Coalition Senators Dissenting Report
SENATE SHOULD REJECT CRUSADE AGAINST PRIVATE HEALTH
Coalition Senators recommend
the Senate reject the government's proposal to reduce or scrap private health
insurance rebates for millions of privately insured Australians.
This measure is the Rudd
government's second strike in two budgets against the important private health
component of our mixed public and private health system. It is a blatant breach
of one of the most emphatic pre-election commitments of the government, driven
by ideology rather than the pursuit of good public health policy.
The overarching policy
objective in health funding and service delivery should be to ensure timely and
affordable access to quality health care for all Australians. There are not
sufficient publicly-funded sources to meet current and projected future demand
for acute and chronic care services. To achieve this we need, therefore, the
right balance between a strong public and a strong private system.
The private system is
underpinned by private health insurance. The more people take out and retain
private health insurance over the long term the more affordable it is for
everyone and the more additional (private) resources are channelled into our
health system.
At present more than eleven
million Australians take additional responsibility for their own health care
needs taking out private health insurance. At the end of the March 2009 quarter
about 9.7 million Australians were privately insured. This was up from a mere
5.7 million Australians with private hospital cover when the last Labor
government induced a serious downward spiral in private health insurance
participation rates which bottomed out in December 1998.
Under the Hawke and Keating
governments, private health insurance participation rates dropped from 63.7% in
1983 down to 33.5% in 1996. It took the Howard government another two years and
a number of sound policy initiatives like the Medicare Levy Surcharge, the 30%
Private Health Insurance rebate, and Lifetime Health Cover working together
to turn things around and restore the balance in our health system.
Equally, the impact on
private health insurance participation of changes to the Medicare Levy
Surcharge thresholds last year and private health insurance rebates this year
will not be immediate. Impacts of health policy changes are rarely immediate.
Over the past two years private health insurance participation rates have
continued to grow (albeit more slowly), as a result of the ongoing impact of
the sound private health policy framework put in place by the Howard
government. There is no doubt however that this upward trend will continue to
slow and soon start to reverse again, as it did under previous Labor
administrations.
In 2007, the Australian Labor
Party promised that on coming to government it would not change the existing
arrangements for private health insurance rebates introduced by the Howard
Government. This promise already has been broken twice in less than two
years. This will result in fewer people choosing private health and more
pressure on public hospitals.
Indeed, if this measure is
passed there is no doubt (and even the government agrees) that it would:
-
add further pressure on public
hospitals;
-
increase the cost of private
health insurance for millions of Australians ; and
-
result in fewer people with
private health cover.
The argument between the
government and the Coalition is not about whether there will be more
pressure on public hospitals and other publicly-funded services. The government
has conceded that point. The question is how much additional pressure,
and whether the government has properly assessed what that impact on public
hospitals will be.
More pressure on public
hospitals means more people will have to wait for longer to access much needed
public hospital treatment.
Given the combined effect of
the rebate reduction/abolition and the increases in the Medicare Levy Surcharge
in this proposal (if implemented), many privately insured Australians would be
left with no option other than to drop or downgrade their level of cover. This
in turn would put even more pressure on public hospitals (pressure not
accounted for in any of the government's assessments or modelling).
Over time this measure,
together with last year's changes to the Medicare Levy Surcharge thresholds,
will put further upward pressure on private health insurance premiums. Every
increase in premiums over and above what would have happened otherwise will
force more people to leave private health or not take it up. This was the
experience in the 1980s and 1990s until the Howard Government intervened.
The policy shifts of the Rudd
Government are not based on rationality or common sense. They are part of an
ideologically-driven crusade against private health and private health
insurance and will take Australia back into the downward private health membership
spiral experienced under the previous Labor administration between 1983 and
1996.
THOSE WHO DO NOT LEARN
FROM HISTORY...
As previously mentioned,
private health insurance participation rates plummeted under the Hawke/Keating
governments from 63.7% in 1983 down to 33.5% in 1996. This was with the
blessing of the then Labor government, which wanted to see Medicare take over
the role played until then by the private health sector.
