Lindsay Tanner (Melbourne, Australian Labor Party, Shadow Minister for Finance) Share this | Hansard source

I will be very generous to the member for Paterson and get to the point about the Medibank Private sale, which is where I was about to get to in any event. The point is that we have Senator Minchin’s third privatisation agenda—that is, the sale of Medibank Private—before us today in the parliament and, again, he is making a mess of it. This legislation is being put to the parliament to empower the sale of Medibank Private, but the government has indicated that it is going to put off any sale until 2008.

The excuse for this is that it is very difficult to overlap the Medibank Private sale with the T3 sale—the latest privatisation of Telstra. So, particularly given the comments of the previous member, the issue of T3 is in fact directly relevant to the debate before the parliament today. It is relevant because the government itself says it is relevant. Nonetheless, the point here is that, the reason it is going to defer the sale has nothing whatsoever to do with T3 but everything to do with political cowardice.

The government understands that the sale of Medibank Private is deeply unpopular in the community, that people overwhelmingly oppose it—they do not see any reason for it. Therefore the prospect of holding the sale in an election year has made the government run for cover. The claim that somehow this would clash with T3 is total nonsense. It is complete nonsense, and if you talk to anybody in investment banks and the financial markets who actually has expertise in these areas they will tell you that it is complete nonsense. It is all about electoral fears and has nothing to do with the interests of taxpayers and nothing to do with the interests of consumers of health services.

The bill imposes a number of restrictions on the new owners of Medibank Private once it is sold, if the government is returned to office—which, of course, because of the delay in the sale, is the major qualification to whether or not it will ultimately be sold, because Labor will not sell it. These restrictions last for five years and, in effect, require for a period of five years the company to maintain its head office in Australia, to maintain Australian directors and to have no more than 15 per cent share ownership by any one individual or organisation. Thereafter, it is open slather.

The legislation also overrides provisions in the National Health Act which would otherwise preclude Medibank Private from switching to becoming a for-profit company, and it overrides provisions in the National Health Act which would otherwise preclude the Minister for Health and Ageing from seeking to disallow on public interest grounds any sale or any transfer from not-for-profit to for-profit on the part of Medibank Private.

Most significantly, the legislation also contains a provision which ensures that, should there be any legal liability accruing with respect to the existing members of Medibank Private—an issue I will turn to in some detail in a minute—that legal liability will accrue to the new owners. So, in effect, whoever buys Medibank Private will not be able to sue the government, nor will existing members of Medibank Private be able to sue the government with respect to any rights that they may have with respect to the existing reserves, the hundreds of millions of dollars which are reserves of Medibank Private which have been built up by members—of whom, incidentally, I am one. In fact, a number of my colleagues are also in the same category, and I am sure that there are even some members in the government who are members of Medibank Private. So the legislation explicitly shifts that risk from the government. It explicitly says that, if there is any kind of legal action seeking to assert the rights of Medibank Private members with respect to those reserve funds, the risk is borne by the new owner, not by the vendor, the seller, of the organisation.

The government claims that the sale of Medibank Private will drive down premiums through greater competition and more private sector efficiency. The evidence suggests the contrary. There is a considerable risk of further market concentration occurring in private health insurance in this country. It is pretty laughable to call the private health insurance sector in this country a market. It is not a genuine market as such. If you look at the distribution of business, of market share, you will see that there are one or two dominant players in most states, and there is a significant risk down the track, with the sale of Medibank Private, of that leading to a situation where, in one or more states, you have an excessive market dominance. For example, if a new owner were to decide to exit from the Western Australian market—where I think, from memory, Medibank Private has around 17 per cent of the market—that would leave the existing dominant fund in an even more dominant position and an already very thin market even thinner. The claim that greater private sector efficiency will lead to lower premiums needs to be taken into account in the context of the inevitable increase in advertising and administrative costs and the need to pay dividends or profits to owners, which will eventuate as a result of the change—not to mention the high likelihood of substantially higher salaries for the people running Medibank Private which tend to be a natural and almost inevitable consequence of privatisation.

