Daryl Melham (Banks, Australian Labor Party) Share this | Hansard source

I rise to speak on the Medibank Private Sale Bill 2006. The government’s proposal to sell Medibank Private is no small matter. The impact of the sale will be felt across the entire Australian community, specifically by Medibank Private’s three million members. As Medibank Private represents 29 per cent of the market, there will no doubt be a ripple effect across the entire private health insurance market. Given Medibank Private’s pre-eminent market position, there are likely to be flow-on effects for the other 38 private health funds operating in the market. There is also a potential impact on Medicare, which I will comment on later.

The sale of Medibank Private provides not one extra health service for Australians. We should ask ourselves: what is the advantage of selling Medibank Private? Why has the government concluded that this is good public policy? There is no advantage and no gain to be made for the three million Medibank Private customers. The sale is proposed simply because the government is obsessed by its ideology of privatisation—at the expense of good public policy.

The opposition believes that Medibank Private plays an important role as the market leader in holding down premiums and in keeping the private health insurance market competitive and consumer oriented. That will change if this sale proceeds, as no doubt it will. We have already seen the recent profit growth of Medibank Private. This growth has in no small way been assisted by the government’s 30 per cent private healthcare rebate. In relation to the potential sale I would like to note the retained earnings—in other words, the profit figures—for Medibank Private since 1998-99. In that year there was a profit figure of $57.3 million; in 1999-2000, it was $99.4 million; in 2000-01, $105.9 million; in 2001-02, there was a $175.4 million loss; in 2002-03, the profit figure was $10.4 million; in 2003-04, $44.8 million; in 2004-05, $130.8 million; and in 2005-06, $200.1 million. So this year has seen a profit increase of 53 per cent, to just over $200 million. That is a remarkable turnaround in five years: from a loss of $175.4 million in 2001-02 to such a significant profit.

There is a school of thought that maybe premiums could have been reduced instead of increasing them over that same period of time. There is no doubt in my mind that this was part of the process of fattening up Medibank Private for sale, so that it now becomes an attractive figure for sale. From 1997 a range of government initiatives have been introduced which have effectively stemmed the decline in private health insurance, including the subsidisation of $3 billion in annual expenditure on the private health insurance rebate. It also includes the concept of Lifetime Health Cover, which allows health funds to charge different premiums, depending on the age of the person taking up the private health insurance. The support also includes the government’s campaign to promote the benefits of private health insurance.

This government has done all it could to ensure that private health funds, and Medibank Private in particular, have received support to ensure their profitability. Kenneth Davidson argued in an article in the Age on 24 April this year:

... the $2.5 billion 30 per cent rebate on private health insurance provides more budgetary assistance to the tiny private health insurance industry than to the rest of industry combined.

He argues that this is why ‘Australia has ended up with a less efficient, and less equitable, health sector’. The government in its endless pursuit of the budget surplus has cut funding not only for health but for education, the CSIRO, universities, research and development, and training and retraining. Instead the government doles out grants and one-off payments and special payments, like a mother doling out lollies to her children. Of course, that reward presupposes good behaviour, and these days that good behaviour is defined by signing agreements to conform to the government’s industrial relations policy. We have only to consider the higher education funding agreements to know that.

To return to the specific case in point, the sale of Medibank Private, the Special Minister of State in both introducing the bill and promoting the sale has promoted a competition argument. In the second reading speech the minister stated:

Competition between funds is the best way of keeping a lid on premiums.

The minister believes the sale will improve competition in the health insurance industry. I am unable to find any evidence to date that proves that argument, if for no other reason than that, as yet, we have no information on a potential buyer or buyers or on how the sale will actually play out. Logically, the detail of the sale will dictate the impact on the competition within the industry. For instance, if all or part of the business is purchased by an existing health insurance company, a current competitor, there will be one fewer competitor in the market. Then, of course, the government will wring its hands and cry, ‘Market forces not policies have created this.’

The proposed sale does not assist families struggling to pay private health insurance premiums to supplement healthcare services provided by Medicare, another policy area that is suffering government neglect. There have also been claims that premiums will not increase with the sale. Naturally that is yet to be seen, but I doubt that it will be the case. Logic dictates otherwise. The last time the government made such a promise about premiums they went up by almost 40 per cent. Industry analysts have predicted that premiums will go up. In the first instance, the purchaser will need to recoup its purchase price. The reality is that Medibank Private will cease to be a not-for-profit company. There will be shareholders; shareholders demand returns; returns come from profit; profit comes from increasing costs or lowering service levels.

