Thursday, 27 June 2013
Private Health Insurance Amendment (Lifetime Health Cover Loading and Other Measures) Bill 2012, Private Health Insurance Legislation Amendment (Base Premium) Bill 2013; Second Reading
I rise to speak on the Private Health Insurance Amendment (Lifetime Health Cover Loading and Other Measures) Bill 2012 and the Private Health Insurance Legislation Amendment (Base Premium) Bill 2013. It is interesting that both Kevin Rudd and Julia Gillard, as well as other Labor members, over many years have repeatedly ruled out any changes to the private health insurance rebates. Through means testing changes and announcements since, Labor has repeatedly broken its promise on private health insurance. It is important that I remind honourable senators of some of those comments that have been made. I take you back to Julia Gillard, then shadow minister for health. In a letter to the editor of the Hobart Mercury on 2 September 2004 she said:
I grow tired of saying this—Labor is committed to the 30 per cent private health insurance rebate.
Again, in a letter to the editor of the Courier-Mail on 23 September 2004, Julia Gillard reiterated and countered assertions that Labor would erode or abolish the 30 per cent government rebate, saying:
Labor is committed to the maintenance of this rebate and I have given an iron-clad guarantee on that on a number of occasions.
Then, again, on 15 October 2005, to the Weekend Australian, there was another reiteration. She said:
The truth is that I never had a secret plan to scrap the private health insurance rebate …
Well, history shows what an untruthful woman Julia Gillard will go down in history as. And then of course there is Nicola Roxon—
Of course, it goes on. Ms Roxon in a media release on 26 September 2007 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.
Mr Rudd, in a letter to the AHIA on 20 November 2007, said:
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.
Kevin Rudd at a press conference—
An honourable senator interjecting —
Mr Rudd, in a press conference on 25 February 2008, said:
The private health insurance rebate policy remains unchanged and will remain unchanged.
Ms Roxon told The Age on 24 February 2009:
The Government is firmly committed to retaining the existing private health insurance rebates.
It goes on and on. This indication that was given repeatedly by members of the Rudd and Gillard governments in relation to private health insurance turned out to be untrue. It is like many things that have happened in recent years pertaining to both the Rudd and the Gillard governments—fabrications, lies, to the Australian people. Here we have yet another broken promise in relation to health insurance.
Those opposite perpetrate the lie that private health insurance is for the rich. Some 5.6 million people with private health insurance have an annual household income of less than $50,000, 3.4 million have an annual household income of less than $35,000 and 10.7 million Australians have hospital cover. The government's changes to private health insurance are already having an effect. The government's own Private Health Insurance Administration Council, PHIAC, has found that in the five years to 2012:
… exclusions and restrictions have become much more prevalent.
… … …
… the increased use of exclusions may … work against the policy objective of private health insurance in easing the burden on public hospitals.
The full effect of Labor's means-testing changes has not yet been felt, with PHIAC reporting $1.2 billion in prepayments in the June quarter as people tried to defer the resulting premium increases. Many policyholders prepaid for 12 months or more, thereby delaying the pain of Labor's cuts.
Labor's private health insurance changes will put more pressure on public hospitals, which are already struggling under the $1.6 billion cut to hospital funding in Labor's MYEFO. This includes retrospective cuts to public hospital funding that has already been spent and allocated in 2011-12 and 2012-13. It has caused the closure of public hospital beds and operating theatres and delays to elective surgery. The government has since announced a reversal of its position, but of course only for Victoria and only under pressure.
Federal Labor has spent approximately $1 billion establishing nearly 12 bureaucracies which appear immune to cuts while funding has been slashed from private health insurance, public hospitals and dental health through the closure of the Chronic Disease Dental Scheme. The changes to Lifetime Health Cover in this bill will increase premiums by up to a reported 27.5 per cent on 1 July 2013, and of course this will directly affect lower income Australians.
