Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

The Medibank Private Sale Bill 2006 contains a number of amendments and provisions to facilitate the sale by the government of Medibank Private in 2008. The bill is comprised of three schedules. Schedule 1 modifies provisions in the Health Insurance Commission (Reform and Separation of Functions) Act 1997 and the National Health Act 1953 to allow the Commonwealth to sell its equity in Medibank Private Ltd. It repeals section 35 of the HICA, which currently has the effect of prohibiting the Commonwealth from transferring its shares in Medibank Private. Schedule 1 also amends the NHA to provide for the fact that, once sold, Medibank Private will become a for-profit organisation and have a resulting need to distribute profits. Finally, schedule 1 also creates a new section, section 73AADA, allowing for the payment of compensation if property is acquired from a person other than on just terms.

Schedule 2 contains provisions which form the MPL sale scheme and deal with the actual process of selling Medibank Private. It does not limit the method or timing of the sale, and it recognises that the government may wish to use a number of strategies to obtain the maximum revenue from the sale. It also contains provisions which will enable Medibank Private to modify its constitution and rules such that it can alter its not-for-profit status and operate, once sold, on a for-profit basis. Schedule 2 also contains two appropriations clauses in relation to the cost of the MPL sale scheme and other situations in which expenses may arise. Also within the second schedule are provisions which relate to the ownership of a privatised MPL, including a five-year period in which the maximum stake that can be held by anyone in MPL will be 15 per cent.

The bill contains requirements relating to the Australian nature of MPL, including that the company is to remain incorporated in Australia and that the majority of directors must be Australian citizens, and it ensures that its central management and control is ordin-arily exercised in Australia. Schedule 3 contains consequential amendments relating to various operational aspects of Medibank Private which will cease to exist once Medibank Private is privatised. These include the removal of fixed remuneration governed by the Remuneration Tribunal Act as currently applied to certain MPL officers and the removal of non-application of section 186 and paragraph 461(d) of the Corporations Act 2001, which MPL currently enjoys.

According to page 8 of the explanatory memorandum:

The ... financial costs and benefits from a future sale or sales of ... Medibank Private Limited are difficult to quantify at this stage.

Many people and politicians seem to have a knee-jerk reaction to privatisation. They are either for or against it, without much thought or research. The Democrats policy is not to oppose privatisation when it is done for the benefit of the community and in the public interest. In situations where privatisation is genuinely in the public interest and benefits the community then it should be supported. I do not believe that it has been clearly shown that the sale of Medibank Private Ltd is or is not in the public interest or for the benefit of the community. On the one hand, I can see no sound policy reason as to why the government should continue to be involved in the private health insurance market. The role for government is the provision of public health services. On the other hand, I have not been satisfied by the government’s stated case for the sale of Medibank Private.

There is considerable distance between the real reasons for the sale and the stated reasons for the sale. Page 2 of the explanatory memorandum states that there are five objectives for the sale of Medibank Private, these being:

to contribute to an efficient, competitive and viable private health insurance industry;

to maintain service and quality levels for Medibank Private contributors, including in regional and rural Australia;

to ensure the sale process treats Medibank Private Limited employees in a fair manner, including through the preservation of accrued entitlements;

to minimise any post sale residual risk and liabilities to the Commonwealth; and

having regard to the above objectives, to maximise the net sale proceeds from the sale.

I believe the real reasons for the sale are in fact that the government can see little policy benefit arising from keeping Medibank Private in public hands, that the government earns no income from Medibank Private and that the government can make a windfall profit or surplus of a few billion dollars from this sale.

Those are not bad reasons, but it is concerning that the government has been justifying its actions with reasons that are not what I consider to be its real and genuine reasons. The government has been dishonest in its claim that selling Medibank Private will remove a conflict of interest. This argument has been employed in defending the government’s position in relation to the sale, no doubt due to the strong and positive connotations such a position has. Where there is a genuine conflict of interest, then its avoidance, minimisation and removal is to be encouraged. However, I doubt the sincerity of the government’s claim that, by selling Medibank Private, it will eliminate a conflict of interest.

The Hansard of the Senate Standing Committee on Finance and Public Administration inquiry shows this extract from a conversation between Senator McLucas and Mr Charles Maskell-Knight, who is the Principal Adviser, Acute Care Division, Department of Ageing:

Senator McLUCAS—How does the sale of Medibank Private resolve a conflict of interest?

Mr Maskell-Knight—One postulates that the government may find itself in a position where it is trying to decide how to regulate the industry, having regard to the fact that it owns a major player in it. If it no longer owns a major player in it, it can make decisions about regulatory policy based on first principles.

Senator McLUCAS—Can you identify any time where the government has regulated differently because it owns the major player?

Mr Maskell-Knight—Not that I can think of.

Exactly. Further, doubt must be cast on the government’s claim at page 2 of the explanatory memorandum that the sale of Medibank Private will contribute to an efficient, competitive and viable health insurance industry. On the evidence put before me during the committee inquiry, I cannot say that I have been persuaded that a more efficient, competitive and viable health insurance industry will necessarily result if Medibank Private is transferred to private hands. Equally, however, I am not persuaded that a more efficient, competitive and viable health insurance industry will result if Medibank Private remains in public hands.

What I am sure of is that the simple sale of Medibank Private is insufficient of itself to produce greater competition, as the government would have us believe. The health insurance market is far from an ordinary free market, as I noted during the committee hearing, in discussion with Dr John Deeble:

Senator MURRAY— ... One of the points you make very clearly in your long discourse ... is that the private health insurance industry is in no sense a free market; it is a very managed market. It is a market characterised by high subsidies, high government intervention, high regulation, very low mobility of customers between funds and extremely poor customer knowledge because of lack of comparability. In other words, it is, to use an economist’s term, a most imperfect market.

Dr Deeble—Absolutely.

Senator MURRAY—That is right, isn’t it, as a summary.

Dr Deeble—And it is an oligopolistic market—six major funds dominate.

As increasing competition is a stated objective for the sale of Medibank Private—and it is obvious that the sale of Medibank Private alone seems unlikely to result in marked changes to the competitive characteristics of the private health insurance market in Australia—I think it is crucial that as part of the sale process the Productivity Commission be required to inquire into competition in the private health insurance market. The last time such a project was carried out was almost 10 years ago, with the Productivity Com-mission’s 1997 report Private health insurance. Given the circumstances, it is an opportune time for that report to be updated and reviewed.

Aside from the government’s motivations and reasons for selling Medibank Private, there are other aspects which merit discussion here. A key issue throughout the debate has been the question of ownership of the assets of Medibank Private and whether or not members will be entitled to seek compensation from the government. Most accept that the government has the right to dispose of Medibank Private. But the Parliamentary Library Bills Digest rightly highlights the risk that the government may be exposed to a potential class action by MPL members seeking compensation from the government as a result of Medibank Private being privatised.

It is important to note that the bill accepts this risk as real. In the bill, liability rests with the Commonwealth—the classic constitutional clause allowing for compensation where property has been acquired other than on just terms. More accurately, it does not rest with the government; it rests with the people of Australia, the taxpayers.

