Thursday, 2 November 2006
Medibank Private Sale Bill 2006
We have just seen one of the most disgraceful gags moved in this House. Here we have a very important matter of public policy and we have this government cutting and running from debate. You cannot get a more gutless act on the floor of this parliament than gagging a legitimate debate on an issue of public policy importance not only for the constituents of members on this side of the House but for constituents of government members.
It is typical of the arrogance of this government that it has a bill before the parliament to privatise one of the major public health assets in this country, yet it does not intend to sell this particular entity until 2008. I think it is legitimate to ask: what is the urgency in closing down this debate at this time today? There is no urgency. There is simply one proposition: that this is an arrogant government that is afraid of parliamentary scrutiny. It is afraid to have its policies put under the parliamentary microscope, because people on this side of the House know that this public policy issue is one that is vitally important to our constituents and the constituents of government members.
The Medibank Private Sale Bill 2006 is the latest exercise in the Howard government’s privatisation agenda—driven not by a concern for Medibank Private members or a concern for holding premiums down in the private health sector but by ideology. This is a government that has abandoned any pretence to govern for the families of Australia. It is a government of ideologues, for ideologues and by ideologues. It is interesting to note that the government has introduced this legislation into the House at this time and that it intends ramming it through both houses, where it has a majority and can do what it likes, before the end of the 2006 sitting year, yet the entity will not be sold till 2008.
The government’s central justification for the sale—namely, that it will increase competition in the marketplace and drive down premiums—simply has no basis in history, nor a basis in economic analysis. It is certainly not supported by recent historical experience. Australians who have private health insurance will recall the government’s reforms in 2002 and the government’s solemn promise that those reforms would put a brake on the growth of private health insurance premiums.
Obviously that was one of the Prime Minister’s non-core promises—and he is good at making them. This government is good at making non-core promises, because we have seen what happened to private health insurance once the government introduced these measures. Those premiums have gone up by 40 per cent and put another burden on the households of Geelong, which I represent in this parliament, and indeed Middle Australian households throughout the length and breadth of Australia. This government said that its policy position would put a brake on private health insurance premiums. The fact is now that those premiums have gone up 40 per cent. If you believe anything that this government says about private health insurance then you really do believe in fairies at the bottom of the garden. It is a simple fact that on every policy pronouncement in relation to private health insurance this government has been wrong, and the people who have paid the price are the policyholders of private health insurance in this country.
Here we have a proposition that has no justification in economic fact and we have the justifications of the government neatly compartmentalised in the jargon of an arrogant government that really does not care anymore about Australian families. Its justifications are as spurious as its claim in 2002 that its reforms of private health insurance would keep premiums down. The government says an independent Medibank Private will be more efficient, and it goes on to say that its sale will lead to greater competition in the private health insurance marketplace and that it will remove the Commonwealth’s conflict of interest in this area of policy.
Let us start with the last one first, before we get to the economic analysis. What conflict of interest is there for the Commonwealth, which receives no income from this particular asset? The Commonwealth does not receive any income from this asset. Surplus income is retained by the entity for the benefit of the policyholders, and therein lies the legal argument that is at the heart of this privatisation—the entitlement of Medibank policyholders in the seat of Corio and throughout Australia who have generated the surplus in this private health insurance company. They are entitled to the benefits of their contributions over many years since the Howard government privatised it, yet under this legislation they will certainly not receive their due entitlement and the Commonwealth will be open to legal challenge on a compensation basis by those people.
Let members of the government be under no illusion that those legal challenges for compensation will come, and the government knows that, because the government has insulated itself in this legislation from any liability for those compensation claims. That is an admission, if ever I have seen one, that there is a case for compensation and that the Commonwealth or others will be sued as a result of the actions of this bill.
Let me put this proposition to members opposite. The government receives a profit from Australia Post, yet the government regulates postal and other telecommunications services in this country. Is anybody suggesting that there is a mammoth conflict of interest, or is the government going to privatise Australia Post, the ABC or the CSIRO along with Medibank Private? Is this next on the hit list of the government’s privatisation agenda? I would think so. Any government that has the gall to privatise Medibank Private in the circumstances that this government is doing obviously has more on its mind than that.
The government’s position is that an independent Medibank Private will be more efficient, with consequent benefits to policyholders. But quite frankly that is not borne out by the facts. We know that there are many small community based private health insurers that have significantly lower costs than the larger insurers. They provide a range of services very well to their members and they are able to earn a surplus that is ploughed back into the organisation for the benefit of members.
