Julia Gillard (Lalor, Australian Labor Party, Shadow Minister for Health and Manager of Opposition Business in the House) Share this | Link to this | Hansard source

This is one of the most important debates we will have in this parliament during the life of this parliament. The issue that we are debating today—the sale of Medibank Private—will be one of the biggest issues at the next federal election campaign. We know, of course, that Australians do not want Medibank Private sold. We also know that if the Howard government is re-elected it will be sold. There is only one way to stop Medibank Private being sold, and that is to vote Labor at the next election. The position is crystal clear: a re-elected Howard government will sell Medibank Private; Labor in government will tear this legislation up and keep Medibank Private in public ownership. It could not be simpler than that.

Today, in the debate on the Medibank Private Sale Bill 2006, we will hear, from speakers from the government side, a repetition of some of the promises that have been made by the Howard government, most particularly by the Minister for Health and Ageing, about what will happen when Medibank Private is sold. Today I want to go through why none of those promises will be kept, why none of those promises are true, and why none of them should be relied on by the Australian people. No-one should be fooled by them.

Of course we should, at this point, remind ourselves that these promises are being made by the Minister for Health and Ageing, who at the last election campaign gave Australians a ‘rock-solid, ironclad’ guarantee—only to smash that guarantee after the election. He has no credibility when it comes to making promises to the Australian electorate, and the promises that have been made in respect of what will happen after Medibank Private is sold are promises that simply will not come true.

We should also at this point remind ourselves that the Howard government has always wanted to sell Medibank Private. When this government came to office, it began hurting Medibank Private by removing the collocation of Medibank Private offices with Medicare offices. At that time it also placed Medibank Private on its asset sales program. Of course, the Howard government has created world records in its ability to sell assets, Telstra included.

Also, at that point, shortly after its election, the Howard government began commissioning scoping studies on the potential sale of Medibank Private. This first occurred in 2002-03, and there was another update in 2004 before it finally decided that it would sell the fund. During the period of the original scoping study, Medibank Private faced a number of financial and operational challenges which saw the government defer its decision to sell. The government also intervened in a number of ways, including an equity injection into Medibank Private and operational improvement plans.

All of this was about making a future sale viable. It was an indication that the Howard government was stuck on its course of selling Medibank Private. During this time, the finance minister became the sole shareholder minister, whereas the Minister for Health and Ageing had also been a shareholder minister prior to that time. However, the minister for health is still responsible for the regulatory and policy arrangements relating to the private health insurance market.

The two things that have been constant about the Howard government are that it has always wanted to sell Medibank Private and, of course as we know, it has always wanted to dismantle Medicare. This has been one of the consistent features of the Prime Minister throughout his political life. He voted against the creation of Medibank, the first universal health insurance system in this country. He voted against the creation of Medicare. He campaigned in opposition against Medicare, pledging to destroy it if he were elected at that stage. And that intention, like the intention to sell Medibank Private, has never gone away.

These days the Howard government says, to much laughter in this House by government members, it is ‘the best friend that Medicare has ever had’. The fact that they laugh when they say it indicates how hollow those words are. Like a child telling a tall story, they laugh at their own audacity; they laugh at their own shamelessness in saying something that they clearly do not believe. So, two constants about this government: they have always wanted to sell Medibank Private, and they have always wanted to destroy Medicare.

Medibank Private is, of course, the dominant force in Australia’s private health insurance market, with almost three million members and a market share of almost 30 per cent Australia-wide. It is the No. 1 insurer in four states. Like most other private health insurance funds, Medibank Private operates as a not-for-profit entity. There are 40 registered health benefit organisations operating health insurance for people, and only five of those are for-profit entities, with a total market share of 31.5 per cent. So, clearly, the health insurance sector is currently dominated by not-for-profits. In a comparative analysis of the performance of Medibank Private against the rest of the private health insurance industry, Medibank Private claims a consistently lower level of management expenses per membership.

The bill before the House today makes the necessary changes to the National Health Act and other amendments to allow the government to sell its shares in Medibank Private. The bill brings to light a number of issues which add to the controversy of the sale. The bill limits foreign ownership and has ‘Australian identity’ rules for directors and sets the location of the Medibank Private head office for five years. After five years, anything could happen—Medibank Private could go offshore.

The bill excludes the National Health Act provisions which would allow the change of Medibank Private’s not-for-profit status to be a disallowable instrument. That is, this bill achieves the result that this parliament will not have a separate debate on whether or not Medibank Private should become a not-for-profit entity—once again, in the long tradition of the Howard government closing down debate in this House.

This bill excludes National Health Act provisions which would allow the Minister for Health and Ageing to examine the impact of the change of status from a not-for-profit to a for-profit organisation on members and premiums and disallow the change on public interest grounds. Clearly, the Howard government wants no inquiry—certainly no open inquiry—about whether this is in the public interest. This bill allows current surpluses of Medibank Private to be redistributed to those who are successful in becoming subscribers to the initial public offering of shares in Medibank Private. Interestingly, the bill includes compensation provisions for compensation for which the fund might be liable in the event that any legal action is taken against the sale—and I will come back to that matter during the course of this speech.

Labor opposes this bill lock, stock and barrel. The government’s decision to sell Medibank Private is based simply on an ideological agenda about privatisation; it is not based on the best interests of Medibank Private members or private health insurance in this country. The government’s assertions that the sale will allow the fund to be more competitive and will put downward pressure on premiums are simply wrong. The government is, of course, seeking to avoid a separate debate about the change of status of Medibank Private from a not-for-profit to a for-profit entity.