Rationality only entered
Labor’s thinking towards the end of its period of government. Alarmed about the
impact of 10 years of Hawke and Keating government policy on the private health
system, then Federal Health Minister Graham Richardson released a discussion
paper on private health insurance reform in December 1993.
In it he observed that[1]:
"It
was anticipated that the introduction of a high quality universal health car
system would result in a significant decline in the number of people with
private health insurance. Indeed, the Medicare levy was introduced to help finance
the shift of large numbers of people from the private to the public system.
However:
"There
was an initial drop (in private
health insurance participation rates) from 63.7% in 1983 to 50% in 1984. The
decline has continued ever since, with particular pressure being put on the
participation rate as a result of the recession. From 1984 to 1993 the average
decrease in the proportion of the population has been 1.2%. However in the last
two years the fall has accelerated to an average of almost 2.2%." (emphasis
added).
And unlike the first-term
Rudd Labor government, backed up with ten years of data, then Senator
Richardson was acutely aware of the impact reductions in private health
insurance participation rates would have on the public hospital system.
Indeed, in his 1993
discussion paper he said:
"...declining
rates of private health insurance membership have significant implications for
the public system.
As
more people drop out of private insurance the demands on the public system
grow. Already there are problems – the most obvious being waiting lists. There
are too many people waiting too long, in pain, for vital operations."[2]
The discussion paper should
be compulsory reading for any member of the Rudd government intent on pursuing
an outdated and misguided ideological agenda against private health.
The introduction to the
discussion paper includes this damning assessment of the impact of ten years of
Hawke/Keating policy on health[3]:
"We
have now reached the point where private coverage has fallen below 40%. This is
not an immediate problem as those who have dropped out are mostly young and
healthy. However, as time goes on, an increasing number of older, high
users of health services will give up their insurance. (emphasis added).
These
are people who do not currently use the public system much or at all. Should
they come to rely on it, money and resources will have to be found to provide
for them.
There
are also a great many low income families who maintain private health
insurance. As premiums continue to rise these people will come under increasing
pressure to drop their cover. This gives rise to the real possibility
that a flash point will be reached where the gradual decline of the last couple
of years becomes an avalanche. (emphasis added)
This would have critical implications for both the private and public
systems and would require significant additional expenditure by governments." (emphasis added)
Why does the Rudd government
think that going down the same old ideological path again will result in
different outcomes?
Senator Richardson was forced
by Paul Keating to take his recommendations on how to restore better balance in
our health system – including consideration of a Medicare Levy Surcharge – to a
Federal ALP Caucus/ACTU working party. This is where his proposals were buried,
and it wasn't until the election of the Howard government in 1996 that sensible
reform of the private health insurance policy framework was seriously pursued.
The reality is that the Rudd
government is already expecting and budgeting for a reduction in private health
insurance participation rates.
Indeed, the Rudd government
expects the proportion of the Australian population with private health
insurance to drop by more than 2.6% over the forward estimates period. However
they have hidden that in the budget fine print.
In previous Health and Ageing
Portfolio Budget Statements the budget targets and reference points for the
‘number of people with private health insurance’ were always expressed as both
a total number of privately insured and as a proportion of the population (that
is as a percentage).
There is a longstanding
convention over many decades to monitor the proportion of Australians with
private health cover.
Even during the Hawke/Keating
years private health insurance participation rates were measured as a
proportion of the population. Indeed it is a more meaningful measure as it
takes the effect of population growth into account.
In this budget, and contrary
to previous budget papers, the Rudd government no longer includes a percentage
target or reference point, but only states the government's expectation that
the ‘number’ of Australians with private health insurance will stay at 9.7
million over the forward estimates.
Even a very conservative
assessment of ABS population growth forecasts (using the median projection out
of the three available ABS scenarios) means that the government expects the
proportion of the population with private health insurance to drop from 44.6%
to 42% over the forward estimates period.
This is a worrying trend, and
one can only assume that the reason the Rudd government have removed the
percentage reference in the budget papers is to hide the fact that they expect
it to go down over the forward estimates and they did not want to draw any
attention to that.