There is one certainty that will come from this privatisation: that Medibank Private will be purchased by a for-profit company. We all know how for-profit companies operate. They have to return a dividend to the shareholders, and that return on capital from the for-profit organisation that buys Medibank Private will come from several sources. It will have to come from surplus income, which will be derived either from the policyholder subscriptions and premiums paid by households or from investment income.
The simple reality is that, in generating a return on capital for its owners, a for-profit insurer will need to generate a profit margin. It is logical that we ask where this is going to come from. I have canvassed some elements: it will come from surplus income, a reduction in administration costs or a reduction in payments to policy holders. There are various scenarios. The upshot of this is that we have premium increases, raids on surplus income for the benefit of profit or reductions in payments to policy holders. Even if administration expenses are reduced significantly, the amount saved that could contribute to a return on capital for the health insurance investor will be relatively small—anybody in the private health insurance industry will tell you that. The only way an insurer can reduce insurance payments to policy holders is if it limits the benefits it offers, reduces the costs of care provided to policy holders or requires policy holders to make a higher contribution to the cost of their care. That is the reality.
When we get into the options for a for-profit organisation that might purchase Medibank Private, there are other implications. Another option for that insurer is to directly intervene in the scope or amount of care that is available to patients. When we get into this managed care scenario, we are really going down the American path of a private health system where there is managed care and insurers can stick their beaks into the sort of care that might be provided. Another option is higher copayments by policy holders. Consumers—that is, householders in Geelong that are already in Medibank Private—may well have an increase in the copayment that they must pay in order to get the required amount of cover that their family needs.
One of the most disturbing things about this privatisation is simply this: there has been no study undertaken of the economic impact on the private health insurance sector as a whole. As we know, there are about 40 private health insurers in this country. Medibank Private, with 30 per cent of the market, is one of the larger ones, but a significant proportion of them are small community based private health insurers. We have one in my electorate of Corio, in the Geelong region, in GMHBA. GMHBA stacks up very well compared to the larger insurers, like Medibank Private and others, in its administrative costs and the range of services that it provides. That is why a significant number of families in the Geelong region have taken out private health insurance with either GMHBA or Medibank Private. There has been no economic analysis done by the government of the impact that this privatisation will have on these smaller and not-for-profit funds.
You do not have to be an economic genius at all to understand that, once the status of Medibank Private is changed from a not-for-profit to a for-profit entity in this sector, there will be pressure for premium rises or a cut in care to those who take out that private health insurance as the organisation’s imperative changes from the delivery of services to profit. In that scenario, there are losers all over the place. Families lose because they pay higher premiums. They lose because they are required to shoulder the burden of higher copayments. They lose because the care that is offered to them is reduced and compromised. They lose because we get into the American model of managed care. In the sector more broadly, we will see an amalgamation of many of those not-for-profit organisations as pressures bear upon them in the marketplace for a variety of reasons.
This is a retrograde policy based not on sound economic analysis or public policy but squarely on ideology. I am deeply concerned for Medibank Private policy holders in the Corio electorate, but I am also concerned for GMHBA, its policy holders and the members of the smaller funds because, at the end of the day, this is a recipe for driving premiums through the roof. That will put an increasing burden on families who are already burdened as a result of this government’s workplace relations legislation. They are already burdened because of this government’s inability to do anything about petrol costs and they are burdened because of this government’s inability to contain interest rates. They are getting it in the neck from Liberal interest rate rises while they are mortgaged to the hilt, which means that they will have less disposable income to spend on their private health insurance. To have a private health insurance premium rise on top of the burdens that the Howard government has already put on them is enough to break them.
Quite frankly, Australians have had a gutful of Liberal interest rate rises. They have had a gutful of Liberal private health insurance premium rises. They have had a gutful of a government that has failed to move on petrol prices. As a result of that Liberal incompetence, they are suffering in their pockets. I would urge all private health insurance members in the Geelong area to reflect very seriously on what this government intends to do after the next election because, as sure as night turns to day, the promises that it makes that premiums will come down will simply not occur.
I rise to speak in strong opposition to the Medibank Private Sale Bill 2006. But before I come directly to the bill I would like to talk about the environment in the community at the moment within which this bill sits, and the implications it will have, particularly, as the member for Corio said, for the average families in each of our electorates, and what it is that they are concerned about—in particular, in the area of private health insurance premiums.
