Jennie George (Throsby, Australian Labor Party, Shadow Parliamentary Secretary for Environment and Heritage) Share this | Hansard source

In the course of my contribution I hope to be able to answer some of the assertions made by the member for Macquarie. I thought the debate was supposed to be about the Medibank Private Sale Bill 2006 rather than the expansive historical excursion that we were taken on by the Chief Government Whip. I want to begin by saying that I oppose the bill, and I do so for a number of reasons. I want to take issue with the Chief Government Whip when he asks: why should the government have its money tied up in a health fund? I think that is a very important issue and one that I do not think has been resolved, as to who owns the assets of Medibank Private. Is it the members who have contributed to it over a substantial period of time, and what role does the government have over those assets? I will come to that a bit later.

The bill that we have before us is really one that gives effect to the intention of the government to sell Medibank Private. They have now decided to do so by a share float. But, of course, they are not going to do it before the federal election. They are running scared because of popular sentiment about this issue and they are leaving the decision until after the election. Interestingly enough, as the explanatory memorandum to this bill makes very clear, for the government to achieve its sale objectives, it is necessary for Medibank Private, which is currently conducted on a not-for-profit basis, to convert so that it can be conducted on a for-profit basis. That has really significant implications for the policyholders in Medibank Private, and the change to a for-profit basis will have an impact on other health funds in the sector. The explanatory memorandum to the bill goes on to state:

When Medibank Private Limited becomes a “for profit” company, it will be able to pay dividends or return capital to its shareholders. This includes using the surpluses already built up in the Medibank Private Fund.

It is interesting that 30 years ago the Fraser government established Medibank Private, arguing then that a government owned company would introduce greater competition in private health insurance and strengthen the capacity of the government to reform and regulate that industry. Yet, 30 years later, the Howard government proposes to sell it. The decision to sell it is not made on any rational or convincing grounds, and the community understands that well. Senator Minchin, the Minister for Finance and Administration, had this to say:

We’re not selling this for the money. We think it’ll be good for the industry and good for consumers of private health insurance.

We beg to differ. In the argument I will put in my contribution, I will show why we beg to differ. First of all, we know that Medibank Private is Australia’s largest health fund. It is a national fund and it currently provides cover for about three million of our fellow Australians. You have to ask: where is the morality in the government selling a fund whose assets have been built up by member contributions? Its assets in the 2005 annual report are listed as being up to $653 million. As the President of the AMA made clear recently—and I would have thought that he was well versed in this industry:

... much of the value of Medibank Private is in its financial reserves—

$653 million—

which were not contributed by the government but rather, extracted from the members in compliance with regulatory requirements.

Medibank Private members have played a huge part in building up the value of this fund and, in my view, no share offer deal—whatever that might be; whatever arrangement the government finally comes to—can properly compensate members for selling out from under them the fund that they have built over the last 30 years.

This issue is a significant one in the debate. It is about the rights of existing members of Medibank Private. One of the conclusions that obviously the government does not like was that reached in a research brief prepared by our independent Parliamentary Library. It is arguable that members have the right to the benefit of the existing surplus assets of the fund and that a sale of Medibank Private, if it were adversely going to affect those rights, could in fact give rise to a claim against the Commonwealth for compensation. The AMA, again, for example, has argued:

If the Government no longer wishes to be involved as an operator of a private health fund, there is a strong case for mutualising Medibank Private and retaining the equity with those who have contributed to it, namely the members.

Obviously, the government did not like this advice or conclusion from an independent source, so they rushed off to lawyers at the top end of town, to one of their favoured legal firms, Blake Dawson Waldron. They, of course, provided the advice that the government wanted. I must say that the issue of the rights of members, in my view and in the view of our shadow minister, remains a very live one in this debate.

It must be a live one because the government has made some concessions. It is now talking about some entitlements for existing members in the eventual sale plan. This could be in the form of a special entitlement to or discount on shares. But I repeat my contention that no share offer deal can properly compensate members for selling out from under them the fund that they have built in the last 30 years.

The not-for-profit health insurer, as it operates today, recently announced its results for the last financial year. Its profit has increased 53 per cent to a healthy $200 million. This has happened at the same time as its premiums rose by nearly six per cent on average. So it seems to me that the government has had this agenda in mind for quite some time and that it has been fattening up Medibank Private just like it did to Telstra in the lead-up to its privatisation and sale.