Medibank Private has been in the black recently. With the expenses associated with and the actual cost of the sale it will probably take some years to build up profits to a level acceptable to the owner and/or new shareholders. There is also the possibility that if premiums do not increase then benefits may well be reduced. Given the market share that Medibank Private will bring with it—currently 29 per cent—and the likelihood that the purchaser will be an existing health insurance company, the new version of Medibank Private will be a massive company. In all likelihood it will remain the industry leader. As industry leader there is a very strong possibility—it is almost a certainty—that the other funds will follow suit such that premiums increase and benefits decrease across all funds.

It is typical of this government that it acts in a politically expedient manner without thinking through the consequences—or, if it does, ignoring them. On the subject of political expediency, who gets the profits from the sale? This is not as straightforward as it might seem. Terry McCrann, in an article in the Mercury on 10 October 2006, suggests that there are two components to the value of Medicare:

The first is the franchise, the name and its customer base ... The Government may be entitled to sell them and pocket the proceeds. The second component is the profit and multiple of that profit ... There is at least an argument that profit and the sale multiple are owned by the members who have seemingly overpaid for their health insurance.

I note that the minister indicated that the sale money would be used for health and medical research. The shadow minister, the member for Lalor, in a statement on 17 October indicated that this money had already been budgeted for by the government.

I would like to move on to consider the social implications for this latest piece of government budgeting. I have never been a fan of privatisation. When in government, as you know, Mr Deputy Speaker, the ALP chose to privatise the Commonwealth Bank but I, along with many others, voted against it in the caucus. There is no doubt that the ALP have learned from that experience, which is why we so vehemently argue against privatisation. We only have to consider the example of Telstra to understand that private is not necessarily better.

This government is obsessed with being debt free—but at what cost? Expenditure has been lowered with a consequent lowering of standards in education and health. This has benefited the coalition’s constituency—to the advantage of the wealthy and to the detriment of the less wealthy. The case for a debt-free government has not been made. If I have a house worth $350,000 and have paid $100,000 on the loan I took out to buy it, then I sell it, I am actually better off, cash in hand—or debt free—but I have nowhere to live so I must pay rent. Kenneth Davidson stated in the Age article I have previously quoted:

The reduction in public debt has been financed by increasing the tax burden and the sale of public assets.

It is those people struggling to survive who bear the burden of high taxation. These are the people who will be most affected by the sale of Medibank Private. Petrol prices continue at an all-time high, and interest rates and commodity prices increase. For most families, private health insurance is an item on the family budget that may well be regarded as expendable. It is an item that can actually be cut, while interest rates and purchase of commodities cannot be cut.

In any scenario that the government cares to paint, there can be no guarantee that premiums will not increase and health benefits will not reduce. There will no doubt be a flow-on effect to Medicare as people previously covered by Medibank Private potentially leave private health coverage, if there is an impact on premiums. The likelihood is that Medicare will be strained and all the mechanisms this government has introduced to prop up health insurance will be as nothing. The Parliamentary Library’s research brief concludes that:

There is little evidence to support assertions that a privatised Medibank Private would be more efficient, competitive and less expensive for consumers. Similarly there is little evidence that a privatised Medibank Private would be less competitive or less able to contain costs.

I concur. This conclusion supports what we already know about the government’s management of the private health insurance industry. The government cannot be trusted to deliver any benefits from the sale—estimated at around $2 billion—to the three million customers who have paid high premiums to establish the equity in Medibank Private.

If this government were genuine about reducing premiums there would be a transparent debate about capping premiums. Instead, private health fund members face rising premiums and increased out-of-pocket costs for treatment at private hospitals. I add to this the fact that there is not one extra hospital or medical service provided out of all of this.

I take little comfort from the assurances provided by Senator Minchin, and I am sure that I speak on behalf of the 67,983 people in my electorate of Banks who are covered by private health insurance. I can only judge the government on its previous performance in this area. That record shows an average increase of eight per cent a year in the cost of private health insurance, with no corresponding increase in benefits. This bill does nothing to improve the health outcomes of Australians and it will likely place more stress on the increasingly overburdened family budget. It is right for the ALP to oppose the bill.

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