Wednesday, 14 March 2012
Fairer Private Health Insurance Incentives Bill 2012, Fairer Private Health Insurance Incentives (Medicare Levy Surcharge — Fringe Benefits) Bill 2012, Fairer Private Health Insurance Incentives (Medicare Levy Surcharge) Bill 2012; Second Reading
It is a pleasure to continue my contribution to this important debate on behalf of all Australians. Before I was interrupted earlier, I was talking about the reliance of the government on the figures put forward and I was questioning how the Australian people can rely in any way, shape or form on the figures provided by the government when we know that historically the information they have provided in relation to a number of other policies has simply been untrue. They have gilded the lily—I think that is the kindest way it can be described without drawing further inferences on the character of those who make the assumptions. So I would suggest to the Australian people and to the Senate that they should rely more on the private industry figures and the concerns of private industry, because they are the people who are at the coalface and whose livelihoods are going to be directly affected.
An analysis by Deloitte, an independent group, shows that in the first year 175,000 people could be expected to withdraw from private hospital cover and a further 583,000 people could be expected to downgrade their cover. Over five years, it is expected that 1.6 million people will drop their cover. That is the equivalent of the entire population of my home state of South Australia; 4.3 million people are expected to downgrade their cover over the next five years, and that is close to the entire population of Queensland. The government owned insurer, Medibank Private, has forecast that 47,000 of their members alone will drop their cover and 92,500 of them will downgrade. This is considerably more than the 27,000 the minister has claimed will drop their cover throughout the entire sector. So let's not pretend that we can rely on the figures that this government has put forward. We have had similar figures put forward and advanced in any number of policy areas and we know that the government has always come up short; they continue to say what they want to say rather than detail the facts that are on the table. We also know that the contributions by the government senators in this debate have largely centred around Mr Abbott. It says to me that the government is so lacking in confidence in their own policy agenda that they seem reduced to attacking the Leader of the Opposition, who is without doubt the most effective leader of an opposition that we have seen in this country for a very, very long time, if at all.
In summary, the impact of these changes to private health insurance will not just be felt by those on higher incomes, who the Labor Party seem intent on beating up on all the time and who will suffer up to a 43 per cent increase in their premiums; it will be felt by all Australians with private health insurance and those who do not have private health insurance and rely on the public hospital sector. We know that private health insurance premiums are going to rise. We know that the burden on public health care will increase as more people withdraw. We know that Australians will all pay for Labor's ideological bent with longer waiting lists and higher costs. There will be $3.8 billion in additional recurrent costs for the public hospital system, and it is expected that the cost of dealing with the increased demand in public hospitals will outweigh the savings to government from the means testing of the rebate. As I mentioned earlier, $1 in savings is going to result in an expected $2 in additional costs for the public hospital system.
This is not economics. This is not rational; it is an irrational money grab by the government for a short-term benefit but it is also undermining the integrity, scalability and affordability of not only private health insurance but health care generally in this country. This is not considered economic management from the government and it is clear once again that the Labor Party is blinded by its misguided ideology, which is committed to class warfare, increasing the divide between Australians and discouraging Australians from not being reliant on the government. The change will have an impact on other services in the health field, with 2.8 million people with general treatment cover expected to withdraw and 5.7 million to downgrade over five years. The blind ideology of this government is damaging all Australians, our infrastructure, our general wellbeing and our welfare. I will be voting against the bill.
One of the greatest challenges facing our nation at the moment is the ageing population. One of the issues that we face is the ever increasing health budget associated with the ageing of the population. That is why these bills are so important. They shall restore sustainability to our health system. They shall ensure that our health system remains effective and efficient in the treatment of patients in both the public and private systems.
I want to dispel one of the illusions of those opposite. Make no mistake: this government remains committed to supporting people taking out private health insurance in this country. In fact, the number of Australians taking out private cover continues to grow, and there are 10 million people with private health insurance in Australia at the moment, the highest number of people since 1982. These bills are about creating the right balance in the provision of health services in our country. The government's support of a mixed model means that our health system can remain sustainable into the future and making these changes will allow the system to restore and rebalance their overall welfare and allow a fairer distribution of benefits.
The vast majority of taxpayers who have the benefit of private health insurance will see no change to their premiums. This is a far cry from the doomsday rhetoric coming from the opposition. The package will see single people earning $84,000 or less and couples or families earning $168,000 or less receive the same rebate that they get now. Those opposite know that the system is currently unsustainable and unfair to those on lower incomes. If this unsustainability is allowed to continue, this rebate will begin to swallow up larger and larger proportions of the Medicare levy each year.
Single people who earn more than $84,000 get almost 28 per cent of total funds available under the private health insurance rebate scheme; at the same time, people earning this much make up just 14 per cent of those eligible from the rebate. Couples earning more than $168,000 get almost 21 per cent of total funds available under the private health insurance rebate scheme but, at the same time, those people earning this much make up just 12 per cent of those eligible for the rebate. We have a situation where around 26 per cent of people eligible for the private health rebate get almost 49 per cent of the total funding available under the scheme—a perfect way to highlight the unfairness and instability of this scheme. This is a scheme and a system that was implemented by the Howard government. That government gave Australia a system that benefits wealthier people at the expense of people that are less well off in our community. It is the view of this government, the Gillard government, that that situation is unsustainable.
These reforms are about redressing this imbalance and ensuring that our health system does not crumble under the weight of a scheme not designed with equity in mind, and this government has a plan to address that inequity. Under these bills, the 14 per cent of single taxpayers earning more than $84,000 a year who have private health insurance will get around 12 per cent of the total funds available under the private health insurance rebate scheme. Under these bills, the 12 per cent of couples earning more than $168,000 a year who have private health insurance will get around 12 per cent of the funds available under the rebate scheme
That is around a quarter of the people eligible to access the system getting around a quarter of the funds available. Clearly, it is a much fairer and more equitable distribution of the funds under the scheme. It also means that our health system is placed back on a sustainable path for the future.
The government's legislation is importantly supported, wholeheartedly, by the Australian Healthcare and Hospitals Association. The AHHA is an independent peak body, an advocate for the Australian healthcare system and a national voice for universally accessible high-quality health care. The AHHA says that means-testing the rebate will result in a fairer use of public health funding and will not impose an additional burden on public hospitals. The AHHA is correct to say that this, and Treasury modelling shows us that 99.7 per cent of people with private health insurance will keep their policy under these measures.
When talking about maintaining private health insurance in this country and promoting a change in behaviour to ensure that more people take out private health insurance, it is the additional Medicare levy which has been the most effective public policy tool in promoting and encouraging people into private health insurance, not the health rebate implemented under the Howard government. Under the current system the private health insurance rebate is expanding at a rapid rate. The projections tells us that if it is unchecked it will double over the next 40 years as a proportion of health expenditure.
The government's proposed changes contained in the bills will result in savings of $2.4 billion over the forward estimates. These bills were before the parliament in June 2009 and March 2010. On both occasions they were opposed by those opposite and defeated. The cost to the budget is already in the line of $890 million. It is now time for those opposite to recognise the damage that they are doing, particularly given that they claim to be fiscal conservatives interested in reducing debt and wastage and ensuring that our budget outlays, particularly in health, are not unsustainable and unfair. Those opposite must recognise that a fairer and more equitable private health rebate system is in our national interest and in the interest of long-term viability of a sustainable health system. The time has come to stop playing politics with our health system. Opposition for opposition's sake means that over the next 40 years the cumulative impact on the health budget will be almost $100 billion. With a budget black hole of $70 billion it is hard to see why those opposite would be opposed to this measure.
