Keep Medibank Private In Public Hands (23/06/2010)

About three years ago I was honoured – and a little surprised – to receive a letter from former Prime Minister, Malcom Fraser.healthinsurancecars300w.jpg

The letter said in part:

“When Medibank Private was introduced in 1976 we believed that, if the Government were actively involved in the business, we would have a better handle on costs and outcomes than if it were all done by private enterprise.

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

I received this letter as the convenor of the Save Medibank Alliance – a group of organisations and concerned citizens that joined together in 2006 to oppose the Howard Government’s legislation to privatise Medibank Private - Australia’s publicly owned, private insurance company.

The proposal to sell off Medibank Private ultimately met the same fate as that of the Howard Government. The newly elected Labor proceeded to make good on their election commitment and scuttled the privatisation plan.

And that's where the story should have ended.

Fast forward to the Opposition's recent budget reply, where the Coalition confirmed plans to resurrect the Medibank Private privatisation proposal.

What was true in Malcolm Fraser's day remains true nearly thirty five years later. A publicly owned Medibank Private is a force for good in the private health insurance market.

The Rudd Government remains committed to public ownership of Medibank Private for very sound policy and financial reasons.

The presence of a government owned business acts as a civilising influence in the private health insurance industry, helping to keep premiums low and delivering innovative health outcomes for their customers.

Medibank Private works actively with members to introduce innovations such as health management plans and programs to manage chronic conditions, improve health outcomes and to reduce demand on clinical services.

Medibank Private’s premium rises have frequently been lower than the industry average. We're talking about a highly efficient and competitive company with low overheads, recognised within the industry for their effectiveness in managing of operating costs.

There is no advantage to any of Medibank’s policy holders from any 'smash and grab' privatisation – only the prospect of higher premiums.

In 2009, the Rudd Government converted Medibank Private into a fully commercialised business paying tax and dividends, ensuring it competes on equal terms with other profit-making major private health funds.

This underlines the fact that any claimed benefits in debt reduction from a sale would be largely cancelled out by the loss of dividends to the government.

The Coalition’s aim to secure the highest price would likely see Medibank broken up and sold off to its competitors – thereby reducing competition, not increasing it.

In other words, let the market rip.

The Opposition’s support for the so-called free market is at odds with their opposition to the Rudd Government’s proposal to means-test the Private Health Insurance Rebate.

It doesn't make sense for Tony Abbott to argue that wealthy Australians should have their private health insurance premiums subsidised by all taxpayers while at same time supporting a policy that would see these very same premiums rise in a less competitive private health insurance industry.

If enacted, the Coalition policy to privatise Medibank Private would a poor result for our health system, private health insurance sector and ordinary Australians.