I have been here since the 2004 election. Since that time there have been two increases approved by the health minister for private health insurance premiums. I have to say I would be very surprised if those representing seats on the opposite side of the House did not have the same experience that I have. There is indeed deep anger and disappointment in the community about the impact of the cost of health insurance premiums on their family budgets. On both occasions that the average increases were approved by the health minister, the interesting feedback I got was that people would ring up and say: ‘I’ve just got a letter from my private health insurer telling me what my new monthly premium will be. I’m very concerned because mine’s gone up 12 per cent’—or 17 per cent; the worst case I had was someone whose private health insurance premium had gone up 21 per cent. What this reflects, and what people are now coming to understand, is that, when the minister ticks off on an average increase—for example, eight per cent—that is an average across all the products offered by the provider. That means that some lucky people will get a nought per cent increase—perhaps even a decrease—and others may well get a 12, a 15 or a 22 per cent increase on their premiums. With a little bit of investigation—I encourage most of these people to ring their health insurance providers and ask them why they had this sort of increase—most of them were given this explanation of it being an average across products. However, if they then said: ‘Okay, which product was it that had a nought per cent increase? I might be more interested in taking out my insurance with that package,’ generally speaking they found that those products were no longer available to new applicants. The insurance companies were certainly getting an eight per cent average, but it was averaged over products, which meant that many average families in my electorate, who are attempting to do the responsible thing under this government’s regime and take out private health insurance coverage, were finding that they were the ones who were paying the highest increases in premiums. That is the environment in which we come to this bill. That was the response that I had to the first lot of premium increases.
This year the interesting addition to that was the number of people saying they were seriously concerned that they would not be able to financially maintain their health insurance coverage. I had one person who had actually made the decision at that point to drop their coverage. With the mortgage repayments they were dealing with as a family and the costs of living increases because of inflation rises, it just was not possible to sustain their private health insurance coverage any longer. That is the dilemma that increasingly middle and lower income families are facing in Australia if they want to take out any sort of private health insurance coverage. The government for many years has been telling us that its policy imperative has been to increase the coverage of the Australian population who have private health insurance—yet each step it takes seems to make it more difficult for that to be sustained by families in our communities.
Of course, the government have it a little bit both ways. The other side of it is that they actually penalise you through the tax system if you do not take out private health insurance. So many people find themselves in a double bind in that the government have put them in the position where their tax liability is going to be significantly affected if they do not have private health insurance coverage, yet they are increasingly frustrated by the cost of that particular product, its increase in cost year after year after year and the decreasing provisions that that coverage allows them to access. So there is all this frustration boiling away in the community about private health insurance coverage. I think that is something that members opposite would have to know in their own communities—that the level of disenchantment, and indeed anger, with private health insurance is very high amongst the families in our community. They are very frustrated by it. Indeed, people are really at the point where many are considering which is the lesser of two evils: to deal with the problem through their tax or to take out the coverage.
Coming to the bill before us, which seeks to privatise Medibank Private, we see from the government what is simply very rough and ready privatisation, designed initially to deliver a quick buck to the government’s budget. The backlash was so significant that they immediately started to walk away from it—although, I will acknowledge, not before they told the member for North Sydney. He had the unfortunate opportunity to put the argument that there was no reason to delay it before he got the message that the position had changed. Indeed, even today we see the government, having moved a gag motion, saying that this is such an urgently important matter that we cannot have a full debate, we cannot allow everybody who wants to express the views of their constituencies in this House the opportunity to do so. One would have to say that it is a bit bemusing, given that the government had already made the political decision that this was too distasteful and politically difficult to sell before the election so they would just put it through a legislative program and tell people that it was not going to happen till after the election anyway.
The reality is that, with the proposed sale not coming up until 2008, there is no urgency for this House to finalise this, so again it is poor handling of the policy process and the debate to have done that today. So I take up the concern of some of my colleagues who I know wanted to put before the House the significant representations they have had in their own electorates about this legislation and, more broadly, health insurance coverage in Australia at this time.
The government has put forward this privatisation and I have concerns about the proposed legislation. It does not take into account the membership rights of Medibank Private members—and I should acknowledge that I am a Medibank Private policyholder. The sell-off will do nothing to reduce private health insurance premiums. Indeed, this government is the emperor with no clothes whenever it opens its mouth to say that a policy position it is taking will decrease private health insurance premiums. This is certainly not going to fly with a community that remembers the guarantees it was given before the 2001 election that the new private health insurance regime would drive down premiums. There have been premium increases of 40 per cent since that time. I do not even know why the government is bothering to run that argument. It must realise it has no credibility whatsoever with that sort of claim. The government’s decision to back the sell-off of Medibank Private has constantly been shrouded in secrecy.
I, like many of my colleagues on this side of the House, have lodged a petition to try to get the government to reconsider its privatisation agenda for Medibank Private. Only a couple of weeks ago, I took a petition to the main street of my electorate and stood in front of our Medibank Private office. In the half-hour or so that I was there, it was not difficult to fill several pages. Interestingly, it was not just the Medibank Private policyholders who were keen to sign the petition—though, obviously, Medibank Private policyholders were keen. This was during the day, and the pensioners who were coming to the office to put in their various claims were gravely concerned. When I asked them why they were with Medibank Private, they almost invariably said they had chosen to go with Medibank Private because it was the government owned provider.
