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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Bills Digest continues:

The Research Brief—

that is, the earlier library document—

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

The Bills Digest then says:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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