Andrew Laming (Bowman, Liberal Party) Share this | Hansard source

This is a really important debate on the Private Health Insurance Amendment Bill (No. 1) 2014. I know all of Australia is listening to this debate on the future of private health insurance. I think the member for Lalor, the previous speaker, was quite right to say that coverage continues to increase to over 55 per cent of the Australian population. As you travel around the OECD you see that that does reflect that we are a nation that equally gives Australians the opportunity to contemplate public or private provision of social services both in health and education. We have a delicately balanced system in both school education and health as a result. That is something to be very proud of.

I am also proud of the coalition's continuous support for the important role that private health insurance plays in this country. We do not need to apologise for that. We are one of the few nations in the world that still have the appetite for a debate over whether private health service provision is a bad thing or not. Most other economies have moved on now and appreciate the role that that plays, but here we have a rancid partisan debate—a continual and utter fixation on destroying private health insurance from the Labor Party. It is something that has held back health reform over the last two decades significantly.

When you have the Labor Party that can see no further than what can be provided for free and protecting the dream of Gough Whitlam's Medicare into perpetuity—nothing beyond that—then it is almost impossible to have a constructive debate about where the health system is heading. Well, this is where it is heading. It was Michael Wooldridge who had the foresight in the late 1990s to rescue plummeting private health cover levels by introducing the three-legged policies of Lifetime Health Cover, community rating and a private health insurance rebate. Academics have looked at these three and tried to evaluate which was the most powerful incentive for people to take up and maintain private health cover. I think most agree that it is the Lifetime Health Cover model unique to Australia which applies to those individual citizens who do not take up by the age of 30 private health insurance but were financially able to do so. When they choose to take out cover at a later time, two per cent is added to their premium for every year of life after 30, capping out at a 70 per cent premium approximately for those who take up private health cover for the first time at the age of around 65. That additional LHC is paid for a 10-year period, after which the premia revert to the normal levels. That Lifetime Health Cover model has had an extraordinarily powerful uplift effect on private health cover in this country. It is something that a former health minister, Michael Wooldridge, can take the credit for, as can the then coalition government. So it goes without saying that, when it comes to reforming the health system to ensure that both the private and public health systems can thrive, it is coalition governments that pursue that objective. At the moment, however, there is a Labor opposition constantly nickel-and-diming the private system and doing their best to undermine it.

I appreciate that Labor are absolutely captured by the notion that every piece of interference they can run against the private health system is in some way a dollar that goes back into the public hospital system. If only it were that simple! If only making it tough for families to keep their private health insurance in some way made our public hospitals better, that might be a debate we could contemplate. But it is sheer rubbish. It is not the case at all. In fact people who take out private health insurance fund their way through an enormous amount of health services in this country. More than half of all the hips and eyes—all the high-expense, rapid throughput surgery—done in this country are done completely on the private purse, with nothing more than a Medicare rebate for the procedure. Many of those Australians pay significant out-of-pocket costs to be part of that system. This is Health Insurance 101—but Labor continues to have a problem in understanding the role of private health insurance.

When Labor were looking for savings, where else would they go but after the hardworking Australians paying private health insurance? They thought there was easy money to be gained there of course. The first thing they did—after promising before being elected that they would not touch anything, which we know was a great distortion of the truth—was to suddenly come up with tiers. Suddenly, if you earned more than $90,000 as an individual, you were wealthy and deserved a lower private health insurance rebate. Keep in mind what a rebate on your insurance policy is. A rebate is saying, 'Thank you for taking out your own health insurance', because—wait for it—when there is a 30 per cent health insurance rebate, for every dollar that goes into the system, the federal government pays back 30c to say thank you. Were that system not in place, that 70c would never have been invested in the health system.

Most people forget this, but it is private health insurance that is building, all around this country, the private hospitals of tomorrow that will care for me and my cohort when we need them. Let us be honest: when there is a sudden demographic requirement for additional hospital places and hospital beds, there is no point trying to build them then. By the time you need them, it is too late. They have to be there beforehand. It is the private health insurance premia paid all around this country by nearly 11 million Australians that will ensure the hospitals are there. I can say that because I have worked in public hospitals, private hospitals, public general practice and private general practice. The great Australian system, which delivers some of the best health outcomes in the world and gives us the second-longest quality-adjusted life expectancy in the world, is achieved relatively modestly. Part of that is because of private health doing its part to take people off public hospital waiting lists.

In debating tonight's amendment, recognise that Labor made it virtually impossible for us not to have to contemplate not only a continuation of these tiers but, in our case, a freezing of indexation for those tiers. For a very small number of Australians, that means that they will potentially—because these tiers will not go up as incomes increase—be tipped into higher tiers and therefore receive slightly smaller private health insurance rebates. Other Australians will also come up against these tiers and find themselves contributing a larger Medicare levy surcharge—increasing, for instance, from one per cent if you are earning around $105,000 to 1.25 per cent the minute you tick over that. That rate then applies up to $140,000, at which level it ticks up again. Those three tiers remain, but they will not be indexed up for inflation. As people's incomes increase over time, they will move into higher tiers. The incentive to take out private health insurance, however, will be just as strong, because you will face a higher Medicare levy surcharge if you do not. From this you can see that some Australians will be paying more, but the sum total of those extra contributions will be directed into the Medical Research Future Fund. That will be a very important contribution.

When Labor is in power, they pretty much completely ignore and blacklist the private health insurance system—unless they can see the chance to rip some money out of it. It is fascinating that, after six years of Labor, we still have 34 health insurers. But it is an enormously complex terrain. Treasury modelling was constantly trying to identify whether fiddling with the system—first of all by creating these tiers and means-testing the private health insurance rebate and, secondly, by saying that the lifetime health cover component of your premium would not be eligible for the rebate—would cause people to drop their cover.