Presently, the lifetime health cover loading is removed after 10 continuous years of hospital cover. Once again, the government is changing the rules of the game on ordinary Australians. There will be people who are close to having their leading removed, having paid the loading in good faith and abided by the appropriate rules and regulations. Now, they may be slugged with a 27 per cent increase in premiums and forced to drop their cover. The change will add extra complexity to the private health insurance system. The means-testing changes already created around 12 different pricing structures for premiums. Changes to the lifetime health cover will further increase the administrative burden on private health insurers with short time frames to change systems by 1 July and that is next week. The previous coalition government's private health insurance reforms, in the form of the rebates, the Medicare levy surcharge and lifetime health cover, saw the number of people with private health insurance increase 75 per cent, from 6.1 million to over 10.7 million people. The bill also ceases direct claiming of the private health insurance rebate through the Department of Human Services known as the incentive payment scheme. This is also to take effect on 1 July this year. The coalition acknowledges that very few people access the rebate through the scheme—99.9 per cent of rebate claims are said to be made by the premium reduction scheme or through tax offset claiming. It is claimed that this will reduce the administrative burden for the Department of Human Services, insurers and the Australian Taxation Office. The coalition supports private health insurance. This bill, which was introduced by the government last year and considered by the coalition then, adds more complexity to private health insurance and will raise premiums, including for those Australians on lower incomes. The coalition does not support the lifetime health cover component of this bill and we will be moving an amendment to oppose the lifetime health cover component.
I now turn, in the limited time available, to consider the Private Health Insurance Legislation Amendment (Base Premium) Bill 2013. Of course, the government is rushing this bill through the parliament. It was introduced on 15 May and debate began on 27 May. The government has brought on debate without giving the opposition time to consider it properly through the normal processes. Of course, once again Labor is playing tricky politics by listing this bill in cognate with one introduced last year. Labor is trying to hide from responsibility for the terrible decisions that have been forced on Australians due to years of wasteful and reckless spending. The Australian public know that this Labor government, whether it is under Ms Gillard or under Mr Rudd, in a few short years has turned $70 billion in net assets and a $20 billion surplus into rolling deficits and debts now pushing through the government's own $300 billion debt ceiling. Due to Labor's economic incompetence, started under Mr Rudd and continued under Ms Gillard, there is now a budget emergency.
Despite some objectionable cuts being implemented, the parliament does not need to consider all new legislation in the context of Labor's dire fiscal reality as outlined in this chaotic budget. The coalition acknowledges that there are serious concerns with this latest Labor bill, including that this change will increase the cost of private health insurance further for all Australians with cover irrespective of age or income; the effect of this change will not be felt by individuals or the health system for some time as it will not commence until April 2014; the effect of the government's cuts from means-testing changes have yet to be felt, with over $1.2 billion in premium prepayments in June 2012 as people sought to avoid the financial consequences for one financial year or more; and of course, like many, many other bills that have been rushed through in this session, this bill adds more complexity to the private health insurance system.
Unfortunately, this parliament cannot undo all Labor's bad decisions and wasteful spending immediately. The coalition will not be opposing these bills. Before I conclude my comments in relation to these bills, I want to refer in particular to additional comments made by coalition senators in the Senate inquiry. They stated that this is the third significant change to private health insurance that has been proposed by both the Rudd and Gillard governments. The coalition senators referred to means testing provided for in the Fairer Private Health Insurance Incentives Act 2012 and related legislation. That is the only measure that has been implemented to date.
In relation to the means-testing change, the Private Health Insurance Administration Council found in The operations of private health insurers annual report 2011-12:
In response to the reform, many insurers promoted prepayment options to maximise their customers’ opportunity to claim a rebate in respect of premiums paid. As a result, policy holders were able to ‘lock in’ premiums for up to the specified prepayment period, which saw prepaid premiums increase by $1.2 billion.
… … …
… the impact on policy holders’ choice in respect of cover will emerge as prepayment periods end.
Coalition senators agreed with submissions that detrimental effects on coverage rates and the level of cover caused by the means-testing changes and the subsequent proposed changes included in the bill will not be known for some time. Current trends in private health cover do not accurately reflect the impact of changes that have been deferred through prepayments and others that have not yet been implemented.
When you look at the consequences of these bills—as coalition senators pointed out—one is likely to be an increase in the cost of obtaining private health insurance to consumers, as is noted in the explanatory memorandum. Of course it will affect people with private health insurance, irrespective of age or income. As was noted by a number of organisations that made submissions, such as Medibank Private, HIRMAA and National Seniors Australia, there are particular concerns about the long-term consequences and in particular those for older Australians who are on fixed or lower incomes.
Coalition senators shared in their dissenting report the significant concerns of a wide range of stakeholders regarding difficulties in implementation associated with this measure and how the bills would add significant complexity to the administration of private health insurance and the associated cost for insurers. Coalition senators urged the government to give more detailed consideration to alternative measures provided to the committee that could mitigate the administrative burden and implementation complexities associated with these bills.
