Means testing private health insurance is unfair to hard working families

February 13, 2012

The Fairer Private Health Insurance Incentives Bill 2011 is about two things.

The first is the fact that once again the government has betrayed the Australian people by categorically ruling out means-testing of private health insurance rebates prior to an election but has then directly attacked these rebates once in government, doing exactly the opposite of what it promised. Breaching faith with the Australian people really has become part of the DNA of Labor, hasn’t it? In fact, the primary deceiver in this parliament, the Prime Minister herself, said in 2006 of then health minister, Tony Abbott:

… the minister for health today claimed that I am opposed to the 30 per cent private health insurance rebate. This is not true.

Well, it is absolutely true, Prime Minister-and once again you have demonstrated why the Australian people no longer trust anything you say.

Second, this bill is about the price hardworking Australian families are being forced to pay for Labor’s billions and billions of wasted taxpayers’ funds and for Labor’s addiction to debt and deficit.

Yes, the government is targeting hardworking Australians-the very people who help to keep communities and our economy strong, the people who take personal responsibility, the people we should be respecting, valuing and encouraging-something the coalition has been committed to while in government.

It appears that the Labor government has declared war on individuals earning over $80,000 and couples earning over $160,000 a year by restricting their access to a range of government services.

The contempt this government has for Australians who are working hard to achieve a degree of financial security is a national disgrace.

This is the third time the Labor government has brought this legislation to the parliament. Firstly, in the last parliament, despite those explicit and repeated promises at the 2007 election that ‘federal Labor has made it crystal clear that we are committed to retaining all the existing private health insurance rebates,’ Nicola Roxon went on to say, ‘The Liberals continue to try to scare people into thinking Labor will take away the rebates.’

Clearly people had a right to be scared. Repeated betrayals have proven they could not then and cannot now trust a single word anyone in this government says.

The Prime Minister to be, Kevin Rudd, made the same commitment in a letter to the Australian Health Insurance Association in 2007. How many more times do you have to say it? Far worse, however, have been the repeated attacks on aspirational Australian workers and working families that are simply part of a wider national Labor assault, highlighted by that 2011 budget.

But the greatest risk carried in this legislation is to the health system itself. According to the government’s Australian Institute of Health and Welfare, total expenditure on health goods and services in Australia in 2008-09 was estimated at $112.8 billion. Recurrent expenditure was $107.1 billion, or 94.9 per cent of total expenditure.

This equated to nine per cent of Australia’s GDP. Of that funding, $49 billion came from federal government funding and $30 billion from state government funding.

The remaining $34 billion was privately funded and included $19 billion paid by consumers themselves in using services, $6 billion from other non-government sources and $9 billion from private health insurance funds. According to the Private Health Insurance Administration Council, as at 30 June 2011 private health funds are paying out $15 billion in health benefits to provide for the needs of the nearly 12 million Australians who carry private health insurance.

That is over half of the Australian population. Of these, some 10 million have hospital cover, which accounts for about half of these costs. An Econtech report said that every dollar of funding provided for private health insurance rebates saves $2 of costs that are then paid by private health insurers.

The question we should be asking today is: how many of those people who are investing in their own health by taking private health insurance will drop out or reduce their cover because of the changes proposed by the government? What cost this will add to the public hospital system and allied health services and how will this increase waiting times? In a regional area like my own, these are very relevant questions. It will also impact on all Australians with private health insurance. Those taking that responsibility will face higher premiums in the future.

The Deloitte report released by the Australian Health Insurance Industry Association in May this year stated that 175,000 Australians would drop private health insurance within a year of means tests being applied.

The fact that millions would withdraw or downgrade cover over the next five years would prove disastrous for the health system as a whole. Specifically, Deloitte found:

Significant numbers of consumers will withdraw from their private hospital cover (1.6 million consumers over five years) or downgrade to lower levels of private health cover (4.3 million consumers over five years) following the proposed policy change;

Significant numbers of consumers will also withdraw from their general treatment cover (2.8 million consumers over five years) or downgrade to lower levels of private health cover (5.7 million consumers over five years) following the proposed policy change;

Private health insurance premiums will rise 10 per cent above what would otherwise be expected. As premiums rise, private health cover will become less affordable for all consumers-

That is something we all should be very concerned about- that is, not just those who are in the tiers;

As people withdraw from private health insurance, the burden on publically provided healthcare rises. The findings indicate that the cost of treating consumers in the public hospital system are expected to rise substantially above what is currently anticipated by Government-Deloitte estimates that additional operating costs accumulated over five years will be $3.8 billion and $1.4 billion in the fifth year alone.

In time, it is expected that the cost of servicing increased demand for public hospital services will outweigh the savings to government from the means testing of the rebate.

In addition Anop Research Services Pty Ltd was commissioned by the Australian Health Insurance Association to conduct a detailed survey of the private health insurance population regarding the federal government’s plans to means-test the private health insurance rebate.

Their report found:

There is likely to be a significant drop-out from private health insurance-up to 13% in hospital cover and up to a larger 18-21% in general treatment cover, to the extent that ancillary service providers (dentists, optometrists, physiotherapists etc.) will be severely impacted.

There will be an even bigger impact on the private health insurance industry as a result of the numbers who will downgrade their level of cover-at least 24% in hospital cover and at least 34% in general treatment cover.

Drop-outs and downgrades are likely to be higher among the healthier groups, leaving a pool of less healthy members in the privately insured population.

The public hospital system will be likely to feel the impact of the potential consumer drop out, with the Medicare Levy Surcharge not a strong driver to remain in private hospital insurance.

The government owned insurer, Medibank Private, has predicted that 37,000 of their members alone will drop their cover and 92,500 will downgrade. That is from the government’s own private insurer. I understand that the AMA is also on record saying that a million people will drop their private cover.

There can be no doubt that the public health system will have to pick up the pieces of this policy by treating those clients who withdraw from private health insurance.

Of course, the federal Labor government is counting on the fact that much of this additional cost will fall directly onto state governments providing public hospital services. State governments around the country are extremely concerned, and rightly so. This is basically an underhand piece of cost-shifting and it should be exposed for the public to see exactly what it is.

Why is this government continuously punishing people who work hard and take personal responsibility by sharing with the government in the costs of their own health service provision?

The question before the House needs to be simplified to its core elements. The coalition believes in respecting hard work and letting people manage their own affairs. The government’s actions continue to show the opposite.

In my electorate I have quite a number of people who pay private health insurance. I have received from my constituents a petition with thousands of signatures demanding that this bill be opposed and, so, I oppose this bill.