I am not at all convinced by the legal advice from Blake Dawson Waldron, which maintains at page 3, item (f), of the brief to the department:

Contributors have no rights or property interests in assets comprising the Fund, or enforceable rights to the benefit of Fund assets ... For this reason, the Commonwealth will not be liable to pay compensation …

Despite the evidence given to the committee by the department, it is clear that the government does not agree, either, with the legal advice from Blake Dawson Waldron. Otherwise, why would it have a clause giving a Commonwealth indemnity to cover the risk? The government says that the liability clause is a standard one—a precautionary provision that would prevent the validity of the bill being challenged if it did not allow for compensation under the just terms provisions of the Australian Constitution. This is a circular argument. In the absence of such a liability clause, no-one would challenge the validity of the legislation unless they thought there was a case for compensation.

The fact is that the bill specifically anticipates the risk of a compensation claim and allows for the taxpayer to pick up any compensation tab. This is a problem that needs to be faced up to. The only sure-fire way to avoid this risk altogether, therefore, is to sell Medibank Private Ltd to its members. Rather than selling off Medibank Private via a public float—as the government seems intent on doing—or private placement, Medibank Private could be mutualised and sold to its members. By way of example, if there are 1.2 million members, which was the evidence we had, each member could be offered a right of first refusal to purchase a shareholding equivalent to $1,500. This would give the government $1.8 billion, a figure at the upper end of estimates that have been suggested it might raise in public sale and at a lower cost than otherwise might be the case with a public float. Those share portions which were left over as a result of members opting out could then be sold to the general public. The members of MPL could then operate it as they saw fit, including a public float later if they so wished.

In my mind, this removes any risk that the government may be exposed to. It means the government receives its money. It satisfies the members by giving them right of first refusal in buying into Medibank Private and is potentially the lowest cost approach. Remarkably, however, the government so far has refused to seriously consider this as the avenue to proceed down. One cannot help but feel that, by and large, the government believes there to be an assumption that the sale of government assets must be by public float.

Finally, I wish to address what is to be done with the proceeds from the sale of Medibank Private. As I noted earlier, the sale of Medibank Private may raise a sum of close to $2 billion for the government—a substantial windfall. The important question then is: what will the government do with the proceeds from the sale? Up to $2 billion will be a substantial amount, and there should be concern about what the government will do with the proceeds from the sale of this Commonwealth asset.

The bill is silent on the matter. The realistic options would seem to be: placing the proceeds of the sale into general revenue for current expenditure; placing the money into the Future Fund to meet the future superannuation liabilities of public servants; or to hypothecate the funds. The first two options I have listed strike me as being singularly unattractive. It would be poor financial management and poor financial policy to put the proceeds of asset sales into general revenue for current expenditure. Tipping the money into the Future Fund to meet the future superannuation liabilities of public servants would be a singularly unattractive option, as opposed to the far more immediate and better alternative represented by the need for current health capital expenditure. This suggests to me that the sound option would be the hypothecation of the funds for the provision of public health care services. The Democrats have been anxious for some years about the lack of Commonwealth expenditure on mental and dental health, as well as on other public health measures.

Further, I believe that such hypothecation of funds would also help alleviate concerns that some stakeholders and certain members of the public hold in connection with the proposed sale of Medibank Private. The following questions are generic to all privatisation sales: is the public interest better served by the asset remaining in public hands? Can the sale realise funds that can be put to a better use? A strong case has not been made for Medibank Private remaining in public hands. The weakest aspect is with regard to the present intended use of the realised sale funds if it were to move out of public hands.

I reiterate that Democrat policy does not state that Medibank Private should be kept in public hands. Democrat policy states that the Australian Democrats are not automatically opposed to privatisation of government assets. Each case of privatisation should be assessed on its merit with reference to the community benefit and the public interest. The question is: is this sale genuinely in the public interest and for the benefit of the community? I do not believe that the government needs to continue to play an ownership role in the private health insurance market. I believe that the public health market is the area which the government should focus on. However, I do not wish to see the Medibank Private Sale Bill 2006 pushed through parliament without regard for some of the key issues that the proposal raises, especially when there are potential consequences for the people of Australia. The concern over the risks of compensation claims must be taken seriously, and effort should be spent in minimising the potential for these risks where possible.

The revenue that would be raised from the sale of Medibank Private must be dealt with specifically by the bill. Not to do so would be to leave the door open for its appropriation into general revenue or for the sale funds to be tipped into the Future Fund. Neither of these alternatives justifies the sale.

I have circulated amendments which will address our concerns and which will hopefully receive some positive responses. The other thing I have addressed is the issue which was looked at by the Senate Standing Committee for the Scrutiny of Bills, and that is the open-ended nature of the provision for when the sale should be concluded and therefore when the provisions of the bill should apply. I have sought to limit that in time terms, as the scrutiny of bills committee implied. In closing, I wish to move two second reading amendments.

John Watson (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Senator, you can move only one second reading amendment. However, you can foreshadow a second one.

Andrew Murray (WA, Australian Democrats) Share this | Link to this | Hansard source

I will do that then. I foreshadow that Senator Allison will move:

At the end of the motion, add “but the Senate is of the view that prior to the sale, the Productivity Commission be required to conduct an inquiry into the private health insurance industry, with specific attention to enabling an efficient, competitive and viable private health insurance industry”.

And I move:

At the end of the motion, add: “but the Senate is of the view that prior to the sale, the government of the day be required to prepare and present a discussion paper to the Parliament addressing the (eventual) method of sale of Medibank Private Limited, with particular reference as to why that particular method was chosen over alternative methods”.

Anne McEwen (SA, Australian Labor Party) Share this | Link to this | Hansard source

The Medibank Private Sale Bill 2006, which we are debating today, is yet another litmus test for the public to gauge this government’s lack of social responsibility. It is another opportunity for Australians to see this government dismantling social goods and taking away things that are of benefit to all Australians in favour of a system where nothing is in public ownership and everything is hostage to the vagaries of private enterprise—which this government posits as some kind of economic nirvana.

Labor does not support this legislation, and Labor has pledged to abandon the idea of selling Medibank Private when we are elected to run this country on behalf of all Australians. The arguments in favour of the sale are based on ideology, not fact. It is the same basis for legislating that we have become used to in the 10 long years that this government has been in power. Never mind that the public do not want public assets sold off; just sell them off anyway. Never mind that there is no good economic reason for it; just sell them off anyway. It is a predictable approach so often shown by this government in matters of national importance, an approach that shows the government refuses to be guided by the principles of equity and fair play and will not be deterred by the best informed opinion or by the most reasonable argument for the common good.