Potential buyers of Medibank Private would be fairly foolish not to understand that its market share is based on the fact that a large number of the policyholders are with Medibank Private because it is the government owned provider. As a potential buyer you would have to wonder what would happen to membership numbers if it were no longer the government owned private health insurance provider.
People who were not Medibank Private policyholders were also quite happy to come up and sign the petition because they were so angry about private health insurance premium increases and the government’s failure to deliver on its promise. There is a boiling anger in the community about the fact that people are trapped into having private health insurance coverage and, on top of that, they are not even getting good value for their money because every year they have find more from the family budget to cover the premiums. These people were asking why the government does not use Medibank Private as a market leader to drive down the cost of premiums and put pressure back onto the privately owned providers. They wanted to sign the petition as a way to express that frustration with the market. The response to the petition, which has only been going for a couple of weeks, has been overwhelming. I have no doubt it will continue to be so, and I have no doubt that other members on this side of the House who are similarly using petitions to gauge community concerns will find exactly the same outcome.
Like most members of this House, I get lobbied fairly regularly by the private health insurance industry. They send me letters to make sure I know how many people in my electorate are covered by private health insurance—and, as I understand it, there are just over 64,000. That number has been pretty consistent over the few years that I have been getting those letters. The interesting thing about that is that the private health insurance industry is obviously lobbying us to keep us supportive of the importance of private health insurance coverage. I would say to them—and, indeed, to the government, whose stated aim is to increase the level of private health insurance coverage—that one of the best ways you can do that at the moment is by actually delivering downward pressure on premiums, by actually delivering at least one year in which the minister does not pull out his pen and tick off his approval for an increase and by actually delivering on the capacity of the money you pay to get you a better quality product. People do not believe that is happening—and with good reason. It is not happening, and it is has not happened since the government made a commitment that that is its aim. The private health insurance industry could do the same thing.
The government introduced part of the package with an advertising campaign. We all remember the ‘umbrella’ ads that said we would be under a scheme that would provide extensive private health insurance coverage for people at really good value for money, drive down premiums and provide better quality products. Part of that, of course, was the 30 per cent rebate. That probably sounded pretty good at the time, but when you consider that, since that 30 per cent rebate was introduced, the cost of premiums has gone up 40 per cent—and that is on average—I would suggest that it has not taken long for people to work out that, because they have had at least a 40 per cent increase, it is now a pretty useless product for them. If you have a high-end product your annual increase each time was 12 per cent, so you would have had an even bigger increase in your private health insurance premiums over that time. Yet taxpayers pay out $2 billion every year to the private health insurance industry under this scheme.
The government designed this scheme, according to all of its claims, with a view to driving down premiums and increasing the coverage of private health insurance. It has achieved exactly the opposite. It is a $2 billion policy failure because it is not actually driving down premiums. The minister can directly address that by not ticking them off for a billion next year—but, given it is an election year, I am cynical enough to predict that he may well not do so—and by actually driving for better products in the marketplace so that people feel they are getting value and so are encouraged to take out coverage.
Not only does the taxpayer make a subsidised contribution to what is a very profitable industry every year; the taxpayer also underwrites the industry’s advertising bill. In fact the government provides it with a captured market audience by the way its policy operates to force people into having to take out coverage. As I indicated, the 2001 promise—like so many of them that we remember—was broken. How the health minister is able to hold his head up in this place, given the sorts of promises that he has made before each election and then his being rolled by finance ministers after the elections is simply astounding. I can guarantee to him that this is one of those issues that people are very conscious of: that he and the government promised that premiums would decrease but they have not. In fact, they have increased beyond the level of the rebate.
I should acknowledge, as some of the other speakers on this side of the House have, that these increases should be added to the seven interest rate increases that we have seen in much the same time frame. And there is speculation at the moment that another one is on the cards for next week. Indeed, quite astoundingly, the Prime Minister has joined in, saying that would actually be quite logical—‘a stitch in time’ I think he called it. I can guarantee him it will not be a stitch in time for any of the budgets of the households in Cunningham or, no doubt, any other places, given that people have already had that last lot of interest rate increases on their mortgage payments. Remember that you had those interest rate increases and then, early in the following year, you had the increase in health insurance premiums. Those sorts of pressures are particularly significant, and I do not think people will be amenable to the argument at all that another interest rate increase to come in this month will be a stitch in time and involve less pain. It is one thing for the government to get out there and say, ‘Why don’t you take the pain now because it will be less terrible when taking the pain next year?’ but it is hardly an encouraging or optimistic message to be taking to the community. I do not think it will be very well received at all.
