Mitch Fifield (Victoria, Liberal Party) Share this | Link to this | Hansard source

I rise to contribute to the debate on the Medibank Private Sale Bill 2006. This bill will implement the government’s policy in relation to the sale of Medibank Private. It will establish a framework to give the government the flexibility it needs to sell Medibank in the way best suited to the achievement of its objectives. These objectives include: to contribute to an efficient, competitive and viable private health insurance industry; to maintain service and quality levels for Medibank Private contributors, including in rural and regional Australia; to ensure the sale process treats Medibank Private Ltd employees in a fair manner, including through the preservation of accrued entitlements; to minimise post-sale residual risk and liabilities to the Commonwealth; and to maximise the net sale proceeds from the sale.

The Senate Standing Committee on Finance and Public Administration—which I chair—conducted an inquiry into the bill, the report of which was tabled in the Senate on Monday. The committee received 13 submissions from members of the public and organisations and heard from 12 witnesses at a public hearing. The submissions and evidence have provided valuable contributions to the committee’s consideration of the bill, and I would like to put on record the committee’s thanks to all those who took the time and effort to make submissions.

The committee’s report addresses concerns relating to Medibank’s ownership and the government’s right to sell it; the impact of the sale on Medibank’s performance and that of the private health insurance market; the protection of members and employees; and the provisions which restrict ownership and control of Medibank Private for five years from the date of sale. The government’s independent legal advice is unequivocal on the question of ownership. The Commonwealth owns Medibank Private and, with the passing of this bill, will be free to sell its shares. It is also clear that legal and beneficial ownership of Medibank Private vests in the Commonwealth, which removes any right by contributors to claim against Medibank’s assets.

A number of witnesses were concerned that privatisation would lessen Medibank’s ability to continue providing competition in the health insurance market. The fact is that Medibank Private is already a market pacesetter in efficiency and innovation. It has successfully negotiated with health providers on the basis of its bulk buying power. This has brought with it gains for members, through minimised premiums, and has served as a model for other private health insurers in the way they approach their businesses.

From the evidence received by the committee, Medibank Private is also highly competitive in terms of the ratio of revenue it spends on management, its member retention and its very high market share. There is no reason that this should not continue under private ownership. Indeed, it is difficult to imagine a circumstance where future owners would risk their investment by running the company less competitively than its current managers. Medibank Private, regardless of ownership, will continue to be an important player in the health insurance market. Consumers will continue to benefit from strong competition, and the sale will help to ensure that any premium increases are minimised.

Some are concerned that the quality of insurance sold by Medibank would somehow diminish after the company’s sale. The sale will not result in any reduction in the surety of the insurance product sold by Medibank Private. The capital adequacy and solvency provisions, which all private health insurers must meet, remain untouched by the bill. Medibank Private will be no less safe and solid than any of its competitors.

The Community and Public Sector Union and the Save Medibank Alliance expressed concern that the sale of Medibank Private would lead to reduced security for Medibank employees. The committee appreciates that the prospect of changed ownership may be unsettling for staff but believes that the union’s concerns are unfounded. After all, the bill does not dilute any of the entitlements and protections currently afforded Medibank’s employees. Medibank Private Ltd is a public company, limited by shares, and existing employees work for this entity. The mere fact of Commonwealth ownership makes no difference to the legal position of its employees, nor would employee status be affected by the transition of ownership to private hands.

The bill imposes restrictions to ensure the company must remain incorporated and managed in Australia and must not be broken up. No one shareholder may hold more than 15 per cent of the company, and the majority of board members must be Australian citizens. The appeal of these provisions lies in their safeguarding against radical changes to the business in the short and medium term. The sunset clause on these restrictions achieves the best of both worlds. Employees are protected during the transition period, while the company’s new owners will be free to run their business unfettered in the longer term. The potential benefits of sale are readily apparent to the committee majority, as are the important safeguards which have been put in place to ensure that the best interests of all parties are observed and taken into account.

These include powers residing with the Private Health Insurance Ombudsman, the Private Health Insurance Administration Council, the Australian Competition and Consumer Commission, the Minister for Health and Ageing and the Department of Health and Ageing. Representatives of each of these entities made submissions to the committee, signalling their readiness to uphold the oversight responsibilities for which they are each responsible. The committee was convinced that the sale of Medibank Private is in the interests of health consumers and that the interests of health consumers will still remain the paramount concern of Medibank Private.

