On the back of news today that the Abbott Government is going to wave through a big increase in private health insurance premiums, I joined David Speers on Sky PM Agenda to talk about why that would be bad for everyone's health. Here's the transcript:
SKY PM AGENDA
THURSDAY, 22 JANUARY 2015
SUBJECT/S: Tony Abbott’s attack on Medicare; spike in private health insurance premiums
DAVID SPEERS: Let me bring in the Shadow Assistant Treasurer now, Andrew Leigh, our guest this afternoon. I wanted to talk to you about health insurance premiums. But can I just pick up though on the Medicare changes firstly. What is Labor's approach to any sort of co-payment? Even if there was further change to only apply it to wealthier Australians, is it something you would contemplate at all?
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: David, all we have got at the moment are thought bubbles from the Government. I mean, the Government apparently thinks today that its main problem is that the prime minister doesn't ‘skite’ enough. I think what the Australian people want from their Prime Minister is not more skiting, but more considered policy development. We know in the case of the co-payment, that doctors are against it, patients are against it and the health experts are against it. They don't want patients being priced out of going to the GP and ending up in the emergency room. That’s the more expensive bit of our health system, and the bit where – compared to other developed countries – we spend far more of our health budget.
SPEERS: But the doctor there wasn't opposed to any sort of co-payment, they are leaving some room there for some type of co-payment. So my question again: is there any type of co-payment that Labor would support, even if it was more targeted at the wealthy?
LEIGH: We don't support co-payments, David. We don't think it is good to be stopping people going to the doctor. One of the benefits of you going to the doctor is it helps me as well. You pop along and get your flu shot, that makes me less likely to get the flu. In that sense, consuming health is different from, say, going out and buying a car. I want to encourage you to stay healthy because that means I'm more likely to be healthy; or if we are co-workers, you're less likely to get sick and throw a workplace burden back on to me. In economic jargon, it's a public good.
SPEERS: But getting back to first principles here of this whole debate: the Prime Minister has used this figure time and again, that Medicare was costing us $8 million a decade ago, today it is $20 billion, and in 30 years it will be $30 billion. Do you accept those figures and is something going to have to change?
LEIGH: What you need to remember is that Australia is growing in population and we have also got inflation running. If you look at health costs as a share of national income, we sit below the developed country average. We are spending 6.1 per cent of our national income on health compared to 6.3 per cent for the typical developed country. We spend less than countries like New Zealand, and a lot less than the United States which is spending 16.3 per cent of their national income on health. In fact, health costs in real terms fell a little last year, David. We don't have a crisis in our healthcare costs. We don't need to trash Medicare. We need to make sure that Medicare endures. It is a great mark of what Australia has achieved. Of course, over the opposition of past Liberal governments, it is easy to forget that all of the elections, 1969 to 1993, saw Labor arguing for Medicare and the Coalition arguing against it. So with a track record like that, maybe it is not so surprising that the Coalition still, deep in their DNA, wants to rip into Medicare. But it's a great system and one that Australians can be proud of.
SPEERS: Let me turn to health insurance premiums, with reports today they will go up by around 7 per cent from April. That is what the health funds are calling for. They went up 6 per cent last year. The Prime Minister said it is up to the market to decide this. The government does have the power, of course, to step in but it doesn't sound like they will on this occasion. Labor didn't stop any premium increases during its time in government either, did it?
LEIGH: I don't think that's right, David. My understanding from speaking to people around at the time is that under both Nicola Roxon and Tanya Plibersek, initial fee raises were rejected and then the health funds came back with something more modest. The proof is in the pudding. Average fee increases under Labor, from 2007 to 2013, were 5.3 per cent. Under Peter Dutton, they went up 6.2 per cent. So for someone paying $1,700 a year, which is the typical single person amount, that is nearly another $20 under the coalition compared to Labor. And that element just compounds over time. To get huge health premium increases, you've got to go back to the time when Tony Abbott was Health Minister, when the premiums went up 8 per cent in one year. That’s an astonishing level to allow the health funds to increase premiums by.
SPEERS: Whether it is 7 per cent, 6 per cent, or 5 per cent, it is still above inflation and still another hit to the hip pocket. I would just like to explore how this can be addressed? Are there ways, do you think, to encourage younger, healthier people into health insurance that would then bring down the burden for all the cost for all? Is there more that can be done in this policy area?
LEIGH: Well, we already do a couple of things, David. As you know, most people receive a government subsidy for their health insurance. We have the lifetime health cover system which strongly encourages over-30s to get into the system. The targeting of the private health insurance rebate didn't cause 1.6 million Australians to drop their private health insurance as Tony Abbott predicted in 2011. In fact, more Australians have private health insurance now than did before. But because the government compels people to, or strongly encourages people, to buy private health insurance, the government too has an obligation to put downward pressure on premiums. It is not the market for biscuits or apples or cars. It is a market that is highly concentrated, there’s five big companies that have 83 percent of market share, and the government is encouraging people into that market. So we do have to put downward pressure on, and this kind of ‘let the market rip’ approach that Tony Abbott believes in, is just going to end up with bigger costs for consumers.
SPEERS: What about from within the health funds themselves? At the moment, they can't actually price risk on things like age and pre-existing conditions. Would that help them offer more attractive products if they could offer a cheaper product to younger or healthier people, do you think?
LEIGH: Well, the benefit that comes from health insurance, David, comes in when we pool risk. The economists talk about this as a challenge of adverse selection. If we allow you to write premiums which are too carefully targeted, then premiums for some people just become unaffordable. So I think we have got the balance right at the moment. But again, I think we need this government to start thinking about the many rather than the few. Yes, their laissez-faire approach will be good for health fund profits. But it won't be good for the wellbeing of ordinary Australians who will end up paying more. Potentially a lot more, too, over the course of an Abbott Government if premiums are allowed to rise by as much as the health funds want to increase them by, rather than pushing the lid down as Labor did when we were in office.
SPEERS: Ok, thanks for joining us this afternoon
LEIGH: Thank you David.