The bills will introduce a three-tier private health insurance incentive scheme. The first tier will apply to singles earning more than $84,000 per year and couples earning more than $168,000 per year. People in this bracket will receive a rebate of 20 per cent. Between the ages of 65 and 69 the rebate increases to 25 per cent and after the age of 70 the rebate increases to 30 per cent. There is no change in the Medicare surcharge for people in this bracket. Under the second tier of this scheme, applying to singles earning more than $97,000 per year and couples earning more than $194,000 per year, people in this bracket will receive a rebate of 10 per cent. Between the ages of 65 and 69 the rebate increases to 15 per cent and after the age of 70 the rebate increases again to 20 per cent. For those in this bracket, the Medicare surcharge will increase to 1.25 per cent of income. The third tier will apply to singles earning more than $130,000 per year and couples earning more than $260,000 per year. This third tier will receive no rebate. Taxpayers in this income bracket who do not hold private health insurance will pay a 1.5 per cent Medicare surcharge. It is this surcharge that has been effective as a public policy measure, in ensuring an increase in people moving to private health insurance.
All of these brackets will be indexed to the average weekly earnings. These bills ensure that the balance is kept in our healthcare system—particularly important given the ageing of our population. These bills represent a careful and well-thought-out approach to the mix of private and public health care in this country. They end the waste in our healthcare budget. They restore sustainability, something that is clearly lacking in the design of the system under the Howard government. It is for those reasons that these bills must pass the Senate. They must pass because they are vital to our health system and they are vital to our national interest and the long-term sustainability of the greatest area in our budget, our health budget. I commend these bills to the Senate.
I rise to speak on the Fairer Private Health Insurance Incentives Bill 2012 and related bills. Anybody watching these proceedings today may well be experiencing a sense of deja vu. Why do I say that? The reason is that the changes proposed by this bill have already been rejected twice by this parliament since the government tried to implement them following the 2009 budget. Despite the fact that they have twice been rejected by this parliament, we find ourselves in this situation again today. The difference is that this time the bills, as Senator Thistlethwaite said, will go through the Senate. Why will they go through? It is because of nothing more and nothing less than a grubby little deal that the government had with the Australian Greens in order to sit on that side of the chamber.
There is nothing fair about these bills. When you look at the title of the bills you may find it slightly ironic. If you were not properly versed in the politics of envy you might think that you were going to get something from the government under these bills, looking at their titles. You might think you would be receiving an increase in your private health insurance rebate. But nothing could be further from the truth because, despite the titles of these bills, this is what this government does best: it deliberately misleads the Australian taxpayer. Why do I say that? Let us look at the history of what the now government said about the bills that we are currently debating in this chamber. The promise that the Labor Party made to the people of Australia prior to the 2007 election was this: if elected to govern, a Labor government would not change the private health insurance rebate regime for the 11 million Australians who take responsibility for their own healthcare needs by taking out private health insurance and thereby relieving pressure on the public healthcare system in this country. That was in 2007; it would not change. That was Labor's promise to the people of Australia.
Now let us consider the promise that was made by the Labor Party and the actual reality of what we are doing here today. The bills that we are discussing today do exactly the opposite of what the Labor Party promised they would do when they made their announcement to the people of Australia in relation to these bills. These bills do nothing more and nothing less than represent yet another in a long line of betrayals by the former Labor government and the current Labor government in relation to policy positions they had prior to an election and policy positions they suddenly adopted when they were elected to government.
The former Prime Minister Mr Rudd—who was also the Minister for Foreign Affairs and who is now merely the member for Griffith—and the former Minister for Health and Ageing Nicola Roxon promised repeatedly that they would not alter the health insurance rebates. Ms Roxon, when shadow minister for health and ageing, confirmed that the then Labor opposition commitment was that they would not increase the private health insurance rebate. Those of us on this side of the chamber questioned the sincerity of that statement, but so adamant was Ms Roxon in this promise that she said:
Federal Labor has made it crystal clear that we are committed to retaining all of the existing Private Health Insurance rebates, including the 30 per cent general rebate and the 35 and 40 per cent rebates for older Australians … The Liberals … try to scare people into thinking Labor will take away the rebates.
This is absolutely untrue.
But it did not stop there. On 20 November 2007 in a letter to the AHIA the now former Prime Minister stated:
Both my Shadow Minister for Health, Nicola Roxon, and I have made clear on many occasions this year that Federal Labor is committed to retaining the existing private health insurance rebates, including the 30 per cent general rebate and the 35 and 40 per cent rebates for older Australians.
Federal Labor will also maintain Lifetime Health Cover and the Medicare Levy Surcharge.
The promises actually continued. In May 2008 on Macquarie radio then Health Minister Roxon said:
… we continue to support the 30 per cent, 35 per cent and 40 per cent rebate for those Australians who chose to take out private health insurance.
The promises continued. In October 2008, in a speech to the Australian Health Insurance Association conference, Ms Roxon said:
Private health insurance consumers will still be able to claim the 30 and 40 per cent rebate and the lifetime health cover incentives will remain in place.
There is a pattern of behaviour forming here. The Labor Party made their promises to the Australian people very clear: if elected to govern, they would not change the private health insurance rebate regime. That is the pattern of behaviour. Those are the continual promises that were made by the Labor Party in the lead-up to not one but two elections. The promises went on. On 24 February 2009 in the Age newspaper Health Minister Roxon said again, 'The government is firmly committed to retaining the existing private health insurance rebates.' But I have to say that that promise is not nearly as good as the promise given by the current Prime Minister in writing in a letter to the Weekend Australian on 15 October 2005, when the now Prime Minister said:
The truth is that I never had a secret plan to scrap the private health insurance rebate … For all Australians who wanted to have private health insurance, the private health insurance rebate would have remained under a Labor government. I gave an iron-clad guarantee of that during the election.
The difference between Tony "rock solid, iron-clad" Abbott and me is that when I make an "iron-clad commitment", I actually intend on keeping it.
That could not be further from the truth if Ms Gillard tried. Ms Gillard's version of an ironclad guarantee must be very different to what the Australian people understand an ironclad guarantee to be. It clearly is very similar to the, 'If elected, we will not impose a carbon tax under the government I lead,' statement 24 hours before an election—and then, once elected, suddenly the imposition of a carbon tax is Labor Party policy.
This government, just like the former Labor government, have proved time and time again that, based on the promises that they make to the Australian people prior to an election and based on the policies that they impose on the Australian people once they are elected, they are not fit to govern. The very fact that we debating these bills which have already been rejected twice by the parliament goes straight to the Labor Party's hatred of private health insurance and to its politics of envy. These bills have nothing to do with reforming the private health insurance system. We all know that. But, in typical Labor style, they have everything to do with raising revenue to fix the massive black hole that the Labor government has created through its reckless spending. Quite frankly, these bills should not be listed as health bills but as appropriation bills, because Labor's fiscal incompetence means that it needs to rip money from the pockets of hardworking Australians yet again to fund its reckless spending.
What is worse is that the Labor government has admitted that it is not going to put any of the money it rips out of the private health system back into the public system. You would at least expect that if it was going to rip money out of the private system it might actually put it into the public system. Minister Plibersek had the opportunity to confirm this when she was interviewed by Steve Price on 15 February 2012. Ms Plibersek refused to commit to Labor putting any of this money back into the public health system. Ms Plibersek also refused to rule out Labor's making any more changes to the public or private health sectors, saying the Gillard government 'have no plans at the moment to make any further changes …'. Clearly, the key words in that statement were 'at the moment'. If Australians were unable to believe an ironclad guarantee from the Prime Minister that the private health insurance rebate would not be touched, Minister Plibersek's statement that Labor has no plans at the moment to make any further changes to the public or private health system should be seen for exactly what it is: absolutely worthless.