When we go through the government’s reasons for selling Medibank Private, we see that they are clearly paper thin, compared to their thick-skinned ideological obsession with selling off this asset. There is no evidence—and I repeat that: there is no evidence—that the sale will reduce premiums or increase competition. Premiums are principally driven by health costs, an issue which the Howard government has failed to adequately address through its health policies. The Howard government cannot guarantee that the sale will have a positive impact on members of Medibank Private and as a result is allowing a six-month notification period to allow members to get out of the fund by way of transfer prior to sale. The Howard government cannot guarantee that the sale will have a positive impact on members and consequently, in addition to the transfer provisions, they are not allowing scrutiny—as I have indicated—of the impact of the change of status of Medibank Private. Medibank Private’s sale will have little or no effect on their current operational requirements or ability to operate competitively. They have recorded large surpluses in recent times and they do have a relatively low management-expense ratio.

I will go through some of the principal arguments that surround this sale, about which the Howard government is not giving the Australian people the truth. The first question is: can it sell Medibank Private without compensating the three million members of the fund? Let us remind ourselves of a bit of history here. The Parliamentary Library, in this building, is well respected. It is independent. It is authoritative. Indeed the minister for health conceded those things in this parliament yesterday. In early September the Parliamentary Library produced a research brief, a paper, indicating that there were legal doubts about the ability of the government to sell Medibank Private without compensating members. That advice became public on a Friday. By Monday the Minister for Finance and Administration, Senator Nick Minchin, was brandishing legal advice obtained from Blake Dawson Waldron which stated that the library was wrong.

In preparing the Bills Digest for this bill, the Parliamentary Library guide to this bill for the assistance of parliamentary members and members of the public, the library provided a complete rebuttal of the Blake Dawson Waldron advice. We need to remind ourselves that this is an extraordinary step for the library to take. Bills Digests are normally very non-controversial documents, but on this occasion the library has actually blown the whistle on the Howard government and said that in its view this is the circumstance with the sale of Medibank Private: that the three million members of Medibank Private cannot have Medibank Private sold out from under them without being compensated. The only answer the government have given to this is to basically say that the legal advice they have obtained is somehow better than the legal advice from the Parliamentary Library. I ask members of the public listening to this debate to think about the following simple proposition. There is an old saying: he who pays the piper calls the tune. People might like to consider whether independent advice provided by a respected institution like the Parliamentary Library is more likely to be right than advice paid for by a government which is famous for getting the advice that it wants to hear.

I will take you now to the conclusion of the library on the question of whether or not Medibank Private can be sold without compensating members. The library says this:

... it is arguable that members of Medibank Private could be entitled to compensation if the terms of any sale do not adequately account for their right to the benefit of fund assets.

The Bills Digest continues:

The Research Brief—

that is, the earlier library document—

refers to Medibank Private’s 2005 annual report which cites a net asset figure of $653.3 million ... It is this figure in respect of which members’ entitlement is discussed ...

The Bills Digest then says:

... (account would also need to be taken of the Commonwealth’s $85 million equity).

Even if we say that the $85 million together with interest ought to be repaid to the Commonwealth, what the library brief is saying is that there is around half a billion dollars of assets that arguably three million Medibank Private members need to be compensated for if the government is going to sell the fund out from under them. So we are talking about $500 million, or half a billion dollars, of assets and the rights of three million people.

I used to be a lawyer; maybe I still am. I know that these propositions can have arguments either way—of course they can. But the issue is this: if there is any skerrick of legal doubt that this government is about to rip $500 million—half a billion dollars—off three million Australians, then the government ought not to proceed. It ought not to do that to three million Australians about such an enormous amount of money.

Of course, the government pretends it is very brave about all of this. It dismisses the legal advice. It knows what it is doing! Medibank Private members do not have any rights! Consider this: when this government first went out to say that it was going to sell Medibank Private, it basically said: ‘We’re gonna sell it. We don’t know how—trade sale, float it, not sure yet, not even going to tell you. Going to put the legislation through parliament first. Will work that out later.’ What changed this government from that strategy to saying that it would float it so Australians could buy shares in it? The only thing that credibly intervened in that period was the Parliamentary Library’s first advice. It was publicly available on the Friday; by the Sunday the Treasurer was musing about floating it. If legal doubts could drive such an enormous change in the government’s strategy, they must be pretty powerful legal doubts.

And this legislation itself points to the fact that the government are anxious about compensation, because it refers to the fact that there might be compensation flowing from the sale. So do not believe their brave words: Senator Minchin saying, ‘My legal advice is better than anybody else’s,’ or the Minister for Health and Ageing echoing those words. Judge them not by what they say but by how they act. They have retreated and said, ‘Yes, we’ll float it’—I say because of the legal doubts—and the bill before the House today specifically deals with the prospect of compensation. This bill is about a potential half-billion-dollar rip-off, and every Medibank Private member in this country should know that.

Then there is the claim by this government that selling Medibank Private is going to make it more competitive. Once again, this is a ‘trust me’ claim from the Howard government—a government that goes out and gives you a rock-solid, ironclad guarantee and then smashes it as soon as it is re-elected. It is a ‘trust me’ claim because the government has never publicly released the advice it says it has got on that question. If it is not good enough to be released, it is not good enough to be scrutinised and debated and it is not providing any role in the public debate, why should anybody believe the government on it? I most certainly do not. Interestingly, the library’s expert advice in the form of the Bills Digest concludes very powerfully about the government’s claims of increased competition. It says:

The Government argues that the sale of Medibank Private will lead to reduced management costs and allow the fund to pursue new areas of business but it is unclear how these improvements will be realised. The proposition is based on the conclusions of a scoping study undertaken by Carnegie Wiley, however detailed information from the study has not been provided. This means that there is very little publicly available information to support such claims.

There would appear to be nothing, from a regulatory point of view (apart from being able to distribute profits to shareholders), to show that the ‘new’ Medibank Private will be able to do to improve its operations that the current organisation cannot. A privatised Medibank Private would be free from the governance burden that applies to GBEs but it is not clear whether this would significantly reduce the organisation’s management expenses. A publicly listed Medibank Private could potentially improve operational efficiency through the use of additional capital to invest in improved information technology systems or organisational restructuring. However, it is not clear that any reduction in management costs would be greater than the potential increase in costs associated with Medibank Private’s new responsibility to distribute profits to shareholders.

