Carol Brown (Tasmania, Australian Labor Party) Share this | Hansard source

I rise to speak on this package of important bills for fairer private health insurance incentives. The government understands that our good health is our best asset. Being able to keep in good health and providing for those instances where we are in need of treatment is an important way to ensure quality of life for all Australians. It is important that we understand this and act in the best interests of Australia to ensure fair and equitable outcomes for everyone. We are committed to making our health system stronger and ensuring we give the best possible health care to Australians whenever they need it and wherever they live.

The Gillard government has always been very dedicated to giving people support to take out private health insurance, especially those on low incomes. We are committed to providing affordable private health insurance through the private health insurance rebate. The Fairer Private Health Insurance Incentives Bill will amend various acts to give effect to a budget measure to introduce three new private health insurance incentive tiers. This will have the effect of improving the lives of working people and ensuring greater fairness for people right across Australia.

The number of Australians taking out private hospital cover just keeps growing. In fact, new figures that were issued recently by the Private Health Insurance Administration Council demonstrate that more Australians are covered by private hospital insurance now than at any other stage in the past 36 years. In addition to this, about one million people have taken out new hospital cover since the government took office, which has raised the participation rate to 45.7 per cent. The Private Health Insurance Administration Council also found that, in the December 2011 quarter, the private health insurance industry reported a record profit of $461 million before tax, and profit before tax for the year to December 2011 was $1.27 billion.

The government's Intergenerational report 2011 highlighted that the private health insurance rebate is one of the fastest-growing parts of health expenditure. This is one of the reasons why we are putting forward changes to the rebate so we can make sure it will be sustainable as we move into the future.

These proposed modifications mean that the government is rebalancing the group of policies that support private health insurance. This will mean that those who can afford to pay for their own private health insurance will do so. Higher-income earners will get a reduced rebate and, as income increases, the rebate will drop progressively. In effect, the tiered system will be introduced for those people who earn higher incomes. It will set three different rebate levels and surcharge levels which will be centred on income and age. This has been described as reducing the carrot and increasing the stick to make sure that those who can afford to contribute more for their health insurance will do.

The government is committed to keeping the balance between public and private health systems so people who are high-income earners will get less government assistance for their private health insurance but will receive a rise in costs if they withdraw from their health cover. This is further evidence that we are committed to a sustainable private health system—and, to make sure that it stays this way, we want to rebalance the support for private health insurance so it provides a fairer distribution of benefits. I would like to take this opportunity to remind the chamber that 76 per cent of those people who have private health insurance and are on low or middle incomes will not see any changes to their current rebate entitlement. Low- and middle-income earners will not be affected by these reforms. In fact, nine out of 10 Australians will not be affected by these changes at all. To break it down, single people earning less than $83,000 a year and couples or families on less than $166,000 a year will not be affected at all by the changes—contrary to what those opposite would lead you to believe. The taxpayer funded subsidy decreases as incomes increase, but only singles earning in excess of $129,000 a year and families earning $258,000 or more in the next financial year will lose the rebate entirely.

We are proposing these reforms because, as a government, we firmly believe that low- and middle-income earners should not continue to subsidise the private health insurance of higher income earners through their taxes. Another positive aspect of these changes is that they will mean $2.4 billion in estimated savings to the government over the next three years and $100 billion over the next 40 years. This means that our support for private health insurance will stay fair and sustainable for the future. I keep mentioning that these changes are about being fair and sustainable, because that is central to the changes that we are making. For this rebate to continue to be sustainable these reforms must go through.

I would also like to remind the chamber that the means test will not result in large numbers of people leaving private health insurance or higher than usual premium increases. We know this because Treasury has estimated that 99.7 per cent of people with hospital cover will keep their insurance, with only around 27,000 people to drop out of private hospital cover. It is also unlikely that there would be any change to the cost of hospital or general treatment policies. The changes to the Medicare levy surcharge will encourage higher income earners to keep their private health insurance.

These figures are backed up by the Health care and insurance—Australia 2009 report, which found that even fewer people would drop out of private hospital insurance than estimated by the government. This report states that 99 per cent of privately insured high-income earners would stay in their private hospital cover after means testing if health insurers informed them of the other measures that would impact on them if they opted out such as lifetime health cover and the Medicare levy surcharge. This is about 16,000 people. The report also found that 26 per cent would consider downgrading their private hospital cover to a lower or cheaper level of cover.

The other two bills that form part of this package are the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill and the Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Bill. The Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill will amend the Medicare Levy Act 1986 to change the budget measure to enact three new private health insurance incentive tiers. The Medicare Levy Act 1986 sets out whether a person has to pay the Medicare levy surcharge in respect of their taxable income or that of their spouse. The person's income for surcharge purposes decides whether they must pay the surcharge, and if their income is above the prescribed income thresholds they will need to pay the appropriate level of surcharge. This bill will insert the new tiered system that will determine which level of surcharge must be paid where they do not have appropriate private health insurance.

The Fairer Private Health Insurance Incentives (Medicare Levy Surcharge—Fringe Benefits) Bill will amend the A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act to give effect to the budget measure to introduce the three new private health incentive tiers. This bill will make the private health rebate fairer by introducing the private health insurance incentives tiers. The A New Tax System (Medicare Levy Surcharge—Fringe Benefits) Act determines whether someone has to pay the Medicare levy surcharge in respect of a reportable fringe benefits total they or their spouse may have. The person's income for the purposes of the surcharge governs whether a person must pay the surcharge. If they earn above the prescribed income thresholds they will need to pay the applicable level of surcharge. This bill will insert the new tier system so as to decide which level of surcharge must be paid where they do not have appropriate private health insurance.

These bills also ensure that the government will commit to spending $165 million over three years, funded by an increase in the Medicare levy surcharge for higher-income earners, contained in the legislation, on public dental services. We are committed to improving Australia's dental system and making sure it is aimed at those Australians who are least able to afford oral health care without some form of assistance. This is another way that we are helping Australians with their dental and medical visits. As these proposed changes demonstrate, this government is strongly committed to ensuring that lower- and middle-income Australians are better off and are treated more fairly by the health system.

I would like to finish by restating the most important changes this package of legislation will enact. These reforms will provide a more just and fair distribution of benefits to Australians and will see those people on lower incomes who require the most help will receive the largest benefits. I commend these bills to the Senate.