Let us look at the reasons, or the lack of reasons, that the government has given to explain the sale of Medibank Private. The explanatory memorandum accompanying the bill argues—and I find this bizarre—that there is no sound policy reason for the Commonwealth to continue to own a health insurance business. But, at the same time, it provides no rational or compelling argument for its sale. In my view, there are much weightier arguments for the fund to remain as it is. The Minister for Health and Ageing, Tony Abbott, at least told the truth in justification of the sale. He said:

... the Government obviously is instinctively in favour of privatisation.

So, really, it is an ideological obsession on the part of this government rather than any good argument on either economic or public interest grounds for its sale. Our Prime Minister has never made any secret of his belief that government has no business running commercial enterprises, even—ironically, on this occasion—one founded by a former Liberal government. The Prime Minister made clear his views as long ago as 1988 in a speech when he said:

... the fatal flaw in public interest is that you cannot operate a quasi-commercial undertaking in a public service environment.

Back in April this year, the government stated its intention to introduce legislation in this year’s budget for the sale of Medibank Private. The Minister for Finance and Administration said:

... we would hope to complete a sale in financial year 2006/07.

He then said:

We have not made a decision yet on the method of sale. Broadly speaking, the options to us are a trade sale or a public offering.

I think that now, because of that ongoing debate about who actually owns the assets, concessions will be made to the policyholders, and no doubt we will see some favourable share arrangement leading up to the floating of Medibank Private. But there is no doubt that public opinion is strongly against the sale of Medibank Private, just as it was strongly against the sale of Telstra. It was particularly so in seats like the one Deputy Speaker Scott represents. So, fearful of the political backlash before the election, the legislation is being introduced but the sale is not going to happen until some time in 2008.

If you do not believe my argument about the lack of compelling reasons for the sale of Medibank Private, let me quote to you from a column written by Terry McCrann, a noted economist who is not often on the side of Labor on issues, but I thought his advice and reasoning was very cogent. He said:

The argument for its sale is pretty thin. Yes, like Telstra it is operating in a field of private sector competitors.

But it is a field absolutely controlled by government policy, and intricately interwoven with both public health in the broad and Medicare itself in the particular.

Unlike Telstra, it’s hardly worth the money so far as the federal budget is concerned. The $2 billion could easily disappear in another year or two in Iraq or a ‘parameter’ variation to the budget numbers.

There’s also a particular problem with a float over a trade sale. That would mean a company listed on the stock exchange which would have to make a profit for shareholders.

In contrast the entire private health insurance sector is today at least nominally non-profit.

So what does the introduction of a profit-based player in the private health insurance sector mean?

They all switch to profit-making? Or Medibank Privatised can’t compete?

We know that Medibank Private has always been a not-for-profit fund. But, on sale, as the explanatory memorandum makes out so clearly, it will inevitably have the profit motive as its primary consideration. In my simple view, this can lead only to one conclusion: if you have to satisfy the shareholders, then higher premiums for Australian families will follow as surely as night follows day. As I said earlier, given that Medibank Private is currently Australia’s biggest health insurer, once it becomes a for-profit company, that will obviously have implications for the rest of the sector. If the market leaders’ premiums are going to rise, it will not be too long before the others follow. Quite frankly, this is really bad news for the 36 per cent of my community that I represent in this parliament covered by private health insurance.

The claim made by Senator Minchin and the government that premiums will not increase as a result of this sale is a statement that lacks any credibility and any logic. It is not just disputed by reputable economic commentators but by the AMA as well, whose president said the obvious:

....the sale of Medibank Private would drive up premiums as the new owner sought to maximise returns to shareholders.

We all know the government has form on promises about premiums that are never met. I can remember in 2001, when I was newly elected to this parliament, that we were told that all the government’s policies would put downward pressure on premiums. Since I have been elected, private health insurance premiums have risen by 40 per cent—so much for downward pressure on premiums! That can only get worse if it is privatised and becomes a for-profit company.