This a government that has rolled back the broad idea of fair play and social responsibility for a narrow concept of so-called ‘values’ that further legitimises and endorses the rights of the least vulnerable over the majority of Australians who deserve greater social protection and consideration. Here again we see the government using its Senate majority to fulfil the long-held dreams of a Prime Minister who has a passion for erasing any social good put in place by former Labor governments. As we know, the Prime Minister does not like Medicare but is not game enough—yet—to dismantle the social good. He voted against the creation of both Medibank and Medicare and has in the past pledged to destroy Medicare. As I said, that would be too unpalatable for the Australian public at the moment, so instead he is targeting the next-best thing, which is Medibank Private—despite the fact that Medibank Private has been a part of Australia’s history, culture and economy since 1976 and, even more importantly, despite the fact that it is a successful organisation, and despite the fact there is no good reason to sell it. What other reasons could the government have for selling off Medibank Private Ltd, when the weight of discussion says that there is little evidence to support the merits of the proposal in this legislation? In fact, the sale could be a double whammy in also failing to provide a check on the cost inefficiencies of the health system generally—let alone all the other possible damaging consequences that have not been addressed by senators opposite.

It is another example of the slavish devotion this government shows to competition and privatisation, a devotion that could well prove detrimental to the wellbeing of many Australians who can least afford to be victims to this government’s unreasonable and narrow agenda. It is clear that the ideological imperative is at work again in this legislation, but the government will never admit that. What reasons do they put forward for flogging off Medibank Private and what independent academic and objective support is there for those reasons? Not much, I suggest.

Senator Minchin, the Minister for Finance and Administration, said the decision to sell was reached because the government has no good policy reason not to sell and it is necessary for the government to remove the perception of conflict of interest as both regulator and provider. The latter point is an interesting one, a position that assumes without any basis that government presence in the market actively compromises efficiencies through control, potential or real. That argument is erroneous. It is just a smokescreen for ideology.

Even when Medibank Private is privatised, as it no doubt will be, despite the lack of any good reason to sell—there is no doubt this legislation will pass the chamber—it will be subject to the myriad legislation and regulation that already control the health industry in this country. The argument that government control impedes efficiency conveniently ignores the real control the government has in regulation. It is disingenuous to claim government ownership of the fund is a conflict of interest when government has that regulatory control.

Then there is the argument that somehow flogging off Medibank Private will make it more efficient and effective. Even a good report card for Medibank Private, in an unusually forthright brief prepared by the Parliamentary Library—a report card that highlights its good performance in the provision of efficiencies, services, premiums, innovation and competition—cannot save it from the Prime Minister’s draconian sell-off. The library brief, which is very comprehensive, offers no evidence for the government’s position on the economic efficiencies that are claimed to flow from the privatisation of this asset.

Even former Liberal Prime Minister Malcolm Fraser, as the report indicates, knew that one of the benefits of Medibank Private under government ownership would be to help keep premiums down. But, as the library brief further points out—and common sense tells us—a not-for-profit structure is far more likely to act in the interests of its members, because the imperative is clearly not just to reward shareholders.

While we are talking about members, nearly three million Australians are members of Medibank Private. We should acknowledge that the rights and entitlements of those members are not at all certain in this legislation. Senator Murray, who spoke just before me, has made reference to that point, and I will make a few more comments about that further on. Why sell a public institution that has since 2001-02, as Standard and Poor’s have observed, set long-term strategies for profitability and efficiencies and has again, as seen from 2004-05 reports, delivered on those strategies?

We know from independent reporting that Medibank Private’s administrative expenses are below the industry average. You would have thought that that was a demonstration of the efficiencies that the government claims Medibank Private needs to implement. It has already implemented those efficiencies and is a well-run organisation. The results at Standard and Poor’s, an independent organisation held in high esteem by economists and others in our community, vindicate Medibank Private’s efforts in this regard. Surely those are the results that a government wants from a health insurance provider, any health insurance provider. It appears, from all the evidence, that being both regulator and provider is neither detrimental to the fund’s performance nor to competition in the sector generally.

In addition, Standard and Poor’s noted that Medibank Private has embraced innovative marketing strategies and has been very competitive in a market that Standard and Poor’s itself calls ‘competitive and highly volatile’. It is entirely possible that the sale of Medibank Private could lead to a lessening of competition with a greater concentration of larger insurers perhaps unwilling to embrace the innovative competition strategies in the manner that Medibank Private has.

Indeed, Medibank Private has triumphed. It is the No. 1 insurer in four states and has, as I said, almost three million members and 30 per cent of the Australian health insurance market. It is an iconic institution and a favourite of the Australian public, who join Medibank Private not just because it is competitive, efficient and provides good services but because it is in government control. It is one of the features that attract people to become members of Medibank Private.

As I said, it is a successful organisation and we are told that competition in the industry makes for successful organisations. Medibank Private is successful, so now we fundamentally want to change it. Why? There is no justification for the government’s arguments in that regard. The bar to better competition and outcomes in the opinion of many experts is not in the current mix of health insurance providers but in the structure of the regulatory framework under which the industry operates.

I understand the government is looking at that regulatory framework. Wouldn’t it have made sense to have done that first, to see what the rules of play are going to be before changing the teams on the field? As for public policy reasons, according to health economist and expert on health insurance Dr John Deeble, Medibank Private has successfully supported universality and equity through minimal levels of regulation. So what exactly are the ‘public policy reasons’ that the minister claims are reasons for this legislation before us?

The Senate Standing Committee on Finance and Public Administration’s inquiry into this bill and the subsequent report grappled with the justification for the government’s position. The dissenting reports from the opposition and minor parties underlie the paucity of argument that the government has put forward to support this retrograde bill. The government senators’ report from that inquiry woefully failed to support, let alone robustly support, the purposes of the bill—except the purpose of maximising the amount of money that the government will rake in when it flogs off this valuable public asset. If we look at the other grounds that the government senators relied on in their report, we find the already discredited claims about some ill-defined public policy, the concocted conflict-of-interest arguments and the furphy over the benefit of competition, when Medibank Private is already competitive and successful.

Then we have the government’s reliance on the CRA International report, which comments favourably on the proposed privatisation and the possibility—not the certainty—of improved efficiencies and lower premiums. There is not much else in that CRA report that the government can hang its hat on. Both the AMA and the health insurance expert to whom I referred to earlier, Dr Deeble, are dismissive of the government department commissioned report.

It is interesting to note that the AMA starts its additional submission to the Senate inquiry by saying that it has no philosophical objections to the sale of government assets when appropriate and yet goes on to say that it believes the sale of Medibank Private will lead to higher premiums for members of private health funds. The AMA says:

In the first instance, the higher premiums will have an impact on the members of Medibank Private. However, Medibank Private is a major player in every State/Territory health insurance market. Higher premiums will make Medibank Private less competitive and will allow other funds to raise their premiums also.

In the view of the AMA:

... these outcomes are deleterious to the broad strategy of support for private health insurance. The sale of Medibank Private will inevitably have a deleterious impact on the Budget cost of maintaining that support. The Parliament needs to consider all budgetary impacts of the sale, not just the expected sale proceeds.

That AMA submission goes on to provide substantial data supporting its position. I will not repeat that here. But it is telling that an organisation whose membership is not known for its left leanings and its left ideology believes that this privatisation is going to be a bad thing for the people of Australia.

