Joe Hockey (North Sydney, Liberal Party, Manager of Opposition Business in the House) Share this | Link to this | Hansard source

The coalition is an advocate of choice for Australians. That is why in government the coalition was, and still remains, committed to private health insurance. We are committed to increasing healthcare choices for Australians and to taking the burden off the state-run, dysfunctional public hospital system. In government the coalition used three pillars of key policy reform to improve the uptake of private health insurance. These are the private health insurance rebate, the Medicare levy surcharge and Lifetime Health Cover. I will now explain these policies in full and show how they have changed the healthcare landscape for Australians. This will enable me to highlight how this government’s policy vandalism threatens the very delicate balance between public and private health care that has been built up over the last decade and a half.

When we came to office in 1996, health fund membership was around 35 per cent and falling fast after 13 years of Labor neglect. Quick steps were needed to halt the slide and turn it around. In 1997, the then coalition government introduced the Medicare levy surcharge. The Medicare levy surcharge, or MLS, is an additional one per cent surcharge of taxable income. It is imposed on those earning above a certain threshold income who are eligible for Medicare but who do not have hospital insurance with a registered health insurer. The MLS is in addition to the normal 1.5 per cent Medicare levy. As is now well known, the income thresholds above which the MLS kicks in are currently set at $50,000 for singles and $100,000 for families. It is an incentive for those who can afford to contribute to their own health care to take out private health insurance and alleviate some of the pressure on the public hospital system. This measure had an immediate impact on the number of Australians prepared to take out private health insurance. It set in train a pattern of increases in memberships that has continued to this day, but it is part of a wider package.

In January 1999, the government introduced the 30 per cent private health insurance rebate. In return for making a big contribution to the cost of their own health care, the coalition subsidised almost one-third of the total private health insurance premiums of Australians. In 2004 we introduced loadings on the rebates for older Australians. The amendment saw the rebate increase from 30 per cent to 35 per cent for persons aged 65 to 69 and 40 per cent for persons aged 70 and over. This measure again saw a further increase in the uptake of private health insurance, but the coalition recognised the need to do more.

Therefore the third pillar, Lifetime Health Cover, was introduced in July 2000. This measure made it worth people’s while to join health funds earlier and to remain members. Under Lifetime Health Cover, Australians aged over 30 who remained uninsured after July 2000 had their future insurance premiums subject to a two per cent surcharge for each year of age they remained uncovered. So, for example, a person aged 40 who purchased health insurance for the first time in 2004 became subject to a 20 per cent surcharge on their current and future premiums. This is the difference between the age of 30, which the lifetime health cover sets as the base, and the actual age of assumption of cover. If this same person delayed purchasing health insurance for a further 10 years, the surcharge would grow to 40 per cent. The Lifetime Health Cover surcharge is capped at a maximum loading of 70 per cent and Australians born prior to 1934 are exempt. In addition, people in Lifetime Health Cover can take a two-year period of absence without incurring a higher premium.

Together these policy pillars led to the highest number of Australians in private health insurance in the history of the country. From less than one in three in 1998 it is now almost one in two. Indeed, on the Friday of budget week the latest data from the Private Health Insurance Administration Council showed that 9.477 million Australians, or 44.6 per cent of the population, were covered by private health hospital cover. That is almost 10 million Australians who have willingly given themselves a choice of hospital and doctor when they need treatment and care. Significantly, in the 12 months from March 2007, the biggest growth of any age group was among 25- to 29-year-olds with an increase of 57,500 people. That week the Minister for Health and Ageing saw fit to issue a press release about members of parliament participating in Australia’s Biggest Morning Tea. Of course the minister said absolutely nothing about this great piece of news. It is no wonder; she must be embarrassed and ashamed that, because of what her government is doing, it will never be the same again.

Let me now turn to that act of policy vandalism. On 13 May the government handed down its first budget, but the Treasurer gave the game away the weekend before. The government announced plans to revise the Medicare levy surcharge thresholds to $100,000 for singles and $150,000 for couples and families. To grab a pre-budget headline it was dressed up by the Treasurer as a Robin Hood style tax handback to battlers. In reality it is another revenue raiser tipped to save $960 million in rebates over four years to a government trying desperately to rein in its immense expenditure. All the more evidence that this is a savings grab, and it is not really savings; it is a tax grab, cutting spending on the private health insurance rebate that conveniently slots into Labor’s anti-private health ideology. It is the announcement, in case we ever doubted it, that this government does not really believe in private health care. This government announced that it does not believe in private health insurance in a speech delivered at that time.

Through this measure the government has breached election promises to leave private health alone. What the Prime Minister, Treasurer and Minister for Health and Ageing are saying to you and me is that private health insurance is a waste of money, that it is not worth having, that the only way to get good health care is through the public system. What dangerous ideological tosh. Australia is a wealthy country. We can afford to provide high-level health care to those who cannot afford to pay for it themselves. But those who can afford to contribute to their own health care should be urged to do so. This ensures a fair, high-quality healthcare system for those who need it. To suggest that the Australian government can provide high-quality hospital care without a significant co-contribution of a private healthcare sector is misleading.

Here in Australia we have a counterbalance system of private and public health care. Private hospitals currently provide almost 60 per cent of hospital admissions, and not just for simple procedures and operations. The growth rate of private admissions has well outstripped that of public admissions since Lifetime Health Cover completed the private health insurance rescue mission in 2000. Several years ago Professor Ian Harper of the Melbourne Business School and Chris Murphy of Econtech calculated that every dollar spent on the rebate brings in two dollars of private health spending. That is two dollars of public money that does not have to be spent. It is not a bad deal, really. State premiers and ministers have been queueing up since the Treasurer’s announcement only a few weeks ago demanding hundreds of millions of dollars of extra funding for the anticipated surge in public hospital demand.

State Labor premiers demanding compensation speaks volumes. This is because, if passed, this measure will see a dramatic decline in private health insurance membership numbers in this country and less choice for Australians. It is not hard to predict who will be the first to drop out of insurance: people who feel they are not getting an immediate pay-off for staying with health insurance. Many Australian families are hurting. Petrol and grocery prices have never been higher, mortgages are sucking up more and more of the household income. With incentives to retain private health insurance under attack, many young, fit Australians will move to drop their private health insurance coverage. With large losses of good-risk members the whole sector becomes less viable. Its policies become unaffordable, the range of products becomes narrower and less relevant to consumers, and the death spiral is back. Indeed, Access Economics predicts a snowball effect. Their report forecasts higher premiums, which will see more people driven from private health insurance, because the incentives to stay with this product are being pared back.

This measure comes at a difficult time for insurance generally. While premiums are important to the ongoing viability of the private health insurance industry, the main source of revenue is investments. Roughly half the income of insurance firms comes from investments in the stock market and property and various other financial instruments. The stock market corrections both here and overseas and the slowdown of the property market have seen and will see incomes for prudential entities fall. Currently the health industry’s net margin is 5.6 per cent. Raising the Medicare surcharge levy will put a lot of pressure on funds’ reserves and hence their investment portfolios to cover the gaps left by departing members. The only publicly listed health insurance company is NIB. The Monday after the member for Gellibrand announced the intended MLS changes in the media, the company’s listed share price tumbled to a 52-week low. It is now trading at half its former share price. This is a measure of the confidence of the market in the effect this measure will have on the sustainability of private health insurance. The effect of the announcement on private hospital shares was just as bad, as the market knows they depend very significantly on insured patients using their facilities.