The Prime Minister was on commercial radio saying that the next interest rate increase could well be justified. That is an unprecedented position given that he has always argued that it is the independent Reserve Bank of Australia that will make the call—except of course during the election campaign when he told people that he had the capacity to affect all interest rate outcomes. But he has argued that another interest rate rise will be justified. In fact I think he said it would be hard to criticise it. I can assure him that we will not have any difficulty criticising his contribution to it!
There comes a time in the life of governments, particularly after a decade, when you start to see tipping points that happen when they get a bit complacent; they become a bit arrogant in their comfort zone in government. I think that if the members opposite and the ministers and the Prime Minister have not picked up the fact that one of the issues that will cause real irritation in their communities is private health insurance premiums then they are well and truly out of touch and in for a lot of trouble as a result of it.
The electorate is sick and tired of broken promises, worn-out excuses, secrecy and the hiding of information, lack of accountability—today we again saw it with the gagging of this debate—and lack of action—promises that are never delivered. I think the Prime Minister better than most can feel that tipping point coming on. I think he knows it; he just thinks he can ride through it. But to be honest I think actions like these plus the simmering anger about interest rate increases, the simmering anger about cost of living increases—because underlying, ongoing inflation is not being addressed through investment in skills and infrastructure—the simmering anger about increasing health costs and the feeling that the government just is not listening or understanding anymore how those pressures are affecting families and their budgets are really an indication that the government is now at the point where it has lost touch with, and lost an understanding of, the struggles that the people that it boasted for so long it cared about are actually experiencing. Not only has the government broken its promise to keep interest rates low; it has broken its promise to keep premiums down. With that sort of record, people become— (Time expired)
Yet again, why the rush? Here we have another gag on legislation that is decreed to be so urgent that it must pass this House by midafternoon. Yet again there is no full debate on legislation that is particularly of interest to an Australian public tired of the flogging off of the national infrastructure and assets that they believe are there for the benefit of all and for the dividends that they provide, both social and monetary, for the good of the nation.
The Medibank Private Sale Bill 2006 would enable the government, if it were to be re-elected next year, to proceed with the sale of Medibank Private in, as I understand it, 2008, which again raises the question of what the urgency is today. I do not suppose it has got anything at all to do with building up an election year war chest with $2 billion worth of moneys that may be directed into key areas of concern for the government! I note it has been said that one will be medical research, but that is a fairly broad spectrum. If the public were consulted on this, they might suggest that, in the unfortunate event of the full sale of Medibank, those proceeds should better be utilised in bringing our public hospital system up to an acceptable standard across the board. The Minister for Health and Ageing has often said that he would like a role in federal responsibility for health care and hospitals. If this sale indeed proceeds, there would be an opportunity for him to put his money where his mouth is.
This debate has settled down into an interpretation of just what constitutes membership of Medibank Private. The Parliamentary Research Library’s Jerome Davidson and Luke Buckmaster have given carefully considered opinions that it is arguable that members have the right to benefit from existing surplus assets of the fund and that the sale of Medibank Private could give rise to claims for compensation. In fact, the board of Medibank Private had received legal advice some years ago that raised questions about whether the Commonwealth was indeed the sole owner or whether, indeed, its 2.8 million members had ownership rights.
The Australian Medical Association has called for the fund to be mutualised and has grave doubts about the Commonwealth pocketing some $2 billion and leaving its members effectively stranded with no call on a share of the fund’s assets. I stress I am not a Medibank Private member. The AMA says:
If the government no longer wishes to be involved as an operator of a private fund, there is a strong case for mutualising Medibank Private and retaining equity with those who have contributed to it, namely the members.
The government does not like this advice and of course has sought its own from Blake Dawson Waldron, which says there is no room for compensation claims by current members. However, the government seems to have conceded that there is a moral claim by including safety net clauses in item 7 of schedule 2 of the bill to cover any eventuality of claims being made. According to advice from Blake Dawson Waldron, membership of Medibank Private is a contractual relationship that can be terminated on two months notice at Medibank Private Ltd’s discretion. The advice says members have no enforceable rights to benefit from the general assets other than through claims under their policies and that Medibank Private is the beneficial as well as legal owner of the fund assets.