What this is clearly saying is there is nothing about moving Medibank Private from being a publicly owned not-for-profit entity to being a shareholder owned for-profit entity that magically increases its ability to compete. There is nothing on the public record about that.

Senator Minchin says he has this secret study, but he obviously does not trust it enough to put it out in the public domain, and the only analysis one can have of this is the analysis put out by the Parliamentary Library. There might be some benefits from the ability to raise increased capital but then, of course, you have to generate a profit, and that is a burden that is not on Medibank Private now—the need to generate a sufficient commercial profit, year in, year out, to distribute to shareholders to keep them happy with their dividends. In those circumstances, how is competition increased?

Then, of course, one tends to characterise competitive markets as markets that have multiple players. Just moving Medibank Private from being in public hands and not for profit to being in shareholder hands and for profit does not magically increase the number of people competing in the private health insurance sector. The day after the Howard government’s sale of Medibank Private there will be exactly the same number of private health insurers in this country—not one more, not one less. So how is it possible that this in and of itself somehow increases competition? It does not. It is nonsense. The government knows it is nonsense, and the document it relies on is a document it does not see fit to share with the public.

In the same breath, the government says: ‘Oh, it’ll all be more competitive—article of faith. We believe in that when we’re selling things and, because we believe in that, there’ll be downwards pressure on premiums.’ Let us just remind ourselves that the last time the Howard government started making promises about downward pressure on premiums was in 2001. What does the scoreboard show? The scoreboard shows that premiums have gone up almost 40 per cent since, so the government is not very good on keeping promises when it comes to downward pressure on premiums. If there is no increased competition, if there are no increased efficiencies, why would anybody believe that there will be downward pressure on premiums?

You do not have to take my word on that, although you may be prepared to. We should note the words of a respected economic commentator, Terry McCrann. He is certainly someone who is out there as a dry economist. He has said that privatising Medibank Private, particularly by way of float, will introduce a profit motive not only into Medibank Private itself but possibly more broadly across the private health insurance sector and that will be bad news for premiums. What Terry McCrann is clearly pointing to is that, when you put on a company—in this case, Medibank Private—the need to generate year in, year out, a profit sufficient to satisfy shareholders, then that becomes its basic motivation. Someone has to pay for that profit. In a private health insurance company, how will it be paid for? It will be paid for by the premiums of members.

So, just as a matter of logic, premiums will bear an additional burden. But Terry McCrann’s fears go broader than that. He is not just worried about what happens to Medibank Private members—who might well have this additional premium burden put on them—he is worried that if you change Medibank Private, the dominant private health insurer in this country, into a for-profit entity then that will create a domino effect through what now is largely a not-for-profit private health insurance sector and, as a result of that domino effect, that sector will be much more likely to end up being predominantly a for-profit sector. If that occurs, what flows? You have premium levels that need to generate profits for owners. That is No. 1. But I tell you what else happens: you create a for-profit sector that would be putting pressure on government—particularly the Howard government because private insurers so much have the ear of this government—to lift the regulatory burden, which they would describe it as, and to lift the regulation off private health insurance because they want to be out there making profits.

Let us remind ourselves what that regulation is. It is things like community rating. If you were a for-profit private health insurer, would you be cheerfully administering community rating, where everybody pays the same premiums, whereby you cannot put an additional premium on someone who is a bad risk? Of course you would not. You would be beating down the door of the government to ask: ‘Can you get this regulation off my back?’

That is bad news for Medibank Private members, it is bad news for Australians’ premiums and it is potentially bad news for the whole private health insurance sector. It is setting up an environment where we are far more likely to see less regulated health insurance, and that is bad news for everyone who relies on community rating to get them health insurance when they need it. I think Australians, particularly those with a chronic illness, disability or a genetic predisposition towards disease, would want to be thinking about that because, in a less regulated private health insurance environment, they will either be deemed uninsurable or only be able to access private health insurance if they can pay astronomical premiums.

When we look across the issues of this proposed sale we see that they are enormous. Can the government sell Medibank Private without compensating its members? There is a legal argument about that. The government do not want to deal with the legal argument. They want to legislate to try to get away from that legal argument and potentially rip off three million Australians to the tune of more than half a billion dollars. The claims about competition are entirely hollow. They are claims which cannot be sustained by the government. Indeed, they have made no effort to sustain them, except by way of assertion.

On the question of premiums, it stands to reason that if you have to generate a profit then that places an additional burden on premiums—the fact that the current not-for-profit status of the private health insurance sector could end up being changed overwhelmingly to a for-profit status because of the sale of Medibank Private. Also on the question of premiums, the Minister for Health and Ageing has never seen a premium increase that he was not prepared to tick off. Every year he actually ticks off premium increases that have been asked for. And on the question of a privatised Medibank Private, when the minister has been asked about the impact on premiums, he has basically said—with a shrug of his shoulders, as is characteristic—‘You know, if I had to put up Medibank Private premiums and give approval for that, of course I’d do that.’ And up those premiums would go.

This legislation cannot be fixed, it cannot be tinkered with and it cannot be amended in any way which would make it satisfactory. It has simply got to be voted against, and that is what Labor will do. But I am not naive enough to believe that this bill will not pass through this House. It will, through an exercise of the government’s numbers and then it will pass through the Senate, through an exercise of the government’s numbers. But, fortunately, in this case we do have the ability to change the future. We do not have to accept a situation where Medibank Private is sold, with all of the negative consequences that that will have for Medibank Private members and for private health insurance in general. We can change that future by ensuring that we change the government at the next election and that the incoming Labor government tears up this legislation, ensuring that Medibank Private remains where it should be—that is, in public ownership.