Another aspect of this bill that needs to be looked at is the broader current role of Medibank Private. This broad role was envisaged by both former Prime Ministers Whitlam and Fraser when Medibank was set up and it was that Medibank Private was to act as a moral social agent in the health insurance industry. Many experts in the field disagree with Senator Minchin’s view that there exists no social policy ground to impede the sale. Dr Deeble argued strongly that the opposite is the case. Medibank Private has long provided that balance between need and justice. It has offered a stable national presence in the insurance market and has competed financially with other insurers. Importantly, it carries the flag for broad public interest in the health insurance field.

There is much in this bill that needs to be exposed for what it is. Read together, the Senate committee report and the library’s research brief and subsequent Bills Digesttogether with the AMA submissions and other submissions to the Senate inquiry—clearly outline that the government has mounted a slight and untenable case. The predominant weight of evidence should halt this bill in its tracks on the grounds of reason and fair play.

As I mentioned earlier, there are other reasons for stopping this bill, including the unresolved question of the rights of current members of Medibank Private in the sale process and as beneficiaries of the proceeds of any sale. The government has attempted to stave off the legal uncertainties in that regard by seeking a legal opinion from Blake Dawson Waldron, an opinion that has been rebutted by the library in its expertly and independently prepared Bills Digest. The fact that the government is not wholly convinced by its own commissioned legal advice is evident in the moves to include in the bill some safety net clauses that are clearly intended to compensate members if indeed there are future claims by them arising from detriment after Medibank Private is sold. While that is some good news for members, the fundamental question of whether this is something the government can sell without risk of challenge is not yet resolved. Nevertheless, the government pushes ahead with the legislation.

A further issue was raised by the Senate Standing Committee for the Scrutiny of Bills, of which I am a member. So is Senator Murray, who spoke before me. We are going to have open-ended legislation sitting on the books, as the government’s stated intention is not to sell Medibank Private until 2008—that is, after the next federal election. So we are going to have legislation on the books without knowing what the economic, social and political circumstances of the nation will be when it comes into being. That is a very poor way to make legislation, and the scrutiny of bills committee—as it should—will bring to the Senate’s attention every occasion when legislation that has no stipulated commencement date is proposed by this government.

There are then the matters of the future employment status of the staff of Medibank Private and the lack of any consideration of that in this legislation. All we get is a patronising attitude to the issue in the government senators’ committee report, which acknowledges that the ‘prospect of changed ownership may be unsettling for staff’. Yes, the prospect of perhaps losing your job is unsettling. You would think that the government might have thought to address the staff issue in a more constructive way than just saying ‘staff can keep themselves informed and also raise any concerns or questions they might have about the implications of Medibank’s sale’. I am sure being informed is a great consolation to those staff of Medibank Private who are very concerned about what their future employment prospects are. Then there is the question of foreign ownership. The bill acknowledges legitimate concerns about foreign ownership, with some measures to prevent the loss of Australian control of the organisation. However, those restrictions expire after five years. After that, Medibank Private is up for grabs.

I will also make passing reference to comments made by Senator Fielding in his dissenting Senate committee report, in which he says that the government is ‘selling out’ Australian families by selling Medibank Private. Labor could not agree more, and that is why we will not support this bill and why we have given the Australian public a guarantee that Labor will do genuine family impact statements for all legislation that a Labor government brings to the parliament.

In finishing: the evidence garnered in the Senate committee inquiry, the evidence shown in the information provided to all members of parliament by the esteemed Parliamentary Library and the evidence in the department’s own commissioned report is that there is no good economic, social or public policy justification for the sale of Medibank Private. The government senators’ report to the Senate committee is a hopeless conjecture of possibilities and assertions—a ‘romancing the stone’ approach. It is both shallow and selective—a straw argument that fails to sell the case, yet the government arrogantly expects the Australian public to cop it.

The government senators’ report merely echoes the government’s overall attitude. It is a government that is prepared to thumb its nose at anything that does not fit its fixed and narrow vision. It is a government that is not concerned with expert opinion and argument. It is a government that arrogantly and intentionally fails to establish sufficient grounds or arguments for its case. Worse still, it is prepared to vandalise public institutions in the name of its cause, without due regard for the consequences. The government has not made its case for selling Medibank Private, and this bill should not be supported—and it will not be supported by Labor.

Kerry Nettle (NSW, Australian Greens) Share this | Link to this | Hansard source

The Australian Greens oppose the sell-off of Medibank Private. We do so because we do not want to see further privatisation of health care in this country. We are proud and vocal supporters of the public health care system in this country, and we want to see the federal government prioritise and invest in public health care in this country. But it is not just the federal government that we want to see do that; it is the opposition too. Instead what we have is the government, with the support of the opposition—with the support of the new deputy leader of the Labor Party, the shadow minister for health—spending over $3 billion of public funds every year subsidising people’s private health insurance. Instead of investing that over-$3 billion of public funds each year in our public health system, we see them subsidising people’s private health insurance.

In speaking to the Medibank Private Sale Bill 2006 today, I offer a challenge to the new deputy leader of the Australian Labor Party. Does she support investing public funds in our public health care system? Will the new deputy leader and the new Leader of the Opposition continue to support pouring public health funds, taxpayers’ dollars, into subsidising the private health insurance that is taken up predominantly by Liberal Party voters in wealthy electorates like that of the Minister for Health and Ageing, Mr Abbott? Will this new Labor dream team continue to support pouring over $3 billion of public funds into subsidising people’s private health insurance, rather than delivering public health outcomes and public health services for the millions of Australians across this country who need that support?

That is the challenge I offer today to this new Labor team. What is their commitment to public health care? Do they believe in and will they take to the next election a policy that echoes the one that the Greens have been calling for for years, which is a prioritising of investment in our public health services? That $3 billion is sitting there. It is taxpayers’ money. It is in our budget for health care, and it is not being spent that way. It is currently being spent subsidising the people in wealthier electorates who take out private health insurance.

Later in my speech, I will go into the figures for people who take out private health insurance and whose electorates they live in. To give you a snapshot: they live in the electorate of Tony Abbott on the northern beaches. The member for Warringah has the highest uptake of private health insurance. So the people in his electorate—the people with the highest uptake of private health insurance—get the largest proportion of any electorate of that over $3 billion that the government and the opposition support using to subsidise people’s private health insurance. They get those public funds—not the people in the electorate of Lalor, where the new Deputy Leader of the Opposition comes from, where only 36.6 per cent of people have any access to those public funds which are put into our budget to be spent on public health services. That is one of the lowest percentages we see around the country.

Effectively, the current position of the opposition on this issue is to support subsidising the private health insurance of those people who live in wealthy electorates like that of the health minister, Mr Abbott, so that they get that access to public funds rather than those people who live in Labor electorates like that of the new Deputy Leader of the Opposition, the member for Lalor. They are not getting access to those funds. So the challenge today for the new deputy leader of the Labor Party is: are you going to support the 64 per cent of people in your electorate who rely on the public health care system? Are you going to take to the next federal election a policy which says that that over $3 billion of public funds—contributed by taxpayers for health services in this country—will be spent on public health care?

