Chapter 3
Views on the bill
3.1
The committee gathered a range of views on the bill.
3.2
The first is the government's position.[1]
The Treasurer argues that Medicare Levy Surcharge (MLS) threshold levels have
not changed for a decade and should be increased to restore the proportion of
the population who are liable for the surcharge to 1997 levels. An increasing
number of average income earners are now falling into this 'tax trap'. In 1997
just 8 per cent of taxpayers incurred the surcharge. This has risen to about 36
per cent of single taxpayers in 2008–09 and up to 45 per cent of single
taxpayers by 2011–12.[2]
3.3
This measure will give taxpayers without PHI on typical incomes
between $50 000–$100 000 per annum some tax relief. This relief is
already given to those with PHI. At the same time the government continues to provide
financial incentives to encourage people into private health insurance.
Moreover, the government has publicly stated its support for a mixed model of public
and private health insurance and the use of a variety of measures to ensure the
continuing viability of the public and private health sectors.[3]
3.4
A second view is that of the private health funds (both profit[4]
and not-for-profit[5]),
private hospitals[6]
and private health insurance organisations.[7]
They oppose the bill on the grounds that young and healthy fund members who are
no longer liable for the MLS will drop their membership, causing premiums to
rise, leading to further fallout from the funds and subsequent premium
increases. The private health insurance industry expresses concern that these
changes will not only affect their profitability, but they claim it will
further lengthen public hospital waiting queues. Their argument is pitched in
terms of the bill's threat to the delicate 'balance' between public and private
provision of health care services and health insurance in Australia. In terms
of the bill's principal policy objective, they argue that there are alternate
ways to give tax relief than increasing the surcharge thresholds.
3.5
A further group recommend taxpayers' money to be directed to the
public health system, and away from the private health funds.[8]
They argue that the bill is a welcome policy initiative to encourage a more
efficient allocation of resources to the public health system. The committee
heard from several witnesses that the federal government should not be subsidising
the private health insurance industry, but should redirect its funding to the
areas of highest need in the public hospital system. Some witnesses even argued
that the bill did not go far enough in increasing the MLS thresholds.[9]
3.6
The following two chapters examine these perspectives on two
levels. Chapter 4 examines the evidence from various studies estimating the
impact of the proposed higher MLS thresholds on private health insurance
coverage, PHI premiums and the public hospital system. Chapter 5 outlines the
qualitative arguments sketched above based on the insights of submitters and
witnesses. Chapter 5 thereby gives context and perspective to the estimates presented
in Chapter 4.
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