EXISTING PRIVATE HEALTH
INSURANCE REBATES IMPORTANT
The Federal Government’s
moves on the private health insurance rebate and the Medicare Levy Surcharge in
the last two Budgets have shaken the underpinnings of the industry, even if the
full premium and participation effects are still to be seen.
The National Health and
Hospitals Reform Commission, which reported in June 2009, has also recommended
further sweeping changes to private health insurance. We haven’t even seen the
results of the Preventive Health Taskforce, the Health Technology Assessment
Review or the Human Tissue Review, each of which has the potential to make
significant additional regulatory changes affecting private health insurance
coverage.
It is obvious that under
Labor the benign policy settings and relationships that benefited the private
health sector in the previous decade are going if not gone.
There is a view once again
prevalent in government that the private health sector and private health
insurance supplement the public system, that they are optional extras not vital
components of our overall health infrastructure. They fail to recognise that
the private health sector handles well over half of all Australian hospital
procedures, many of these of great complexity. Whether the Rudd government
likes it or not, each of these procedures potentially could be done in the
public sector at full public cost.
As Professor Ian Harper and
Chris Murphy demonstrated as far back as 2004, each dollar spent on the private
health insurance rebates saves two dollars of Federal and State outlays.
Incentivising people through the private health insurance rebate system draws
private dollars into the system to fund billions and billons of dollars in
private hospital care.
AUSTRALIANS WERE CONNED BY
LABOR ON PRIVATE HEALTH
The Rudd Labor government
does not have a mandate to pursue this measure.
The question of what Labor
would do in relation to the private health insurance policy framework in
general and private health insurance rebates in particular was extensively
canvassed before the last election.
Kevin Rudd and Nicola Roxon,
approaching an election from Opposition, considered the issue politically sensitive
and material enough to provide strong and clearly worded public and private
commitments that a Rudd Labor government would retain the existing rebates.
In a letter to the Australian
Health Insurance Association dated 20 November 2007 then Opposition Leader
Kevin Rudd wrote:
"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."
As stated in the Prime
Minister's letter, that same iron-clad guarantee had been provided by both
himself and his then Shadow Minister on 'many occasions'.
In a speech to the Annual Australian
Health Insurance Association Conference in Melbourne on 10 October 2007, then
Shadow Health Minister Nicola Roxon said:
"This
is why we have committed to the current system of private health insurance
incentives – including the package of rebates, the Lifetime Health Cover and
the surcharge.
Labor
understands that people with private health insurance – now around 9 million
Australians – have factored the rebate into their budgets and we won't take
this support away."
When the Coalition had previously
dared to question the sincerity of that emphatic pre-election commitment we
were accused of running a dishonest scare campaign. This is what the then
Shadow Minister for Health and Ageing Nicola Roxon had to say on 26 September
2007:
"Federal
Labor rejects the Liberal scare campaign around the Private Health Insurance
rebates... The Liberals continue to try to scare people into thinking Labor will
take away the rebates. This is absolutely untrue. The Howard Government will do
anything and say anything to get elected".
Of course we now know that
this is exactly what has happened for more than two million Australians.
The Howard Government was
telling the truth, while Labor conned people into believing that it had changed
its ways; that it would no longer be driven by its longstanding ideological
agenda against private health.
THE CON
CONTINUED IN GOVERNMENT
When the Coalition questioned
the newly elected government's commitment to private health insurance, the
government accused us of perpetuating the scare campaign. The Parliamentary
Secretary for Health and Ageing read the now discredited September 2007 press
release into the Hansard record and reconfirmed the Rudd government's
commitment to the retention of the existing private health insurance rebates[4].
On many occasions since has
the government reconfirmed its commitment to retain the existing private health
insurance rebates.
As late as 24 February 2009,
confronted with media inquiries about government plans to scrap the private
health insurance rebates, Federal Health Minister Nicola Roxon reassured people
that:
"The
Government is firmly committed to retaining the existing private health
insurance rebates."[5]
Yet, during Senate Estimates
it was revealed that while Minister Roxon was giving these public assurances,
behind closed doors she and other senior members of the government were seeking
and obtaining advice on how to progress changes to those private health
insurance rebates. 'Firmly committed' to retain the existing rebates in public,
while secretly working on plans how to reduce and scrap them.