I would like to take this opportunity to thank committee members for their cooperation. I also thank the secretariat, particularly Alistair Sands, Tim Watling and Monika Sheppard, for their assistance with the inquiry. I commend the report of the committee to the Senate and I commend the bill to the Senate.

Ruth Webber (WA, Australian Labor Party) Share this | Link to this | Hansard source

It is difficult not to get a sense of deja vu as I stand here today to discuss yet another Howard government bid for privatisation. This government, led by the great ideologue himself, has pursued the goal of privatisation with great vigour and often total economic abandon. While I could spend considerable time discussing my ideological opposition to this bill, I feel that my Labor colleagues and I have drawn a very clear line in the sand when it comes to the continual sell-out being perpetrated by this government. Instead, I would like to focus on some of the more practical concerns that I have with this bill and that feature highly in my decision to oppose it.

An experience that I think would be common amongst many members of this parliament is membership of local sports clubs. Often within these clubs, members will devote themselves to the organisation for periods of years or even decades. I wonder how the long-term members of a local football club would feel if the president decided to sell off the clubhouse and then pocket the proceeds.

If the Medibank Private Sale Bill 2006 should pass this place, we will see this very experiment play out on a much grander scale—except, with Medibank, the government not only is removing an asset from its membership but is then expecting those same people to buy it back again and to pay perpetually more and more in premiums. This bill represents another chapter in the Prime Minister’s war on public assets; however, the war on public assets seems to have somehow evolved into a general war on the public, period.

The very idea of the public is at the heart of this debate. Medibank Private is inherently a public institution. It was established with public dollars and relies on the long-term patronage of a significant proportion of the Australian public to remain financially viable. Despite being a public good—an entity that provides social dividends over financial ones—this organisation still commonly turns over a sizeable profit. However, this success would not be possible without those Australians who are members of Medibank Private. Their patronage is not incidental; it is the reason that such an organisation can exist.

The government must see the role of Medibank Private’s membership very differently. The three million Australians who are currently members of Medibank Private—and I must acknowledge here that I am one of them—are right to worry about being out of pocket if this sale goes ahead. In Mr Howard’s economy, loyalty obviously means very little. Despite the loyalty of people who have remained members for several decades, once the organisation of which they are a member is sold, they will not see any compensation—no reward for their loyalty whatsoever. I am unsure if some of the more ambitious members of the government would be too happy with that treatment of loyalty either.

But that has not stopped the still government owned Medibank from trading on a nice idea. As recently as this week, the Medibank Private website proudly refers to its product as a membership. My understanding of membership is that it is reciprocal: one is a member of an organisation as much to contribute to and benefit from its functioning as to merely receive a service. This is what differentiates a membership relationship from a seller-buyer one: the buyer has no role in directing the seller, whereas a membership is inherently interactive.

Just because the government chooses to call it privatisation rather than mutualisation does not make it so. Likewise, a politically friendly legal opinion from one law firm does not mean that this perspective will hold up in court. When amounts of between $500 million and $1 billion are being discussed, I would hope that the government gets its legal basis rock solid. At the very least, I would like to see a government that respects the members that allow Medibank to have such a plump price tag.

Thus far, the government’s approach to this asset has been anything but respectful. As with any coalition initiative, this proposal is allegedly designed to increase competition and, consequently, lower costs for the consumer. We are supposed to believe that the health insurance market will be a laissez-faire paradise for the average Australian. I consider that to be wishful thinking, at best.

The Australian Medical Association opposes this sale for a number of reasons, prominent amongst which is that the sale will actually reduce competition in the insurance sector. I would like to quote their submission to the ACCC on the matter:

Health fund mergers have occurred and will continue to occur because the overall regulatory environment is conducive to the market being shared among a few dominant players. This does not serve consumer interests. The increasing concentration of the private health insurance industry has had a counterpart in the private hospital industry where there has been consolidation in an endeavour to counter the increasing market power of the funds. The end result is less choice for the consumer.