Just by way of example, there was an article in the Daily Telegraph of 17 June 2013 entitled 'Tax-time fright for health insurance'. The article referred to the 400,000 Australians about to face big tax debts because they have not told health insurers that they are no longer eligible for the government rebate. The article refers to a double whammy that these households will face because they will be hit with a premium surge of as much as 42 per cent when they do stop claiming the offset. The article refers to polling by Galaxy Research as to the numbers of people who will likely be caught out. They found that 22 per cent caught in the means test had no awareness of it. This equates to 392,000 people. The articles states:
… the number who could face a debt may be even higher because a further 25 per cent did not know what difference it would make to their tax return.
'This means that almost half of the 1.7 million Australians on incomes captured by the means test could be in for a surprise come tax time,' said Galaxy's research director Peter Matthew.
Then there is the story in TheAdvocate of 26 June 2013. It quotes pensioner Richard Peters as saying that he will be forced to pay around an extra $1,000 a year for private health insurance under proposed government changes. For a pensioner like Mr Peters, this means paying an extra $18 a week. The article says:
'The loading will differ from person to person, but I'm 74 and that is a difference of $937,' Mr Peters said.
'With the rates and everything else going up, it's just another cost.'
Mr Peters said once the change went into effect, it would result in more people turning to the public health system.
'It will just blow out the waiting list again,' Mr Peters said.
That is a practical example of a pensioner. And I am sure that there are many, many people like Mr Peters out there.
I remind the Senate that organisations like Private Healthcare Australia have consistently warned that Labor's legislative changes to the private health insurance rebate will increase premiums for all Australians and force people onto the public hospital lists. Changes to the private health insurance rebate will hurt those Australians who need it most. I will reiterate the figures: 3.4 million people with private health insurance live in households with incomes less than $35,000 per annum and 5.6 million people with private health insurance cover reside in households that have a gross annual income of below $50,000. For the 12.5 million Australians with private health insurance, this will no doubt have a major impact.
As Mr Peters outlined in the article that I quoted, he will as a pensioner be facing paying an extra $18 a week. We know that for someone on a pension that is a sizeable amount. As we know, many older Australians will be affected and have already been affected by the changes in private health insurance. As shadow minister for ageing, many older Australians say to me that it is vitally important for them to hang onto their private health insurance. For many of them, it means forgoing other things just so that they can hang onto it. They do not want to be foisted onto the public hospital system, because the public hospital system will not be able to meet their needs or requirements. As a consequence, hanging onto private health insurance is vitally important for them. As I have indicated, the coalition will be moving an amendment to the Private Health Insurance Amendment (Lifetime Health Cover Loading and Other Measures) Bill 2012.
I note the comments that Senator Fierravanti-Wells made on behalf of the coalition about the fact that there are 12½ million Australians with private health insurance. I am one of those 12½ million Australians. It is important that we have a good balance between the public and private systems. I have serious concerns about the unintended consequences of the provisions in these bills: the Private Health Insurance Amendment (Lifetime Health Cover Loading and Other Measures) Bill 2012 and the Private Health Insurance Legislation Amendment (Base Premium) Bill 2013.
I have spoken before in this chamber on many occasions about the need for balance between Australia's public and private health systems. Back in 2008, I negotiated with the government as part of my support for health related legislation for there to be a Productivity Commission report on the public and private hospital systems and a fair comparison between the two. That report, which was published in December 2009 and was over 400 pages long, provides a lot of very good and useful information about the need for both systems, the way that they interact with each other, their relative efficiencies, how the private system can be more efficient in a number of areas and how the public system can play a valuable role and also be more efficient in other areas. But you need a balance between the two.
My fear is that this legislation will make matters much, much worse and destroy that delicate equilibrium between the two systems. Access to affordable health care is a human right. But there is no escaping the fact that our public system is struggling, with waiting lists for treatments blowing out and practitioners battling to keep up with increased demand on the one hand and budget cuts on the other.
While we have a health system that many in the world envy, we cannot ignore the fact that it relies on a delicate balance between the public and private systems. If we tip the scales too much one way or the other, we risk putting those systems under too much strain. The measures included in the Lifetime Health Cover loading will be bad for consumers and bad for both the public and private systems. I acknowledge the opposition is intending to move amendments to remove that particular schedule from the bill, and I support that amendment. I also have serious concerns about the provisions in the Private Health Insurance Legislation Amendment (Base Premium) Bill 2013.
I believe that this will have a negative impact on the rebate, and therefore on people's ability to afford private health insurance. Artificially setting premiums for the purpose of the rebate may be a cost-saving measure in the short term, but its long-term effects could be drastic. I note that both bills were referred to the Senate Standing Committee on Community Affairs for inquiry, and that the committee recommended both bills be passed.