Minister Roxon first obtained
advice from her Department on 12 January 2009[6].
Advice on how to change the rebate had been sought by the Health Minister's
office as early as December 2008[7].
We also know that Treasury
provided advice on means testing the rebate on 20 February 2009 at the request
of the Treasurer[8],
that the Department of Finance and Deregulation provided advice on the same
measure on 22 February 2009[9]
and the Prime Minister’s Department on 23 February 2009[10].
Yet after all of that was
going on within the Rudd Labor government, on 24 February 2009 the Minister for
Health and Ageing told Australians that the government remained firmly
committed to retaining the existing rebates.
How can anyone believe
anything the Rudd government will say about commitments on private health
insurance now or in the future?
Dr Armitage, the Chief
Executive of the Australian Health Insurance Association put it very succinctly:
"It
would be difficult to have 100 per cent trust before any budget, given what has
happened to us in the last two – particularly this decision...
It
would be difficult to have 100 per cent trust given that we have such a
definitive letter from the Prime Minister, which has now been shredded."[11]
Mr Michael Roff, Chief
Executive of the Australian Private Hospitals Association put it this way:
"...these
proposals constitute a fundamental breach of promise by the government. This
entails reneging on clear commitments that were made not just in the lead-up to
the last election but were repeated by a range of senior government figures,
from the Prime Minister down, on numerous occasions both in public statements
and private meetings since the election.
There
are now serious concerns within the APHA membership about what further changes
may be made in subsequent budgets when commentators concur that substantial
cuts to expenditure will be required to meet government spending targets."[12]
Privately insured Australians
and the broader private health sector are indeed being asked to pay the price
for the Rudd government's reckless spending sprees since coming to office.
IMPACT ON THE COST OF
PRIVATE HEALTH INSURANCE
As a direct result of these
changes the cost of private health cover will increase for more than 2.3
million Australians by between 14.3 and 66.7 per cent.
People of all ages with
private health insurance in the first income tier will see their rebate reduced
by 10 per cent, people of all ages in the second tier by 20 per cent – yet
people in the third tier will be treated differently depending on how old they
are.
The older you are the steeper
the increased cost you will face as a result of this measure.
Those in the third income
tier aged less than 65 will see the cost of their health insurance increase by
42.9 per cent. Those in the same tier, 65 years and over but less than 70 years
old will see the cost of their health insurance go up by 53.8 per cent, and
those 70 years and older will see the cost of their health insurance go up by a
staggering 66.7 per cent.
Treasury and Health
Department officials have pointed out that there are only a small number of
people in these higher categories. But what does that prove? It seems
inequitable that older Australians are being hit extra hard.
In any event, these are steep
increases in the cost of private health insurance, which come on top of any
ordinary increase in private health insurance premiums. In the current
economic climate, and given the ongoing impact of last year's changes to the
Medicare Levy Surcharge thresholds those premium increases are likely to be
higher on average than what they have been in the final years of the Howard
government.
Furthermore, while 2.3
million Australians with private health insurance will see a direct, immediate
and automatic increase in the cost of their private cover by up to 66.7 per
cent, all of the eleven million privately insured Australians will be faced
with additional increases in private health insurance premiums as a result of
this measure.
Of course any increases in
premiums expected by the government as a result of this and last year's measure
(and their related impact on the Budget), are conveniently hidden in the
contingency reserve. The published budget papers do not include any information
on what the government expects to happen to the cost of premiums as a result of
this or last year's measure over the forward estimates.
IMPACT ON PRIVATE HEALTH
INSURANCE MEMBERSHIP
The government has stated that
a total of 40,000 people will drop private cover as a result of this measure.
That number is made up of:
-
25,000 people who are expected to
drop their hospital and general treatment cover;
-
10,000 people who have hospital
and general treatment cover who are expected to keep their hospital cover and
drop their general treatment cover;
-
5,000 people with general
treatment cover who will drop that cover;[13]
Catholic Health Australia
commissioned research by Access Economics which showed that[14]:
"Four
times more people than predicted by Treasury may go without private health
insurance as a result of changes to the private health rebate and Medicare Levy
Surcharge...