Putting aside the fact that these bills represent nothing more and nothing less than a blatant broken promise to the Australian people, among the huge issues we on this side have with these bills is that they are fundamentally flawed and will have a detrimental impact for young people. The bills have nothing to do with saving money. They have everything to do with the ideology of those on the government side who are determined to hit hard-working Australians who actually pay out of their own pockets to look after their own health needs. These bills are all about the Labor government's ideological push to target the so-called rich. The reality is, as it always has been, that Labor hates private health insurance. God forbid that you should actually put a bit of money away, take a bit of responsibility and ease the pressure on the public health system. If you do that the Labor government will slap you around and tell you that is not good enough. But this is where the Labor government has got it very wrong. The problem for the Labor Party is that, in targeting the so-called rich—and these people are far from rich: a doctor's salary and a nurse's salary combined is not rich, but it is under the definition of this legislation—the damage these bills will cause is going to be much more widespread and is going to hit those people who cannot afford to take out private health insurance. That is a great policy aim.
Whatever money the government tells the people of Australia it is trying to save by implementing these reforms, the actual effect of the legislation when it goes through will be that the consumer, the Australian people, will end up paying, either in longer public hospital waiting lists or in increased private health premiums. That is the fundamental flaw of this legislation. It is not the coalition saying that about this legislation; it is the experts who do this daily and who have done this day in, day out for decade after decade. They say that people will drop out of private health insurance because they cannot afford the higher health premiums. According to the conservative estimate provided by the government owned insurer Medibank Private, if this legislation goes through, 37,000 people will drop their cover and 92,500 will downgrade their cover. Again, this is not the coalition, these are Medibank Private's own figures. If you do not believe Medibank Private you might believe the independent analysis undertaken by Deloitte, which predicts that 175,000 people would be expected to withdraw from private health cover in the first year alone, with a further 583,000 people expected to downgrade their cover. Over five years that figure would increase to 1.6 million Australians who, as of today, hold private health insurance and who would drop that cover and another 4.3 million who would downgrade. That would lead to $3.8 billion in additional recurrent costs for the public health system as a result of this fundamentally flawed legislation. There are Australians who want to continue do the right thing because they want to take responsibility for their own health. It is not because they are rich; in fact, they are far from it. They say: 'If I have a little bit of extra money I won't spend it on a holiday, I won't spend it on frivolous things. I will actually insure my family and my children through the private health system.' But what will the Labor government deliver to you? Because of this legislation, premiums will increase by 14, 29 or 43 per cent depending on your income bracket. So much for helping the battler! That is a direct slap in the face to those Australians who, because they can, stand up and take responsibility for their own health needs.
For those people who are not as fortunate, who cannot afford to take out private health insurance and who rely on those who can to actually do so, the bad news is this: hospital waiting lists will increase. So if you thought it was bad in the public system now, believe you me, you have not seen anything yet—because if 1.6 million Australians are expected to drop their private healthcare cover over the next five years then they can only go to one other place, and that is the public hospital system. For those people who currently have no other access but through the public hospital system, guess what? The waiting list is going to get longer the minute this legislation goes through. Anyone who has ever queued at an emergency department will know that that is not funny, it is actually very serious. The bad news is that, if this legislation goes through, those queues at emergency departments will just get longer. Anyone who has had to wait in an emergency department with a sick parent, a sick partner or a sick child will know that emergency waiting times are already unacceptably high. Well, they are going to get a lot higher as soon as this legislation goes through.
In terms of statistics—and this is not the coalition speaking; this is the experts who have looked at this legislation and analysed it—the government's decision to means test private health insurance will mean that an estimated 845,000 new procedures will be forced onto the public hospital system, yet again putting further pressure on waiting lists.
This is an ideological war that the Labor Party has been pursuing for decades against people with private health insurance. The Liberal Party will not be supporting this legislation. We have never supported legislation of this type and, unlike the Greens and Labor, our position will not change.
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.
I come to this debate with a fairly firm belief. It is a belief that private investment in activities like health care is something that should be encouraged. It is a belief that the systems that we support out of this place—that are society, that are government, that are laws—should encourage people to invest privately where they can in things like their health care and the education of their children. That of course is not to say that government should not have safety nets in place. We absolutely should—and, as a country, we should be proud of the types of safety nets we have in these areas. Medicare provides an outstanding safety net in terms of health care for Australians. Could it be better? Do we wish that we could provide even better health care for all Australians? Of course. It is, indeed, an area of never-ending demand, but we should be proud that we provide that. We should be proud that our education sector is a great education system. Could it be better? Absolutely. Does it need areas of revival? You bet. Does it, perhaps, even need a real revolution rather than a bricks and mortar revolution? I would argue that it does. Nonetheless, we have a great situation when it comes to the types of safety nets we provide. We should continue to do that, we should fight to preserve them and we should fight to make them better all the time. But we should not do those things at the expense of private investment in people's health or education.
I now come to this legislation, the so-called Fairer Private Health Insurance Incentives Bill 2012, with the concern that this legislation undermines the principle that people should be encouraged to invest in their own health care. People who can afford to do so should have support, encouragement and incentives from government to invest in supporting their health insurance and their health care. Why is that important? Why does private investment help in this regard? Because the more people who can afford to invest in their health care do so out of their own pocket, the more there is left for government to spend on making those safety nets better. That is the fundamental point, or it should be the fundamental point, of this debate. The more we get Australians to dig into their pockets where they can afford to do so, take out private health insurance and take some responsibility for their health care, the more there is left in the general revenue bucket of taxation for the Commonwealth to support state governments, the public health system and public hospitals and to provide the best possible level of safety net for those who cannot afford to take out private health insurance. Regrettably this legislation fails that test.
This legislation will see fewer Australians invest in private health insurance. It will see fewer Australians take responsibility for their own private health care. It will see less money spent by Australians on private health insurance and less money spent by Australians in the health sector. What does it mean when Australians spend less of their own money in the health sector? It means that governments will be left to spend more or that resources and services within the health sector will be stretched even further. They will be the end results. We will see governments having to prop up the public health system with more money, to raise taxes in other ways, to increase revenue from taxpayers in other ways and to fund public hospitals, the Medicare system and the public health system because there is an increase in demand—or, as my colleague Senator Cash said before, we will simply see an erosion of the services available in the public health system and we will see longer waiting lists, greater delays and more people suffering as a result.
These are the principles on which I oppose this legislation. These are the principles on which I opposed the legislation that went before this so-called Fairer Private Health Insurance Incentives Bill, legislation that this government brought before us previously to try to rip away the incentives for private health insurance and, in doing so, to destroy that incentive, that mechanism, through which Australians invest by looking after themselves and putting more money into the health system.
It is not just the principle of what is good public policy that makes me oppose this legislation, it is the continuing betrayal of the Australian people by this government. Senator Cash and others have highlighted this, and I also highlighted it in my previous contributions when the Senate rejected the predecessors to this bill. It is a betrayal because it is the opposite of what the Labor Party said they would do when they went to the people as an opposition seeking election to government. Many times over, different representatives of the Labor Party stood before the Australian people, hands on hearts, and said, 'We won't be stripping away the incentives for private health insurance.' It is quite reminiscent of other promises, the most famous of all being Ms Gillard's promise that there would be no carbon tax under a government she leads.
It is, as my colleague Senator Williams and I were discussing, a matter and a question of trust. It is the trust that Australians should be able to have in their politicians. We all know in this place that perhaps that trust is at too low a level in the public mind. We should all question why that is the case. You do not need to look terribly far when you see politicians—and in this case Labor politicians time and time again—staring down the barrel of the camera during election campaigns, saying one thing, promising one thing and then doing completely the opposite after the election.
Let us have a look at what some of Labor's leadership team, Labor's spokespeople, said before they came into government about the private health insurance rebate and their approach to it. Let us have a look at what the now Prime Minister, then shadow minister for health, Ms Gillard said in a letter to the editor in the Hobart Mercury on 2 September 2004:
I grow tired of saying this: Labor is committed to the 30 per cent private health insurance rebate.