There is no doubt that the private health insurance industry is generally offering a high-quality product with good choice for Australians. Just a look at some of the high-cost claims paid by funds shows how well they do. But the industry must continue to strive for efficiency and relevance, and I urge insurers to keep innovating around their products and services, in particular to introduce the broader health cover made possible by the 2007 reforms. If good risk members see true value for themselves then they may well keep their cover, even though it will become more expensive under this government. But this measure will undermine the industry as a whole. One of the reasons that Labor has fastened onto this measure is that private health insurers are a politically soft target. They may not be regarded as the most popular of all industries. However, like most forms of business, health funds can always do some things better. But this is not just about private health insurance; it is about the long-term viability of what private health insurance purchases—that is, access to private hospitals, choice of doctor and hospital, timely access to the best hospital care and, thanks to the reforms introduced by the coalition last year, better access to early intervention, chronic care management and hospital in the home type services.

This measure will place an enormous financial burden on the public hospital system. Hospitals in this country are under strain. Today’s Sydney Morning Herald reports the story of two-year-old Zara. She suffers from cerebral palsy and vomits six times a day. The constant vomiting is not only distressing but is giving her pneumonia as the vomit goes down the wrong tube into the lungs. This condition could be fixed by surgery, but Zara’s surgery was cancelled for the third time yesterday after waiting around at the hospital all day. How will adding more people to the waiting lists at public hospitals help little girls like Zara?

What about people like 28-year-old Chris Planer? Chris contracted carcinoma on the floor of his nose and the roof of his mouth. After surviving a gruelling 16-hour operation and basically having his face reconstructed, Chris needed reconstructive dental therapy. Contrary to the statements made in this chamber by the member for Gellibrand that Chris would not qualify for the coalition’s Medicare dental, Chris was lucky enough to get his treatment before the scheme was axed by the Rudd government. People like Mr Planer have now been delivered a double whammy by this government. With access to private health insurance under threat, how will they access dental care? Not through Medicare. That has been dismantled—dismantled, might I add, by a minister who did not even understand the system she was attacking. Instead, people like Mr Planer will have to rely once again on the state dental clinics.

Public hospitals are staffed by high-quality professionals, but they retain long waiting lists for surgery and for specialist visits. Access to allied health through the public system is limited. If Australians want access to dentists, physiotherapists, occupational therapists or dieticians, they will simply have to wait and wait and wait. Like all insurance, health insurance is a safety net for those who wish to have choice in how their health care is managed. It is the gateway to a wonderful private system which shares with the public sector the responsibility of meeting our healthcare needs. If private health insurance collapses, so will private health as a whole. It is that simple. At the end of the day, the public system will have to pick up what the private system is unable to deliver. That means longer queues at hospitals and greater strain on the public hospital system, with no solution yet offered by state Labor governments.

In contrast to Labor, the coalition stands for choice. This is a fundamental principle of the Liberal and National parties—the opportunity for individuals to choose the type of health cover that they want. We want private investment in our health care. We do not believe it wrong to provide strong incentives to encourage that participation and investment. The policy contained in this bill is bad policy for Australians. It will lead to higher private health insurance premiums. They will become known in the years ahead as the Rudd insurance premiums. We oppose this bill; we will vote against this bill. We look forward to the debate continuing in the other place but, ultimately, bad policy needs strong opposition, and we will oppose it all the way.

Yvette D'Ath (Petrie, Australian Labor Party) Share this | Link to 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.

Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

This is another one of the bills that the government introduced into this House a mere 24 hours ago. The Tax Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2008 provides for a number of amendments to the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act 1999 and to the Medicare Levy Act 1986. It is with great audacity that the government is bringing on debate on this bill less than 24 hours after it was introduced. It is a tactic of a government that is under pressure; a government that is desperate to divert parliamentary attention away from their woeful attempt and lack of plausible policy to help Australians—singles, pensioners, families—cope with ever-climbing fuel prices.

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

Stick to the facts.

Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

We know that you are there, Bill. This is a government that is already, by the actions that it has taken in this House tonight, arrogant and drunk on power. The opposition opposes this bill. We oppose it because it is likely to result in a drop-off in the numbers likely to take out private health insurance. In fact, what we know is that the effect of these bills will be to put almost half-a-million more Australians into already long public hospital queues.

Compare that with the record of the coalition government. Through a series of measures—such as a 30 per cent rebate on premiums and Lifetime Health Cover, which allows health funds to charge different rates for people who join at different ages, thereby rewarding loyalty and encouraging people to join early and maintain cover—we rescued private health insurance, bringing membership levels up to a sustainable 44 per cent of the population, compared to 34 per cent under Labor before we came to office in 1996. These measures have led to long-term stabilisation of the private health insurance industry, thus taking the pressure of Medicare. More than 55 per cent of all hospital procedures are now done in private hospitals.

Contrast that with this disastrous Labor budget. The financially and physically fit will no longer be taking up private health insurance. Young people, who are less likely to make claims on their private health insurance policy, are most likely to drop their cover. They are the best customers for private health insurers, so this decision of the government will impose great financial strain on the private health sector. This leaves pensioners, the elderly and the sick, and those who know that they are going to need their private health insurance, to face higher health insurance premiums. Private health insurance adds money to the health system overall. Reducing the premium inflow and reducing the government assistance through the rebate will reduce the assistance available to Australians through the public system.

Health insurance is now one of the key parts of the CPI. A decision that will lead to higher prices for private health cover will feed into the CPI. How can the Treasurer or the Prime Minister sensibly claim that this budget will keep downward pressure on inflation? We are here today debating a decision that will have exactly the opposite effect. There are estimates that these bills will have an inflationary effect of around 0.17 per cent, reflecting an approximate 10 per cent increase in prices for premiums. Clearly, the cost of private health insurance is going to go up. As people stop renewing their private health insurance, health insurance costs for everybody else will go up. What did this tricky Prime Minister do in the lead up to last year’s election?

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

He won it.

Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

That was an interesting interjection from the member for Maribyrnong. He is saying, ‘It does not matter what we did to achieve it; it does not matter how we did it; it does not matter that we misled the Australian people: we won it, and that’s all that matters.’ He is taking from the Graham Richardson school of politics, I see.

This is the reason why we believe the Prime Minister misled the Australian people in the lead up to the election: he wrote to the Private Health Insurance Association of Australia to assure them that he would not be making changes to the current arrangements applying to private health insurance. Just five months later, he pulls a trick on the association and all Australians. He is conning Australians, and particularly those Australians who need private health insurance and those who need hospital care. Some in the industry are saying that these measures will lead to 400,000 people dropping out of private health insurance. How can increasing the load on an already stretched public health system help improve health services? This government’s decision can only lead to increasing demands on the public hospital sector and on overworked nurses and doctors. The government’s decision is contrary to the coalition’s principles of encouraging people to take responsibility for what they do and encouraging self-reliance and independence.

This is a decision that will have a cost to revenue of $660 million over the forward estimates period. But it will save the government over $950 million because there will be fewer people claiming the private health insurance rebate. So the government will profit from people dropping their private health cover. When these people get injured, fall sick and need public hospital treatment, they will be joining already long public hospital queues. It is a very misguided decision.