Andrew Southcott (Boothby, Liberal Party) Share this | Link to this | Hansard source

We have just had an indication that, if Labor are elected at the next election, the sale of Medibank Private will not proceed, but that will be cold comfort for the premium holders of Medibank Private because the Labor Party, true to their form in the past, will trash private health insurance. The Labor Party have never liked private health insurance, they have never liked the private health insurance rebate and they have never liked any of the reforms which have been made to improve private health insurance. The sale of Medibank Private would be cold comfort for its premium holders because Labor’s track record on private health insurance is not good—it is one to be ashamed of.

In the period from 1986 to 1988 we saw premiums rise by 40 per cent due to direct actions of the Hawke government, including the withdrawal of the Commonwealth day bed subsidy and Commonwealth government support for private health insurance. When John Howard became Prime Minister, the foundations of our health policy were to have community rating for private health insurance, bulk-billing and free access to public hospitals. It is a nonsense to draw the long bow of suggesting that in the future we would not retain these elements, which have always been part of our health policy.

In addressing the Medibank Private Sale Bill 2006, I would first like to address the issue of why we should sell Medibank Private. Medibank Private is a government owned private health insurance fund. We currently have 38 health insurance funds. There is no good reason for the government to be in this market. There is sufficient competition and there is portability between health insurance funds. There is no reason to have government ownership of Medibank Private. When the Labor Party were in power they were the kings of privatisation. They privatised Qantas, the Commonwealth Bank, the Commonwealth Serum Laboratories and ANL. But that was in government. In opposition they have opposed every privatisation. There is no reason for the government to own a private health insurance fund. It would be adequate to have it on the share market. Selling Medibank Private would allow us to do other things, like having an extra $500 million in medical research for the NHMRC and announcing a $170 million research fellowship. It is all part of the overall approach of the Howard government to have disciplined economic management. This is why we have had budget surplus after budget surplus and delivered income tax cuts year after year. It takes a lot of discipline to run an economy which is now worth $1 trillion.

The next issue to address is the issue of a float versus a trade sale. A feature of the private health insurance market is that there are two or three big players in each state market, so it needs to be looked at on a state basis. Medibank Private is generally No. 1 or No. 2 in each of these state markets. The other major players are MBF, BUPA and HBF in Western Australia. The advantage of a float is that you keep the structure of Medibank Private intact. You do not have to face the issue that competition may diminish. All the sale of Medibank involves is a change in ownership. Although not completely analogous, many of the private health insurance funds have gone from being mutuals through the demutualisation process. They have gone from being not-for-profit to being for-profit. Members of these funds have noticed no difference in the way the funds operate. As far as the members are concerned, life goes on and the funds operate as normal.

The third issue to address is the timing of the sale. Currently the sale of T3, the third tranche of Telstra, is underway. It would complicate things to have a second privatisation. We are advised that it takes nine months to complete a full sale, so the best time for the sale would be in 2008. But it is important to pass the legislation now so that everyone has certainty and the company can plan for privatisation in 2008, if we win the 2007 election.

The fourth issue to address is what will happen with premiums. What I can say is that changing Medibank Private from not-for-profit to for-profit will have no impact on premiums. Changing Medibank’s ownership from government ownership to being owned by shareholders will have no impact on premiums. The things that will drive premium rises in the future will be the things that have driven premium rises in the past—improvements in technology, increasing numbers of prostheses and the ageing of our population. Premiums have to be approved by a committee of the government. Funds have to provide good reasons for any premium rise. They have to show how a premium rise will improve their capital adequacy, for example. So the idea that Medibank Private moving from not-for-profit to for-profit will of itself lead to a premium rise is wrong.

In regard to the fifth issue, the legislation has a shareholder cap so that no individual shareholder can own more than 15 per cent of the company. This shareholder cap will last for five years from the time of sale. There are also provisions that any foreign ownership is subject to the Foreign Investment Review Board and that, when the five years is over, any takeover of Medibank Private will be subject to the ACCC. The ACCC have said that they will look at this, and they will look at the state markets. They will look at ensuring that there is no substantial diminution of competition.

The sixth issue that needs to be addressed by this bill is community rating. Community rating has been here for 10½ years under the Howard government, and it will continue into the future. If the government is re-elected, community rating will stay. Community rating is the principle whereby funds pool the risk. The funds do not charge a higher premium for sick people, and they do not charge a higher premium for elderly people. This is important; the Howard government has always stood for it and will continue to stand for it. It is just rubbish for the shadow minister to assert as she did that in some way the sick, the elderly and so on will face higher premium rises in the future. It is a rubbish claim. Community rating will remain. It is a typical scare tactic of the shadow minister to suggest otherwise.

When we look at Labor’s policy on private health insurance, they have never been in favour of the private health insurance rebate. You only have to read the ‘gospel according to St Mark’: The Latham Diaries. Entries include:

13 February 2004—A good meeting this morning with Gillard’s health expert, Stephen Duckett and Hal Swerissen. We’ve worked out a way of dealing with the despised private health insurance rebate. We need to kill it slowly, dismantle it slice by slice.

During the 2004 election campaign, Mark Latham wrote:

Medicare Gold combines my plan for killing the private health insurance rebate with Ducker and Swerissen’s vision for extending federal responsibilities in hospital care. It required a lot of work to model the private insurance implications and to ensure the cooperation of the states, all handled by Gillard.

Some may say: ‘Well, that was Mark Latham. He’s not a member of parliament; he is no longer leading the Labor Party,’ but, looking at an earlier entry from the diary, we find someone who is very much so. In 2000, Mark Latham wrote of the private health insurance rebate:

At different times Beazley has boasted to caucus that it—

that is, the private health insurance rebate—

will go.

When the Howard government came to power in 1996, we faced a situation where the private health insurance level was at 30 per cent. It was falling to the level where private health insurance would not have been sustainable after 13 years of neglect under the Labor Party. Firstly, we introduced private health insurance incentives and then the 30 per cent private health insurance rebate. The introduction of Lifetime Health Cover in 2000 saw private health insurance stabilise at 43 per cent and it has remained at that level for over six years, since 30 June 2000.