Where this will end up, time will tell, but I think the evidence is overwhelming that the pressure is going to be upward on premiums, not downward. And Australians know that predictions from the Howard government about private health insurance premiums cannot be believed, because the results—the outcomes, the track record—with respect to private health insurance premiums have been horrendous. The pressure is always upwards, well beyond inflation, well beyond the cost of living. So, when the Howard government say to people that this is going to lead to lower private health insurance premiums, most people do not believe them.

I said that it is difficult to see how private health insurance in this country can be seen as a true market. Here we have a market where the government forces people to buy the product and the percentage of Australians who are caught within that net in the middle to higher income bands is ever growing, because the trigger points of $50,000 and $100,000 are not indexed. So the government forces people to buy the product. It sets complicated price rules which determine what price people have to pay at different ages. It microregulates the sector. It massively subsidises it, to the tune of billions of dollars. And now, courtesy of the last budget, it is going to spend $53 million on a campaign advertising the virtues of private health insurance. If that is a private market then I would be fascinated to see what the government sees as government control, because that clearly is nothing like a genuine market for services. So the notion that somehow we are going to see a flourishing of private enterprise courtesy of the sale of Medibank Private is totally misconceived.

The final issue I wish to turn to, which I adverted to briefly previously, is the question of the legal status of the assets of Medibank Private. There is a serious possibility here that the government is seeking to sell something which it does not fully own. Once again, Senator Minchin—Father Christmas—has got himself in a bit of a pickle about this particular problem. Some time ago, a report from the Parliamentary Library indicated that the government may not legally own the members’ reserves—which of course have been built up not by injections of capital from the government but through the premiums of several million ordinary members, including me—and, as a result, may not have the legal right to sell them.

In effect, the government is seeking to hand over Medibank Private lock, stock and barrel to a new private owner and to simply pocket the proceeds without any form of direct compensation to those members of Medibank Private whose premiums have built up those assets—that capital—over that period of time. The government refused to release the legal advice on which it based this assertion. But, in response to the Parliamentary Library report, which indicated that there was a serious doubt about whether or not it owned these assets, it put out a quick and dirty legal opinion, cobbled together over a weekend by Blake Dawson Waldron, indicating that the Parliamentary Library advice was wrong and the government’s position was correct.

The government still refuses to release its original legal advice, and I know why—because it is widely known in finance circles that advice has been provided to the Department of Finance and Administration indicating that the Parliamentary Library is basically right and that there is a big question mark over the legal ownership of all of Medibank Private’s assets. That is why the government is not releasing its original legal advice.

The quick and dirty advice in the wake of the Parliamentary Library’s report really does not stand up to much scrutiny. A lot of it is very tendentious and there is some rather sloppy reasoning in it. One suggestion that I particularly liked was an effective claim that, if the government proceeded down a particular path suggested by the Parliamentary Library, it would be liable to a claim for compensation for just terms on the acquisition of property under section 51(xxxi) of the Constitution—in other words, that a particular course of action would imply that the government, through the National Health Act, was acquiring Medibank Private and it would therefore have to pay compensation. There is a slight problem with this reasoning, and that is that the government still owns Medibank Private. So the implicit suggestion in the legal advice is that the government would have to pay compensation to itself as a result of acquiring its own property. It is patently absurd reasoning and an indication of legal advice that was cobbled together at the last moment to suit the government’s argument.

The government has refused to release its advice on this issue, and we know why. If there were no risk that there may be legal action on behalf of Medibank Private members seeking to stake some kind of claim to those reserve funds then why is there a provision in the legislation indemnifying the government against that risk? Such a risk clearly does exist. None of us knows what will occur. The Blake Dawson Waldron advice argues that Medibank Private has no ongoing obligation to members because it can easily terminate them—for example, it can throw me out for no particular reason—but in fact it fails to note that there are provisions in the National Health Act that effectively prohibit it from discriminating against members in that way.

There is a very complex legal argument involved here, but there is a wider moral point, and that is that Medibank Private has been built up over the years by its members, effectively as a mutual. The government has no right to step in and grab those funds and say, ‘We’re going to take them.’ We oppose this legislation. Its mishandling by the Minister for Finance and Administration, Senator Minchin, is yet another example of his unfitness for the position. He is not a tough guy. He is Father Christmas. He is a stumbler. He is a bumbler. He has no idea what he is doing. (Time expired)

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