We on this side of the House support choice—whether it is in relation to superannuation, financial products or union membership. This is the centre of our philosophy and we support those who choose to purchase private health insurance. Labor retain their blinkered, ideological objection to private health insurance, thereby posing a threat to a strong and balanced health system. The coalition remain committed to a balanced public and private system and strongly encourages those who want to take out private health insurance. By doing so we are taking the pressure off the public hospital system and improving the health system for everyone. I cannot support this bill.

Mike Symon (Deakin, Australian Labor Party) Share this | Link to this | Hansard source

I rise today to speak in support of the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008. Over many years I have worked with a large number of working people affected by the operation of the Medicare levy surcharge since the Howard government introduced this measure way back in 1997. These people were not necessarily well off. They were blue-collar workers: tradespeople, labourers and construction workers. They earned good money when there was work available and very little when work dried up. In 1997 not many of this group would have been earning anywhere near the income thresholds set at $50,000 per annum for singles $100,000 per annum for couples. Sometimes in a really good year when work and lots of overtime was on offer, some of these workers would go over the threshold. The next year was not likely to be as good due to the nature of the construction industry and those workers would drop back under the threshold. Mostly the Medicare levy surcharge did not affect them as it was supposed to capture high-income earners when introduced by the Howard government. However, as the previous Liberal government never indexed these thresholds, this group of workers became more and more exposed to the surcharge as their incomes increased over the years through wages growth and CPI movements. Many workers across all industries now earn income in excess of the previous surcharge thresholds and are forced into paying for private health insurance they may not want or need. This does not come about from working massive amounts of overtime. The threshold is crossed by many who are on award wages and even more who are on enterprise agreements.

A lot of workers have spoken to their accountants at tax time and made the decision to take up bare bones private health cover with many exclusions and large excesses. The reason for this is simple. If the policy costs less than the surcharge that would be payable, the worker is in front. They can then also claim the 30 per cent private health insurance rebate, which is not affected in any way by the introduction of this bill. In fact this bill leaves all the private health insurance rebates in place at the varying levels of 30 per cent, 35 per cent and 40 per cent as we always said that we would. The Rudd Labor government wants to give people incentives to take out private health insurance, not hit them with a tax grab that they cannot afford.

As reported by Phillip Coorey in the Sydney Morning Herald on 27 May 2008:

Treasury modelling obtained by the Herald shows that when the Howard government introduced the levy in 1997 and applied it to singles earning over $50,000, it covered eight per cent of workers.

The article goes on to note:

The income threshold was never indexed and over the years, as wages rose, more and more workers had to pay the $1000 levy unless they took out private health insurance.

In the recent budget, Labor doubled the threshold to $100,000. The Treasury estimates this will expose 8.5 per cent of the workforce to the levy unless they take out private health cover.

Many people forced into this supposed choice between private health cover or paying the Medicare levy surcharge are young adults, who are less likely to claim on private health insurance whilst they are still young. The Rudd government has allocated $1 billion in funding for public hospitals over the next year along with substantial investments in primary care designed to keep the pressure off public hospitals.

I believe this is an issue about choice. Despite the increase in thresholds, it is estimated that most of the individuals and families with incomes between the new and old thresholds will retain their private health cover. If the product and service provided by a private health fund is good and relevant to the individual’s or family’s needs then I am sure that cover will continue. Being forced to buy a product you do not want or pay extra tax is not choice. But the shadow Treasurer, the member for Wentworth, claims to believe in choice, saying at his recent National Press Club appearance: ‘We believe that government should enable choice, rather than take the choices on our behalf.’ But the shadow Treasurer and his predecessors in the Howard government let the $50,000 threshold stay in place that forced working families to take out private health insurance just to avoid a tax bill at the end of the year.

Now of course, this is the opposite of choice—the opposite of what those on the other side of the House claim to believe in. They talk about being the party of tax cuts but they oppose this proposed tax relief for at least 400,000 Australian workers. This leads me, of course, to the very large group of those around 400,000 Australians who choose not to take out private health cover, but who are slugged up to $1,500 a year in Medicare levy surcharge. If the Liberal Party think that $50,000 per year is still a high income, I would really like to see what they think a low or middle income is. They claim that an income of $150,000 per year is not very high and that people in this salary range and above should receive welfare from the government. The opposition cannot have it both ways. If $50,000 per year is a high income, how can $150,000 per year not be? Paying an extra one per cent of your gross income is a significant slug to working singles and families who do not want private health cover.

This bill is targeted at bringing relief to working singles and working families. Some individuals will be up to $1,000 per year better off, while some couples will be up to $1,500 per year better off. The question really has to be asked: why does the opposition want to stand in the way of a tax cut to 400,000 working people? I support this measure to help working singles and working families choose whether they should spend their money on private health insurance and I commend the bill to the House.

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

I welcome the opportunity to oppose the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008. What we are seeing here is more misleading politics and spin from the Rudd Labor government, who have tonight been caught out on a Fuelwatch scheme which is nothing more than a cost impost on average Australians. Just as they were there, they are here being less than honest with the people of Australia. They are portraying this as a tax cut for 400,000 Australians. There is some argument with regard to the figures, but the various figures, which range up to a loss from the health insurance industry of around a million people, can only have one possible consequence. The only possible consequence is that those who remain in private health insurance will pay more—so they are being asked to pay for this. The government pockets something north of $300 million in money that they save, and the public health system—which I assume those opposite are going to say is in great shape, because, if it is not, why are they pushing more people in that direction?—will groan under a greater load than it has already.

The reality is that right at the bottom of this is a fundamental opposition by those who sit opposite to private health insurance, which allows people the opportunity to insure against ill health and the costs associated with it. That has been clear every time any discussion on private health insurance has been raised in this House. In the end the true mantra of the Labor Party comes out: they are opposed to private health insurance.

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

Mr Shorten interjecting

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

The member opposite, whose seat I cannot remember, since he has only been here a short time—it will come to me later—

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

Maribyrnong.

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

Maribyrnong, that’s right. I thought, ‘There was a member for Maribyrnong; he was a nice bloke. What happened to him?’

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

There’s been 10 of them, actually.

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

No, I was thinking of the last one. He was a nice bloke. There must have been some sort of coup that went on down there. But whoever they have put in there was not here when the government introduced measures to ensure that private health insurance was an option more affordable to more Australians and was an option—

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

What happened in the New South Wales Liberal Party today?

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

I don’t belong to the New South Wales Liberal Party, Member for Maribyrnong. But I can tell you that, with what happened here in the House, today was a very interesting day, as reported on the news tonight.

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

Not as interesting as the Sydney Liberals!

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

I would challenge that.

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

You might have a point.

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

And there will be more points tomorrow—I’ll give you a tip! This issue is about whether or not Australians can afford to have health insurance in the future under a Labor government. This measure is squarely targeted at small-term political gain for long-term public health pain. This measure is clearly targeted at taking away the opportunities to ensure that health insurance is affordable for all Australians. If I look at my own electorate of Groom—a beautiful electorate, one I am very proud of—I see that 57 per cent of people aged 18 and over have private health insurance.