Ms Gillard was growing tired of saying it. She took the voluntary step, on her own volition, of writing a letter to the editor of the Hobart Mercury to say that she grew tired of saying how committed Labor was to the 30 per cent private health insurance rebate. It is a shame that that commitment did not last when they went into government. It is a shame that that commitment was only about winning votes from opposition. Ms Roxon, now the Attorney-General and previously the health spokesperson and, of course, the health minister who introduced this legislation trying to dismantle the private health insurance rebate, in a media release on 26 September 2007, which we will assume she authored or approved of—and, like a letter to the editor, this was hardly a format in which she was verballed or taken out of context in any way—said:
On many occasions for many months, Federal Labor has made it crystal clear that we are committed to retaining all of the existing private health insurance rebates, including the 30 per cent general rebate and the 35 and 40 per cent rebates for older Australians.
'On many occasions for many months', she said, so of course it was not just a one-off media release by Ms Roxon, trying to reassure voters running up to the 2007 election. No, it was on many occasions for many months that she and the rest of the Labor Party team made this solemn promise—over and over and time and again—that they were committed to the private health insurance rebate, a commitment that was actually only valid whilst they were in opposition.
Mr Rudd, by then the Prime Minister—so, indeed, the alleged commitment remained into the early years of government—said at a press conference on 25 February 2008:
The private health insurance rebate remains unchanged and will remain unchanged.
That must have been one of the most pithy, short and succinct quotes that Mr Rudd ever gave. His time as Prime Minister was renowned for convoluted language and long, hard-to-decipher and incomprehensible words that he would throw in to mask whatever his true intent was. But on this occasion there was no doubting his true intent. The true intent of the then Labor Prime Minister was that the private health insurance rebate would remain unchanged. He was, of course, just saying what they had said in opposition.
On 24 February 2009—by then 18 months into government—Ms Roxon said to the Age newspaper:
The Government is firmly committed to retaining the existing private health insurance rebates.
So firmly committed were they to retaining the existing private health insurance rebates that the commitment could not even last for the rest of 2009. They could not even last the year out before the commitment evaporated and then we saw the government attempting to unwind the existing private health insurance rebates. We have seen them try it several times throughout this parliament, and thankfully this chamber, the Senate, has stood in the government's way. It has stopped the government from breaking its promise—a promise that would see an undermining of private health insurance and private investment into health care in this country and, as a result of that, a higher cost for the public health sector and for taxpayers in this country.
The Senate has blocked this legislation before. I know, as I stand here and reflect on the contributions of other senators, that the chances of it doing so again look somewhat slim. But I implore my colleagues to reconsider their positions on this bill. I implore those opposite—the government and their governing partners, the Greens—to reconsider where they stand on this legislation and to think about whether they should in fact honour the words of Ms Roxon, of Mr Rudd, of Ms Gillard and of many other Labor spokespeople who promised, time and time again, not to do exactly what it is that they are asking this Senate to approve of them doing today.
Of course, we know that Labor desperately need to prop up their budget. With all of the waste, all of the mismanagement and all of the billions of dollars of debt that no doubt we will see in the not too distant future, the government will come back to this chamber and say, 'Oh, you know that increased $250 billion debt ceiling we got the parliament to approve recently? Well, that is not enough. We're going to need more.' I am sure we will see that bill and will have that debate in this place during the course of this year. With such massive debt piled up during the reign of the Rudd and Gillard governments, it is obvious they are desperate to clutch dollars from wherever they can get them. In this case, they are of course targeting those who seek to make that investment in private health insurance.
So who are the types of people who invest in private health insurance? Are they all the rich silvertails that we get the impression of? Indeed, the new health minister, Ms Plibersek, stands there at the dispatch box in the House of Representatives and talks about the Parliament House cleaner subsidising the health insurance of the health minister or other members of this place. Is that the situation we have? Well, no; patently, it is not. The statistics indicate that there are 5.6 million Australians who have private health insurance who have annual household incomes of less than $50,000 and 3.4 million who are on an income of less than $35,000. So many people struggle to be able to afford their health care, to be able to make that investment.
I know what those opposite will say in response to that. They will say, 'These are not the people targeted by these changes. Because there is means-testing, these people will still get the rebate.' But that ignores, as this government so often does, the fundamentals of how something like the private health insurance market works. Something like the private health insurance market, and any insurance market in general, relies upon having the broadest possible coverage, relies upon having the greatest number of people and, in particular, relies upon having the greatest number of healthy people in it to underwrite the finances of the system.
What we see, and what all of the evidence points to as a result of this legislation, is that fewer people will have private health insurance going forward. More Australians will look at the fact that the government is stripping away the incentive for them to take out private health insurance and decide that it is just not worth continuing to pay it. They will not make that investment themselves anymore, and that means fewer dollars going into the overall pool of the private health insurance fund. It means fewer people there, and the result of that will be that we will see higher premiums in the future. The Deloitte report that looked at this estimated that in the first year alone 175,000 Australians will withdraw from private hospital cover and 583,000 will downgrade their cover. It estimated that over the next five years 1.6 million Australians will withdraw their private hospital cover should these changes be implemented and 4.3 million Australians will downgrade their cover. It is important to remember and reflect on both of those statistics: those who totally opt out and those who downgrade. In either event they are reducing the extent of private investment into their health care and the size of that private insurance pool and, as a result, the private health insurance industry will need to put their premiums up. In fact, the same Deloitte report predicted that we would see a 10 per cent rise in premiums above what would otherwise have been expected as a result of this legislation. It becomes this vicious spiral where the higher costs mean that more people drop out, and the more people drop out the higher the costs. That is the spiral—a death spiral of sorts—that this government will plunge the private health insurance industry into as a result of their changes.
What will that mean? What are the flow-on effects of that for the public system? The Deloitte report found that another 845,000 admissions to public hospitals will be required over the next five year. To put that in dollar terms, so far as it can be estimated, there will be an additional $3.8 billion in recurrent costs for the public hospital system as a result of these types of changes. These are massive costs that no government in this country is currently well placed to meet. State and federal governments alike are all grappling with deficit budgets and significant debts with only one or two exceptions to that. So we have a situation where either the debt and deficit will go up, the rate of tax will have to go up or, of course, the service delivery will be reduced and more people will be left to languish on the waiting lists.
Some people listening will have thought the numbers of people involved in the insurance industry who do make that personal investment of their own accord are quite remarkable, and they are remarkable. In South Australia, in the electorate of Hindmarsh, 69 per cent of voters were estimated to have private health insurance when I last spoke on this matter. That is more than 89,000 Hindmarsh inhabitants covered, or 68,000 voters covered by private health insurance. These people will be the ones who suffer, as they will in every electorate right across the country. Members like Mr Georganas and others should answer why they think the government deserve to break the promises made on countless occasions to keep this and why it is that they are hell-bent on destroying private investment in the health insurance industry rather than encouraging people to add to the pool and to grow the size of money available for the health care of all Australians into the future.
I rise to speak to the Fairer Private Health Insurance Incentives Bill 2012 and related bills, a package introduced by the Gillard Labor Government. At the core of Australia's progressive income tax system, supported broadly by both major parties over a long period of time, is the basic observation that some in our community do not have the earning power of others and that taxing those people at the highest rate would be unjust. It is based on the observation that those who reap the prosperity of a strong and stable economy should give back to the society that has created the conditions for their success. It is also based on the understanding that those who earn more are able to satisfy their fundamental needs and have the opportunity to use their additional income to make choices about their lifestyle and their priorities. These choices are less often available to those on lower incomes, where a higher proportion of money earned goes on the basics and the essentials.