But the Parliamentary Research Library authors of the Bills Digest rightly question the integrity of the termination of membership rules, given this government’s Lifetime Health Cover program, which is designed to reward those taking out hospital cover early in life and maintaining it. In other words, the eligibility for lifetime cover at reduced premiums could be broken with the stroke of a pen. The library paper, correctly in my opinion, points out the use of this arbitrary membership termination rule in the government’s legal advice and says it is tantamount to improper discrimination under the National Health Act. As the Bills Digest states:
The view that community rating affords protection for continuity of membership is one shared by the Department of Health and Ageing, which has advised that:
- Members are currently provided with the right of continuity of membership through the principle of community rating.
Again, the advice from the Parliamentary Library, as opposed to the government’s legal advice, suggests a possible minefield in the area of transfer from not-for-profit to for-profit status.
The National Health Act is also not clear on the process for changing status. As the Bills Digest suggests, the not-for-profit accumulation of funds could be changed to the profit distribution to shareholders through a unilateral change of status. On any literal interpretation of the act, according to the Bills Digest:
... an organisation that was not established for profit cannot become so merely by changing its constitution or its rules.
So, whatever the protection built into this bill, the question remains as to the status of the current members and their claim to compensation. Again, the parliamentary research briefing notes say:
- the scheme of the legislation has always contemplated that the members have the ultimate entitlement to benefit from the fund assets, and
- the Health Insurance Commission did not hold beneficial ownership of the fund and its assets before Medibank Private Limited and hence that ownershipcould not have been transferred to the latter in 1998 ...
In essence, as the research brief so clearly stated and as has not been satisfactorily answered by Blake Dawson Waldron, Medibank Private Ltd is not properly described as the beneficial owner of the Medibank Private fund assets.
The government has said competition in the market is the reason for the sale, or one of the primary reasons. The track record for the privatisation of state insurance companies does not suggest any downward pressure on insurance premiums. I remember the state government of the day in New South Wales promising that green slips would be much, much cheaper, that premiums would be reduced. In fact, exactly the opposite occurred.
The privatisation of the Commonwealth Bank opened the way for the eventual stampede of banks from the bush. ‘Don’t be the last bank out of town,’ was the cry. In the absence of any real community service obligation for banks, such as the US Reinvestment Act requiring continued presence of, if not banks, credit unions in communities, the banks chased profits largely at the expense of service, especially in the bush. Fees began an upward spiral as any regulated players, any publicly accountable player, disappeared from the marketplace.
I do not have to remind anyone in the House about the ramifications for the public benefit of the Telstra privatisation. We already see Telstra backing away from any interest in areas that are not profitable, hoarding technology to maximise returns, failing to roll out terrestrial broadband, trimming staff and costs and services, and joining other players in the privatised marketplace by cherry picking the eyes out of the profitable bits of the market and arguing user-pay for the rest.
Just today I picked up an interesting note on the Next G mobile network from the website of Paul Budde, the communications commentator. He says:
The so-called 850MHz flavour of the 3G ... is, in global mobile terms, a niche market.
Remember Sol telling us that this was the technology that would save the world? We were aeons ahead of the rest of the planet with 3G. The commentators, the experts and, I suspect, most people in the bush now know there has not been a huge rush from the vendor community to produce a wide selection of mobile phones for this particular service. Budde says:
The selection will always be limited, and it will always be more expensive.
... in order to roam on Telstra’s other 3G network (in the cities), which is not compatible with the regional service, customers on that network will need a dual-mode handset, which, naturally, will add to the cost.
He also says:
... because of end-user prices and because of the technology limitations, wireless broadband services do not compete with those available on fixed networks.
He goes on:
My point here is that it would be wrong to create the impression that 3G HSPDA is a real alternative to fixed broadband. An equivalent wireless broadband service, comparable to fixed services, will be at least 50% to 100% more expensive, which would put it beyond the reach of most users.
In fact it will be a yuppie service for the bush, when the bush requires basic fixed services not bells and whistles. Neither the government nor Telstra, particularly after privatisation, will give a damn. ‘The company has made it appear that this alternative would be a good solution to lack of fixed broadband services in regional Australia,’ says Budde. Well, it is not. He knows it, and country people know it now. We will not get the sorts of services needed, except in the form of user-pays, for those outside the profitable parts, because Telstra is going private—with private shareholder dictates and not public need dictates. That is the lesson of the privatisation of Telstra and of the Commonwealth Bank; and indeed it is the lesson for Medibank Private.
The government’s scoping study on the sale said privatisation would enable Medibank Private to operate more efficiently through lower management expenses and would place downward pressure on premiums. Privatisation has certainly put downward pressure on the Telstra executive’s salaries, hasn’t it! There is no evidence to suggest such privatisation would lead to lower management expenses. The recent payments to Telstra executives before privatisation show how millions of dollars of bonuses, share offerings and other payments can be stripped out of company profits to unjustifiably reward management. Rather than a downward pressure on premiums, there would be an immediate attempt to recoup at least the purchase price for starters and to reward executives far beyond their worth. There is little evidence to suggest a privatised Medibank would be more efficient, competitive and less expensive for consumers. In fact the reverse could be expected.