Do you have a commitment to public health care in this country, or are you going to continue with the existing policy of the opposition, which is to spend that over $3 billion subsidising the private health insurance of those people who live in wealthy Liberal electorates—to ensure that they get access to those public funds and to ensure that they get support and subsidy for their private health insurance—rather than investing it in the public health care services of this country? The challenge on day one for the new Deputy Leader of the Opposition is: do you support the public health system of this country or are you going to continue to pour money into subsidising the private insurance bought by people in Liberal-held electorates and wealthy electorates of this country—electorates like that of Minister Abbott?

That is central to this issue in the piece of legislation that we are dealing with today. This piece of legislation is about a particular private health insurance operator. If this proposed legislation goes ahead in the sell-off of Medibank Private, we will see premiums going up—and I will get onto some of that detail later. Every time private health insurance premiums go up so too does the amount of public funds that are put into the private health insurance rebate to subsidise the private health insurance of wealthy people, in predominantly Liberal-held electorates, who take out private health insurance. Every time we see premiums go up we also see—and we must see—an increase in the rebate that is paid. Public funds are being spent on subsidising private health insurance rather than being invested in public health care, and that is what we will see if this legislation goes ahead.

The opposition can stand up and oppose this legislation, as do the Greens, but the question is: when it comes to the issue of the private health insurance rebate, does this new opposition dream team, including the member for Lalor, continue to support spending over $3 billion of public funds on subsidising the private health insurance of those people who live in wealthy Liberal electorates like that of Minister Abbott? Eighty-six per cent of people in Minister Abbott’s electorate get access to these public funds which should be spent on public health care. Only 36 per cent of people in the electorate of Lalor have any access to public funds which should be earmarked for public health care. I will be seeking to move amendments in the process of dealing with this legislation and to say yet again that the Greens’ priority when it comes to public money being spent on health care is to invest that money in our public health system. We do not want to see more money every year—it is up to over $3 billion now, and so it is not a one-off—being taken from the public purse with the support of the government and the opposition and put into subsidising private health insurance for, predominantly, those people who live in wealthy Liberal electorates. That is the fundamental question we are dealing with in this piece of legislation.

Recent evidence does tell us that the sell-off of Medibank Private will lead to an increase in premiums. We need only look at recent history to see that this is what is occurring. Unlike the government’s rhetoric—their claim that this will lead to a limit on premium increases—health commentators who have been discussing this legislation point out that this is simply not the case. The President of the Australian Medical Association pointed out in the Canberra Times in September that ‘the sale of Medibank Private will drive up premiums as the new owner sought to maximise returns to shareholders’. We saw the Community and Public Sector Union and the Save Medicare Alliance in their joint submission to the Senate inquiry also arguing that private ownership of Medibank Private would increase premiums. And, let me remind you again, every time premiums increase so does the amount of public funds being spent on subsidising private insurance rather than going into our public health system, where it is desperately needed. Recent evidence tells us that will occur.

Over the last five years we have seen this happening. In 2002 there was an average rise in private health insurance premiums of 6.9 per cent. The Minister for Health and Ageing at the time, Senator Patterson, ‘warned’ in the Canberra Times that any attempt by health funds to raise premiums the following year would be ‘met with scepticism’—not a terribly successful warning given that in the next year, 2003, there was a 7.4 per cent rise in premiums. It was not just a rise in premiums but a rise in the amount of public funding being used to support this private health insurance industry rather than being invested in our public healthcare system.

In the next year, 2004, there was another increase. The average increase then was 7.6 per cent—another increase not just in premiums for people but also of public funds, a privatisation of public funds, our health budget going away from public taxpayers into the hands of the private insurance companies running this sector. In 2005 it was the same thing again: a 7.9 per cent increase in premiums—another increase in public funds being transferred from the public purse to the pockets of predominantly wealthier Australians who take out private health insurance. This year we have had a rise again—five years in a row. It was 5.7 per cent this time. The evidence tells us that premiums are going up and up and up. The sale of Medibank Private will push premiums up, and every time premiums get pushed up public funds are transferred out of our taxpayers’ hands and into the pockets of those people who take out private health insurance in this country.

Total up those five years of increases that I have just outlined. That is a 35.5 per cent increase in private health insurance premiums over those five years! A 35.5 per cent increase in premiums! And what goes along with that: a massive transfer of public funds away from taxpayers into the pockets of those people who buy private health insurance, subsidising the insurance industry. That is not delivering us the public health services and outcomes that people in the community want. In the lead-up to the last federal election I attended several meetings with the ACTU and with a range of health unions. Health economists across this nation were unanimous in their acknowledgement of the inefficiency that exists in the private health insurance rebate and in the way it does not deliver improved public health outcomes. How many more health economists do we need to come out and say that this does not work before the government and the opposition recognise the problem?

This is a fundamental social justice issue. We have had the new leader of the Labor Party write prolifically about the importance of social justice, and of course the Greens have welcomed that. The concept of social justice is fundamental not just to the Greens and our philosophy but also to the development of the Labor Party. It is a fundamental concept about looking after those people in our community who need access to health services through our public health system. If there is that genuine commitment to social justice then I challenge the new Leader of the Opposition to put his money where his mouth is. Let us see a commitment from the opposition. There is over $3 billion there every year—easy money. If you want to support our public health system, there is the money—you do not need to look any further; it is the elephant in the lounge room—over $3 billion, every year. Take that money and invest it in our public health services and the social justice outcomes that you will get by doing that are the very things that people in this community have been crying out for: that investment in health services. Don’t just continue with the rhetoric of believing and supporting the public healthcare system. Show us that prioritisation of public health care by taking that funding and investing it in the place where it can deliver the very best public health outcomes in this community—that is, in our public health system. People have been asked which healthcare system they use, and surveys have found that in cases of emergencies, regardless of whether or not people have private health insurance, they turn to their public hospital and to the public healthcare system to ensure that they get proper care.

The latest Australian Bureau of Statistics private health insurance data found that:

In 2004-05 20% of people with private hospital insurance who were admitted to hospital in the previous 12 months reported their most recent admission had been as a public (Medicare) patient.

So, regardless of whether people have private health insurance, when there is an emergency and they need health care, they recognise that it is through the public healthcare system that they are able to get that support.

Prue Power, Executive Director of the Australian Healthcare Association, said just last month:

It is important to understand that public hospitals treat the most-complex cases and provide most emergency treatment, while private hospitals tend to focus on less-complex elective procedures.

If we want to ensure that people are able to get access to the emergency treatment that is provided by our public healthcare system, we need to invest in it. There is over $3 billion every year waiting to be invested, waiting to be spent, in our public healthcare system. That is my challenge today to the new Leader and the new Deputy Leader of the Labor Party: let us see whether you have a genuine commitment to investing in and prioritising public health care in this country. That is the position of the Greens. That is the position that I have argued in here for the last 4½ years and that I will continue to argue. It is not just me; it is the health economists around the country who recognise that our public system is the best way to ensure that all Australians, regardless of their capacity to pay, have access to quality health care. In order to ensure that those Australians have access to that care, we need to see an investment of public funding, and there is $3 billion there every year that can be injected into ensuring that we have a quality system.

