Thursday, 11 March 2010

Political debates

There seem to be a couple of interesting political debates happening around this time, one of which I found interesting (and convincing) and so without providing much additional insight, I reproduce:

The Greens policy on Health Reforms:

As stated by Senator SIEWERT at the Senate on Tuesday, 9 March

"...In his speech he talked about the Labor Party’s ideological belief around the insurance rebate. I would put the proposition that the coalition has an ideological belief that private health insurance will save our public health system. We do not believe that is the case and I will argue that point shortly. In fact, we have argued in this place many times that we believe this is bad policy. It does not deliver good health outcomes and we would be better off directing the money that we invest in the private health rebate directly into our public health systems. This policy pours billions of dollars of taxpayers’ funds straight into private health insurance.
In fact, what we are doing is filtering the resources that we are supposed to be putting into our health system through the private health insurance rebate. We do not believe this is an appropriate way to address our chronically underfunded public health system. We should be directing those funds directly into our public health system. Our public health system and health workers are struggling because of the lack of resources and because now $3.8 billion is channelled into the private health insurance industry rather than into our hospitals. We have opposed, and we will continue to oppose, this approach to health funding. However, we do concede that means testing the private health insurance rebate is an improvement on a flat rate of 30 per cent to all private health insurance holders irrespective of their income level and capacity to pay. Certainly removing the rebate from those on higher incomes, we believe, is a step towards the Greens position of getting rid of the rebate altogether, and it is bedded in the current system.
I have outlined previously our concerns about the private health rebate. In fact, as I think I have also said before, we are not alone in our concern about the economic wisdom of the private health insurance rebate.
Treasury does not always or very often support the Greens position but in this issue it appears that it does in fact support the Greens position. This was highlighted in the Age last year, when the revelations were made that Treasury had advised government that the private health insurance rebate was bad policy and that the billions that go towards this policy would be better spent on our ailing public health sector. Let me quote from the article in the newspaper at the time, which cited documents from the Treasury briefing, we understand, to the Rudd government shortly after its election:
THE private health insurance rebate paid to millions of Australians is “very poor policy” and should be dumped, according to a confidential briefing to Treasurer Wayne Swan.
It goes on to state:
The briefing said the billions of dollars lost annually to the rebate would be better spent on public hospitals.
That is a sentiment we very strongly concur with. Then it directly quoted from the Treasury document:
This rebate represents very poor policy. “There is no doubt that its $3 billion annual cost to revenue
could deliver far better health outcomes if directed to additional capacity in public hospitals.”
Again, that is a sentiment we support. Since that advice was provided, apparently in November 2007, the annual cost of the private health rebate has risen to $3.8 billion. We are edging up very close to that $4 billion mark. Here we have Treasury providing advice in line with the Greens policy on the private health insurance rebate as a funding model—the same Treasury whose advice the government relies on for many other important economic issues. Yet this government has ignored the advice on the private health insurance rebate and seems to buy the previous government’s ideological belief that private health insurance is the saviour of our health system. That is certainly yet to be demonstrated. I think the time for that experiment is over.
We have said on many occasions that we believe the rebate is very poor policy. It is not an effective mechanism to improve our health system. It is an ineffective and inefficient use of taxpayers’ dollars within the broader health system. It does not directly fund health service delivery, and it basically supports the health insurance industry. Compelling evidence was presented to the Senate inquiry into these bills by Dr John Deeble. Dr Deeble was a member of the old Health Insurance Commission for 16 years and was a director of Medibank Private, with responsibility for premium setting, so he has had a long-term involvement in this area. He described the private health insurance rebate as wasteful and divisive in the way in which it separates the public and the private health systems rather than integrating them. The Greens believe that government would be irresponsible if it ignored the advice received from a broad range of health and economic experts.
Ian McAuley from the Centre for Policy Development provided evidence to the Senate inquiry that showed the rebate in particular has had minimal impact on private health insurance membership and equally has had little effect on reducing public hospital demand. He provided the committee with evidence that showed that the private and public sectors deal with very different caseloads, so this rebate could never be expected to reduce the demand on public hospitals. Dr Deeble provided the inquiry with evidence that showed that private health insurance membership was not sensitive to price. He pointed out that when the 30 per cent rebate was introduced in 1999 there was almost no effect in the two years following its introduction. Coverage rose by about two per cent. Dr Deeble felt that the only reason the subsequent rise in coverage took place was the considerable advertising and fear that Medicare would not cover consumers in the future. Dr Deeble spoke of his experience at Medibank Private. He said it was possible to vary premiums without any discernible effect on membership and that there could be significant differences between insurers without any noticeable change in market share. He felt it was almost impossible for people to understand all the various products that the insurers offered and be in any position to determine if they offered value for money.