However, the committee report into the Lifetime Health Cover Loading bill included evidence from the department itself that the effect of the provisions in the bill could mean an increase of $116 per person per annum. On the other hand, health funds estimated that the impact would be even higher. GMHBA in particular stated:
… the removal of the rebate on the Lifetime Health Cover loading component of Private Health Insurance premiums will result in a further 1% to 18% (average of 10.6%) price increase from the 1 July 2013 for those with Lifetime Health Cover loadings. This will impact approximately 17.9% of GMHBA memberships (approximately 40,000 individuals). In simple terms the removal of the rebate means a 42% increase in the loading for these members.
A 42 per cent increase is a very significant amount. This is a significant amount for many people, including the elderly and those on low incomes. These people do the right thing and choose to have private health insurance to protect themselves, and now the government risks putting that protection out of reach.
In particular, GMHBA stated:
According to Private Healthcare Australia - the Australian Taxation Office & Australian Bureau of Statistics, 3.4 million people with private health insurance live in households with incomes less than $35,000 per annum. A staggering 5.6 million people with private health insurance live in households with gross annual incomes below $50,000.
We should be making it easier for people on low incomes to access private health, not harder.
On a similar line, submissions to the committee on the base premium bill expressed concerns about the impact on low-income earners. National Seniors Australia stated:
The decision to increase the rebate each year in line with the lower of the CPI or the Government-approved increase to premiums is discouraging to older Australians who have attempted to provide for their own health care.
The other concern is that health care has become so complex that consumers will give up trying to understand what they should be paying and what the best deal for them is, and will end up paying more anyway. Australian Unity explained it in this way:
For consumers, health insurance will be more expensive and more opaque because of the proposed legislative changes. To determine their costs, consumers must now apply the relevant (Australian Government Rebate) percentage to the ‘base premium’ for the relevant product, which is directly linked to general CPI. After determining their AGR entitlement, it is deducted from the ‘commercial’ premium to finally calculate the level of direct contribution they are required to make to their health insurer.
The situation is further complicated for consumers who incur a lifetime health cover (LHC) loading. The LHC loading is calculated with reference to the ‘commercial premium’, not the ‘base premium’ and added to the direct contribution the consumer must make.
I hope you understood that, Mr Deputy President, because it is quite baffling. Private funds are also concerned about the impact on the way they run their businesses, and whether increased administration will lead to increased costs.
There is also the serious question of whether the base premium will undermine Australia's community rating system. Under this system, people pay the same premiums regardless of how likely they are to use their cover. Creating a base premium will mean higher costs to consumers, which may mean insurers will have to charge more to clients with a higher risk profile.
These bills risk a lot for short-term, narrow gains. I believe any benefits achieved by these bills in terms of revenue are far outweighed by the negatives for consumers and for the way that this could destroy that delicate balance between the private and public systems. In all good conscience, I cannot support these bills.
I will just make a couple of very quick comments in relation to the Private Health Insurance Amendment (Lifetime Health Cover Loading and Other Measures) Bill 2012 and the Private Health Insurance Legislation Amendment (Base Premium) Bill 2013. The first question that has gone unanswered tonight is: what period of grace is there for fund members after the end of June with this transition? No grace period options have been discussed and no grace period options have been given. The minister must immediately—tomorrow—come out and say what grace periods there are.
I do just want to follow up a couple of quick quotes from my colleague Senator Fierravanti-Wells. There was one from the unelected Prime Minister, Kevin Rudd, at his press conference on 25 February 2008:
The private health insurance rebate policy remains unchanged and will remain unchanged.
Again from the unelected Prime Minister, in a letter to the AHIA on 20 November:
Absolute rubbish! Another broken promise.
My colleague also referred to HIRMAA. HIRMAA is the Health Insurance Restricted and Regional Membership Association of Australia. It is the peak industry body representing all 13 restricted insurers and a number of non-restricted access regional private health insurers. Since its formation in 1978 HIRMAA has advocated for the preservation of competition, believing it is fundamental to Australians having access to the best value healthcare services. I want to congratulate HIRMAA on their strong advocacy on behalf of member funds and members.
I have a letter from HIRMAA in relation to these bills. They wrote to me and said, 'Dear Senator, I am writing to express our strong opposition to two bills to be shortly debated in the Senate.' They are referring to these bills. The letter continues: 'The impact of these two further changes to private health insurance will have detrimental consequences for the private health insurance industry and consumers. If passed by parliament these legislative changes will lead to a significant number of Australians discarding or downgrading their PHI. Inevitably this will lead to additional pressures on the public health system, a system already under considerable stress and overload.'