We all know the current Minister for Health and Ageing’s predisposition to rubber stamp premium increase requests from the private health funds. He confirmed this recently in his own words when he said:

The standard I have adopted since becoming the Minister is that I will normally approve increases as long as I am confident on expert advice that they are justified by the needs of the funds ...

So why should people in the community put any store on promises made by this government about health insurance premiums, when they know the outcomes have been so different from the promises? These outcomes have led me on many occasions to raise concerns on behalf of the people I represent about the increase in costs of private health insurance.

Since 2001 the overall increase in premiums has been an astounding 40 per cent and, for some funds, the increases have been much higher. The member for Macquarie, in his historical dissertation, seems to miss this point completely. Let me give you one example. Last year constituents reported to me that the NIB fund raised premiums on average by 17.3 per cent at a time when the government was publicly claiming that the average increase in the sector was just under eight per cent. They can say that the average is eight per cent, but when you disaggregate those figures you can see that one fund, on average, at the different levels of coverage, had a 17.3 per cent increase. I pursued these exorbitant increases on behalf of the people I represent with the Private Health Insurance Ombudsman, but no redress was offered.

With increases in gap fees and increases in premiums, is it any wonder that many of my constituents tell me they are not receiving value for money from their fund? They feel they are paying more but getting less. I cannot understand for the life of me why the minister cannot force this sector, which is subsidised by taxpayers to the tune of $3 billion and more a year, to come up with a product that covers all your costs when you use a private hospital.

Not only are people slugged by increasing premium costs, but the gap continues to rise and people are asking, ‘Well, what’s the value in it?’ Regrettably, many people that I represent—pensioners and low-income people—will continue to be forced out of private health coverage. And this will be even more the case when Medibank Private is sold. These annual increases well above the rate of inflation—sometimes astronomically above—are a breach of government commitments and they are putting enormous pressure on household budgets. And, as I said earlier, the worst is yet to come.

I really do not see that the sale of Medibank Private does anything substantial to address the very critical issues that this nation faces in respect of health reform and health needs in our community. We need to do a lot more to ensure that private health insurance is affordable and provides real value for money. It is not good enough for this minister and the government—which likes to paint itself as the great friend of the private health sector—to ignore the big macro issues such as the cost of medical technologies and the future demand that will come with an ageing population. Those issues, let alone the sustainability of private insurers, seem to me to be the key issues for the entire health sector, and I do not see how the sale of Medibank Private would add anything constructive to addressing the long-term needs that we all know are so desperately required out there in the community.

We know that private health funds are paying out more in benefits, but at the same time out-of-pocket costs, the gap and other non-insured health costs are growing and placing an increasing burden on all health consumers. This is also occurring for the non-insured as the public sector is also moving costs onto individuals or at least not fully meeting new costs as they arise.

I think it would have added much more substance to the debate about long-term reform in the sector if the minister had made that the key issue rather than trying to pretend that there is some value to the Australian consumer and to the industry through the sale of Medibank Private.

I want to conclude by saying that community sentiment and expert opinion is strongly against the sale. This is the reason the sale has been deferred to 2008. It is not because of the Telstra float but because the Prime Minister and the minister understand the way people feel about this proposed sale. A recent Herald/ACNielsen poll found 63 per cent of voters opposed the sale and only 17 per cent supported it. And even among the government’s supporters, almost half in this survey opposed the sale.

The government has put off the sale until after the next election in the hope that in a year’s time people will have forgotten about the issue. Well, the community must know—and we will make sure they know—that if the Howard government wins the next election, Medibank Private will be sold. And they should know that the sale of Medibank Private will push up premiums. That is the inevitable consequence of selling Medibank Private and making it a for-profit organisation. If it is for-profit, its primary consideration is profits and accountability to the shareholders. So the sale will push up premiums and, very importantly—and the community needs to understand this—the premiums will go up not just for current members of Medibank Private but for all private health insurance members. Once the dominant player in the market sets the pace then inevitably the others will follow.

I know that the government, for political reasons, is deferring this sale, but I think we ought to say on the record that it is the intention of the Labor Party to make the community well aware of the implications of this sale. Certainly, I intend to be writing and communicating with the roughly 36 per cent of electors I represent who are currently covered by private health insurance, warning them of the serious consequences for them, their families and their household budgets if the Howard government is re-elected with its clear commitment to the sale of Medibank Private.

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