Speech to Parliament: Private Health Rebate

Mr TURNBULL (Wentworth) (10:36): The Labor government first proposed this change—this reform, as they describe it—in the budget of 2009. It was put up on the basis that the savings achieved were needed in order to address the diminution in Commonwealth revenues arising out of the global financial crisis. However, the savings then stated—$1.9 billion over four years, and the savings are still of a comparable amount at this stage—were at a level that could have been readily achieved from savings in other areas. So, the argument for the reform was always a specious one. As we said at the time, the truth is that these changes are just the latest phase in Labor’s unrelenting war against private health insurance.

Labor hates private health insurance. It hates it because it encourages self-reliance and because it offers choice, and Australians know that. Australians do not trust the Labor Party on the matter of private health insurance. If anyone doubts that, that is why the Labor Party—the then Leader of the Opposition and subsequently Prime Minister, Mr Rudd; the current Prime Minister, the member for Lalor, Julia Gillard; and the shadow health minister at the time, Nicola Roxon—in the lead up to the 2007 election said again and again that they would not change the private health insurance rebate. At the time, in 2009, when they broke that promise I said that never was an election promise given more emphatically and then broken so brazenly.

Ms Plibersek interjecting—

Mr TURNBULL: There have been quite a few broken since then. The Minister for Health has become habituated to breaking election promises and, indeed, it is an enduring feature of this government that it is incapable of keeping an election promise. The truth is that these changes will force people to drop private health insurance cover or choose cheaper cover with more procedures excluded. That follows as night follows day. You put up the price of something—make a good or service more expensive—and people will buy less of it. And the people who will buy less of it are those who feel, because of their youth or their health, that they have less need of it—that is to say, their need of private health insurance is more marginal. The consequence of that is that the pool of revenues in the private insurance sector will be diminished, and that will inevitably put up the cost of private health insurance for all those who are insured, whether they are on high incomes or on low incomes. All Australians with private health insurance will face higher premiums into the future if these changes proceed. It is a matter of great disappointment to me and everyone on this side of the House that a number of the Independents, including the member for Lyne, have decided to support the government in this regard.

As I said in 2009, every Australian knows that the cost of public health is growing, as are the waiting lists for public hospitals. Every Australian knows that as our population ages the need for more self-reliance in the provision of health services becomes greater. A government that is prudent and responsible in its management of this important area of public policy would do everything in its power to encourage Australians to be more self-reliant—take out private health insurance and do more to take care of their own health—where they can afford to do so. We know that every dollar of funding provided for the private health insurance rebate saves $2 of costs that are then paid by private health insurers. The report from 2004 that has been much cited here by Econtech and Harper Associates and Hagan is the reference for that.

We know that private hospitals treat 40 per cent of all patients in Australia—in 2009-10 that was 3½ million patients. They perform the majority of elective surgery in Australia—nearly two-thirds. Twelve million Australians—that is nearly 53 per cent—have private health insurance cover, and 10.3 million Australians have hospital treatment cover. There will be 2.4 million Australians directly affected by these changes and face immediate increases in premiums of 14, 29 and 43 per cent in their respective income tiers.

All of those insured—all of those taking out private health insurance—will be affected by this because the pool of revenue into private health insurance will be reduced. It is absurd to argue that you can increase the cost of private health insurance and not then reduce the amount of private health insurance that is taken out. Plainly, that is the inevitable consequence. Just as if you put up the price of cigarettes by increasing excise, fewer people will buy cigarettes. The impact is on all of those insured because it is a pool. The inescapable fact is that those people who choose to drop their private health insurance or reduce the level of their cover—reduce their contributions—will be those people who make a, probably, perfectly rational decision that they are unlikely to need private health insurance, and they make a judgment at the margin and reduce their contributions.

Deloitte’s analysis has concluded that in the first year, 175,000 Australians would be expected to withdraw from private hospital cover and a further 583,000 will downgrade. Over five years they expect that 1.6 million will drop their cover entirely and 4.3 million will downgrade. The government’s own private health insurance insurer, Medibank Private, has predicted that 37,000 of their members alone will drop their cover and 92,500 will downgrade. There is no question what the impact of this will be. It will be bad for private health insurance and it will also be bad for the public hospital system because the more pressure that is put on private health insurance, the more expensive it becomes and the less resources that are available for private hospitals and private health insurance, the more pressure there will be on the public hospital system. Every Australian is a loser out of this; there are no winners. The government says, ‘Why should there be a tax benefit—a tax concession—for people on high incomes, and why should someone on a lower income be paying tax and therefore’, they argue, ‘assisting, benefiting or supporting someone on a higher income who takes out private health insurance?’

That argument is so specious, because the truth is that most Australians pay tax and most Australians benefit without a means test from the services provided by government, whether it is the ABC, whether it is defence, whether it is education—it is a very long list. The argument therefore is not that this must be means tested because otherwise it would be unjust. On that basis, you would means test every single benefit. The truth is that we have a progressive income tax system and people on higher incomes, quite properly, pay a much higher proportion of tax and therefore the social equity, the income redistribution that is achieved in a society like Australia, is largely effected through that progressive tax system.
The means-testing argument is not one that is universally valid. Of course, there are benefits that are means tested and should be means tested. No-one is suggesting they should not be, but the argument about whether this benefit should be means tested has to be assessed on its consequences. This may be an ideological issue for the Labor Party, but it is not an ideological question of whether all benefits should be means tested. The question is: should this tax concession be means tested? The unarguable evidence, the uncontradicted evidence, is that there will be a reduction in the number of people taking out private health insurance cover and a reduction in the cover they will take out.

The only point of difference is the extent of that reduction. It follows inevitably that any reduction in that contribution to the insurance pool affects every other person that draws on that pool. The truth is that in any insurance pool the people who need the insurance the most benefit from the contributions from those people who for whatever reason—it might be good health or it might be good luck—do not need that insurance cover. If everyone could look into the future and know what their medical circumstances were going to be, and so the only people who took out private health insurance were those who knew they were going to be sick or needed a procedure in a hospital, then the insurance premiums would be impossibly high. The whole system would be unworkable.

That is why the Howard government wisely introduced this rebate and a number of other measures to expand the incentives—a combination of sticks and carrots—to encourage people to take out private health insurance and, above all, to promote a culture of self-reliance. It is absolutely fundamental that in our society we encourage everybody, where they can afford to do so, to be more self-reliant. We cannot afford to allow a situation where the welfare state becomes so all-encompassing and so expensive that citizens lose their own sense of responsibility and self-reliance. You have only to look at some of the fiscal catastrophes in Europe to see what the consequences of that are.

Self-reliance and private health insurance are clear social goods. They are promoted by this policy; they have been proved to work. The consequence of this change will reduce the availability of private health services for all Australians. It will increase the cost of private health insurance for all Australians, regardless of their income, and it will put additional pressure on the public hospital system. That is why the coalition today, as we have done for nearly three years, steadfastly and staunchly oppose it.