In this country we have a robust public health system. All Australians are entitled to primary health care and to hospital cover through the Pharmaceutical Benefits Scheme and our universal Medicare system. Labor has always been committed to the universality of healthcare because we have always been committed to equal access to the fundamental determinants of a quality of life. But Labor's approach to public policy—and the approach reflected profoundly in the Australian character—is one of fairness. That so many people should have the opportunity to use their prosperity to expand their life choices is something about which Australian society should be proud and Labor certainly is. But it is the goal of our party to extend those choices and that freedom to all Australians. The options available to the few should never be at the expense of the rest of society.
Throughout the tenure of the Howard government, that is exactly what happened. The coalition pursued an agenda that was not about good, sound public policy and economic management. Instead the coalition dedicated itself to strengthening its support amongst higher income Australians, establishing a number of vast spending programmes that directed money not where it was needed but instead where it was politically advantageous for them. While there are a number of examples of this policy—from youth services to tax cuts to education—there is no clearer example than the subject of today's bills: the private health insurance rebate.
This scheme was ostensibly designed to encourage Australians into private health insurance and take the pressure off the public system—a euphemism constantly employed by the coalition for ripping money out of basic health services. This scheme, in its universality, was based on the notion that the private health insurance market, in and of itself, does not provide adequate incentives for Australians to subscribe to it, quite contrary to the market fundamentalism usually espoused by the coalition. Under the Howard scheme, approximately 14 per cent of single taxpayers who have incomes above $80,000 per year received about 28 per cent of the total private health insurance rebate paid to singles based on their average premium. Approximately 12 per cent of couple taxpayers who have incomes above $160,000 per year receive about 21 per cent of the total private health insurance rebate paid to couples based on an average premium. These figures represent a significant overrepresentation in expenditure towards these population groups—the population groups that are far less likely to require a rebate in order to have access to private health insurance. In fact, were their rebate levels to be reduced in the manner proposed by these bills, it is predicted that 99.7 per cent of private health insurance policyholders would choose to retain their cover.
This means that Australian taxpayers on low and middle incomes are subsidising Australians on very high incomes on the basis that those on higher incomes deserve an incentive to opt for private health. It is incomprehensible to me that fairness could mean that those who work in aged and community care or as cleaners or childcare workers should subsidise the very well off. Ignoring the fact that this rebate could not achieve its function of providing a genuine expansion of choice or incentive into the private health system, the Howard government chose to introduce this policy which has now become the fastest growing area of health expenditure. This is typical of the fiscal management of the coalition which has always chosen to redirect precious public money to an area of political, rather than social, gain at the expense of the broader health system.
The bills before the chamber right now represent an effort by this Labor government not only to build fairness back into the system of private health insurance incentive system but also to restore fiscal and budgetary responsibility into the management of our health system. In the 2009-10 budget, the government announced that it would introduce means testing for the private health insurance rebate and increase the Medicare levy surcharge for people on higher incomes who do not hold private hospital cover. Means testing for the rebate will be implemented over a number of private health insurance incentive tiers. The tiers will establish four income categories, the first of which—singles earning $84,000 a year or less and families earning $168,000 a year or less—will continue to receive the full rebate. These are the people who do not necessarily have access to the suite of options for discretionary spending, like private health cover. These are the people who will benefit from some assistance—assistance that just might determine whether they are able to access private health.
Despite nine out of 10 Australians not being affected by these changes, these reforms will result in savings to the public balance sheet of more than $2.4 billion over three years, which will be reinvested by this Labor government into services that all Australians need. As the Minister for Health said when she spoke on these bills in another place, it is next to impossible to find another item from the health budget like this one which can be cut without an appreciable effect on the services that Australian taxpayers enjoy. There could hardly be a clearer indication that the scheme was poor public policy to begin with. Only 10 per cent of Australians will be affected by this change and, contrary to the opposition's assertions, only 0.3 per cent of Australians are predicted to alter their cover as a result.
The coalition asserts that, as a result of changes in the private health insurance rebate, premiums will rise, putting pressure on lower-income policyholders. Of course, it does not take an economist to notice that premiums for private health insurance—indeed, the cost of health care generally—go up each year. When the Leader of the Opposition was the Minister for Health and Ageing, rises in private health insurance premiums were as high as seven per cent per year. Premium rises are averaging around five per cent a year now, thanks in part to the strong and stable private health sector which this government has fostered. But the point is that the Labor government supports industry and the health sector with fairness and, in order to make access to private health both fair and responsible public policy, serious reform of this type is needed.
Where the coalition designed policy for the wealthy minority, the Labor Party will always dedicate itself to designing fair policy for a strong society, the settings for an economy in which all people have the chance to succeed. While I have no doubt that the private health insurance rebate is appreciated by those who received it under the Howard government, it is not and should not be the priority of government spending when those in genuine need of assistance still struggle. There is a clear correlation between household earnings, socioeconomic status and health outcome.
In my home state of Tasmania, we are fortunate to enjoy a unique quality of life. Sadly, many do not have the health to enjoy it. In fact, health inequality is one of the biggest challenges now facing Tasmania, the state with the second highest burden of disease and injury of all states and territories. The average Tasmanian adult working full time earns less than $1,200 per week, making the average income less than $70,000 per year. The high levels of cardiovascular disease, cancer, diabetes, asthma, lung disease, kidney disease, arthritis and depression that Tasmanians experience disproportionately affect those with lower incomes. These are the people who need government assistance. These are the people to whom welfare must be directed, those in genuine need of the compassion which binds together Australian society. These are the people for whom Labor is dedicated to directing its support, those who do not have the freedom about which this opposition mouths platitudes but denies in practice.
This bill is not about undermining the private health insurance sector, a sector that has grown by 960,000 more Australians holding policies than when this government took office and a sector that continues to grow. It is about recognising that if we are genuine about providing health solutions to people then we must direct government funding to the areas in which there is genuine need. It is about recognising that if we are to provide choice and fairness we must make sure that where government subsidies are used to encourage participation they are a true and useful incentive. And most of all these bills are about recognising that good public policy must reflect the character of this nation and be imbued with the sense of fairness that is at the core of being an Australian.
I have to say, by way of an opening, that plans to means-test the 30 per cent private health insurance rebate threaten to strangle Australia's health system, will directly affect an estimated 2.4 million health fund members and will mean a return to overcrowding and long waiting lists in public hospitals.
Unlike many other countries, we are fortunate in Australia to have a very effective health system which, by and large, is available to all, often at no cost through the Medicare system. The teenager injured on the football field, the young mother enduring a difficult birth, the middle-aged man with a heart attack and the elderly woman suffering a stroke know that help is never very far away, be it in the emergency room of a hospital, via the Medicare phone helpline or whatever. Those who suffer will rest a little easier knowing that their tax dollars are being well spent in catching them when they fall.
Sadly, however, the Gillard government continues to hack away at Australia's healthcare system, which once set the standard for other first world countries around the globe. In recent months we have seen the government muscle in on the recommendations of the independent Pharmaceutical Benefits Advisory Committee on the listing of PBS medicines. Similarly, funding for medical services like joint injections and cataract surgery were slashed last year while access was reduced for psychological services and GP involvement in psychiatric management, meaning less-effective service for those people who are in such need of it and who cannot wait the long time it sometimes takes to see a psychiatrist. Dr Gillard's latest health legislation, the fairer private health insurance incentives bills, continues the theme of downgrading our health services.
As I said at the beginning, plans to means-test the 30 per cent private health insurance rebate threaten to strangle Australia's health system, will directly affect an estimated 2.4 million health fund members and will mean a return to overcrowding and long waiting lists in public hospitals. It is ironic that this rebate was first introduced to deal with the very problem of overcrowding in public hospitals. Means-testing private health insurance will make the scheme unavoidable for many people, and those who until now have saved the extra dollars each week to take up private health cover in the advent of the worst are about to have their good night's sleep taken away from them. They will feel the insecurity of not knowing whether or not they can get quick treatment for any medical problems from which they may suffer.