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

Must be rich.

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

See, Mr Deputy Speaker Georganas, the member for Maribyrnong interjects as he has continually—

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

Order! I ask the parliamentary secretary opposite to stop the interjections. The member deserves to be heard.

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

I just want him to keep on topic, sorry.

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

I was talking about private health insurance, Mr Deputy Speaker. I am not sure—

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

I advise the member for Groom to keep his remarks through the chair.

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

I was addressing the chair. I was saying that in Groom some 57 per cent of people over the age of 18 are in fact members of health insurance companies. The response to that from the member opposite was, ‘By jeez, they must be rich.’

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

Mr Shorten interjecting

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

That is what you said, and I hope the Hansard picked up your interjection. What it shows is that there is a fundamental belief that the only people who should have health insurance are the rich people who support the Liberal Party. And the rest of them? The Labor Party is going to look after them in a public health system. I have a Labor government in Queensland and I know what it is like for those people in my electorate who try to use the public health system. They come in and complain continually about it. Health insurance is not the purview of the rich; it is the purview of people who want to take responsibility for their own health costs. And when we were in office our government made sure that it was affordable for a broader range of people than was the case before. We introduced the mechanisms to both encourage them and reward them. The Medicare levy surcharge was part of that encouragement. The reward was a 30 per cent rebate on their health insurance bill. Those two measures saw private health insurance under our government increase significantly.

What we are seeing with this bill is a very deliberate attempt by the Labor Party and the Rudd government to destroy private health insurance for the average person, to push the cost of health insurance up so far that more and more people will withdraw from it. So, while Treasury figures initially said 400,000 will get a tax cut from this, the knock-on effect from that will be a very significant drop-off in the number of people who are privately insured—perhaps a million people, based on figures that have been put around the place in the last few weeks. If it is only a million people then some of us will be relieved. But, if a million people leave these health funds, that effect will continue to cascade. Who knows what the ultimate figure will be! But one thing for sure is that young people and healthy people will not be insuring themselves. On that basis the impact on private health insurance premiums will be left to those who are either aged, sick or in urgent need of health insurance. The healthcare costs to the public health system will escalate beyond control. This sort of short-sighted populism is a hallmark of the Rudd Labor government. It is the hallmark of a government that has no regard for the long-term future of Australia.

Bill Shorten (Maribyrnong, Australian Labor Party, Parliamentary Secretary for Disabilities and Children's Services) Share this | Link to this | Hansard source

Mr Shorten interjecting

Ian Macfarlane (Groom, Liberal Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

I do not have any trouble keeping a straight face on this. I firmly believe that the long-term cost of this to the country will see our health system thrown into further chaos. If I had any confidence that the Rudd Labor government could address the public healthcare problems that we are seeing in Australia at the moment, perhaps my concerns may be lessened a little, but, having seen nothing but spin, having seen nothing that would give me any confidence that they actually even understand the long-term ramifications of this, I have no option but to oppose what is rampant vandalism of private health insurance in this country.

Half the population is being hit by Labor for a cheap, prebudget headline, and the other half will suffer from the pressure imposed on the public health industry and the public health system. No responsible government would take that position. No responsible government would put out a budget measure on the basis that it is going to save, in terms of families, $660 million over four years but at the same time see a saving to government of some $959 million, and that is the short-term impact. So the government puts $300 million in its pocket, the public health system gets loaded up, the private health system faces a crisis in terms of increases in health insurance premiums, and who loses? The average Australian. If we do not have stability in this area of private health insurance, if we do not have across-the-spectrum membership of these health insurance funds, then only those who are ill or at risk of becoming chronically ill are going to take up the insurance, and that will send the price of this insurance spiralling through the roof.

This is not good legislation. This has not been a good budget. It has been a high-taxing, high-spending budget. It has been a budget that has no regard for the long-term impacts in any area. What we are seeing in this particular piece of legislation is a philosophical opposition to health insurance combined with a smoke-and-mirrors trick where they portray it as a tax saving. They have even convinced members of their own backbench that it is a tax saving but the long-term implication is that taxes must rise. You cannot impose this sort of cost on the public health system and not have to pay for it. So, for a short-term saving, for a short-term gain, there is nothing but long-term pain.

We need to see from the Rudd Labor government a commitment to both private and public health, just as we need to see the same commitment on public and private education. It is a combination, where those who can, those who wish to or those who see it in their long-term benefit to take control of their own costs, decide whether or not they are going to use the private health system and decide whether or not they are prepared to set aside what is a significant part of their income to take out that health insurance. For doing that and for relieving the load on the public health system they should have some reward, and that is why we introduced the rebate and why we also put in place an incentive to encourage people to take out health insurance in the first place. This is bad legislation; the outcomes will be bad for all Australians. Short-term gains and long-term pain should never be the mantra of any government.

Greg Combet (Charlton, Australian Labor Party, Parliamentary Secretary for Defence Procurement) Share this | Link to this | Hansard source

The Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008 is an important bill. It is a bill that demonstrates the Rudd Labor government’s commitment to providing relief to working families, particularly low- and middle-income earners. It is astonishing to hear some of the contributions from the opposition in relation to this bill and that they are opposing it, because this bill clearly will lead to the opportunity for ordinary working people, earning in the order of $50,000, to have the choice as to whether or not they take out private health insurance and, if they do not take it out, to avoid the Medicare levy surcharge. It is a bill which in aggregate also demonstrates and reinforces the economic credentials of the government, while those across the chamber, through their opposition to this bill, further undermine their economic credibility. Despite the rhetoric of the shadow Treasurer, the member for Wentworth—and I think I heard the member for Stirling suggesting the same—that somehow they are representative of a position of choice in this regard, this particular bill demonstrates absolutely clearly that the Labor Party is the party of choice in this matter. It provides working people with a choice in relation to private health insurance. The Liberal Party, in taking the position that it is taking, is a party of coercion and compulsion in trying to force ordinary working people to take out private health insurance and punish ordinary working people if they choose to not take out that insurance.

This bill, as we have already heard, increases the threshold for the one per cent Medicare levy surcharge from $50,000 for individual income earners to $100,000—from $50,000 to $100,000—and it increases the threshold for families from $100,000 in annual earnings to $150,000. That provides real potential taxation relief for ordinary working Australians and returns—and this is an extremely important point—the thresholds to the approximate position they started at when the Medicare levy surcharge was first introduced by the Howard government in 1997. It restores the thresholds to the approximate position they were at over a decade ago. It was appropriate then for the opposition to say these thresholds should be at that level. They failed to index or increase the thresholds at any point during the term of the Howard government. Now they say, when you come fast forward: ‘Those thresholds are no longer appropriate and should be retained at a level of $50,000 for individuals and $100,000 for families.’

Let’s just consider for a moment what that is really saying. Full-time ordinary average weekly earnings now stand at $58,400 per annum. So we are in a position where the average full-time worker is subject to the Medicare levy surcharge—and would remain so under the position of the opposition. This bill seeks to change that. In fact we have a position here where people who are earning less than average ordinary weekly earnings are paying the Medicare levy surcharge. To put this in some context it is worth recalling what the then health minister, Michael Wooldridge, had to say when he introduced the surcharge in 1997. He said:

High income earners will be asked to pay a Medicare levy surcharge if they do not have private health insurance.