(Catholic
Health Australia) ...published independent research that shows the
Government's new private health insurance changes could result in up to 100,000
people going without insurance."
Given the way the measures in
these Bills are structured, the most rational response for anyone seeking to
minimise the additional cost imposed as a result of the reduced (or lost)
rebate would be to go for a cheaper policy and to drop general treatment cover.
That is to downgrade their level of private health cover. The government has
increased the size of the stick for those in Income Tiers 2 and 3 who may want
to drop their private cover to avoid the increase in cost of their private
health insurance caused by the government's changes to the rebates.
Indeed, Mr Ian McAuley, who
was very supportive of the government's proposed measures nevertheless
recognised that:
"If
we were all rational, the most rational response would be to shift to a cheaper
policy – the previous witness said it was downgrading, but I would not
necessarily call it that – and to drop ancillary cover."[15]
Yet, the Government has not
assessed the impact of this most likely and most rational response of privately
insured Australians in those income brackets on the private and public health
system at all. This is illustrated by the following exchange during Senate
Estimates:
Senator CORMANN—On
top of the people that are dropping cover, how many people do you expect will
downgrade their cover?
Ms Shakespeare—The
government does not actually expect that people will downgrade their cover as a
result of this measure.[16]
This assertion by the government
is quite unbelievable and completely irrational.
The consequence is that the
government's assessment of this measure underestimates its impact, in
particular on public hospital waiting lists.
There are two ways people can
go for a cheaper policy:
-
By increasing the level of 'front-end deductible',
that is by agreeing to pay a larger out-of-pocket expense at the time of
accessing a hospital service in return for a lower premium today; this
increases the incentive for a patient to seek admission as a public patient in
a public hospital to avoid the increased out-of-pocket expense;
-
By exclusions, that is exclude certain hospital
procedures from their private cover, eg heart surgery, orthopaedic surgery or
mental health services; if such a service is required by patients having
excluded it from their cover they will most likely present at a public
hospital;
None of this has been taken
into account by the government when assessing the impact of this measure on
private health insurance participation rates or on public hospitals.
Furthermore 1.4 million
Australians with general treatment cover only have been completely excluded
from any assessment of the impact of this measure on the basis that Treasury
did not have access to any personal income tax data for that cohort of
privately insured Australians.
Finally, the government has
been suggesting (after the release of one quarter of membership data) that the
Coalition's pessimistic suggestions about private health insurance
participation rates after last year's changes to the Medicare Levy Surcharge
thresholds had not occurred.
The not so subtle suggestion
by the government is that given the Coalition supposedly got it wrong last
time, any predictions about membership impacts this year had to be treated with
caution.
The Coalition of course had
merely pointed to Treasury estimates (initially of 644,000 fewer Australians
with private health insurance) when criticising the impact of the government's
changes last year to the Medicare Levy Surcharge thresholds.
After the Senate eventually
passed the twice watered down measure in October 2008, the Coalition pointed
out again that the government expected nearly 500,000 fewer Australians to have
private hospital cover as a result. This was based on advice provided by the
Government during the debate in the Senate.
The Minister for Health and
Ageing herself said at the time that there would be 492,000 fewer Australians
with private hospital cover as a result of the change. The $740 million in
estimated savings over the forward estimates were in fact based (and
contingent) on that reduction in the expected number of people with private
hospital cover (and taking their private contributions to the health system
with them).
Based on one quarter of
membership data the Minister for Health has been arguing that this wasn’t
happening. Some government Senators sought to press this point with witnesses
during this inquiry. Yet both Treasury and the Department of Health and Ageing
confirmed that the estimated impact of the measure had "not been
revised" and that (the impact) was "over the forward estimates
period" and that "we have had one quarter of data since the
measure took effect". [17]
In fact, Mr Peter Robinson,
Principal Adviser in the Social Policy Division of Treasury said "it
was probably safe to say it was a little bit too early to tell after the first
quarter"[18].
Asked directly whether the government had revised the estimated savings from
the changes to the Medicare Levy Surcharge thresholds legislated in October
2009, Mr Robinson's answer was a clear no.
