Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Administration, Senator Minchin. Does the minister recall saying that a privatised for-profit Medicare private would put downward pressure on premiums through greater efficiencies? Is the minister aware that, of the current providers, the eight funds with the lowest administrative costs are not-for-profit funds? Don’t two of the three for-profit funds have higher administrative costs than Medibank Private? Haven’t health experts also made it clear that a privatised Medibank will lead to higher premiums because the owner would need to deliver higher dividends to offset the risks in the industry? Isn’t it the case that the minister’s claim of lower premiums in a privatised Medibank is an expression of ideology that is not supported by the evidence? Why won’t the minister release a business case to support his assertion that privatising Medibank will result in lower premiums?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

To correct the record, Senator Sherry referred to Medicare private; I am sure he meant Medibank Private Pty Ltd. The government does remain very firmly of the view, as in the decision we announced in April, that there is no good public policy reason for the government to continue to own a private health insurance company, and that is what this is. Medibank Private is one of 38 providers of a product called private health insurance in the Australian private health insurance industry.

After our examination of the history, the performance and the state of this industry, we do not believe there is any case for us to continue to own this company. Taxpayers have borne the risk of this business for some 30 years. Taxpayers had to contribute some $85 million to the business only two years ago to ensure its capital adequacy. Taxpayers bear the opportunity cost of having a substantial amount of capital tied up in a private health company that could otherwise be invested to the benefit of ordinary Australians. We have, of course, already substantially increased investment in medical research in this country as a consequence of the decision to sell the company. I think we increased our commitment to medical research in this country in the last budget by some $500 million as a consequence of us making a commitment to sell Medibank Private. We think that is another advantage.

As to the issue of premiums, one of the consequences of a sale, which is justified on its own, is that we think that a privatised Medibank Private will run on fully fledged commercial lines and be able to reduce the upward pressure on premiums. That was certainly the finding of the Carnegie Wiley scoping study. It has not been the practice of governments, as I said I think on Monday or Tuesday, to release scoping studies but there is some evidence in the marketplace for the claims that the Carnegie Wiley study made.

BUPA is the biggest private health insurance operator in Australia. It operates the Mutual Community Fund in South Australia—I declare an interest: my family and I are members of that fund—and HBA in Victoria. They are both highly competitive funds. Indeed, their premium increases have been below the national average increase every year since 2001. Overall premiums across the market have increased by 35 per cent over the past five years; BUPA, as I say a private for-profit operation, has delivered premium increases of only 25 per cent in that time. There is clear evidence for the case that we make that private for-profit health insurance companies operating in the disciplines of private industry are able to deliver lower premium increases than is the case for the non-profit mutual sector.

The key way in which you keep the pressure down on premiums in this marketplace is through competition—the more competition the better. We think that the competitive tension in this industry will be improved by having Medibank Private run by private sector operators who can exercise significant discipline in the marketplace with respect to cost pressures, and I think that is evidenced by the record of the BUPA funds over the last five years.

Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Given that the minister says the government is not selling Medibank for the money but for the benefit of members, why will he not detail how members will actually benefit? Is the minister seriously suggesting that Medibank members will get a better deal out of American corporate raiders, such as Kohlberg Kravis Roberts, than a not-for-profit run Medibank Private? Will the minister now give a guarantee that Medibank’s three million members will pay lower premiums to a privatised fund?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I remind Senator Sherry that of course the government has retained its authority over the approval of insurance premiums. Any member of any health insurance fund is free at any time to transfer their health insurance policy to another fund. That is the point of competition and transferability. If they do not like the service they get from Medibank Private or anybody else, they can take their business to one of the other 38 funds in the market. Medibank Private customers have been served well by George Savvidis and his team over recent years and I congratulate them. I am sure Medibank Private will continue to provide very good service. We are doing this for taxpayers. Taxpayers are the ones who have supported and sustained this business. Taxpayers are the ones who have capital tied up in this business. Taxpayers are the ones who should be free of this investment and have the capital that is tied up in Medibank Private put into a diversified equity investment in the Future Fund. This is together with the fact that we have, of course, increased the research dollars in Australia. (Time expired)