I indicated that the Greens have done some analysis on this issue in terms of the uptake of private health insurance. It was based on data from a Roy Morgan survey of over 50,000 people. It showed that across Australia the private health insurance rebate means that residents of rural, remote and outer suburban electorates are effectively subsidising the insurance of those people living in wealthy Liberal-held electorates. Residents of Labor-held electorates lose out. Those seats held by the National Party, interestingly, are the worst off. Yet we continue to see both of these parties supporting their own constituents, subsidising the private health insurance that is taken out by the people who live in the electorates held by Tony Abbott and others in the Liberal Party. They are the facts on the ground. The private health insurance rebate is a redistribution of wealth away from those people who contribute across-the-board through their taxation into the pockets of those wealthy insurers. This is something that needs to be turned around. The challenge today is to the opposition: don’t just oppose this bill—that is an obvious one—take up the challenge of ensuring that we have a quality public healthcare system across the board. Join the Greens in saying there is over $3 billion there every year, let us invest it in the healthcare system in this country to deliver the best outcomes, most equitably and most fairly to all Australians regardless of their capacity to pay. Let us put that funding where it is most needed: in our public healthcare system, not in the pockets of the private health insurance industry.

Claire Moore (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I take up part of the challenge posed by Senator Nettle and indicate that the obvious response is that the Australian Labor Party are opposed to the Medibank Private Sale Bill 2006. We have been opposed to the privatisation of Medibank Private in the past, we are opposed now and we will continue to be opposed to the sale of Medibank Private. That contrasts greatly with the government’s position. We all know the government has always wanted to sell Medibank Private. It is no surprise that this legislation is before us. The government made its public announcement that it wanted to sell, it was going to sell—and it has made that announcement a few times—and its most recent announcement was in April this year. Of course, it had to then bring in legislation to make that statement real.

Again, in this place I am going to put on the record my complaint about the role played by the Senate committee process in the ongoing determination of legislation. When the government made its decision that it was going to sell MPL and made that decision public, there was surprise from people who are members of Medibank Private—of which I am one and I think many people in this place are also members of Medibank Pri-vate—and there was surprise in the community about this. From the Labor Party’s point of view, it is clear that the government always wanted to sell Medibank Private, along with the long list of other public entities which have been sold and which the govern-ment promised it would sell—sometimes it changes its mind—and it is clear that the government has a privatisation agenda.

Somehow during the election process, and most particularly during the last election process, the sale of Medibank Private was not high on the agenda. In terms of the public pronouncements during the election processes, it was not a killer argument with the community. So when we actually had the election results and the change in the numbers in this place—which I think is a stimulus to the ability to move forward with this type of legislation—whilst we expected the legislation to come forward there was still a sense of surprise in the community and amongst the people who have private health cover. However, once the announcement was made publicly, it was important that the legislation was brought in to make it a reality so that we could go through the farce of the debate here—so that we could have the rubber stamp of the decision.

Following normal practice, the legislation was put before the Senate Standing Committee on Community Affairs for review. The legislation was brought in in late October and was referred to the Scrutiny of Bills Committee—and a number of people here have already spoken as members of the Scrutiny of Bills Committee—and the Senate Standing Committee on Community Affairs, of which I am a member. I see that the chair, Senator Fifield, is in the chamber at the moment. The committee advertised the inquiry on 25 October 2006 and went through the normal processes of contacting people who have shown interest. In terms of health insurance, the Ombudsman and a number of different associations and organisations were personally approached to see whether they cared to make a contribution to the committee. Then there was one hearing, on 3 November. The inquiry was advertised on 25 October, there was one hearing on 3 November and the date to report back to this place was 27 November. So for this particularly significant piece of legislation that is going to change the status of one of the largest—if not the largest, depending on whose figures you are actually looking at—private health funds in the country, the decision by the major owner, the government, was to sell it off despite conflicting legal advice, which we saw as members of that committee. Considering the range of issues, the amount of time dedicated to the effective scrutiny of that legislation was one hearing day. That is extraordinary pressure.

I have actually got the name of the committee incorrect and I apologise for that. I have been referring to the Senate Standing Committee on Community Affairs, which is the other committee I am on. I apologise to the extremely effective secretariat of the Senate Standing Committee on Finance and Public Administration. Of course, that is the appropriate committee. It is just that community affairs has a crossover with health. There was extraordinary pressure on that secretariat to work with the chair and the other members of the committee to have their report ready in a very quick fashion in order to bring the legislation to this place for consideration.

As with the vagaries of the way the schedule operates, this legislation was not actually debated last week, which I think was the intent of the government. It had to be rushed forward and tabled on 27 November so we could go to the debate, but it is actually being debated this week, as we can see. Again, the effective time for scrutiny, consideration and exchange of knowledge and opinions has been truncated, which it is of deep concern to me and, I am sure, to other members in this place and to people who watch the processes of government. We should not be rushing through such significant issues. We should be considering more clearly, with greater concept of detail, and allowing more debate around how we can best move forward. Given that, at least the people who did have the opportunity to make a contribution—and I think most of them are on record, as we can see through the Hansardnoted their concerns about the limited time they had to put forward their concerns and be involved in an effective debate, because this issue demands debate.

Whilst we know the government is determined to push forward, I think that it is worthy of debate to see whether the sale of Medibank Private should be concluded and, more particularly, how it should be done. We note that we now have a decision to sell—there is no real clarity about how—in the future. Once again we have a greyness of process. All the decisions will be made, it will be set up and we will do it in the future. So we move forward and have the opportunity to at least put our concerns on record. There are a number of concerns. Of course there is the basic concern about the privatisation of something that was introduced with great fanfare. There has been a long history with Medibank Private. I am one of those people who can remember, vaguely, when the idea was actually introduced in 1976 to have that process. Certainly, from the time that I was able to be employed, and I was an employee of the public sector, there was an acknowledgement that Medibank Private had a linkage with the government. For some people, this is seen as a very positive aspect.

I asked the representatives of Medibank Private directly when they came before our committee and at previous times when we had them at Senate estimates whether they actually understood the rationale of people when they chose to take up private health insurance and which private health insurance they chose. Anecdotally, there is a view that for some people there is a particular attraction in going to the organisation that has some sense of a link to the government, and Medibank Private has had that.

I refer to a letter that the previous Prime Minister, Malcolm Fraser, sent to the Save Medicare Alliance. He said in that letter that he felt that when Medibank Private was introduced there was a feeling that you could keep an eye on what was going on by having some sense of government ownership. I state that not in outright support of Mr Fraser but just to illustrate how things change. We had a Liberal Prime Minister who was involved in setting up this process and, years later, he is asked his opinion on another Liberal government’s decision to sell it. There is such a contrasting view. The fact that a previous Prime Minister was prepared to put on record some concerns that he had about the sale of Medibank Private indicates that there is some community interest in the sale.

The Save Medicare Alliance, which is a community focused alliance made up of trade unionists—certainly my own union, of which I am a proud member, the CPSU—a number of other community organisations and health focused people, is looking at the sale of the Medibank Private. In particular, there was a concern that not enough people in the community were engaged in the debate; that many people who perhaps had coverage with Medibank Private or were genuinely interested in the Australian health system were not sure about what was going on. We felt, and they felt as an alliance, that an opportunity should be presented for people to have their say. One group of people that are rarely asked their view about whether or not something should happen are those that are involved directly in the process.