That is, for the purpose of
assessing the impact of this measure on public hospitals we have to consider
the combined impact of last year's change to Medicare Levy Surcharge thresholds
and this year's proposed change to the rebates.
IMPACT ON PUBLIC HOSPITALS
For obvious reasons, the Rudd
government is keen to downplay the impact of its broken rebate promise on
public hospitals.
The fact that this time
around the government recognised any impact on public hospitals at all was an
improvement on last year. Indeed, when introducing last year's changes to the
Medicare Levy Surcharge thresholds no assessment or modelling was done by the
Federal government of the impact of that measure on public hospital demand. Any
impact on public hospitals was dismissed as a 'second round effect' not
relevant to the consideration of the budget measure at hand.[19]
In her Second Reading Speech
on these Bills the Minister for Health and Ageing stated in the House of
Representatives that:
"It is
estimated that approximately 25,000 people may no longer be covered by private
health insurance hospital cover, and that it might therefore result in 8,000
additional public hospital admissions over two years. When considered against
the fact that public hospitals have around 4.7 million admissions per year, the
impact of the measure will be insignificant."[20]
During Senate Estimates the
question was put to the Department of Health and Ageing on how the Minister had
derived that figure of 8,000 additional public hospital admissions over two
years:
Senator CORMANN—Have you assessed the impact of this measure on
public hospitals?
Ms Shakespeare—We have had a look at that, yes.
Senator CORMANN—Can you just talk us through how you went through
that assessment and how you came to the conclusions you have reached.
Ms Shakespeare—The figure of 25,000 people expected to drop their
hospital cover is the starting point. There is Ipsos survey data that indicates
35 per cent of people will require hospital treatment over a two-year period.
Using that data, we estimate that there may be up to an additional 8,000
presentations at public hospitals over a two-year period.[21]
It is a matter of simple
maths that 35 per cent of 25,000 equals 8,750. It is curious, and perhaps
indicative of the government's overall attitude, as to why 8,750 was rounded
down to 8,000 rather than round up to 9,000 public hospital admissions. Spin
over substance invariably is the modus operandi of this Rudd Government.
Even more concerning is the
impact on public hospital demand of last year's Medicare Levy Surcharge
thresholds measure combined with this year's broken promise on private health
insurance rebates.
The Rudd government's own
budget estimates indicate that even twice watered down, the Medicare Levy
Surcharge threshold changes eventually passed by the Senate in October 2008, will
result in 492,000 fewer people with private health insurance.
If we apply the government's
own methodology to its own numbers, that means about 181,000 additional public
hospital admissions over two years as a direct result of last years and this
years changes to private health insurance policy.
172,200 additional admission
as a result of the changes to the Medicare Levy Surcharge thresholds last year
(= 492,000 x 35%), plus the 8,750 additional admissions as a result of the
broken promise on private health insurance rebates.
Catholic Health Australia
pointed out that:
"The
analysis, by Access Economics, found the rebate and Medicare Levy Surcharge
changes could stretch public hospital waiting lists by an additional 36,000
people who would otherwise have been treated in private hospitals."[22]
And:
"When
you combine the number of people likely to forgo their insurance as a result of
this new change and last year's changes, we will see 600,000 fewer people
insured than would otherwise been the case... This means some 216,000 extra
admissions to public hospitals."[23]
Government Senators suggested
that additional funding commitments announced at COAG would offset the impact
of this measure on public hospitals. That is completely disingenuous of course
given that those funding increases were to deal with pre-existing demand
pressures unrelated to either last year's changes to the Medicare Levy
Surcharge or this year's proposed changes to the rebates.
IMPACT ON PRIVATE
HOSPITALS
Policy changes like the Rudd government's broken
private health insurance rebate promise have to potential to have significant
flow-on consequences for the private hospital sector.
In
recent years private hospitals have absorbed a significant proportion of the
growth in demand for hospital services as a result of the growth in private
health insurance participation rates.
Private
hospital operators expressed serious concern to the Committee about the impact
of sovereign risk given the approach taken by the Rudd government on measures
like this one.
Dr
Shane Kelly, CEO of St John of God Subiaco told the Committee that recent
policy changes had left them with "a lack of confidence going forward
for capital investment in private facilities"[24].