Medibank Private itself in its 1996 submission to the Productivity Commission argued that a for-profit health insurer would ‘unnecessarily escalate the premiums for private health insurance’. For instance, we can look at the premiums in the insurance industry since the privatisation of publicly owned general insurers. The privatisation of Medibank, while restricting maximum shareholdings to 15 per cent for five years, would inevitably lead to amalgamations within the industry. Some might say that such rationalisation would increase efficiency. Others would see this as producing less diversity and therefore less competition. Inevitably there will be an influx of foreign operators and an onward march towards the American health model; therein lies the underlying risk—and the government knows it—of throwing Medibank Private, and Telstra, to the marketplace to be at the mercy of those global operators who would come in here, fleece the market and inevitably privatise, if they could, the whole of our health sector.
The argument that the government should bail out of Medibank Private because it represents 29 per cent of the private health insurance market and because it can call on government subsidisation holds no water when you consider that all funds are being sustained by the 30 per cent private health insurance rebate. I supported that rebate, believing it would ease the demand on public hospitals and because I thought it was an initiative that would encourage more people to take up the private health option. While it may have increased private health insurance membership, I am afraid that this membership is subsidised by the 60 to 70 per cent of taxpayers who cannot afford or choose not to pay for private insurance; and it has made no significant impact on public hospital waiting lists.
If, as seems inevitable, this bill passes both houses and that $2 billion goes into the government war chest, no-one in the electorate would have any concerns if that money were earmarked for a proper upgrading of the crucial health facilities that are required throughout our community. I would like to mention one particular program—that is, the radiology and oncology services that are so desperately required in rural Australia, especially in the central west community—in Bathurst, Orange, Parkes, Forbes and in Dubbo, where you largely have a fly in, fly out specialist service. I would hope that the politics of all of this, if indeed there is going to be any politics in it, are laid aside and, as with the case of the allocation of the MRI machine a couple of years ago, the overwhelming argument for Orange to be the epicentre of health care in the central west is recognised; and that Orange is recognised as being in desperate need. It has the required 300,000 people in the catchment. It readily warrants the installation of that service in the central west.
So too there are many other communities right around Australia that are desperate for those services to deliver a standard of care that people in the city can access for the price of a bus trip. I am told that in some communities we have people who are not seeking urgent treatment for cancer because of the impediment of travelling to and staying in Sydney and the disruption and emotional impact of having to move away from their homes for these sorts of treatment. So here is an example of something that is desperately needed.
If indeed the reality is that there is $2 billion in the kitty earmarked for oncology treatment and the radiography-radiology services that are so desperately needed in rural and regional Australia, and indeed those other parts of outer metropolitan Australia along the coast—some have already been provided on the north coast of New South Wales, I grant—you would have a classic example of well-directed objective funding of health care in this country. I would hope you would receive the support of every member of this House, because you would certainly get it from every member of the community.
The opponents of this sale are numerous: the Australian Medical Association, the Doctors Reform Society, the Save Medibank Alliance—including Professor John Deeble, one of the founders of the original Medibank—and, I would suggest, the majority of the electorate. I have grave doubts, as I said, that this sale will increase competition or reduce premiums. That is a nonsense. The steep upward trend of health-care premiums will accelerate.
Privatisation under Labor and the coalition over the past 25 years has been about short-term financial gain, political advantage and the liquidating of public infrastructure and assets that all contributed enormously to the public purse, provided full-time work for many thousands of Australians while guaranteeing all Australians held onto key elements of the market, and exercised discipline on those markets and the services they provided. Yet again public need has been sacrificed to private greed and political short-termism. I reject the bill.
I am very flattered indeed, Mr Deputy Speaker. I have the incredible egoism to say that mistake is often made! Policy must be judged upon its outcomes. You do not wander off with some ideological theory. There is a magnificent cartoon—at least, I thought it was magnificent—of Mr Keating reading a book entitled Japanese Protection and saying, ‘It’s doomed! It may work in practice, but it’ll never stand up in theory!’ It was a magnificent judgement upon privatisation.
I am not coming in here with prejudices; at least, I hope I am not. I suppose I have developed prejudices now, one way or the other, but if you turn the clock back 20 years, I was never one for saying that everything should be in the hands of government. I belonged to the Country Party, which was very pragmatic in these areas. In fact, in the 20 years of Bjelke-Petersen, we were supposed to be the conservative government. It just shows how outmoded the terminology is. If conservative meant privatisation, we did not privatise or even remotely look like privatising anything in the period when we were in office. But every minister was expected to make his department perform. Don Lane, for all of his shortcomings, actually had the railways in Queensland working for a profit for two years there. It was a remarkable and very creditable effort.