Having worked in the medical profession for over 30 years, I recognise the need for adequate private health insurance incentives schemes, especially for low-income earners. As I have said here before, people in most countries think their health scheme is the worst in the world because they have heard anecdotal stories about someone's grandmother not being treated immediately in a public hospital, or someone's child taking a long time to be seen in a casualty department, but the Australian health system is widely recognised as the best of the so-called worst schemes in the world. It is the envy of the world because our private health sector is a vital complement to the public health system. Our system is a balance between private and public medicine and, as such, it means that Australians are treated quickly and at a very high standard.
Private hospitals treat 40 per cent of all patients in Australia, with some 3.5 million people being treated privately in 2009-10. Private hospitals perform the majority of elective surgery in Australia—around 64 per cent of it—with 10.2 million Australians holding private health insurance cover. The simple fact is that the public system does not have the capacity to deal with the demand for its services. Unfortunately, this measure will exacerbate that situation, and will mean a return to long waiting lists and delays in treatment that will see people abandon their private health cover and seek treatment in the public sector.
As it stands, the government's proposal has twice been rejected by the parliament. It was introduced in the last parliament, despite explicit promises at the 2007 election by the then Minister for Health and Ageing, Nicola Roxon, who said:
Federal Labor has made it crystal clear that we are committed to retaining all of the existing private health insurance rebates.
The then Prime Minister, Kevin Rudd, also weighed in, saying in November 2007:
Both my Shadow Minister for Health, Nicola Roxon, and I have made clear on many occasions this year that Federal Labor is committed to retaining the existing private health insurance rebates, including the 30 per cent general rebate and the 35 and 40 per cent rebates for older Australians.
Sadly, the number of Australians able to afford private health cover will decrease dramatically if this proposal comes into law, and the number of people in private health insurance schemes will fall almost as dramatically as the Prime Minister's polling numbers, and that is really saying something.
Our private health system relies on community rating to maintain its services, and people are not penalised as a result of their prior health history. Now there is to be means-testing of the scheme younger Australians may not need to access the health system, leaving those who really do need to access it able to claim from the pool of money which the broader membership contributes to the private health insurance schemes. However, with more and more people being pushed back into the public sector, Australia's public health system is set to become overcrowded. The private sector is set to become far more expensive, and the infrastructure which it represents will be underutilised, as it was in the past.
The coalition, while in government, introduced private health insurance rebates because of falling membership of private health insurance funds and great overcrowding in the public hospital system. Once the rebate had been introduced, membership of the private health insurance funds went up by 10 per cent, from 34 per cent to 44 per cent of the population. This, I am afraid, will be reversed when this new system is introduced, if it is. Deloitte predicts that some 175,000 people in the first year alone will abandon private health cover. A further 583,000 people would be expected to downgrade their policy to a lower level of cover, putting their health and the health of their families at risk. The Deloitte study estimates that in just five years 1.6 million people will say no to private cover and 4.3 million will move to a lower level of cover.
Where will they go? Obviously they will go to the public hospital system. And the public hospital system is already overcrowded and bursting at the seams. It simply cannot support greater numbers. This is a disaster in the making. Labor is wrong to imply that private health insurance is for the rich. There are 5.6 million people with private health insurance who have annual incomes of less than $50,000 a year and 3.4 million who have an annual household income of less than $35,000.
In a blatant attempt to pass the buck, the Commonwealth will force the states to incur an extra $3.8 billion for health services as these increased numbers of people come to the public sector. That is typical of the approach of the Gillard government. The coalition, by contrast, believes all Australians should have access to affordable health care and real choice in managing their healthcare needs. For this reason we oppose this legislation. We think it is going to be a disaster for the Australian public as people will find themselves on surgery waiting lists which will have more names, perhaps, than the list of Labor's prime-ministerial aspirants! The Australian public will be facing long delays before treatment is available to them.
The Australian taxpayer cannot afford to have this strain placed on the public hospital system simply because the government cannot manage the country's wallet. This will be a complete disaster, and this legislation, if it is enacted, will represent a very black day for the Australian health system.
I rise to support the government's changes to the private health insurance rebate system, which will inevitably make things fairer for everyone. Ordinary hardworking Australians have been subsidising the health insurance premiums of some of the wealthiest people in the country. This is not sensible policy and it is not fair. That is why the Gillard Labor government is proposing the Fairer Private Health Insurance Incentives Bill 2012, which will put an end to government financial assistance for high-income earners purchasing private health insurance. People who work hard, earn substantial incomes and pay their fair share of taxes are entitled to spend their money as they see fit. But this government believes that people who work just as hard but earn much less should not be expected to subsidise them.
These new arrangements will only begin to affect singles who earn more than $84,000 annually or families earning in excess of $168,000. The 10 per cent of highest income earners in our community will see progressive reductions in the size of their rebates as their incomes increase beyond this level. Only singles earning more than $130,000—that is one person living alone and earning more than $130,000—or families earning more than a quarter of a million dollars a year will lose their eligibility for any rebate. These changes will enable the government to make sure that every health dollar is spent in the best possible way. And within the health portfolio we are determined that every dollar is spent in the most effective way. So we will do away with this perk for the wealthy and invest in the new treatments, new medicines, and new technologies which will enable Australians to live happier, healthier lives.
The shrill cry from opposition members, as we have just heard, that the sky is falling—that people will abandon private health insurance in significant numbers—simply does not stand up to rigorous assessment. The federal Treasury has carefully examined the matter and has reported that less than one half of one per cent of Australians will give up their private health insurance as a result of these changes. In 2008, the government increased the Medicare levy surcharge threshold and insurers predicted that 913,000 people would drop their private health insurance cover. The reality was that the number of people with private health insurance cover continued to increase and, as at September 2011, 10.4 million Australians had hospital cover
This is the highest number since the introduction of Medicare. So the Henny Pennies sitting on the benches opposite me can relax. The sky is not falling. The future for hard-working Australians, though, looks positive with this major reform that the government is introducing.
In the Northern Territory, we are on the brink of an economic boom the likes of which we have never seen before. The $34 billion INPEX gas development is just the most high-profile of a number of new investment initiatives in the Territory which will underpin a period of unparalleled economic prosperity. As Territorians prepare to roll up their sleeves and make this country even greater, they will applaud the actions of the government as we remove inequity in the health insurance arrangements which prevent ordinary Australians from getting a full return on their efforts.
That is why it is so concerning to hear that my fellow Territorian the Country Liberal Party member for the Darwin-based seat of Solomon is objecting to this progressive legislation. These amendments will make life just a little bit easier for the thousands of low- and middle-income earners who live within her electorate, in the cities of Darwin and Palmerston, yet the member for Solomon will not support these changes. It seems unfortunate that, as she is busy managing more than 10 properties that she owns in joint ownership, the member for Solomon cannot possibly understand the circumstances of the many thousands of people in her electorate who are simply working to pay off their first house. Rather than empathise with these families for whom home ownership is but a distant dream or those who struggle to pay the rent from one month to the next, just like all of those opposite me the member for Solomon wants these people to subsidise her very own private health insurance.
It is no crime to own at least 11 houses, but the question that hangs in the air is whether a real estate tycoon is the right person to represent the interests of battling Territorians in the national parliament. A woman with two young children who earns $36,000 a year as a certificate III qualified childcare worker in Palmerston needs this 30 per cent rebate to afford private health insurance, but she certainly cannot afford to continue to subsidise the private health insurance payments of those earning four or five times her salary, such as the member for Solomon. Those with large real estate portfolios have benefited from this inequitable situation, whereas the ordinary Australians who pay rent on those houses and may not themselves be able to afford private health insurance subsidise the private health insurance of the people who own the house that they rent. The majority of households in the electorate of Solomon do not have private health arrangements, and most who do will not be affected in any way by these changes.
