Joe Ludwig (Queensland, Australian Labor Party, Manager of Government Business in the Senate) Share this | Hansard source

I thank senators for their contribution in the debate this evening. The Fairer Private Health Insurance Incentives Bill 2009, the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2009 and the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Bill 2009 will amend various acts to give effect to the recent budget measure to introduce three new private health insurance incentives tiers. The global financial crisis forced the government to make tough decisions about what is right for Australia in the longer term. The rebate as it stands is quite simply unsustainable, particularly in the context of a budget that has taken a $200 billion hit as a result of the biggest global financial crisis in 75 years. Spending on the current rebate is growing quickly and is expected to double as a proportion of health expenditure over the next 40 years. The $1.9 billion saving to government expenditure over four years associated with these reforms will help to ensure that government support for private health insurance remains fair and sustainable.

This is a hard decision and one that was not taken lightly. But it is the right decision for Australia’s long-term financial future. The government supports a mixed model of balanced public and private health services, but we have to strike the right balance. These reforms have been carefully crafted and well targeted so as to provide a fairer distribution of benefits, because the government does not believe that low-income earners should be subsidising private health insurance for higher income earners. At the same time, higher income earners will also face increased costs if they opt out of their health cover. So we are using what is characteristically called the carrot-and-stick approach.

Senators in this debate have raised the potential impact on the public hospitals. Treasury has estimated that this measure will result in about 25,000 people being no longer covered by hospital-level private health insurance, of which about 8,000 people over two years might require admission. This must be considered in the context of our public hospitals having well over nine million admissions over this same two-year period. Hospitals will not be overwhelmed. This also needs to be considered in the light of the Rudd government’s record investment under the new $64 billion COAG agreement, where hospitals will receive 50 per cent extra funding over and above the old Australian healthcare agreements. This clearly demonstrates that the Rudd government is investing in the private health sector. These are facts and they are supported by the public hospital sector. Here is what the Australian Healthcare and Hospitals Association, the public hospitals peak body, had to say on 8 May this year:

The AHHA dismissed the concerns of the opposition in the private health insurance industry that means testing would result in increased pressure on the public health system.

Some speakers, of course, have asserted today and in this debate more broadly that private health insurance would suffer. In terms of the effect on premiums, these changes are expected to have a minimal adverse impact on private health fund membership, because about 99.7 per cent of insured people are expected to retain their private health insurance. This is because those higher income earners who receive a lower rebate will face an increased tax penalty for avoiding private health insurance.

We heard last year from the opposition and the industry lobby group, the AHIA, that lifting the Medicare levy surcharge threshold, the level at which high-income earners pay extra if they do not have private health cover, would cause an exodus from private health cover. They do really remind me of people who will not settle on the facts, who will not look at the evidence and come to a conclusion, but prefer simply to pick up rumours and continue to use scaremongering tactics. So back then they also predicted a mass exodus of people from private health insurance. Not only did that not happen but the latest official statistics from June 2009 show that there are now 211,000 more people with hospital-level private health insurance than there were at the same time last year. They did not get it right then. Here is what AMA President Dr Andrew Pesce had to say on the matter on Meet the Press on 7 June 2009:

The AMA has had some modelling done itself by Access Economics, and this would seem to show that there isn’t going to be a huge drop-out at this stage …

The opposition have no credibility and they are just scaremongering again. It is disappointing to see the opposition doing this. Quite frankly, either they do not understand the debate or they are simply scaremongering because they do understand the debate and have no argument to put. Anyone who experiences an increase in private health insurance costs due to a reduction or removal of the rebate will be on a higher income and will have received tax cuts through the budget that in most cases more than offset this increase in costs. But, of course, it is what you would expect from the opposition—nothing more than hot air; no debate but scaremongering tactics thrown in.

But I would like to thank the minor parties for their constructive contribution in this debate. It has not been an easy debate. I think the Greens contribution has been measured. The government’s policy on private health insurance comes as a balanced package of incentives and penalties—or carrot and stick, as I earlier referred to it as—and cannot be split and considered separately. The government supports a mixed balance of private and public health. This will make the system more equitable by ensuring that those who have a lesser capacity to pay are provided with more support.

I understand that Senator Xenophon has a longstanding interest in this. I know he has had useful discussions with the health minister on this issue and other issues. As I understand it, he suggests that we delay the passage of this legislation until the Productivity Commission reports back on a comparison of public and private hospital systems. The government looks forward to this report’s findings, which will dovetail into the government’s work on its response to the National Health and Hospitals Reform Commission. However, its findings will not change the fact that the global financial crisis has given the Australian budget a $200 billion hit, will not change the fact that rebate costs are ballooning unsustainably and will not change the fact that the rebate can be made fairer.

In addition, Senator Xenophon has given a compassionate speech, but those issues that we are faced with really do need to be reflected upon in making this decision. I ask Senator Fielding to do likewise. His contribution, as always, was about, in part, ensuring that families, particularly large families, are taken into account. I add this in thanking him for his contribution: singles earning $75,000 and under and families earning $150,000 and under will not be personally affected by these reforms. I can add more specifically that both the rebate and the NLS tiers will be increased by $1,500 for every second and subsequent child. It is a system that is designed so that families are taken into account.

In summary, this measure will make private health fairer and more balanced, and more sustainable in the long term. By maintaining a carefully designed system of carrots and sticks, this measure will have a negligible effect on both premiums and the public hospital system. This is the right thing to do for Australia’s economic future and to maintain a sustainable mixed public-private health system. With that contribution, I thank all of the speakers in this debate.

Question negatived.

Original question put:

That the motion (Senator Faulkner’s) be agreed to.