There were a range of predictions—from Treasury saying there would be almost no effect through to the private health insurers, who had great reservations about the impact of Labor's changes. In the end, I think the score was one all. The fall in private health insurance has not been anywhere near what was predicted by the private sector. But where Treasury got it wrong was in failing to predict the number of people who would downgrade—those Australians who would say, 'I have to get just enough private health insurance to avoid the Medicare levy surcharge, but I am going to get as many exclusions and downgrade as much as I can, simply to avoid the tax.' How utterly rational! Possibly up to two million Australians did that. It is difficult to pick through the numbers and work out how many were genuine downgrades and how many were simply phoning up iSelect and being told there was a cheaper policy somewhere else and taking it. In the end, though, two million out of 13 million Australians took out more trimmed-down private health insurance cover.

How could that possibly matter? If you live in a regional town, if you live somewhere outside of the capital cities where there are no private hospitals, suddenly it does matter. When people drop their ancillaries and no longer have cover for optometry or cover for allied health, suddenly a whole lot of work disappears for our regional allied health providers—who are there backing up the local, often solo, GPs. Allied health providers form a modest but very powerful, in fact elite, health provision network in some of the most remote parts of the world. This is Australia's secret: we can deliver some of the highest quality health care to remote populations and to small population centres

That is what gets undermined by Labor's approach, because in those towns the propensity to take up private health cover begins to be undermined. Why take out the cover if there is no clinician to see in town? Sure, you have a general practitioner; and most Australians in those areas, regardless of their income, are paying full tote to see their general practitioner—in many cases bulk-billing rates are very low and there are large out-of-pocket expenses—only to suddenly find, through Labor's reforms, that the allied health providers are leaving town and the only hope is driving to a nearby public hospital and being in a very long queue for care. That is the alternative—but, in the end, that is Labor's picture, isn't it? Labor's vision for health is simply to undermine private health insurance at every opportunity and do their best to drive every Australian down the road to the local public hospital.

That is not the Australia I want to see in the future. I have a vision that Australians will always have a choice. I know that at least 10 per cent of people with private health cover are low-income earners. These are people who are earning, often, a minimum wage and are weighing up whether they take out private health insurance or choose to send their children to a low-fee, independent school. I celebrate that we live in a country where we have that choice because there are plenty of nations where there is not. The first thing you do, if you want to undermine that, is start taking away the incentives that work.

Why does this sound familiar? Why does this ring true? Doesn't this have a flavour of the immigration debate when, under Kevin Rudd, they slowly and steadily unpicked and unravelled, with no idea what it was going to do to people movement? That is exactly what happened in private health. There were promises before the election not to touch the rebate and the reality afterwards was they hooked straight into it, creating tiers and undermining insurance. For those of you out there who thought you were getting a 30 per cent private health insurance rebate, let us look at the numbers now. If you are between the ages of 65 and 69 and you are earning over $105,000, that rebate is now under 15 per cent. If you are under 65 years of age and you are lucky enough to be earning over $105,000, that rebate has now fallen to 9.68 per cent. True, people have not pulled out in numbers as large as some predicted; but I have made the really clear point that it is the downgrading that matters. It is the downgrading that kills off regional and remote. And we have exclusions that are even more concerning, because Australians looking for the cheapest way to avoid the Medicare levy surcharge will start looking for the cardiac exclusion or the arthritis exclusion—they will start looking for any clinical exclusion to get the policy slightly cheaper but still get the full-tote, 30 per cent rebate, or as much of it as they are able to get. The result is that those costs are simply transferred back to the public hospital system. In the end, that will come home to roost. That is obviously another one of those Labor impacts.

Lastly, when Labor attacked private health insurance with these tiered approaches, we saw a complete gaming of the system with Australians rushing out to prepay their health insurance prior to July 2012. Wasn't that ridiculous? 'Let me pay one more year in advance so I can secure as much of the private health rebate as possible.' That was a another mistake by the then Labor government.

In conclusion, let us be honest: if you like private health, then for goodness sake, you want to keep Labor Party fingers off it. If there are areas where you can improve private health insurance, it is not going to happen under that mob over there. Right now we know there can be improvements. There are 34 insurers and they are working to build membership. They cannot promote their services to individual cohorts within their membership. I lament that the first time that many private health insurers know they have a member with diabetes is when they get the bill to take off the toe. They need to know much earlier than when there are catastrophic items being charged for under Medicare and seeking a rebate, so that private health insurers can be part of health prevention. They are still not able to do that.

Lastly, there really is a role for looking again at the reinsurance model which says that, where high-cost patients are borne by the private health insurance system, they are effectively shared among a pool of reinsurance—to ensure there is a community rating in place so that no insurer will be reluctant to take on high-need patients. But in the end we also need to make sure that, if insurers are going to do their best to reduce those costs in those complex chronic-disease patients, they get the full reward of their work. If they can halve the cost to the hospital system of some of these patients, why should that not simply be shared around the reinsurance model? Those are two very pertinent points made by the private health insurance industry.

In closing, the coalition was the architect of private health insurance. We built it back from near death in the mid-nineties, after 12 years of Labor. It is the coalition that continues to fight for its right to exist. We are the party that can see the role of private health insurance in overall health and hospital reform. I urge everyone out there who has seen their premium nickel-and-dimed over the last six years: we must do everything we can to keep private health levels as high as possible.

Debate adjourned.

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