Australians are not fools and a sense of a fair go is deeply ingrained within our psyche. That is why the Australian Labor Party wants to amend this legislation. We want to end the perverse twist on the Robin Hood ideal, where money is currently being taken from the poor and given to the rich. Nine out of 10 Australians will not be affected by these changes at all. There will be no discernible pressure on the public health system and no significant impact on Territory household budgets. In the Northern Territory, if you need accident and emergency treatment, there is only the public hospital to go to. In the Northern Territory, if you have a child that is chronically sick, there is only the public hospital to go to as that is where the paediatric ward is. Despite that, people in the Northern Territory still try to take out private health insurance. They simply now want a fair go in order to continue to afford that insurance policy.
That is why the member for Solomon has to decide if she wants to represent only the interests of the one in 10 people in her electorate who are very well off, including herself, or whether she will show some regard for the much larger number of Territorians who work hard just to make ends meet. Will she acknowledge those who are unemployed, those who have a disability, those who do not speak English as a first language or those who, for a range of reasons, sometimes find life to be a struggle? I am asking her to take this opportunity to support this legislation which will remove just a little bit of the burden from the shoulders of those Territorians who are finding the going tough. Mahatma Gandhi once observed:
A nation's greatness is measured by how it treats its weakest members.
So why would you continue to defend a system in which the poorest in society are subsiding the wealthiest members in society when it comes to private health insurance? This situation is simply and utterly unfair.
The Australian Labor Party makes no apology for our fundamental belief that ordinary working Australians are entitled to their fair share of our nation's bounty. That is why we have invested so heavily in improving our schools to skill up young Australians for work in the new economy; that is why we are building the long-awaited National Disability Insurance Scheme, so that people with a disability can get the support they need; and that is why we are amending this legislation to ensure that the poorest Australians who want private health insurance will no longer be asked to subsidise the wealthy, who can well and truly afford to pay for their own private health insurance. It is not the Labor way and it is not the Australian way.
The Labor Party is a party of sound economic management. It is indisputable that Labor steered this country through the global financial crisis in better shape than any other comparable economy in this world. We will continue to apply the principles of sound economic management to make this country stronger and fairer, particularly in the health system, for all Australians. That is why I am supporting this range of legislation. I am of course disappointed that the 'no-alition', the party on the other side of this chamber, who want to do everything except support our reforms and continually say no to everything we put up, will not back off and put their hands up for legislation that is fairer, that is just and that will provide for a better health system in this country.
I rise to speak on the Fairer Private Health Insurance Incentives Bill 2012 and related bills. I ask: what is this bill doing in the Senate? I will tell you why it is here. Let us go back to the untruths spoken on 20 November 2007. Federal Labor leader Kevin Rudd wrote to the Australian Health Insurance Association and said:
that is you lot over there—
is committed to retaining the existing private health insurance rebates, including the 30 per cent general rebate and the 35 and 40 per cent rebates for older Australians.
I am right that that lot over there are federal Labor, aren't they? That is what the then Leader of the Opposition, the politically slain Prime Minister, Mr Kevin Rudd, had to say on 20 November 2007. Two months earlier, in a media statement, shadow minister Roxon said:
The Liberals continue to try to scare people into thinking Labor will take away the rebates.
This is absolutely untrue.
My colleague Senator Birmingham spoke an hour or so ago. We were chatting at the side of the chamber and we were saying that people have lost trust in the government. The Australian people do not trust you. They do not trust you because you said before the 2007 election, 'There will be no new taxes. We're not going on a taxing spree.' Along came the luxury car tax, the alcopops tax and the flood tax. We have got the mining tax coming; the carbon tax has been through. They are a government of taxation, because they have blown the dough. They are broke. They have sent us into $232 billion of gross debt as of last Friday.
Here we have another broken commitment by federal Labor—that lot over there, the Australian Labor Party. I must clarify that, because we do have a representative in this Senate from the Democratic Labor Party, and that has a totally different attitude from the Australian Labor Party. I ask the question again: what is this bill doing here? Let's check out the member for Lyne, Mr Oakeshott, who supported this bill in the other place, in the House of Representatives.
'A man of vision.' I would say a man of betrayal to his electorate, Senator Feeney, who was complicit in the carbon tax and complicit with the Prime Minister, Ms Gillard, who said there would be no carbon tax. Mr Oakeshott was complicit, along with Mr Windsor, in betraying the Australian people with that broken promise. I go back to my point: the Australian people do not trust you, and why should they, when you are doing backflip after backflip with your money mismanagement and your waste and your new taxes, crippling the private sector? That is what you are about. Let us have a look at what Mr Oakeshott did. Mr Oakeshott is prepared to walk away from the people of Lyne on this, just as he did on the carbon tax and the independent youth allowance, where the people in Lyne, New England and those inner regions suffered until my colleague Senator Nash fought the fight of millions to finally bring the government around to having some sort of conscience for those people from regional areas who want to go to university. I will quote from the Port Macquarie News of 11 February. Under the headline 'Nurses make their feelings known' it says:
Dozens of nurses from Port Macquarie and Coffs Harbour rallied outside Rob Oakeshott's electoral office this morning, in an attempt to sway the MP away from voting for means testing the private health insurance rebate.
Perhaps unsurprisingly, Mr Oakeshott's Clarence St office was empty.
Here is another one, from the Port Macquarie Independent, headed, 'Oakeshott's health decision slammed'. It says: 'Ramsay Health Care chief executive Christopher Rex has hit back at Rob Oakeshott's decision to support means testing of the private health insurance rebate, saying that, in his view, the legislation represented poor policy and could have an impact in rural and regional areas like Port Macquarie. According to Mr Rex, Mr Oakeshott never visited the Port Macquarie Private Hospital.' That is not surprising. I will repeat that: 'According to Mr Rex, Mr Oakeshott never visited the Port Macquarie Private Hospital to hear the concerns of doctors but relied on one line out of a release in August 2011 as the key justification for his decision.' This is amazing. That is what this legislation is doing here in the Senate and that is why it is in front of us: Rob Oakeshott sided with his Labor colleagues—as he did after the August 2012 election and gave the government the numbers to pass it through the House of Representatives.
Here is my concern: people will leave the private health system. They will leave in droves and downgrade their level of insurance because they simply cannot afford it. It will be the Aussie battlers, those working families that Labor once used to stick up for about a hundred years ago and have not since. They are the ones who will downgrade their level of insurance. Some will leave. There is no doubt that some will leave. Let us have a look at what will happen then. As they leave, the insurance companies will be forced to raise their premiums. Then more will leave and, as they leave, they will simply put more pressure on our public health system—our public hospital system run by the states. I asked a question in this place a couple of years ago about the Greater Western Area Health Service in western New South Wales. The butchers had cut off supplying meat to Gilgandra and Coonamble hospitals. Why? Because they had not been paid. That was the state of New South Wales Health—under, of course, a Labor government. When a small business has to cut off supplying meat to a country hospital, then you have a serious problem. And what are you going to do with this legislation? You are going to dump more onto that same hospital system that is already under enormous stress. That is the problem we face.
The system used to be very good. I remember when I left school and the first year I was working, in 1973. At that time everyone took out private health insurance. It used to cost me about $100 a year—quite a bit of money in those days but affordable. Along came Prime Minister Whitlam and Medibank—he went, of course, but not soon enough—and then I was paying $400 a year, so I dropped out of private health insurance. I lived in a country town and I thought I would take a punt and drop out of it. It was only 3½ or four years ago that I rejoined private health insurance. I had pulled out because I simply could not afford it as the price of insurance went up and up and up. And that is the problem we face—that when more people pull out there is more stress on our public health system. You only have to go to a place such as Ashford, which I visited a couple of weeks ago, to see this. The community health centre there is run by Hunter New England Health, who do their best under pretty tough circumstances and budget restrictions. Every time it rains the roof leaks severely and the water runs down the walls. The building needs a new roof and it needs to be painted inside. The staff there just get on with doing their job, and they do a wonderful job. But the problems they face are the sorts of problems we have in the public health system simply due to the lack of funds.