He went on to say:

These are the people who can afford to purchase health insurance.

So Dr Wooldridge, the then health minister in the Howard government, targeted this levy surcharge at high-income earners because they were the people who could afford to purchase health insurance, and therefore he argued that, as a consequence, the surcharge was appropriate in order to compel people to take out health insurance.

What is the Liberal Party now really saying? Do people earning $50,000 a year now constitute high-income earners? Do people on less than average weekly ordinary time earnings constitute high-income earners in the view of the opposition? Despite all of the rhetoric about this, the thresholds, as I observed, were not moved once by the previous Howard government since 1997 when they were introduced, the effect being that many more than higher-income earners have been required to pay the surcharge. This is the Howard government in which the current Leader of the Opposition was a minister for seven years.

In his recent budget reply the opposition leader railed against tax bracket creep. Yet, when you look at this issue, in effect the failure by the Howard government to move the Medicare levy surcharge thresholds was a form of bracket creep. It was a form of bracket creep that captured approximately 400,000 middle-income earners as time went by. So where was Dr Nelson, the member for Bradfield, now opposition leader, during the last seven years when he was concerned about bracket creep in relation to these thresholds? Where was he in defending the interests of people who earn less than average weekly ordinary time earnings who increasingly were captured by the effect of the thresholds? He was not around. He did not have any opposition to it and now he is arguing that they should continue to be subject to it. In the view of the opposition, assumedly there should still be no indexation to these thresholds as well.

On this issue, the opposition are being completely hypocritical, have no substance to their position and have nothing to justify it. By doing nothing about the threshold, those opposite were basically supporting, to use the opposition leader’s words, a tax increase on the sly every year since 1997, and it was a tax increase on the sly that hurt a lot of working families. I am proud to be part of a government that will put an end to this. By this measure, the government will take pressure off people who have struggled either to pay private health insurance or to meet the impost of the surcharge. It gives 400,000-odd people choice that they will not have had up to this point in time.

Since 1997, when the surcharge was introduced, average weekly earnings have increased by nearly 50 per cent while the threshold remained unchanged. Lifting the threshold will mean that by the end of the period of the forward estimates in the budget, about 8½ per cent of single taxpayers will be liable for the surcharge, which brings it back into line with the incidence for single taxpayers that existed in 1997. If the government did not act, the proportion paying the surcharge would be much closer to 50 per cent. That is the effect of this bill.

The effect too of lifting the thresholds means that an additional 400,000 individual taxpayers will not be liable for the surcharge in the forthcoming financial year. This does mean a potential real tax cut of up to $1,000 for individuals and up to $1,500 for families. Is that a worthwhile measure or not? A lot of people are struggling under the current environment, where we have inflationary pressure, petrol prices, grocery prices, rising interest rates, mortgage costs and rental costs, and a measure which gives them the choice through this particular operation of this bill—the relief of a potential $1,000 for individuals or $1,500 for families—is an extremely important relief to many working people.

Let us remember, therefore, the corollary that, by opposing this bill, the coalition is effectively voting for up to a $1,500 tax increase, compared with the position of the government. Don’t they think working families deserve any relief at all? In their opposition to all of these measures they are adhering to a position that imposes a lot of pressure on ordinary working people. My colleague the Parliamentary Secretary for Disabilities and Children’s Services and I have spent a lot of our working lives representing ordinary working people and we know from our experience of representing people on incomes in this range—around average weekly ordinary time earnings—the pressure this measure has caused them over the course of the last decade. When given a real opportunity to help working families, the opposition is squibbing it yet again. This legislation further demonstrates that not only are Labor the party of choice; we are also in truth the party of competition. We support the important right of people to take out private health insurance if that is what they wish. We also believe it is important that the private health insurance industry compete in the marketplace without ordinary middle-income people being compelled to join to avoid the surcharge. I am sure that if the private health insurance providers continue or make a greater effort to offer quality products that are good value for money then they will keep as members the taxpayers who are no longer subject to the Medicare levy surcharge. They will do it without coercion.

How does it improve our health system if people are forced to subscribe to private health insurance products not because they offer good cover but because, principally, they allow them to escape a tax obligation? This is an argument the previous speaker was endeavouring to make. It is instructive, I think, to go to some of the private health insurers’ websites and start the interactive searches of their products to establish the right product for you. If you do that sort of search, on many of the sites you will be asked at some point to indicate what your health priority is, and one of the reasons that can be selected is to reduce tax. That is one of the reasons private health insurers put on their websites for selecting their products, and that is clearly a wrong position in relation to the people who have been captured by this surcharge over recent years. A rational system of private health insurance should not be based on this type of financial engineering.

The government supports private health insurance, and all Australians who choose to take out this insurance will continue to benefit from the private health tax rebate—an important measure. By contrast, the opposition appears captive to the lobbying of the private health insurance industry and is prepared to compel ordinary people on less than average weekly ordinary time earnings to buy private health insurance products.

The Tax Laws Amendment (Medicare Levy and Medicare Levy Surcharge) Bill 2008 is centred on providing indexation to the low-income thresholds—another important reform that will help to deliver support for those who need it most, particularly low-income earners. This was another measure designed to take the pressure off working families. Under the reforms in this related bill, the low-income threshold for the payment of the Medicare levy will be raised to $17,309 for singles and $29,207 for families. The additional amount threshold for each dependent child or student will also increase, to $2,682. For pensioners below the age pension age, the threshold will rise to $22,922. This increases the threshold for the Medicare levy payment, ensuring that those on low incomes are not subject to the 1.5 per cent levy. Those changes will all help benefit low-income earners in particular.

This bill, particularly in partnership with the previous bill considered by the House, to which I referred, will provide significant tax relief for working people. Up to $1,500 will be available to working families to help meet the costs of living, including higher grocery, rent and petrol bills. This is what the Rudd Labor government is about. This is the fundamental cornerstone of the budget presented by the Treasurer just recently. The reaction of the opposition to the bill is instructive, I think, as to the direction they appear to be going over the next term. When given an opportunity like this to provide choice and to support working families, they oppose it. When given the opportunity to move beyond some of the rhetoric and to support real practical measures to support ordinary working people, including those on less than average weekly earnings, they oppose it. How can the Liberal Party be a party of choice, a claim the shadow Treasurer attempted to make, and yet be opposed to increasing choice for 400,000 Australians? How can the Liberal Party be the party of low tax and yet be opposed to providing potential tax relief of up to $1,500 for middle-income earners? As the political debate unfolds, it will be interesting to see just how those questions are answered.

Scott Morrison (Cook, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008, introduced into this House only last night by the Assistant Treasurer. At other times, we have made comment about how these bills have been introduced and how quickly they have come before this place for debate. I am puzzled to know what the urgency is in relation to this bill and why it is being debated in this place so quickly. I have made that argument on another occasion, but I refer to it and simply ask these questions: where is the case for the urgency? Who has made the case? Who has run the argument on urgency in relation to this matter? It simply has not been done. The government have loaded up the bill with a political tactic in mind, and that is the nature of politics.

