift a financial burden from Australian families. Those opposite are acting in the interests of big insurance companies, the AMA and, frankly, themselves. A curious alignment has taken place in this House: after one debate that ran for the better part of four hours, where the interests of big oil companies were put front and centre, the next debate is a debate where those opposite put the interests of big insurance companies. It makes you wonder what will come next. Where stand the rights and interests of ordinary Australians in the face of an opposition that has not just lost its way but also its sense of decency? It is an opposition which does not care about the interests of a viable healthcare system, mixing a balance of public and private, delivering high levels of excellent service and delivering to ordinary Australian families. No, it is a debate which is actually about the interests of big insurers. I commend the bill to the House.


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