At the last election, we promised to increase the rebate to 35 per cent for people over 65 and to 40 per cent for people over 70. I heard a lot about how we had allegedly broken promises. That was a promise at the 2004 election, and it was the first piece of legislation we introduced when the parliament reconvened in 2004. But the government is not resting on its laurels on private health insurance. We have announced that we will spend $60 million over four years to make private health insurance even better value for money and will look at enabling private health insurers to extend their cover for preventative health care. When considering chronic diseases, diabetes and so on, it is very important that we allow the funds to manage their population and to focus on preventative health care.

The Private Health Insurance Ombudsman will establish an industry website to give people access to unbiased information about health funds and their products. This is a very important part of how a market operates: to have information available so people can make their decisions. As I said earlier, Lifetime Health Cover was a very important initiative, and it has kept the level of private health insurance in this country at a point where it is sustainable.

The government has a great track record on private health insurance, whereas Labor has an atrocious track record on private health insurance. Anyone who holds a premium with any fund should fear the return of a Labor government. We saw what Mark Latham and Kim Beazley said. Look at their track record. It is not good. I support this bill. This bill will allow the government to get out of a business which it does not need to be in; there is sufficient competition already there. I commend the bill to the House.

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

The Medibank Private Sale Bill 2006, before the parliament today, empowers the government to initiate a sale of the government’s holding of Medibank Private. As you have heard previously, the opposition opposes the legislation. There are a number of issues that are particularly significant in the process aspect of this legislation, which I will refer to in a little while and ultimately will relate to the mishandling of the issue by Senator Minchin, the Minister for Finance and Administration.

Senator Minchin is renowned in the press gallery and elsewhere as the great hard man of conservative politics. Rarely is there a profile of him without some mention of his mythical toughness—how hard he is to deal with; a strong man who is a great factional operative in the South Australian branch of the Liberal Party—and his being quite a scary fellow. When you read these profiles, you tend to worry that he should not be let out near small children. In practice, though, his record as Minister for Finance and Administration—the portfolio where you do have to be tough, where it is essential for the good governance of the country that you are tough and where it is necessary for good fiscal policy and wider public policy that you are tough—is that he has actually been the Father Christmas of finance ministers.

We have seen in the space of six months, between the end of 2005 and May 2006, the ratcheting up of projections of receipts for government revenue for three financial years, commencing with the current financial year, to about $41 billion as a result of the minerals boom. In other words, the projections for the amount of government revenue over this financial year and the next two financial years increased by the order of $41 billion within the space of six months. Notwithstanding the efforts of Senator Minchin, in the lead-up to the budget this year, and in the budget, the government managed either through increased expenditure or through tax cuts to effectively spend an additional $43 billion.

When was the last razor gang? When were the last serious expenditure cuts? They were years ago. The government has been showered in money through its good fortune from a rapidly escalating demand for our mineral products. This has flowed through company tax receipts and indirectly through income tax receipts, and the government has spent the lot. It is not investing for the future. Very little of that revenue has gone into things like education and training. The government has spent the lot, while Senator Minchin, Father Christmas, has sat there going: ‘Ho, ho, ho! There’s a present for every child.’

It is a good political strategy in the short term because the government can hand out money to all sorts of people, look like they are doing good things and, because there is so much money, still keep the budget in surplus. But it is not going to last. You will see evidence of this in the budget papers themselves. There is an indication of how precarious the finances of the Commonwealth are in the medium term when you look at company tax. You will see that, between 1998-99 and 2007-08, the proportion of total government revenue provided by company tax rises from 14 per cent or thereabouts in 1998-99 to almost 25 per cent projected in the next financial year.

That means the government is relying on a giant ratcheting up of company tax revenues as a basis for handing out largesse throughout the community. All sorts of little grants and fiddles and indiscriminate one-off payments will inevitably not last. That huge ratcheting up of company tax revenue will not last. But old Father Christmas has been asleep at the wheel. He has been there, with his big bag of toys hanging over his shoulder, handing out toys indiscriminately to every backbencher who wandered past. Meanwhile, the underlying structural strength of the Commonwealth finances is eroding. Already the impact is starting to be felt on interest rates.

The budget this year did have an upward impact on interest rates—not a huge impact. It was a modest impact but, nonetheless, it did have an impact on interest rates, and we are now seeing the consequences. Unfortunately, it looks likely that in a week’s time we will see more of those consequences. So it is long overdue that old Father Christmas took off his red suit and his white beard and started to behave like the tough guy he allegedly is. Instead of him letting down the taxpayers of this country by sitting there asleep—having had too many beers after he has gone down the chimney—with his big sack of toys and a big smile on his face, it is long overdue that he started to behave like the tough guy he actually is.

The problem—and this legislation is another example of it—is that his track record on dealing with privatisations is equally poor. He championed the Snowy Hydro privatisation, which federal Labor and Labor state governments supported. Suddenly he had a serious bout of Alan Joneses and belatedly discovered that the Snowy Hydro was a national icon and that, therefore, there were cultural reasons why you could not privatise it. In the long term that is going to cause some problems, I suspect, for Snowy Hydro, particularly for its capital base. But Senator Minchin, that great champion of privatisation, suddenly discovered culture.

Then we had the fiasco with T3—a fire sale at the most inappropriate time. It was in the middle of a giant regulatory battle that was creating great uncertainty about the share price—all a result of the government’s bungling with respect to telecommunications regulation—and that has culminated in the attempted appointment, yet to be confirmed, of Geoff Cousins, the Prime Minister’s confidant, onto the Telstra board as a means of punishing the Telstra board and pulling them into line. So what we have seen is a privatisation being done at the worst possible time. We of course oppose any sale of Telstra, full stop, but we are not in charge.