Any economist will justify this claim, or at least acknowledge it as a strong possibility. In recent week’s we have seen large consortiums aggressively pursue Australian businesses, including those that are publicly listed, yet the government claims that market forces and the ACCC will inhibit Medibank Private from the same fate. Why does such a claim fail to inspire me with confidence?

The AMA goes further in its assessment of the proposed sale. They describe the health insurance sector as already being non-competitive in nature. This is a market dominated by a handful of major players who have all been granted generous price increases by the Howard government. Complacency has bred amongst these companies. Smaller operators are being adequately suppressed by the large corporations that already account for 80 per cent of the market. Even mutual funds have demonstrated a tendency to become bloated from time to time. Medibank Private is one of the few insurers in the market majority.

A former director of Medibank Private, Professor John Deeble, has said that Medibank’s establishment was to create a conscience for the private health insurance industry. The sale therefore of Medibank Private will simultaneously allow other insurers to consume one of the other big fish and, conveniently, also remove the last semblance of social consideration within the industry. Unfortunately, the proof will be in the pudding. With Medibank Private in a for-profit modus operandi, the government no longer has a price-setting mechanism within this powerful oligopoly. If the government were serious about free market price factors, they would simply mutualise the fund and ensure that competition does not diminish any further. The reality is very different.

The AMA and many other pundits are stating the obvious: this bill will deliver less competition, less choice and much higher premiums. The legislation will also serve to divest a significant Australian asset. The incredibly buoyant Australian dollar is proof that international investors are very keen on Australian assets. If we are to take the government’s competitive argument at face value, it stands to reason that Medibank must be protected from multinational takeover as well as from domestic entities. Yet the best that the minister for finance and his colleagues could muster is a lacklustre five-year freeze from foreign ownership.

It is no secret that the government moved from an outright sale of Medibank to a public float. There is obviously a feeling amongst the government that the public finds these floats awfully palatable. Consequently, the means have changed when it comes to selling Medibank but the ends are very much the same—and the government knows this. It does not matter how you sell something, once it is gone it is gone for good.

Earlier, I alluded to the economic recklessness that has become a hallmark of this government. The Minister for Finance and Administration, Senator Minchin, has openly acknowledged that the sale of Medibank Private will be delayed until 2008 to allow the sale of the government’s remaining Telstra shares to flow through the market. I take that to mean that the minister for finance would like the same people who purchased T3 to pony up again for Medibank Private.

The Howard government would have you believe that they are the saviour of the mum and dad investor. But, as we have seen with the T2 debacle, the forthcoming T3 debacle and the worst housing affordability figures on record, this government is anything but a friend to the investor. Having encountered a number of constituents who borrowed significant sums of money to invest in the T2 float, I dare say they will disregard the government MPs who will no doubt spruik the Medibank sales bonanza.

It seems to me that this government is taking from the same group of hardworking families and giving very little back. The share floats keep coming, but thus far they have delivered minute reward. This float must surely rank amongst the most insulting. A large proportion of those people who may buy shares in Medibank Private were once members. This is a double dip of the highest order. Only this time they will, in all probability, be slugged with perpetually higher premiums, all whilst their investment carries with it no guarantees of a positive return.

This will of course be incidental to the government, who will have already cashed in their chips. With the global economy looking precarious and local economic conditions looking more so—the phenomenal housing boom in my home state of Western Australia being a case in point—it seems foolhardy to actively promote this float as the government no doubt will.

But, then again, we should not be surprised by the government’s very deliberate timing. Indeed, timing is something that this government specialises in. I find it interesting that the government is doing its best to ram this contentious legislation through in the last sitting period before going into an election year. A 2008 sale date can easily be accomplished by passing this legislation some time next year. In fact, it makes prudent economic sense to schedule the passing of the bill closer to the sale date to allow for an assessment of the company’s worth. Those on the other side of this place may label me cynical, but it seems to me that the forthcoming election period seems to bisect the interval between the passing of this bill and the selling of our asset.

It is also interesting to take a longer term perspective for a moment. I would like to remind the government that Medibank Private was a product of the Fraser government. Even Mr Fraser, a Liberal Prime Minister, had the decency to admit that government owned businesses provide an efficient means of keeping the market in a reasonable position. Recently he wrote this on the matter:

When Medibank Private was introduced we believed that, if the Government were actively involved in the business, we would have a better handle on costs and outcomes than if they were all done by private enterprise.