He expanded further in this
exchange:
Dr Kelly—Clearly
our ability to invest in capital to continue to provide the services in
contemporary facilities and to expand those services to meet demand is reliant
on how well our business is tracking. If we get to the point where we do not
have sufficient capital to invest in capital, then obviously we cannot do that.
Senator CORMANN—In that context, perhaps you can talk us through the
experiences, as far as you are aware of them, of the private hospital sector in
Western Australia in the eighties and early nineties in terms of utilisation
and viability as compared to what they are now. And perhaps you could look
forward—what the impact is likely to be if changes like this continue to be
introduced.
Dr Kelly—The
private hospital sector was in dire straits in the mid- to late eighties and,
really, capital investment was unheard of. There was not really the possibility
or opportunity to invest or reinvest, and it was only the trilogy of changes to
private health insurance that reinvigorated the industry and enabled it to once
again invest in contemporary facilities. There has been considerable
investment. For example, St John of God Health Care, even at my campuses, made
a very substantial investment in upgrading the hospital and providing services
to Western Australians, something that is now in doubt for the future.
Mr Michael Roff, Chief
Executive Officer of the Private Hospitals Association put it this way:
"A range of service planning and infrastructure
development decisions have been made by private hospital operators in both the
for-profit and not-for-profit segments of the sector on the basis of the
repeated commitments given by the government that they would maintain the
current policy settings. If these legislative proposals proceed for
developments planned but not yet underway, there are now doubts over whether they
will go ahead. For those already underway, there are now doubts over whether
they will prove to be viable."[25]
In short, implementing these
changes would undermine confidence in the private hospital sector. This will
affect investment in new and refurbished facilities, new medical and other
capital investment, and staffing.
A BETTER ALTERNATIVE –
INCREASE EXCISE ON TOBACCO
Instead of pursuing its
broken promise on private health insurance rebates, the government should
support the Coalition proposal to increase the excise on tobacco as a better
more positive alternative measure for our health system.
Increasing the excise on
tobacco by 12.5% instead of means testing private health insurance rebates
would have a positive rather than a negative impact on our health system.
Clearly it would have a
positive public health effect, it would lead to less pressure on public
hospitals not more, it would not force millions of Australians to pay between
14.3 and 66.7 per cent more for their private health insurance and it would
have a $300 million positive effect on the budget bottom line over the forward
estimates period[26].
Indeed Treasury
confirmed during Senate Estimates on 2 June 2009 that the proposal to increase
the tobacco excise by 12.5 per cent would more than offset the expected savings
from means testing private health insurance rebates.
Treasury
confirmed that a 12.5% increase in the excise on tobacco would raise $2.2
billion over the forward estimates, which would more than offset the $1.9 billion
estimated saving from means testing private health insurance rebates over the
same period.
The analysis the
government asked for assessing the Coalition proposal over a ten year period
was exposed during Senate Estimates as completely deficient.
The Treasury
analysis quite reasonably assumes that consumption of tobacco would go down
over a ten year period if the measure was to go ahead. While that assumption
was fed into the ten-year revenue forecast, no assessment was done of any
related health savings over the same period.
Officials
confirmed that the government did not ask Treasury to assess the obvious public
health benefits of a reduction in smoking or any related savings for our public
health system.
The government
dismissed those public health benefits and related savings for our public
health system as ‘second round effects’. As if, over a ten year period,
beneficial second round effects are somehow irrelevant.
It is completely
unbelievable that the Government never asked Treasury to consult with the
Health Department in finalising their advice on the Coalition's alternative
proposal to increase taxes on tobacco.
And while the
government has provided a copy of Treasury's analysis to selected media outlets
on 17 May 2009[27]
(no doubt to help push a political line), the copy of that advice has still not
been provided to the Senate Economics Committee for scrutiny. That is despite a
specific request on notice on 2 June 2009. Specific answers to specific
questions on notice and what appears to be a selective extract from the
Treasury analysis was provided to the Senate Economics Committee. Why is the
government refusing to provide a copy of the advice given to the media? What
has the government got to hide?