The government have a different philosophy and that is what they are pursuing. They have done this at the worst possible time and in a way that is calculated to damage the interests of existing Telstra shareholders and taxpayers. To make the privatisation fly, the government have had to trick it up with all sorts of gimmicks and giveaways in order to ensure that they would actually be able to sell the shares. It has been successful thus far. Surprise, surprise!

Bob Baldwin (Paterson, Liberal Party, Parliamentary Secretary to the Minister for Industry, Tourism and Resources) Share this | Link to this | Hansard source

Mr Deputy Speaker, I rise on a point of order. The member for Melbourne is talking about the Telstra privatisation. The bill is actually about Medibank Private, and I fail to see the link between the two.

Bob McMullan (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

I understand the point of order. I did think some of the earlier remarks were a little difficult to relate to the bill but the member for Melbourne has explicitly related these remarks to the bill and, therefore, he is in order.

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

Michael Johnson (Ryan, Liberal Party) Share this | Link to this | Hansard source

As always in the House of Representatives of the Australian parliament, I am pleased to speak on a government bill, to support it very strongly and to commend it to the parliament on behalf of the Ryan electorate, which I very proudly represent.

I support the Medibank Private Sale Bill 2006 because it is good policy and because it is in the national interest. The government should not be in the business of owning many assets, and amongst those are health insurance related companies and organisations. I know that the overwhelming majority of Ryan constituents believe that socialism is dead, but clearly the Australian Labor Party of 2006 still believes that socialism exists and that the federal government should own a whole range of assets. We do not believe in that approach. We think it is in the interests of the country and in the interests of the consumers that key assets are sold because then they will deliver better services and better prices to the people of Australia and the consumers.

I would like to take this opportunity to give the reasons why I think it is important for this health insurance asset that is under the government’s management at the moment to be sold. As I said, it is important that the people of Ryan, whom I represent, are aware of the reasons why it should be sold. An integral part of the Howard government’s commitment to health care is its promotion of private health insurance. The Howard government is very committed to assisting Australians with the cost of private health insurance and to ensuring that they are given the greatest choice in relation to their health care.

Australians might be interested to know that in 1996 fewer than 34 per cent of Australians had private health cover. Today, more than 10 million Australians, or 43 per cent of the population, are covered by private health insurance. This take-up in private health insurance is a very direct consequence of the Howard government’s initiatives to encourage the Australian people to take an interest in their own health care and to be supported by the Howard government in so doing.

In 1999 the Howard government introduced the 30 per cent rebate on private health insurance premiums, worth almost $1,000 a year to the typical Australian family. That was overwhelmingly received by the Australian people and, notwithstanding that, overwhelmingly rejected by the Australian Labor Party. I am sure that the people of Ryan would also be interested to know that more than 55 per cent of all hospital procedures are now done in private hospitals. I know that many of my constituents will have taken advantage of the wonderful services and professionalism at the Wesley Hospital in Toowong, which is in my electorate.

The government has also recently announced some of the biggest changes to health insurance legislation since the early 1990s. Currently in the community consultation stages, these include continuing to make private health cover more affordable, improving customer access to information about health insurance products, streamlining regulation of the industry while maintaining the benefits of competition and, of course, strong governance and prudential oversight. These changes will continue to expand hospital cover to include outpatient and out-of-hospital services, as well as chronic care management for conditions such as diabetes and asthma.

Part of the Howard government’s commitment to private health insurance and the health sector in general is reflected in this piece of legislation, and the heart of it is the sale of Medibank Private. As I said, we do not believe in socialism in 2006. In the 21st century the days of socialism have long gone. Even communist countries such as China and the former Soviet Union, today Russia, are not interested in socialism. They are in the business of privatising many of their state owned enterprises and organisations. Yet here we have the Australian Labor Party and the alternative prime minister, Mr Beazley, seeking to put forward to the Australian people the retention of Medibank Private.

If you go back a little in time, the primary reason for the establishment of Medibank Private by the Fraser government, in October 1976, was the need to promote competition in the arena of private health insurance. Three decades later, Medibank Private is now the largest health insurer in our country. Over that time Medibank Private has been instrumental in transforming the private health insurance industry to be more competitive and more inclusive. There are now some 38 funds which offer private health insurance operating across Australia and, while there is no denying that a government owned Medibank Private has in previous years played an important role, the government certainly feels that it is time for this legislation to pass the parliament and time to give Australian people the opportunity to have a stake in what will be a very successful organisation. The Howard government believes that the health interests of the Australian people are not best served by the government being both a regulator and an owner in the private health insurance industry.

In selling Medibank Private, the government is ensuring the private health insurance market can become even more competitive, thereby helping to keep a lid on premium increases. Notwithstanding some of the rhetoric of the opposition, we do believe that in health, no less than in telecommunications, the market forces in operation will be the best mechanism for keeping premium increases to a minimum. Selling Medibank Private will essentially unshackle its operations, allowing it to apply full commercial practice and discipline to its operations to ensure that it is a dynamic and efficient organisation providing the best possible products and solutions for its members. The government should not be in the business of, effectively, running a health insurance company. This was aptly stated in the editorial of the Australian Financial Review on Friday, 28 April 2006:

It’s a good thing if Medibank Private is taken off the government’s hands; Labor’s opposition to the sale is mystifying. Canberra never had any business running an insurance company.

That very neatly sums up the position that this should not be in government’s hands, and the Labor Party’s position is mystifying indeed.

The Howard government recognises that medical research as well plays an important part in the health sector, and its policies and budget priorities have contributed strongly to ensuring that all kinds of wonderful medical research and scientific research can take place to assist Australians in the management of their health as well as to find cures for the terrible illnesses from which some of our fellow Australians suffer. I want to touch on that because one of Australia’s very distinguished scientists, Professor Ian Frazer, who is of course the Australian of the Year and is also a Ryan resident, is in the parliament today to support the Kids in the House program. This is run by a very important organisation in this country which promotes awareness of diabetes in Australia. In the parliament this morning I had the great pleasure of meeting many of those young Australians who suffer from diabetes, together with their parents, including Jesse Goss from my electorate and her dad, Peter Goss.