There should be, we believe, a national debate in Australia on the kind of health care we expect and how we are willing to pay for it. Professionals and dedicated people in the health sector are demoralised, and the community is dissatisfied. Private health insurance subsidies encourage specialists who would otherwise be available to public hospitals to shift to the higher paying, less stressful private system. Stampeding patients into private health insurance whose prime priority is profit rather than the health system is a recipe for a US-style system, without doubt the developed world’s least efficient. This is why the US spends 17 per cent of its gross domestic product on health, while Canada and Australia spend 10 to 15 per cent and have better health outcomes in terms of longevity, infant mortality and morbidity than the US. However, Australia’s healthcare expenditure is rapidly rising, and we have talked about that at length in this place. Ten years ago it represented 8.1 per cent of GDP. Now it is 10 per cent. The states, as we also know, have increased their health expenditure to the point where it covers up to 30 per cent of their budgets. Taxpayers have a legitimate right to ask, ‘Are we getting value for our money?’ We already know there are private patients in public hospitals, and now we are talking about public patients in private hospitals—the situation gets even more crazy.
We know that countries that grant significant public subsidies to private health insurance—Australia, France and the US—have faced considerable pressures on their public budgets. All that private health insurance does is to rearrange the queues, promoting some and shifting others to the back, and although it may help some with low-priority needs it may lengthen waiting lists for those with greater needs. We believe this is bad policy and we should be rethinking it. Ian McAuley presented evidence to the committee that argued that while the tax systems are far from perfect they do achieve a degree of equity. He pointed out that private health insurance is essentially a stealth tax which builds in inequities. There is no incentive to provide ‘public good’ services, such as the promotion of health lifestyles, and the cost of collecting tax through a single system is more effective than by individual insurers. The private health insurance industry has been successful in conveying the impression that without private health insurance there would be a collapse of the private system and that Australia would be on the path to the madness of ‘socialised medicine’. We should be asking if this is really the case.
We have said time and again that the government’s corporate subsidy to private health insurance is bad policy. John Menadue from the Centre for Public Policy Development calls it a cancerous growth. He says that it is not a health program, and we agree. It is corporate welfare. The Productivity Commission has pointed out that the increased levels of private health insurance have been associated with a marked increase in the number of services performed and reimbursements for their services. But when people really need that insurance—when they are elderly and find they cannot afford to keep up the payments—where are the insurers then? The only winners here are the insurers who, in some cases, have been collecting money from those people for a very long time. The insurers—the same ones who tell us that we cannot live without private health insurance—are the winners out of this system. These are the people who say that without their involvement our entire health system would collapse around us. These are the same people whose administrative costs are double those of Medicare and who push up their premiums every year, in some cases two or three per cent ahead of the inflation rate.
We know that private health insurance has failed to take the pressure off public hospitals, we know it has
allowed private hospitals to attract highly professional staff away from public hospitals and we know it weakens Medicare’s capacity to control costs and quality.
We know it is an inefficient way of promoting so called choice. We know so much about why it is unfair and inequitable that here we are, again, trying to patch up bad policy. We just keep patching and patching and patching to make up for bad policy.
As I have stated on many occasions, the Greens are opposed to the private health insurance rebate. I think
that is patently obvious. We believe that the money that is directed towards corporate welfare of the private health insurance industry would be better directed to our public health system. Ian McAuley calls it the power of policy privilege—and he is right. We do not need subsidies to private insurance firms to promote private health delivery. Private health insurance companies are not healthcare providers; they are part of the financial world. This is a financial product for them.
Private hospitals would be up to $2 billion better off if part of the money that is spent on insurance were given straight to them as a subsidy, for example, and not via financial intermediaries.
Notwithstanding our position on the private health rebate per se, it is simply inequitable that high income earners should receive the same rebate as those on lower incomes. If the government is not prepared to bite the bullet and get rid of the rebate altogether, at least it could make it fairer. The Fairer Private Health Insurance Incentives Bill 2009 [No. 2] introduces a new income means test on the private health insurance rebate and removes the rebate altogether for high income earners, for singles earning over $120,000 and families earning over $240,000. The Greens will support the rebate and continue to call for any money saved from means-testing the private health insurance rebate to be allocated to public health and hospitals. As Ken Davidson wrote recently in the Age:
There is not much point in starving the health system of funding to minimise taxes if it shifts the burden from citizens
as taxpayers by creating an even bigger burden for them as consumers.
Ian McAuley noted in last year’s Senate inquiry that the private health insurance industry has administrative costs that impose an unnecessary 10 per cent on premiums because its overheads are higher than Medicare’s overheads. Private health insurance enjoys a $3.8 billion subsidy, dwarfing that of most other industries.
Yet, as Davidson, McAuley and others have noted, the major purpose of private health insurance is to give its customers the chance to jump the queue for elective surgery while allowing providers to overservice and overcharge their patients.
The provisions of these bills were announced as budget measures, designed to raise revenue and create a fairer system. As I have said, with reservation, the Greens acknowledge the intent of means-testing the private health insurance rebate and strongly believe that the money raised from this over the next four years should be directed to the public health system. We have identified a range of areas, which is by no means an exhaustive list, where the money would be well spent.
For the reasons I have outlined here, the Greens will be supporting this rebate because we think it is a step in the right direction. But nobody should be under any illusion that the Greens support the rebate in general. We do not.
We believe that it should be scrapped and that we should be directing that money into our public health system so we are not funnelling it through insurers, who are financial entities and in it for financial gain, and not promoting and providing an efficient and effective healthcare system in Australia that benefits all Australians."

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