Here we are debating a bill in relation to private health insurance. We are very happy to have a debate on this issue, because for those who sit on this side of the chamber there is a longstanding belief that our health system does not involve just those things covered by the public sector. Our health system comprises health professionals and health institutions that go well beyond the sphere of the public sector. It is the clinicians and those working in the aged-care sector and the not-for-profit sector; it is all of the people who work together to make a viable health system in this country. Frankly, you either believe in that or you do not. You either want to move towards a comprehensive health system which is cradle-to-grave run by the government or you have a system, like we proudly have in this country, which is not the UK system and is not the US system either. Those who rail against private health insurance often make the argument that we do not want a system like the United States. We do not have a system like the United States; we have a uniquely Australian way of dealing with our health system, and it is that uniquely Australian way that the previous government worked hard to restore. Before the previous government came to power, our private health system—and, as a result, our overall health system, at least as it was administered federally—was in a lot of trouble. One of the key measures introduced at that time was to reinvest and provide incentives—carrots and sticks—to ensure that our private health insurance system got back on its feet. And it has got back on its feet. It is moving forward and more and more people have signed up to private health insurance, and that was the objective of that policy. But today we debate a bill which seeks to change all that.

The Medicare levy surcharge was introduced by the Howard government in 1997. It involved an additional one per cent surcharge of a taxpayers’ taxable income imposed upon those earning over a certain income but who did not hold an appropriate level of hospital insurance with a registered health insurance fund. At the time, it applied to individuals earning above $50,000 and couples earning above $100,000.

The amendments announced yesterday—yesterday, I note—involved increasing the thresholds applying to the Medicare levy surcharge from $50,000 to $100,000 for individuals and from $100,000 to $150,000 for couples and families. The explanatory memorandum that was provided with the bill states that the changes will take effect from the commencement of next financial year, the 2008-09 tax assessment period. The financial implications of these changes will be a reduction in revenue, as fewer people will pay the Medicare levy surcharge, and a saving arising from the reduction of government expenditure on the private health insurance rebate. The budget papers indicate that over the forward estimates there will be a net saving of approximately $299 million as a result of this measure. There is a lesson in that statistic. There is $30 billion in new spending from the government in this, the great inflation-fighting budget. They have had to find measures to recover that to keep the budget in surplus, which it has been now for many years as a result of the coalition’s responsible financial management. The government have been able to graft from this proposal $299 million towards the $30 billion in new expenditure in the budget. That is the real motive for this measure, and at the same time they can pursue their ideological tirade against private health insurance in this country—which takes them back many years.

The Medicare levy surcharge was introduced by the former government to provide Australians with choice. It is intriguing to hear those opposite now, as they expound themselves as the new champions of choice. It gave people a choice to opt out of the public system by taking out private health cover or to stay in the public system. The intention was that people who had the capacity to pay for their own health costs would take out private health insurance, through a series of sticks and carrots, as I mentioned earlier. The Medicare levy surcharge was the stick. It was a stick that worked. The number of Australians taking out private health insurance has increased from approximately 30 per cent of the total population before the Medicare surcharge levy was introduced to its current level of 44.4 per cent. The private health insurance rebate and Lifetime Health Cover were the carrots. Under the Howard government private health insurance became more affordable. In 1999 the coalition government introduced the private health insurance rebate. This provided Australians with a 30 per cent reduction in their private health insurance contribution. The rebate makes private health insurance more affordable for Australians by helping to balance Australia’s public and private health systems. We understand the system works as a system. Private health insurance takes the pressure off Medicare for those who need it most.

Lifetime Health Cover was an incentive introduced in July 2000 to give choice to those who had no choice. It encourages young people to take out private health cover by penalising older people who delay taking out private health cover. It encourages people to get into the system when they are young. A two per cent loading is added to the cost of the private health insurance premium up to a maximum of 70 per cent. The loadings mean that a person who delays joining a fund until the age of 40 has to pay 20 per cent more than someone who joins at the age of 30, ensuring that private health insurance covers both young Australians and the older age groups and keeps health insurance premiums lower than they would be without the younger demographic.

Since the budget was released I have stood in shopping centres, I have stood in the village fairs and I have spoken to people in my electorate. This is the issue they go deepest into. They are very angry about petrol prices and they welcome our announcement that we would reduce those by cutting fuel excise. They talk about many issues, but the one they stand there and talk to me about for at least 15 or 20 minutes is private health insurance. It is particularly older people who are saying this to me, because they have paid their dues in private health insurance. They made their commitments to private health insurance long before any of these measures were introduced. They are saying that they would like to see those incentives for younger people when they go into the workforce. They would like there to be the incentives and the proper mix of measures to encourage them to take up private health insurance, to take on some responsibility for their own health care over the course of their lifetime and at the same time ensure that they are contributing to a system that eases the burden on those who are in their advancing years. Many years ago, those who took up private health insurance did so because their parents did so. I must admit that the day I started working was the day I took out private health insurance. My parents had private health insurance and they taught me that it was your responsibility to do as much as you could to take care of yourself and your family. Private health insurance is a responsibility I was happy to take up and maintain. I maintain it today for my sake and that of my own family.

The effect of these coalition introduced measures combined has resulted in the highest number of Australians taking out private health insurance in the history of our country. More than 44 per cent, as I said previously, of our population, or 9.4 million Australians, have taken out private health insurance as a result of those measures. They have had the effect of providing long-term stabilisation of the private health insurance industry and of taking the pressure off Medicare. More than 55 per cent of all hospital procedures are now done in private hospitals. That is what I would call the system working to provide greater facilities, to provide more opportunities and to deliver a whole package to the Australian public—rather than relying only on one side of that equation, which is the public side. God forbid we would have to rely only on that.

The latest figures provided by the Australian Health Insurance Association indicate that there is strong support for private health insurance in my own electorate of Cook. I mentioned this before. More than 92,000 people—that is, more than 70 per cent of the people who live in the electorate of Cook—have private health insurance. That figure is significantly greater than in electorates in the rest of the country, and I am tremendously proud to be a member of that community. Not all communities can afford that, but the community in my electorate have taken on that responsibility. They are by no means an affluent community. They are hardworking people who have small businesses, work in professions or in the Public Service or are tradespeople. There is in the electorate of Cook the broadest mix you could possibly find. They are hardworking people who have decided to pay their dues into private health insurance.

The more than 90,000 people in my community covered by that system are angry because they are now being told one thing: that as a result of this measure they are going to have to pay more to fulfil that responsibility. Many of them will stay, particularly those for whom it has been a responsibility of their lifetime to do this. But some, particularly those who are younger, will not; they will go. They will choose an easier route and they will choose to have their burden shared by many others rather than making their contribution to ensure that the burden is lighter for all. That is why I am particularly offended by the nature of this bill—it strikes at something we should be encouraging. This notion is alive and well in the community of the Sutherland shire, where people do seek to take responsibility for their own lives and for those around them, and they do whatever they can to do that. Private health insurance has been a principal indicator of their level of commitment to that philosophy and one they live out in all aspects of their life.

