Andrew Southcott (Boothby, Liberal Party, Shadow Minister for Employment Participation, Training and Sport) Share this | Hansard source

To begin on Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill (No. 2) 2008, I remind the House that there are now 10.9 million Australians who hold private health insurance. We have 44.7 per cent of the population with private health insurance. It was not always this way. When Labor were last in power, we saw a dramatic decline in the levels of coverage of private health insurance, declining by about two per cent a year. It was approaching the point whereby private health insurance would have been unsustainable. It was a very unstable structure. As each premium rose, there were younger, fitter, healthy people dropping out, which meant that the risk profile of the funds changed. As a consequence there was a vicious cycle whereby people left in the fund were more likely to claim and so it went on.

It was only through taking action that the Howard government was able to stop the decline in private health insurance coverage and to reverse it. This happened principally through three measures: the 30 per cent rebate for private health insurance, which we later increased to 35 per cent for people over 65 and to 40 per cent for people over 70; the Medicare levy surcharge, whereby if people on certain incomes did not have private health insurance they would pay an extra one per cent Medicare levy; and Lifetime Health Cover, which provided that people who did not take out private health insurance over the age of 30 would pay a lifetime additional premium for each year they were out of private health insurance. Those three measures were very important in us now having a very stable and sustainable structure of private health insurance. We have seen the growth of some important groups in private health insurance. In the 12 months to June 2008, 53,513 25- to 29-year-olds took out private health insurance. As most members will know, it is very important that you have a broad representation of the community to have a sustainable structure with private health insurance.

I want to deal with a couple of the arguments the government have presented in favour of this bill. The first one seems to be that this is a tax cut. It is a very unusual tax cut because it saves the government money—$354 million over four years. Most people with any understanding of finance or economics would recognise this for what it is—a tax cut which involves the government giving less to the community over the next four years and adding to the surplus. This is a tax cut which involves the government giving with one hand while taking back with the other. It is the sort of tax cut that the Artful Dodger would be proud of.

Having said that, this is extremely targeted—it only goes to people in a very narrow income band who do not hold private health insurance. When the opposition was in government, we recognised that there were much better ways to target low- and middle-income families and singles. We did it through tax cuts. Look at the tax cuts that were announced almost 12 months ago by the then Treasurer, Peter Costello, and Prime Minister John Howard—tax cuts which were adopted by the then Labor opposition and which came in on 1 July. They were very important for people on average earnings, who got a tax cut of $35 a week, and for average income families, who got a tax cut of about $50 a week. These were very important for what is a very common family structure now: one partner working full-time and one partner working part-time.

This is a tax cut which involves the government building its coffers, so it is not really a tax cut. One of the problems is what the consequences of this poverty decision will be. There are several. The first is that the initial proposal had, on Treasury’s own figures, 644,000 people dropping out of private health insurance. The estimates were that it would principally be young, fit, healthy people dropping out. The argument was that this would not have an impact on public hospitals. But you need to look at the second-round impacts. When younger, fitter and healthier people drop out you will see a change in the risk profile of the private health funds and, as a consequence of that and that alone, premiums will rise because the remaining core are more likely to make a claim on their private health insurance. There will also be second-round effects just from the premium rises alone. Treasury’s own figures expect 57,000 Australians over 65 to drop private health insurance. These are people who are already getting a very significant private health insurance rebate—35 per cent. On the amended bill—the government’s new bill—there will still be 583,000 Australians who will drop their private health insurance. So the first impact is that we will have large numbers of people dropping private health insurance. It will change the risk profile of the private health funds and lead to upward pressure on private health premiums for those who remain.

The second impact is what it does to these people who exit private health insurance. Access Economics has estimated that by 2012—in four years time—there will be an extra 770,000 episodes which will have shifted to the public hospital system. So there are very serious consequences of this legislation. Today we heard the Minister for Health and Ageing introduce a new argument. Apparently, when the IMF are calling for tax cuts and payments to be made to individuals to help with the global financial crisis, the minister for health seized on the Medicare levy surcharge bill as an example of a tax cut. Wrong! There is no cash injection into the economy involved with this bill. In fact, it is taking $354 million out of the economy over the next four years. These are the consequences. In the middle of the global financial crisis, Labor’s idea of a tax cut is to take $354 million away from the community—that is the total. We have 583,000 people who will drop their private health insurance, and, if this bill is passed, by 2012 we will see an extra 770,000 episodes in public hospitals. To the extent that younger, healthier people drop out of private health insurance, we will see the private hospital premiums rise. To the extent that older people drop out of private health insurance as a consequence of those premium rises, we will see additional pressure on public hospitals.

This is not the last word on private health insurance. If this bill is passed, we will be revisiting the consequences for many years to come. This is a very short-sighted piece of legislation. It was put in to meet the government’s imperatives during the budget cycle. It will be very damaging to people with private health insurance and it will put additional pressure on the public hospital system. In my own electorate of Boothby, 71 per cent of voters hold private health insurance and 63 per cent have hospital cover. They would expect me, as their representative, to do everything possible to keep downward pressure on private health insurance premiums. They would expect me, as their representative, to do everything possible to keep additional pressure off the public hospital system. That is why, on this side of the House, we have always been very clear about the role that private health insurance plays in keeping pressure off the public hospital system. We have a vision for a dual system, private and public, where the private system keeps the pressure off the public hospital system. Labor, for their own ideological reasons, have decided to introduce this bill, which will provide no relief to the community. It actually takes $354 million away from the community over the next four years. It will lead to premiums rising, and it will lead to more people using the public hospital system. I will be voting against this bill for obvious reasons.

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