PROCESS CONCERNS
No consultation with
the States and Territories
Before the last election the
Prime Minister committed that he 'would end the blame game' and that he would
ensure a new era of 'cooperative federalism in health'.
The Rudd government has now
introduced major changes to the private/public health balance with serious
implications for State and Territory governments without any consultation.
The States and Territories
are expected to improve the performance of their public hospitals, yet the Rudd
government keeps shifting more demand to public hospitals that are already
under significant pressure.
Industry stakeholders
were misled
Private health industry
stakeholders, along with more than eleven million privately insured Australians
were seriously mislead by the Rudd government.
Submissions for rate change
applications by health funds, planning for future infrastructure and workforce
requirements by hospitals, are but some of the decisions which were erroneously
based on the Rudd government's firm commitments before and after the election
that the existing private health insurance policy framework would be
maintained.
The first the industry heard
about the government's change in direction was when the Minister for Health and
Ageing called stakeholders on the Thursday night before the budget to let them
know that a story in the paper the next day about a government plan to means
test the private health insurance rebates was in fact correct[28].
Mr Roff from the Australian
Private Hospitals Association told the Committee that "these proposals
constitute a fundamental breach of promise by the government".[29]
Dr Armitage from the
Australian Health Insurance Association said "we are disappointed. The
explicit letter (from the Prime Minister) stated that there would be no
change to the present system – it is still the present because it has not yet
been legislated – of the rebate. We felt that that was, if you like, a
cast-iron guarantee, so we are disappointed about that."[30]
No Regulatory Impact
Statement
The government did not
conduct a regulatory impact statement of this measure. The Prime Minister made
a specific decision to exempt this particular measure from the requirement for
a regulatory impact statement[31].
Why? Nobody was able to
answer that question. It remains unanswered to this day.
Means testing private
health insurance rebates will be complex and bureaucratic
Michael Roff from the Australian
Private Hospitals Association put it best when he said:
"I think one of the key problems with it is the
sheer complexity. We are now moving to a system with effectively 10 tiers. You have what I
call tier zero which is where there is no change and then in each of the other
three tiers different surcharges apply and different levels of rebate depending
on age. I think one of the things that is going to happen is that this may lead
to an increase in employment in the tax agency sector. People are going to need
someone to explain to them exactly what it means if they fall within a
particular income bracket and whether or not it is worthwhile to have health
insurance and what sort of things they should consider. I think a lot of people
are going to throw their hands up in the air and say, ‘This is all too hard.’ I
know because I was involved in some of the discussions around the design of the
original rebate scheme that one of the key considerations was to keep it
simple. The administration of this scheme is going to be enormously complex.
The tax office is receiving $60 or $70 million to administer it and tell people
about it, how is the average punter supposed to react?
CONCLUSION
This measure is bad public
policy.
Any measure that puts
additional pressure on public hospitals and will see fewer people take
additional responsibility for their own health care needs is a bad measure.
Yes
this measure will have the most immediate impact on the 2.3 million Australians
with private hospital insurance and incomes above $75k/$150k per annum. They
will see the cost of their health insurance go up by between 14.3 and 66.7 per
cent as a direct result of Labor's broken rebate promise.
However,
all Australians will be negatively impacted in one way or another.
7.4
million Australians with private hospital insurance and incomes below the
'rebate reduction' thresholds will be faced with increased premiums to cover
the cost flowing from those downgrading their cover or leaving private health
altogether.
Those
without private cover will have to compete for access to public hospital care
with the increasing number of those no longer covered by the private system.
This
is yet another step in the wrong direction. It was a step the government
promised before the election they would not take.
Instead
of fixing public hospitals, Labor has been distracted by its ideological agenda
against private health – even though it is putting more pressure on public
hospitals not less.
Recommendation
That
the Senate:
-
Reject the legislation implementing the government's
broken private health insurance rebate promise;
-
Urge the government to increase the excise on tobacco
by 12.5 per cent as an alternative to means testing private health insurance
rebates.
Mathias Cormann
Senator for Western Australia
Sue
Boyce
Senator
for Queensland
Judith Adams
Senator for Western Australia
John
Williams
Senator
for New South Wales
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