The Treasurer said in his budget speech that his government was making the Medicare levy surcharge fairer. I just do not understand how this is achieved by actions that will see a larger number of Australians abandon their private health insurance and move across to the public health system. The results of the Medicare surcharge levy speak for themselves. There has been an increasing number of Australians taking out private health insurance. In fact nearly 9½ million, as we have said, have done so. There has also been a growth in young people taking out private health insurance. During the past 12 months more than 57½ thousand people aged between 25 and 29 have taken out private health insurance. It is the relatively low-claiming 20 to 50 age group that keeps the private health insurance system stable and affordable. This is a policy that is working. We have a policy in our health system that is working, and the first thing the government want to do when they come to power is dismantle it. They may say they want to do this to make it easier on working families, but there are 200 million plus reasons why they are doing this—that is, the revenue they will save and generate from this bill. That is the real incentive. It is not about the health system; it is about trying to raise the money to pay for $30 billion worth of new expenditure in the budget. And that is why we are happy to have this debate. We will have the debate based on the issues of how our health system runs and how we encourage people to take on their responsibilities and live them over all of their lives, as people in my electorate do.

There appears to be some confusion about the number of Australians expected to abandon their private health insurance cover as a consequence of these amendments. There are a lot of disturbing figures in the budget. The fact that 134,000 Australians will be out of work as a result of this budget is probably the most damning. But there is another one which says that there will be 485,000 Australians who will walk away from the private health insurance system. That is the most conservative estimate. The health funds believe this figure could be as much as 750,000. Access Economics has predicted more than 800,000 members of private health funds would need to drop out before the government will meet their savings. So Access Economics is questioning the basis upon which the figures that the government has arrived at in raising their $200 million plus has been calculated. The Australian Medical Association have revised their initial estimate of 600,000 and backed the Access Economic forecast of 800,000. A figure as high as one million has also been reported by some media.

What impact will half a million people or even one million people walking away from private health insurance have on Medicare and the public hospital system? What will be the likely implications of these amendments to the Australian health system? The likely result will be a massive increase of people turning to the public hospital system. And as I said before, God help them when they have to do that. As we know, the public hospital systems run by state Labor governments is an absolute joke—no better illustrated than in my home state of New South Wales. It has got beyond the point of incompetence; it has become endemic. It is a culture of failure in the New South Wales public hospital system. When you have more bureaucrats than beds, when you have a public hospital waiting list system that seems to go higher than petrol prices in this country, this public hospital system is not one that is prepared and able to take on the burden that this bill will ensure will be delivered upon them in spades.

The waiting list for elective surgery in New South Wales is 58,839 people. It is at its highest level in three years. It was 56,200 just six months ago and 55,900 six months before that. I am reminded of the former Premier Bob Carr many times in this place when I look at the Prime Minister, who I believe is the national version of Bob Carr when it comes to political management in this country. If you want to know what this country will look like if we have the same period of government under Labor, just take a look at New South Wales. The same process, the same people calling the shots with Bob Carr all those years ago, are here in Canberra. They are sitting in the rooms with those who make the decisions in this country and they are running the same lines and the same programs. That is what we can expect. Just take a look at New South Wales. That is what you can expect federally by following the same Carr plan. There is a pattern here: public hospital waiting lists in New South Wales are not getting shorter, they are getting longer. Bob Carr promised to halve them, the big quote before he became elected back in 1995—not unlike ‘We will ease the pressure on working families in relation to petrol prices and grocery prices,’ and all of this deceit that the Prime Minister, when he was the Leader of the Opposition, went around the country proclaiming. Bob Carr said, ‘We will cut them by half.’ And were they cut by half? No, of course not. Did the then Premier of New South Wales resign when he did not do that? No. And we see the same obfuscation here from the Prime Minister when it comes to holding him to account for what he led people to believe in this country before the last election.

More than 55 people have joined the waiting list in NSW each week since Reba Meagher became the health minister in New South Wales. How many more will there be as a result of this bill? These amendments will further exacerbate the situation. These disastrous changes being proposed by this government will, based on conservative estimates, result in a further 140,000 public patients in New South Wales alone. The New South Wales public hospital system cannot cope with 140,000 extra patients. It cannot cope with what it has now. It is already overstretched, putting extra pressure on the hardworking doctors and nurses of New South Wales—and right across the country. They are suffering under enough of a burden without having this additional burden imposed on them. If these changes to the Medicare surcharge levy proceed, in all probability it is likely that the health minister can expect a visit from her New South Wales counterpart with a request to negotiate the Australian health care agreement to get extra funding for New South Wales public hospitals—then we will see how the blame game proceeds!

Prior to the election, I did not hear the Prime Minister, when he was Leader of the Opposition, promising to change anything in relation to these measures. He did not let this out of the bag. There are a lot of things he did not let out of the bag prior to the election, and that is the great deceit the Prime Minister has inflicted on the people of this country. Whether it is petrol prices, grocery prices, private health insurance or doing a U-turn on the Northern Territory intervention, none of it was discussed before the election. He comes into this place with a straight face and his forest of spin that sits there on the desk each question time, which has none of the answers that Australians are looking for, and he pretends that he can do no more. The sad truth is that he never intended to do more. He has been found out. I fear the only difference between the current Prime Minister and the former Leader of the Opposition, Mark Latham, is that the Australian people woke up to Mark Latham before the election. They are waking up to this Prime Minister now and they will not be letting him get away with it.

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

There is a lot of history behind the Tax Laws Amendment (Medicare Levy Surcharge Thresholds) Bill 2008. It goes to the health ministers who, through the eighties and early nineties, struggled with the notion of the private-public balance in health provision. Both sides of this chamber have devoted an enormous amount of time to debating the provision, quality and funding of public health services and the role that private health plays. It was a former health minister, Michael Wooldridge, who conceived the three-legged support for private health that effectively delivered the blended health model that we have seen work so well until tonight.

That blended model was delivered in stages. ANU academics have attempted to tease out the relative impacts of the 30 per cent discount on private health cover, the Medicare levy surcharge and the third part, community rating, whereby premiums can be adjusted for age according to the age of the person entering private health cover. It was a very delicate balance and there has been a sense that community rating was probably the most powerful of the three. But of course the 30 per cent rebate has become the most well known and that has been adjusted upward for seniors.

Tonight, the government is methodically dismantling that very, very delicate balance that saw 9.5 million Australians elect to pay their way in health care. There may well be within the government a deep ideological distaste for people who pay their way. I understand that before the election they would write letters to the health insurance industry and reassure them that they had their full support, but deep down the enthusiasm for the 30 per cent private healthcare rebate was lukewarm. The plan was to dismantle the Medicare levy surcharge as soon as they came to power. Of course, the last remaining leg in the stool is community rating, which supports the notion that if we enter private health cover early and we pay our way then we are provided for when we are seniors and most need that health cover.

There are neither quality signals nor price signals in a completely free system. While there will always be a role for a free public hospital system, it relies on a competing private health system to maintain the quality as a competitive option. Those who sell private health insurance know that they rely on a significant base to make it all cost effective—an economy of scale. This does sound like economics 101, doesn’t it? But the simple fact is that if you can have roughly half your population supporting the private health sector and investing some of their hard earned dollars in the health system then those 30 per cent discounts provided by government are exceptionally well-used resources.

That will change and unfortunately Treasury got the modelling all wrong. It was all a little bit of a rush for the new government coming up to the budget. Having had 12 years to think about these kinds of policies, they suddenly found themselves using the wrong hospital cover data and coming up with the wrong number of people who will fall out of private health cover. That is a great shame, but they are not going to amend it, are they. It is too late and the government will proceed blindly into this fatally flawed legislation. Whether there are 500,000, 600,000 or 750,000 people who opt out and go straight onto the public hospital waiting lists, that is no great concern for the government because, you know what, that will flow through to the state governments and they will simply handball them another rescue package before each state election.