It is important that this government focus on policies that affect the economy in a very positive fashion and that affect, within the economy, the health sector. We know that our capacity to fund research is greater when the economy is prosperous and dynamic and, indeed, that is what the government are ensuring under the leadership of the Prime Minister and the Treasurer and their cabinet colleagues. Without a strong and prosperous economy there simply is not the capacity to fund much of the vital research that we so desperately want to fund and to find breakthroughs with.

Some $500 million from the sale of Medibank Private will be committed to the National Health and Medical Research Council over four years, and there will be some $170 million over nine years for new research fellowships. These fellowships will attract top researchers to Australia and keep them here. That is amongst the reasons why it is very important that this sale proceeds smoothly and efficiently when it does go to the market—because the funds that the government is able to generate from the sale will go to very important research, including, as I mentioned, half a billion dollars to the NHMRC.

The government has decided that the sale of Medibank Private will take place as a sharemarket float as opposed to a trade sale. Floating the company will give all Australians an opportunity to own part of Medibank Private and will also allow existing customers to be recognised through an entitlement in the public offer. Allowing Medibank Private to be listed on the stock exchange will enable Medibank to raise capital, expand and offer more services to its customers. The government decided against selling Medibank Private by trade sale because such a sale could be seen to be the mechanism by which Medibank Private’s competitors get involved and that is certainly not desirable. That would, of course, have had a great impact on reducing competition rather than promoting it.

As members will know, the government has decided that the most appropriate time for the sale is probably some time in 2008—we hope to be re-elected in 2007—when that transaction will be put to the Australian people via a sharemarket float. I have heard previous speakers from the opposition say that this is all very devious and mischievous and that, should a Labor government come into office next year, it would automatically knock that policy off the agenda—a Beazley government will not be selling Medibank Private. I say to the Australian people that members of the Labor Party have form on this. We all know that while they were in office they had no hesitation in selling some of Australia’s key government owned assets. High on the list were Qantas, the Commonwealth Bank and the CSL, yet today they oppose the sale of Telstra and, with this bill, Medibank Private. Their form certainly suggests that philosophically they have no problem in selling government owned enterprises when it is politically convenient to them. Of course, in opposition all they will do is oppose a government initiative which is really in the national interest.

As I said earlier, socialism is dead and I know that the overwhelming majority of the Ryan electorate does not subscribe to the philosophy of socialism in the 21st century. The Australian economy exists in a very globalised world. We are very much a modern, dynamic economy and it is vital that we continue to pursue philosophies and policies that reflect that. We do not live in the past. As a nation beginning its journey into the future, there may have been a case for significant organisations, such as an airline or a bank, to be held in the hands of the Commonwealth, but that case cannot be made today. It is important that this bill succeeds in both of the houses of parliament and that in 2008 it is put to the Australian people for them to have the opportunity to take a financial stake in what will be a very successful company.

Quite often one comes across little gems in our vocation. I came across one in the form of a speech by the current Leader of the Opposition when he was Minister for Finance to the Life Insurance Federation of Australia at the Hyatt Hotel in Perth on 7 July 1994. I certainly commend that speech to my colleagues in the coalition and to those opposite as well. As finance minister—the Leader of the Opposition as he is today—he made a very compelling case for privatisation and outlined circumstances where the Commonwealth should rid itself of key assets. I will read it into Hansard because I know that the people of the electorate of Ryan, whom I represent here, will be very interested in this because it gives an insight into the Leader of the Opposition’s thinking and his approach to policy and government. If at the next election the Australian people decide to vote for the Labor Party, they ought to know what they might get. Of course, as the member for Ryan, I encourage them not to do that because that would be to the detriment of the national interest. I regret that time will not allow me to read all of his speech—it is quite compelling—but this is what the Leader of the Opposition, the member for Brand, said as finance minister to the Life Insurance Federation of Australia in July 1994 at the Hyatt Hotel:

I want to start by putting the privatisation program into context, because as a relative newcomer as Finance Minister, it comes as a surprise to me that so little is known about the rationale that underlies asset sales, especially given that we have had an asset sales program for almost seven years now.

Possibly it is the media’s fascination with the dollars that are generated by asset sales that makes it appear that the budgetary bottom line is the Government’s first and last objective in pursuing privatisation.

But there are broader benefits to be gained from moving the ownership of assets into the private sector, most notably in achieving greater efficiency, stronger performance and improved competitiveness in some of our key national enterprises. But I will spell this out in further detail later.

He went on to give several very compelling reasons for the sale of assets. He talks about the Commonwealth Bank, the sale of Qantas and matters of timing and gives reasons, including competition and benefits for the national budget. It really is a very good speech and one could have been forgiven for thinking that it was made by a federal Liberal minister. I commend that speech to my colleagues.

It is interesting to note that in the 1994 quote he said that the asset sales program has been going on ‘for almost seven years now’. So since the Hawke Labor government came to office in 1983 they had been in the process of selling assets. Let us have none of this rhetoric from members of the opposition that they do not believe in privatisation. Today they stand vigorously opposed to the sale of Telstra and Medibank Private but, if they were in government, they would do the same. I think the double standard really brings them into complete political contempt.

I highlight that to anyone who might be listening to this speech, and, of course, to those in my Ryan electorate because they are very much interested in government policies and in the alternative policies of an alternative Prime Minister. I commend the transaction and the bill to the parliament.

Daryl Melham (Banks, Australian Labor Party) Share this | Link to 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.