To their letter to me they attached a copy of their submission to the Senate Standing Committee on Community Affairs. They spent a lot of time talking about the impact on low-income earners, who will be the ones who suffer the most. I will just very quickly read this:
The impact increases with the higher the level of rebate policyholders currently receive, resulting in lower income earners (those not in the means tested tiers) being the most disadvantaged by the proposed changes. It has been estimated by a typical HIRMAA fund that this impact will amount to an average 8.4% premium increase in the first year of implementation (commencing 1 July 2013). For those with significant loadings, the premium increases will be much higher.
… … …
The measure provides a disincentive to everyone without PHI who is over 31 years of age from purchasing PHI. … For those policyholders who are paying a LHC loading, removal of the rebate on the LHC loading component for those who are close to having held hospital cover for 10 years will most likely be perceived by these policyholders as being grossly unfair …
There are a number of matters raised in this report, and what I do want to say is that there is this ridiculous notion of the Australian Labor Party and the unelected Rudd government about who is going to suffer the most from this. As Senator Fierravanti-Wells said, 5.6 million people with private health insurance have an annual household income of less than $50,000. This is not private health insurance for the rich; this is private health insurance for those people that the Australian Labor Party pretends to represent!
I will take you through some of the funds that HIRMAA represents, who happen to represent the very unions that these people opposite come in here and say they are there to protect. Perhaps I will just go through a few for the minister: Defence Health, Navy Health, Police Health, Teachers Union Health, Railway and Transport Health Fund Ltd, and Transport Health. These are funds that are run by those in a variety of industries, including teachers, police and Defence personnel. These are not rich Australians—these are Australians who have decided to take out private health insurance. The Australian Labor Party, for no reasons other than philosophical reasons, wants to rip this apart.
We should have no doubt about what this matter relates to. The Australian Labor Party and the unelected Rudd government have made it quite clear from all their actions and their legislative program that they want to destroy private health insurance. I say to those members of private health insurance funds who are listening or who will be reading this debate, if you want to protect your right to have private health coverage you must ensure that the Australian Labor Party and the unelected Rudd government is not given the opportunity to further reduce private health coverage and increase private health coverage costs. As sure as night follows day, on the back of what they have done they will just take it further and they will not be happy until they have destroyed private health insurance.
I make it absolutely clear that the coalition has a heavy heart in not opposing the Private Health Insurance Legislation Amendment (Base Premium) Bill 2013, and the heaviness of our heart relates to the fact that the Australian Labor Party, the unelected Rudd government, has left this nation in a position where these changes are being forced through as a result of the last budget. I want people to reflect on the unelected Rudd government's rationale for leading us into this position. I need to go no further than GroceryWatch and Fuelwatch and $2.4 billion of failed pink batts insulation. I hear the minister say, 'Oh dear.' 'Oh dear' it is that when you first came into government this nation was debt free. In six years you have loaded onto our children and our grandchildren $360 billion of debt—$360,000 million of debt. They stand utterly condemned for what you have done to this country; you stand utterly condemned for what you have done to private health insurance. You no longer represent working men and women in this country, because working men and women in this country are members of the funds I referred to before. You stand utterly condemned.
The most important thing to remember about the Australian health system is that it is a combination of private and public systems, and through that combination the Australian people get a very good health service. The facts of the matter are that without a strong private sector there would not be the capacity in the public sector, in the public hospitals, to cater for the needs of the Australian population. There are just not enough beds, not enough operating theatres, and the waiting lists would be very long. That is why the Howard government Lifetime Health Cover policy was important—it enabled people who otherwise might not have been able to take out private health insurance to do so, and that meant they could access the private hospital sector and the private medical sector and not use the public hospital sector which, had they done so, would have been even more overcrowded than it is now with longer waiting lists and poorer service—not because the professional people in the public hospitals are negligent or disinterested in the people who come to those hospitals but simply because of the enormous weight of numbers, which would slow down the service.
The government's changes to private health insurance are already having an adverse effect on our hospital system, and Labor's private health insurance changes will put more pressure on public hospitals which are already struggling under the $1.6 billion cut to hospital funding under Labor's MYEFO
We believe in private health insurance. We believe in the private sector. We have to make sure that Labor is stopped in its tracks and that the quality of Australian medicine is maintained.
In respect of the Private Health Insurance Amendment (Lifetime Health Cover Loading and Other Measures) Bill 2012 the question is that schedule 1 stand as printed.
Opposition's circulated amendment—
(1) Schedule 1, page 3 (line 1) to page 5 (line 7).