Perhaps we should just let the states raise their royalties on minerals, giving them some more money to carry out their duties in their health systems, but the government want to go after those as well. We know why. It is because they are broke; it is as simple as that. They have committed to a budget this May that will go into surplus next financial year. Let us go back and look back what happened with the current budget. Two years ago, they budgeted for a deficit of $12 billion for the current financial year. In the May budget last year that was budgeted at $22 billion. Now we find that the budget for this financial year is going to be $37 billion in the red. We have gone from an estimated $12 billion two years ago to $37 billion. So what this measure is about is transferring the cost from the federal budget bottom line to the states. This is a financial saving, as they see it, for the federal budget bottom line, but when people pull out of private health insurance, and they will, this will just put more costs on the states. That is what this is about: transferring actual costs from the federal budget to the states.
Let us look at specialist services. Visiting specialists attend regional private hospitals, and thank goodness they do. Any tinkering with the rebate that causes a cutback in demand in regional private hospitals will flow directly to specialists, who will retreat back to the cities. We need the surgery to be carried out so that those surgeons can make some money in their profession, but if they do not do that in regional areas then they will go back to the cities where they can be flat out all the time in the bigger populations. This is a problem, denying regional patients local access to the expertise and services they need and forcing those patients to travel further, and at greater cost, for consultations and treatments.
It is too simplistic to assume that not enough people in regional areas would be affected by the proposed means test thresholds, of $80,000 for singles and $160,000 for couples, to warrant concern. Once the insurance pool shrinks, when people leave insurance and so the number paying the premiums shrinks, premiums go up. Research last year by Deloitte's shows that 1.6 million people in the government's targeted annual income range will dump their private hospital cover, with another 4.3 million downgrading their cover. I will repeat those figures. Deloitte's are saying 1.6 million people will dump their private hospital cover, with another 4.3 million downgrading. The initial exodus will force premiums up an estimated 10 per cent for those left in health schemes, putting health insurance beyond the reach of lower income earners and causing a second exodus. This is the problem—the domino effect. The fact is that 5.6 million Australians with private cover earn less than $50,000 a year. They cannot afford massive increases in their premiums. You will see more of them exiting the system. Deloitte's adds that public hospitals will be overrun as more than 845,000 extra admissions will pour through their doors. I repeat: 845,000 extra admissions. This is the problem. I would not say that Deloitte's is a company whose modelling and research findings you would disregard.
Exactly, Senator Edwards. I take your interjection: they are a very credible company. They are saying that 1.6 million people in the government's targeted income range will dump their private hospital cover and—this is scary—another 4.3 million people will downgrade their cover.
Treasury! You listen to Treasury, Senator McLucas, when you wish to, but at other times you will not. We could take you down the carbon tax road—but we will not go there. This removal of the incentive is simply another tax by this big-spending government. It is in a different way, but it is more money into the Treasury coffers as Treasurer Swan tries to get the budget into the black after making a colossal mess of our finances. You couldn't believe it! We have a Future Fund of $73 billion that the coalition put aside when it was in government, thank goodness, and it is lucky that has not been raided, but we have now gone to a gross debt of $232 billion, and the interest bill alone on that is going to be huge. So here is an attempt by the government to help get their budget figures back in the black that is going to cause enormous damage to our health system. It is as simple as that. Already in the country areas we have nurses who are overworked, working double shifts, and I can take you to the country hospitals and introduce you to the nurses. We have doctors working hard—
No, these are public hospitals as well.
Senator McLucas interjecting—
Senator McLucas, I will take your interjection. In the town of 12,000 people that I live in we do not have a private hospital. We have a public hospital, and you are going to overload it with more costs and put more work on those doctors and nurses because people are just going to withdraw from private health insurance. Do you not pay any attention to Deloitte's figures there? You think they are just porky pies, do you?
This is a problem that we have in regional areas. Already we have been left behind by many services in the health system. Thanks go to the great nurses who work so hard and the doctors. I can go down to my local doctors surgery and talk to the doctors there, as I always do when I go for my annual check up—I have a chat about how things are going. They not only look after their doctors surgery, they look after the hospital and the aged care facility. Then they get called out on weekends and on emergency. That is the public health system, and what are you doing? You are going to put more work on them as people leave the private health system.
They will not travel to the private hospitals. They will pull out and you are going to put more work on them. As I said, you are just simply shifting the cost from the federal budget onto the state budget and onto an already overstressed public health system through every state in Australia. This is what you are about.
The fact is that you have blown the money—you have wasted the money—and now there is your political promise of returning the budget back to surplus in May. I would say that you might be able to bring out the figures with a little bit in the black this May, but you wait until September 2012 and the actual realisation of that financial year. It will not be in the black, it will be in the red for sure. Labor parties do not understand what black print means on the bottom line of a budget.
I can take you back to the history of the late eighties and early nineties in South Australia, Victoria, Western Australia and Tasmania, where they all went broke under the Australian Labor Party's financial management. At the same time, the so-called 'world's greatest treasurer', Mr Paul Keating, was sending our nation broke at a federal level. Now we have it all over again. What about 13 years of the Hawke-Keating government? There were four budget surpluses, I think. We have never seen one in this one, so we are talking about over 17 years of Labor governments with four budget surpluses. That has happened all my life: give them the cheque book and they will empty the bank account, and more—then just run up the debt. And who has to clean up the financial mess? Every time when the coalition gets elected they have to clean up the financial mess.
Look at Queensland! For those people listening on radio now, here we have an election in Queensland. Under their figures Queensland will owe $85 billion by 2015. At a guess, the population of Queensland is 4½ million people, so 4½ million people will owe $85 billion—'b' for billion. When the Howard government was elected we had $96 billion worth of debt spread amongst about 19 million people—at a guess. Queensland has $85 billion of debt for 4½ million people to service that debt. They are broke. That is why their credit rating has been downgraded, that is why they are paying high interest rates and that is why they are selling off their rail system—because they are broke. And who has been managing their finances? The Australian Labor Party. And that is why on 24 March I hope that they get their just deserts. I am sure they will, because anyone who sends your state broke deserves to be thrown into political history for years and years.
That is exactly what is going to happen, because the Queenslanders realise what sort of a financial mess their state is in.
Senator McLucas interjecting—
Senator McLucas, you are well aware of it too: $85 billion worth of debt is something you should be absolutely ashamed of. It is where your party has taken it. It is just sending the state broke, the great state that was built for decades under balanced budgets, and they never borrowed money. They established their electricity right out to the western country, and the bitumen roads and the tourist industry. They did everything to establish the industries and never borrowed money. If only you could ever learn, but you will never learn. So long as I breathe breath it will be the same old story: give Labor the cheque book and down the tube you go. Nothing changes.
That is what this is about. You will drive people out of private health insurance and you are going back on your word. Mr Rudd made the commitment and Ms Roxon made the commitment to the Australian people never to touch this, and what are you doing? As I said, the Australian people do not trust you because with everything you say the next thing is that you are back flipping and doing a reverse—going back on your word like on so many issues. That is why the people have lost trust in you, lost faith in you and simply do not believe what this government says. You will take people out of the private health insurance industry, you will up the premiums of that smaller net which is left behind and then more will leave as that compounds—the domino effect—and it will all just fall back on our public health system, that is already overburdened, overworked and underfunded. That is what you will do, as sure as I speak now.