Ending the blame game has come to this. It has come to the government destroying the private health system to make their point. We had this great hope that the half of Australians under private health cover might actually have tailored private health packages that might encourage public health options and encourage people to take preventative health measures. That has been lost with your legislation.

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

The member will address his remarks through the chair.

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

The option of having half of Australia covered under private health has gone away for the government. Access Economics predicts as many as 800,000 Australians will pull out of private cover. Most of those will be the young who can say, ‘You know what, it is not an insurance policy; it is just money I do not need to pay. What am I getting for my premium?’ We do not think about that with house insurance. We do not say, ‘What am I getting for my money each year?’ We think about it as providing for the future. But the government thinks that this is money that we can return to the kitchen table. When those people are old enough that they need high-level, expensive, cutting edge, state-of-the-art health services and we have not paid for it over those many, many years, there will be no option, no answer and no plan.

When people drop out, they leave behind others who keep paying the increased premiums. They will be those senior Australians who did not pop up in the Hawker Britton popularity polling. They will be those who have to stick with private cover. They have been there for 10 or 20 years. They will keep paying those heightened premiums because they have no choice. They know that, if they want to get their hip or their cataract done, the only hope in a state public hospital system is to remain insured and pay those heightened premiums.

For the younger Australians, you are going to endeavour to convince them that this was a short-term fix to get that budget to balance and to fund all of that $30 billion of Labor spending. The way to do it of course was to make these cheap cuts in such areas as having to pay out a 30 per cent private health rebate. When this government was sitting over here in opposition, we could see them seething with discontent about having to support a 30 per cent private healthcare rebate. But they did it for political expediency. They silently restrained their anger and frustration that government resources should go towards private health cover without realising that, for every 30 per cent the government pays, an individual for the first time in their life pays 70 per cent of their health care.

It did not cross their mind, did it? It did not cross their mind in opposition, and today they resent the fact that Australians have elected to pay health insurance premiums, just as Australians elect to pay for independent schools. This is that kitchen table test: the choice of putting some money into private cover or some money into independent schools—making a choice as to where I want to invest my money. It is a choice for Australians to make. Premiums are highly competitive and Australians can make a decision. But what you are doing tonight is removing that option completely by allowing those, particularly of my age, to elect for a cheap way out for the next decade, because I can actually avoid a Medicare levy surcharge, take a cheap option and then hopefully dive back in when I am 45 and think I might need my first operation. That sort of gaming of the system is what this government is allowing by taking a short cut in health care.

We have heard the rhetoric about public health cover and we have heard the rhetoric about health prevention. We have heard the rhetoric about planning for the future. But it is in this legislation that we are seeing the reality. The reality is that, if you as a couple are earning $149,000, you can take the short cut and avoid the surcharge. You can worry about your health care later, worry about it when you turn 60, and community rating hits all these people up for one per cent of their age over the age of 30. Do not mention community rating to them now; just give them the easy out. And this from a government that was going to take the hard yards, end the blame game and be the new light on the hill for governments working together and taking farsighted decisions.

What you have done is effectively reduce the base. It is as simple as that. Health works on economies of scale, and by reducing the base you have simply allowed moral hazard—that sense that I can get away without private cover. If I need to queue up, I am happy just to sit there all night. It does not matter that seniors are going to pay a whole lot more for their health cover. Of course, you have the other end of the scale—all those people who said, ‘I’m feeling great now, I don’t need to pay, and I will take a chance. I’ll worry about it when I am 60.’ These are the people that you as a government have just fed right into—the short-cut takers, those who say, ‘I don’t feel too bad at the moment.’ The very people that in public health we are trying to target, saying, ‘Worry about your heart. Worry about your prevention of everyday chronic disease. Worry about your weight.’ We have these people effectively paying private health rebates and talking to their providers every day and having access to allied health cover that they had never known under state government funded hospital systems. They had never had access to those kinds of health services because, with respect, under Labor state governments, waiting lists are not waiting lists for health care; waiting lists are dying lists. You sit on that waiting list and for so many Australians your operation just never comes, it never materialises. Why? Because other people get close to death and simply jump in front of you. If you want to wait for a cataract operation in your average public hospital, you will be waiting so long as you are simply supervened by those who have urgent conditions that require treatment that you may never see that operation. That is the state hospital reality we are faced with at the moment.

There are three choices for you on a waiting list. You can wait—others who have more urgent cases can be treated first; you can elect to pay for some private cover and have the operation done; or you can die on a waiting list. That is the great tragedy that as a doctor I would be told, ‘No, you have to move down the waiting list. Mr X has passed away waiting for his operation.’ That is the hidden saving in having a waiting list that does not move because the hospitals are not appropriately funded. Do not let anyone tell you that today’s legislation somehow better funds the state Labor hospital system. In fact, you have actually done the reverse. You have an enormous number of people and the great concern is you do not know how many people are now going to be queueing in those public hospital waiting lists. Australia has a very delicately balanced model: a GP focused health-care system. After hours you typically either get an after-hours GP who comes to your door through the former coalition federal government’s initiative or you go to a public hospital. The entire triage system after hours is typically through an A&E department. By slowing down service delivery, public hospitals manage to delay services and handball them back to GPs the next morning. That is one of the great cost shifts in the health system that we are trying to avoid. So the first thing that this government does is simply add more people onto that waiting list, add more people onto that queue in the A&E department. That was your great healthcare reform of early 2008. Historians will look back on that contribution. They will look back on how you have damaged those economies of scale—

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

The member for Bowman will desist from using the word ‘you’.

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

And how the government have reduced the economies of scale and in so doing made it much harder for the very families they are purporting to support.

I have made the point already that seniors are completely locked in in this fiasco. If it were as simple as a discount for working families and it all adhered to your popularity polling I could appreciate that. I could appreciate that everything else is going pear-shaped so you are going to try and convince those working families that they no longer have to pay a Medicare surcharge. But that is not the case at all. They are not going to see more food on the table or more petrol in the tank from this measure. This is just a measure to forgo saving for your health care from now through until you turn 60. Those same people will be looking to finding the health cover that they need; they will be looking at a public hospital system that is not delivering for them and they will be forced back to private health care and will have to pay the community rating. It is short-sighted. It is enormously attractive. I am sure when you did your polling it said, ‘If we can sell this off as making it easier for working families, it is something we should do.’

I think it is a great shame that many on the other side in government do not actually know the history of healthcare reform, how hard it has been to develop a truly blended healthcare model, how hard it has been to build up the number of Australians opting for private health cover. Oh, how easy it is to take that away. But you have done it in the most disingenuous way possible. This government has done it by writing to the health insurance sector and promising them it will all be okay. It is almost like one of those ‘Just wait until we get into government and we will change it all’ corflutes for some to have pinned up outside the health insurers. If only they had noticed the corflute. What we have now is that reduced base and the great tragedy that for so many Australian seniors their premiums will be going up. They are locked in and that is all a result of this government’s actions tonight.

Debate (on motion by Ms McKew) adjourned.