He went on to say:

I believe it would be a great pity if Medibank Private were sold and that it would lead to escalating fees.

It must be kept in mind that escalating fees will be a result that affects not just the current membership but the entire private health insurance market. Former Prime Minister Fraser’s point is correct in that the government is willingly forfeiting its ability to be a price setter in one of the biggest regular expenditures for Australian families. It demonstrates very clearly to these people what the government’s real priorities are. But do not worry, the government will crow, ‘We will toss them a few dollars back in tax in return.’ Of course, any such cut will not make up for the inevitable price hikes in the cost of insurance—after all, who can forget the supposed compensation for the implementation of the GST?

I am pleased to see that the Greens, the Democrats and even Family First are opposing this bill. A rational assessment of this bill uniformly returns to the conclusion that selling an organisation that meets social ends whilst still making a profit simply does not make sense. But, just as the government is opting for the most blinkered legal opinion possible, they are also opting for a similar political mindset.

I return to what Professor Deeble said about the role of conscience in the insurance sector. My Labor colleagues and I have grave fears that this government is selling the body that represents our national conscience in health care. It seems that everybody in this place, excluding the government, shares the same fear. But perhaps that is par for the course during the term of this government: throwing a few dollars at the place where a conscience used to be.

If this legislation is passed, as seems likely, and Medibank Private is eventually sold, and if the government gets its way, what next for the delivery of health care in this nation? What next for the status of the delivery of universal health care? What next for Medicare Australia? Where does this government draw an end to privatising service delivery? As far as I can see, they have been on a 10-year crusade against public assets and delivery of service in the public sector. So far we have seen the sale of numerous public assets that deliver essential services, whether that has been the staged sale of Telstra or, now, the proposed sale of Medibank Private. Where next for the state of delivery of universal access to health care? What does this government propose to do with Medicare? What does this government propose to do with the funding of our public health system?

And why the great hurry? Why do we have to pass this legislation now? Why did we have to have a half-day committee hearing, which in this place has been colloquially termed ‘a quick and dirty committee hearing’, where we are given an alarmingly short time to consider contentious legislation, call for public interest, have hearings and write committee reports? Then all of a sudden we have to rush through the passage of this legislation. Why the hurry? If the government is true to its word and it does not propose to sell Medibank Private until 2008, surely there are more than enough sitting days between now and the proposed float before the passage of any legislation is required. We could use that time to have a more considered look at the impact that the proposed sale would have on the state of the private health insurance industry in Australia, rather than just have to take the word of a couple of hand-picked witnesses in a half-day committee hearing. We could actually use the extra time to, as I said, look at the state of the industry and the impact that such a float would have on the Australian investment market. But, instead, we seem to be on some ideological crusade that I think even some in the government would find a little startling: we propose to sell something in a couple of years time, so we have to rush through the legislation now. Perhaps they are concerned that they will lose the next election and, with that, lose control of this place and not be able to continue their vendetta against the public ownership of assets and the delivery of public services by the government.

As I said, they have an ideological obsession with the sale of the creation of the Fraser coalition government and an ideological obsession against the delivery of universal health care. Let us face it: it is only because of the popularity that Medicare has that there is still some commitment to it. The coalition used to campaign long and hard against the continuation of Medicare until they realised they were out of step with the Australian people. Of concern to me and, I am sure, the rest of the non-government senators in this place is not just the future of the private health insurance industry but also the future delivery of health services and the commitment of this government to public health care for the Australian community.

Why the rush? As I said, I do not understand why we are in such a hurry. The opposition is assisting the government in facilitating the passage of legislation and, all of a sudden, they say it is essential and has to be dealt with before we rise at the end of next week. As Senator Evans said earlier today, there has been agreement on how to manage the process of legislation in this place. What we do not accept, and what we did not accept when this bill was put up for exemption from the cut-off, is that this is in fact urgent. You do not need to pass legislation two years before a proposed sale. It is not urgent, it is not critical and it is actually not the right thing to do by the people who hold private health insurance in Australia, particularly the three million-odd policyholders—including me and a lot of other people in Australia—who actually hold policies with Medibank Private.

Debate interrupted.