I have asked at different times of Medibank Private whether they have done any internal surveying of the people who have Medibank Private coverage about how they feel about the privatisation. I have to admit that, in terms of the correspondence I have had with the organisation—it is often just coloured brochures telling me that the premiums have gone up—sometimes I do not read with the kind of attention to detail that I should. It was stated that there had not been an open survey process. Certainly there have been attempts since we had the discussion at Senate estimates and when we had the people from Medibank Private before us during the finance and public admin inquiry, and a website has been set up. There has been a process to try and ensure that people who have coverage with Medibank Private and, most particularly, the people who are working for the organisation have the opportunity to find out what is going on rather than finding out what is happening to their workplace and their future careers by reading media releases from the government and from their employers in the papers.

Those people had the opportunity, hopefully with confidence, to ask questions and look at the incredibly important aspects of any privatisation or change of business arrangements and how that is going to be handled for employees. They were particular questions that we asked the people from Medibank Private at the finance and public administration inquiry. They assured us that that they were taking a deep interest in those issues and there was absolute confidence—that was the statement made by the representative at the inquiry—amongst all staff members that their interests were being looked after and protected. I think that that is an issue that we as a parliament should also be considering. The transfer of business arrangements needs to be clearly codified so that people know about their conditions of service, their future activities and about the locations of their businesses.

One of the key aspects of Medibank Private is that in the last 20 or so years there has been a distinct program within that agency to have regional offices. I know many parliamentarians in this place have been lobbied both on behalf of Medicare officers and Medibank Private officers to ensure that there is that local arrangement—and there are some very small regional offices across the country. We have the only major public document available to all people in the community, if they choose to look at it, about the possible impact of this sale and at the possible efficiencies that could be acquired by the sale. One of the key areas was that they felt they could find some efficiencies in administration, despite the fact that when you look at the cost balances within Medibank Private over the last years and their linkages to their income, outgoings and their administrative costs, they are right in the middle of that important list that they have—talking about administrative costings.

One of the justifications for the sale, and to make it more attractive, is that there could be advantages in efficiencies by a sale and privatisation. It would be only natural for the staff members of the organisation to wonder whether those efficiencies meant them. That is the kind of ongoing discussion we should have. Once the decision to sell has been made public, which it has, and once we get through this unfortunate necessity of going through the parliament to rubber-stamp the legislation to allow the sale to go through, we, the parliament—and at the moment the minister for finance is the major shareholder for this particular process—should have concerns about the people who work in the agency. These staff have been celebrated numerous times through annual reports and public pronouncements by the government and by the structures of Medibank Private for their efficiency, their courteousness and the way that they operate. Given that that has been the history, it is very important for us as a parliament to ensure that those workers are protected, that their concerns are noted and that all those things are put in place before the finalisation of whatever process is to be put in place for the sale.

For me, one of the saddest things about the justification of the government has been this aura around the decision that somehow the sale of Medibank Private is going to have some impact on keeping health premiums down. There is no absolute evidence to that effect. There is no guarantee, and we all know that the costs of health care are determined by a wide range of factors. Senator Nettle used her contribution to talk about general issues of healthcare costs. But if the sale of one agency was going to have such a phenomenal impact on the healthcare premiums, perhaps we would have heard that argument before, and we have not. It has only been in the process of justifying the decision the government has already made to sell this agency that there has been any attempt to produce data to say that the sale of Medibank Private will have a downward effect on healthcare premiums. That is a particularly unfortunate argument because it gives hope to people that somehow there is a linkage and that they will have lower healthcare premiums. We heard—and I will not go through the figures again because I think Senator Nettle went through them in great detail—the recent history of healthcare premium increases, and they have always gone up. In fact, I would like to have some information about the last time healthcare premiums went down. I do not know whether we would link that directly with the sale of any organisation, but perhaps that could be the kind of economic information that we could have shared with us as a parliament. Consistently, when we asked for documentation from the various people that came before us in our inquiry, the key documents that we sought were always unable to be provided because of confidentiality in the business world.

That becomes increasingly frustrating. If you are actually trying to justify a decision to sell, it is not good enough, I believe, to say that we cannot get the scoping studies or the extensive information that has been gone through by the department because it is confidential and business-in-confidence. That seems to happen in most areas. Mr Acting Deputy President Murray, we have been together on a number of committees where that has been the response when we have asked for information. The government says that we will be able to keep those healthcare premiums down by selling off Medibank Private. The linkage is not clear. It is actually mischievous to put that out to the community and say that that is a justification for this sale.

In the small time I have left, I really want to get one quote from our committee report on record. It is from Dr Deeble. He talked about the CRA methodology—that is information that we were able to share—into the kinds of efficiencies that could be gained. I felt that it was not in-depth. I felt that it was quite a simplistic assessment of efficiencies that could be gained by the sale. But, nonetheless, it was able to be read and I applaud that. But I really want to get the quote that we used in the committee report on record here. In our committee report we talked about the fact that the AMA had raised concerns about the CRA report. As Senator McEwen said, the AMA often does not agree with many things we put forward about health issues, but in this case it came forward because it was quite concerned about the simplistic expectation that this sale of Medibank Private was going to have such a wonderful impact on the whole healthcare system. Our report quotes Dr Deeble as saying—and we actually described it as ‘bluntly’ in our report:

My criticism of the CRA report is the method that they have used, which is dressed up in all sorts of academic gobbledygook which I know—or should know, anyway. The methodology they have used there has been misapplied.

In terms of the way that we have actually been sold the issues about the benefits of the sale of Medibank Private, I think in many ways that sums it up for me. I think there is a degree of desperation in the attempts to ensure that people think there is a science in this sale; that there is a rational reason for having this sale. In fact, there is quite a simple reason for the sale from the government’s perspective. They believe it is the best thing to do. They believe in privatisation. They want to divest themselves of this organisation. They will dress up any kind of rationale they can find—that it is going to be more efficient, it will help to keep premiums down, and somehow it will be an advantage—to make it palatable to the people involved.

How can we have an advantage in selling an Australian company? One thing we can say about a government owned company is that it is Australian owned. How we can have an advantage in a proposition that gives us a five-year window in which there will not be overseas ownership? How that can be guaranteed, I am not sure. We are opposed to this legislation—we always will be. There is no surprise in that. We know how it is going to occur. We just have to make sure that every effort is made to protect those who have coverage with Medibank Private, to protect those who work in Medibank Private and to ensure that we make the best of what is going to happen.

Lyn Allison (Victoria, Australian Democrats) Share this | Link to this | Hansard source

The Medibank Private Sale Bill 2006, as we know, empowers the government to initiate a sale of the government’s holding in Medibank Private at a time of its choosing, which it says is sometime in 2008. The bill also sets out a number of other conditions for the conduct of the sale. In preparation for the sell-off, the bill provides for changing the status of the fund from a not-for-profit organisation to a for-profit organisation. It limits individual share ownership to 15 per cent of the company for five years. It places foreign ownership and Australian identity restrictions on directors and its national office for a period of five years and it allows pre-privatisation profits to be redistributed.

