Nicola Roxon (Gellibrand, Australian Labor Party, Minister for Health and Ageing) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

The Fairer Private Health Insurance Incentives Bill 2009 [No. 2] will amend various acts to give effect to the recent budget measure to introduce three new private health insurance incentives tiers.

The new arrangements will commence on the later of 1 July 2010 or the day on which the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Act 2009 receives royal assent or the day on which the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Act 2009 receives royal assent. However, they will not commence at all unless both the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Act 2009 and the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Act 2009 also receive royal assent.

This bill was previously introduced into the House of Representatives on 27 May 2009 where it was passed on 2 June 2009. This bill was previously introduced into the Senate on 15 June 2009. On 9 September 2009 a motion moved in the Senate that this bill be read a second time was defeated. This bill is being reintroduced into the House of Representatives to make the private health insurance rebate fairer.

The government supports a mixed model of balanced private and public health services. The government is also committed to a sustainable private health system, and to ensure it remains sustainable the government will rebalance support for private health insurance to provide a fairer distribution of benefits.

The new arrangements will make the private health rebate fairer. Firstly, singles earning $75,000 or less and couples and families earning $150,000 or less will received the same rebate as they currently enjoy and will not be adversely affected. Currently, however, approximately 14 per cent of single taxpayers who have incomes above $75,000 receive about 28 per cent of the total private health insurance rebate paid to singles—or twice their population share. Under the government’s reforms, these singles will receive about 12 per cent of the total private health insurance rebate paid to singles.

Similarly, approximately 12 per cent of couple taxpayers who have incomes above $150,000 receive about 21 per cent of the total private health insurance rebate paid to couples—again, almost twice their population share. Under the government’s reforms, these couples will receive about nine per cent of the total private health insurance rebate paid to couples.

These reforms will bring government support for private health insurance in line with the principle underpinning the Australian tax-transfer system—that the largest benefits are provided to those on lower incomes.

Spending on the current private health insurance rebate is growing rapidly and is expected to double as a proportion of health expenditure within the next 40 years.

Clearly this presents challenges in the current fiscal environment. These reforms will result in a saving to government expenditure of $2 billion over four years, which will help ensure that the government’s support for private health insurance remains fair and sustainable.

From 1 July 2010 the government proposes to introduce three new private health insurance incentive tiers. The tiers will mean high-income earners receive lower government payments for private health insurance but will face an increase in costs if they opt out of private health cover.

The government’s commitment to retaining the private health insurance rebate remains. Rebates for low- and middle-income earners will be unchanged with the government continuing to pay 30 per cent of the premium cost for a person earning $75,000 or less and couples and families earning $150,000 or less. The existing rebates for older Australians will remain in place for people earning below these thresholds—35 per cent for people aged 65 to 69 years and 40 per cent for people aged 70 years and over.

These people will continue to have no surcharge liability if they decide not to take out appropriate private health insurance.

The new tiered system will be introduced for higher income earners and will set three different rebate levels and surcharge levels based on income and age. The purpose of this is to reduce the carrot but increase the stick and ensure those who can afford to contribute more for their health insurance do so. The government does not believe it is appropriate for low-income earners to subsidise the private health insurance costs of high-income earners.

The first incentive tier will apply to singles with an income of more than $75,000 and couples and families with an income of more than $150,000. For these people the private health insurance rebate will be 20 per cent for those up to 65 years, 25 per cent for those aged 65 to 69, and 30 per cent for those aged 70 and over.

The Medicare levy surcharge for people in this tier who do not hold appropriate private health insurance will remain at one per cent.

Tier 2 applies to singles earning more than $90,000 a year and couples and families earning more than $180,000. The rebate will be 10 per cent for those up to 65 years, 15 per cent for those aged 65 to 69, and 20 per cent for those aged 70 and over. The surcharge for people in this tier who do not have appropriate private health insurance will be increased to 1.25 per cent of income.

Tier 3 affects singles earning more than $120,000 a year and couples and families earning more than $240,000 a year. No private health insurance rebate will be provided for people who fall within the third tier and the surcharge for avoiding private health insurance will be increased to 1.5 per cent of income for these people.

Annual indexation to average weekly earnings of the tiers will ensure that these changes remain equitable and can be maintained into the future.

The increased surcharge for people on higher incomes will help ensure that about 99.7 per cent of insured people remain in private health insurance. This is because those high-income earners who receive a lower rebate will face a higher tax penalty for avoiding private health insurance.

By retaining this system of carrots and sticks the reforms are unlikely to affect private health insurance premiums.

It is estimated that approximately 25,000 people may no longer be covered by private health insurance hospital cover and this might result in 8,000 additional public hospital admissions over two years. When considered against the fact that public hospitals have around 4.7 million admissions per year, the impact of this measure will be insignificant. And the measure will be particularly insignificant for public hospitals given the government’s investment under the new $64 billion COAG agreement, where hospitals receive 50 per cent over and above the old Australian healthcare agreements negotiated by the previous government.

Further, the historic $872 million investment in preventative health will assist in keeping people out of hospitals in the first place.

In summary, this measure will make private health fairer, more balanced and more sustainable in the long term. By maintaining a carefully designed system of carrots and sticks, it will have a negligible effect on both premiums and the public hospital system.

At the same time, low- and middle-income earners who chose to have private health insurance will continue to enjoy the benefit of a significant government rebate. I again commend this bill to the House.

Debate (on motion by Mr Coulton) adjourned.