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

I am pleased to rise in support of the Medibank Private Sale Bill 2006. In speaking to the bill I am mindful of the contribution made by the member for Banks, for whom I have much regard and respect. Notwithstanding that, he seems to be making erroneous assertions concerning the impact of a privatised Medibank Private. I must say that in broad terms this is an issue that has attracted some focus in the community. Certainly on the Gold Coast in my electorate of Moncrieff, the concern in the community has been heightened by the impact on health services broadly, and I guess in a tangential fashion, of the privatisation of Medibank Private. It is right that people should be concerned. As a member of the government, I have been appalled at the shocking way in which the Queensland Labor government has run the public hospital system. It is for that very reason that I am such a key supporter of this government’s philosophical belief and adherence to the policy that says, ‘We want as many Australians as possible to be in private medical insurance.’

This philosophical belief is related directly to the bill that is before the House today. In broad terms, we know that what is occurring in Australia is the maladministration of our public hospital systems around the country, but the problem is most evident in Queensland. It was with great interest that I read in the newspapers on the Gold Coast over the past fortnight that the Gold Coast Hospital has been put on emergency bypass on three or four occasions. In the past fortnight, a city of some 500,000-plus people has been forced to endure its local hospital being put on emergency bypass because the Queensland state Labor government is unable to appropriately manage and run public hospitals in this country.

Despite this fact, it is the position of the opposition and the Australian Labor Party to be opposed philosophically to the principle of private health insurance. I will speak about my own particular electorate of Moncrieff, which has approximately 55 per cent of its population holding private health insurance, despite the fact that the Australian Labor Party does not really believe that private health insurance is the way to go. We hear claims from the member for Banks and a whole host of previous speakers from the opposition who have said that the public should be greatly concerned about the impact of a privatised Medibank Private. The Labor Party says that it is all about ideology. The Labor Party says that the consequence of a privatised Medibank Private will be that premiums will increase. The fact is, though, that not only is the Labor Party engaging in significant acts of hypocrisy with respect to privatisations on this issue but it is also engaging in a very negative scare campaign over what a privatised Medibank Private means for the Australian people. What we know and what we as the government believe is that vibrant competition in the marketplace is one of the very best outcomes that can be achieved. We believe that competition promotes efficiency, drives down costs and provides benefits to consumers. These are the benefits that flow from a competitive marketplace and from privatisation.

We know that there are about 38 private health funds operating in the sector. Medibank Private is certainly one of the largest and a privatised Medibank Private will provide opportunities to further increase the competitive tempo in the Australian private health insurance market. Increasing that competitive tempo will have benefits for the Australian people that will include downward pressure on premiums, not upward pressure. We have seen that in a number of instances. This is where the Labor Party’s hypocrisy is stark because the Labor Party was the party that privatised Qantas; the Labor Party was the party that privatised the Commonwealth Bank. Despite the rhetoric that we hear from those in the Australian Labor Party who are contributing to this debate, we know that the Australian Labor Party is happy to support privatisation when it can waste the funds, as it did with Qantas, as it did with the Commonwealth Bank, not to repay debt—as this government has done over the past several years for some $96 billion of Kim Beazley’s budget black hole that he left us—but simply to use the money in a recurrent way.

This government has made sure that the Australian people are the beneficiaries of privatisations. The various privatisations that this government has engaged in have seen the full repayment of the $96 billion budget black hole that the Australian Labor Party left the Australian people, so that now this government is able to allocate an additional $4 billion or $5 billion each year into funds that help to provide for, for example, education and universities, that help to pay for roads and for the defence of our nation. These are the kinds of correct and wise allocations of taxpayers’ money that this government is now able to contribute to as a result of saving some $4 billion or $5 billion. That is money that the Australian Labor Party was previously paying as interest.

In addition to that there are a couple of safeguards that are worth mentioning with regard to the privatisation of Medibank Private. The first is that the government retains the approval process with respect to any proposed premium increases. So the member for Banks and other members of the Australian Labor Party can claim that the consequence of a privatised Medibank Private will be upward pressure on premiums, but the fact is that the government will keep in place the current safeguards that exist with respect to making sure that any premium increase that is sought is one that can be justified. So claims that premium increases will be unjustified, will be excessive or will put undue pressure and burden on those who are in a private health insurance fund are simply wrong because the government will retain its strong safeguard with respect to premium increases.

In addition to that, the benefits that will flow to the Australian people from a privatised Medibank were announced earlier this year in this government’s budget when we announced that proceeds from the sale of Medibank Private will see the injection of some $500 million into medical research grants through the National Health and Medical Research Council and provide $170 million for the establishment of a research fellowship scheme. All of these benefits will have immediate and direct positive impacts on the Australian people. Quite simply it comes down to the fact that this government does not see the value in using taxpayers’ funds to run a health insurance business. It certainly seems to me to make a lot more sense to use those funds to benefit the Australian people through, for example, the investment of money into the National Health and Medical Research Council and for medical research.

So Labor’s scare campaign is certainly unfounded. I would like to see from the Australian Labor Party a contribution to this debate that actually details what the Labor Party will do with respect to private health insurance. I would like to hear from the Australian Labor Party not a scare campaign on the sale of Medibank Private but a policy proposal that highlights the way in which the Labor Party will support Australians becoming members of private health insurance funds. That is what the Australian people would like to hear from the Labor Party. I know that the 55 per cent of my electorate who have private medical insurance want to know what the Australian Labor Party’s policy is with respect to making sure that premiums will not increase or that private medical insurance will not be nationalised.

We know that this government has in place the 30 per cent rebate, something that the Labor Party begrudgingly only came to the party on very recently. We know that the Labor Party philosophically is very weak when it comes to supporting that 30 per cent rebate—the rebate that makes health insurance so affordable for so many Australians. In addition to that, I would also say to the Australian Labor Party: why doesn’t it put some pressure on its state Labor cousins? We know that the state Labor governments across Australia are maladministering their state public hospitals, the consequence of which is that there is increased pressure for those Australians who want to use health facilities. What private health insurance does is to make sure that those Australians—

David Hawker (Speaker) Share this | Link to this | Hansard source

Order! It being 2 pm, the debate is interrupted in accordance with standing order 97. The debate may be resumed at a later hour and the member will have leave to continue speaking when the debate is resumed.