We all know that the Howard government has for a very long time wanted to sell Medibank Private. The fund has in fact been on the asset sale program since 2002, when the first scoping study was commissioned. Now, of course, with the control of the Senate the Howard government is pressing forward on the sale even though it is clearly unpopular with the majority of the public and, equally importantly, even though the government cannot provide a convincing argument for how this sale will benefit the public.

The Democrats are not automatically opposed to privatisation of government assets, as you yourself, Mr Acting Deputy President Murray, have pointed out. We assess each case of privatisation on its merits and with the community benefit and the public interest as the ultimate test. Just because you own one government asset it does not mean that you should own them all. Just because you sell one government asset it does not mean that you should sell them all. Just because the Democrats have consistently opposed the massive 30 per cent rebate that is provided for those in private health insurance on the basis that it is both inequitable and inflationary it does not mean that we are happy to sell off Medibank Private for those reasons.

The test of privatisation must always be: does the asset serve a particular public purpose and provide a benefit to the community such that it should be retained in public ownership? Of course it is on that last question that the sale of Medicare Private falls down, in my view. There are a number of arguments that support maintained government ownership, but the government has been unable to provide us with any of those convincing arguments on how the public interest would be advanced by its sale.

It is true to say that the proposed sell-off has not been as controversial as some of the government’s other privatisations over time. There is not the same community outrage that we saw with selling Telstra or the Snowy River hydro scheme. But I think we should still not underestimate the impact of the sale. Medibank Private is Australia’s largest private health insurance provider. It is our largest not-for-profit fund and our only truly national private health insurer. It is the largest private health insurer in New South Wales, the ACT, Victoria and the Northern Territory, and it is the second largest insurer in other states.

Medibank Private has around a third of the market, covering three million Australians—that is, three million Australians who will have a direct interest in the sale of this insurer. But, of course, it is not just the current members of Medibank Private who will be affected; more than 10 million Australians—that is, 43 per cent of the population—hold private health insurance. Those 10 million Australians and future members of health insurance funds will be affected by the changes that this sale will bring about.

Standard and Poor’s, an organisation widely considered to be a leading provider of independent financial analysis, say the privatisation of Medibank Private is likely to ‘materially affect the competitive dynamics of the industry’—not that you need to be an economics genius to see that. It stands to reason that that would be the case when the largest provider of a particular service changes ownership in such a dramatic way, going from a not-for-profit organisation to a for-profit company. The explanatory memorandum to the bill says:

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

A not-for-profit organisation, by its very nature, is not about distributing profits but about managing its assets in the interests of its members, and it uses surpluses to the benefit of those policy holders. A for-profit organisation will inevitably have the profit motive as its primary consideration—profits that will not go towards lower premiums for members or more benefits being paid out to members but towards meeting shareholders’ demands for dividends.

And we are not simply talking about changing the nature of this one private health fund; we are talking about changing the whole sector. At the moment roughly 80 to 85 per cent of Australia’s health insurance funds are run as not-for-profit organisations. With this bill the balance of the industry will change from a predominantly not-for-profit sector to a sector that is pretty much equally split between companies that are for profit and those that are not. There is no doubt that a sector dominated by for-profit organisations will be very different from the one we currently have. If the largest insurance provider, the market leader, becomes beholden to the interests of private shareholders and starts acting to meet those interests, this will have a flow-on effect for other funds. At the very least it is likely to force the not-for-profit organisations to become more commercially driven in order to compete. For starters, it will also presumably have to deliver dividends on the $2 billion or so required to purchase the company.

It is true to say that we do not know what the exact effects of a more commercially oriented sector will be, but the government’s assertion that it will result in downward pressure on premiums seems to be the least credible possibility. Medibank Private itself, in its 1996 submission to the Productivity Commission’s inquiry into private health insurance, argued that increasing the number of for-profit health funds potentially means an additional layer of costs—that is, to the shareholder—to the financing of health care. Medibank Private stated that this additional layer ‘will unnecessarily escalate the premium (price) for private health insurance’.

Each of Australia’s for-profit health funds has higher premiums than Medibank Private. The simple reality is that a for-profit company has to return a dividend to its shareholders and therefore it will need to generate a profit margin. There are only a few options as to where this will come from: it will be a surplus income, a reduction in payouts to members or a reduction in administration costs. Or, of course, it could come from policy holders having to make a higher contribution.

The government would have us believe that the sale of Medibank Private will enable the fund to be more efficient through reduced management costs and more private sector efficiency, but in fact there is no evidence to support that assertion. The management expenses for Medibank Private as a percentage of member contributions are 9.2 per cent, and the average for the industry is 9.5 per cent. The relevant figure for HBF is 10 per cent; for NIB, 11.8 per cent; and, for MBF, 9.3 per cent. It is true that the relevant figure for Australia’s largest for-profit medical insurer, BUPA, is 7.7 per cent; however, BUPA has also had less success in retaining members, has received more complaints about services and has a lower level of benefits paid to members as a percentage of contributions than Medibank Private does. So it is very easy to get your management costs down if you provide an organisation or service of lower quality.

Reducing benefits paid to private health insurance policy holders or limiting the amount or scope of care that an insurer offers can also offset pressure on premiums—but surely the government is not suggesting that higher gap payments for policy holders or some form of managed care to fund dividends to shareholders is an acceptable trade-off. The government would probably argue that if standards fall then members can simply switch to another provider. That, of course, ignores the reality of low portability and mobility between insurers currently, and there is nothing in the bill that will improve that situation. As was pointed out in evidence to the inquiry, it is hard to see private health insurance as a true market. Government policy coerces people into buying the product and then subsidises the industry to the tune of $2.5 billion a year.

Privatising Medibank Private will not mean an unleashing of the organisation and participation in unfettered free-market operations with enormous benefits to consumers, even if you do subscribe to the highly questionable proposition that such a framework is a good one for the health sector. There is no evidence that changing Medibank Private from a publicly owned not-for-profit organisation to a shareholder for-profit organisation will make it more efficient or more competitive, or keep premiums down. The government continues to refer to a scoping study by Carnegie Wiley to support its position, but it is not good enough when the government refuses to release the details of that study.

Medibank Private as a publicly owned company has introduced competition into private health insurance and driven down premiums. When Medibank Private first entered the market as a government owned organisation, the existing private funds waited to see what their premiums were and then, in almost all cases, they undercut them. As a publicly owned company Medibank Private has also been able to use its buying power to reduce hospital charges. Payments to hospitals constitute more than 70 per cent of Medibank Private’s costs, and Medibank Private has been increasingly aggressive in taking on private hospitals and medical specialists and in negotiating to reduce the costs that they charge. These savings can then be passed onto the members through reduced premiums or other services. Indeed, the success of competitive tendering allowed Medibank Private to hold cost rises to only 6.2 per cent. I seek leave to continue my remarks later.

Leave granted; debate adjourned.