You must judge these operations upon their outcomes. On the sale and privatisation of the Commonwealth Bank, I think the best statement upon the banks that one can find is in the Sydney Morning Herald dated 12 May 2005. It says:
I will repeat that slowly in case everybody has not heard it: ‘his $34 million a year salary’. The article goes on to say that he believed that 4,200 jobs had to go from the National Australia Bank. I represent one of those areas from which the jobs went. I am not referring just to that area; I am talking about the northern suburbs of Townsville as well, where branches were closed. I used one of those branches, in fact.
If you are looking for an outcome, where we had a local bank manager who made decisions locally, based upon the knowledge of the local economy, we now have managers in Brisbane making decisions over whether you should be allowed to borrow money in Cloncurry, Mareeba or Tully. The outcome in that same year? That article gives the profit for NAB for the year 2005: ‘NAB reported a 17 per cent jump in first-half net profit to $2.5 billion’. So in the first half of the year they made $2.5 thousand million in profit. Did interest rates come down? I have not checked up over the last four or five years, but for that crucial period—the latter Keating period and the first eight or nine years of this government—our interest rates in Australia were 50 per cent higher on average than those in Japan or the United States. So did it deliver cheap interest rates? No, our interest rates were 50 per cent higher than those of our competitor nations.
Did it deliver better services? I spent a lot of time reorganising the Mid West Rugby League, which covers all the western towns between Townsville and Mount Isa. The railways cut back 500 jobs: in a little tiny area of about 10,000 or 12,000 people, we lost 500 jobs. Those jobs were removed mainly from the local railway station, which closed down virtually completely, and local overnighter depots handled all of their work.
Did this deliver a better and cheaper outcome? No. Our parcel prices went up sixfold in that period. The cost to transport a parcel from Townsville to any of those towns went up 600 per cent. Motor car parts doubled in price as a result of the privatisation of the railway system in western Queensland.
Did the airlines profit from the privatisation of Qantas? What is the situation now with the airlines? In fairness, there has been significant diminution in the price of airfares between the capital cities but, as my worthy colleague from Calare explained to the House, that is because they cherry picked out profitable routes and totally withdrew their services from the non-profitable routes. It was a fairly easy task and of course they put themselves in a position where they had a monopolistic position in the marketplace.
There may have been transportation benefits for the intercapital cities—most certainly the Melbourne, Sydney and Brisbane connection—but for those outside of that connection, particularly for people in rural ports, the cost of getting to Townsville from Mount Isa doubled in that period. Similarly, the cost of getting from Mount Isa to Brisbane doubled. Yes, city people got it cheaper, but it was over the broken backs of these people outside the metropolitan areas of Australia.
We have dealt with transport and banks, but one of the most sorrowful issues from where I sit was the Commonwealth Serum Laboratories. There are certain things that simply should not be privatised. The magnificent book entitled Privatisation: Sell off or sell out refers to the cost of selling these items to the public and what the value now is of those items, and there is a $45,000 million difference. We sold Commonwealth Serum Laboratories being told that that was the value of Commonwealth Serum Laboratories. Who was telling us that? Surprise, surprise—the head of Commonwealth Serum Laboratories. I am told that he is now on the list of ‘The 100 wealthiest people in Australia’. His wealth is colossal, and he was a humble public servant prior to privatisation.
It always fascinates me at election time that those who are now my political opponents in the major parties will have $20 million or $30 million to spend throughout Australia. In my electorate in the last election campaign they spent some $350,000. We want to know where this money comes from. How come they had $350,000 and we had only $70,000?
The people are not entirely fooled. I hope and pray that it will go up again next time. But where does this money come from? I do not blame the political parties in the sense that they are in competition with each other. They have to take this money and there is a price to be paid for taking it. But if you were a merchant banker and you were going to handle the agency for the sale of Telstra, and you were to take two per cent on the sale and divide it up amongst half-a-dozen or a dozen of you, you would have an awful lot of money to play around with. One of the political parties in this place has had very prominent people indeed associated with merchant banking. I think that some people need to do some real hard and heavy research on the connection between the merchant bankers, who get the agency for the sell-off of these assets, and when someone gives you a golden handshake for $20 million—‘Well, gee whiz, I think it’s only fair, right, decent and honest to give $2 million back.’
I cannot help but tell the story, at the expense of one of my great heroes Ted Theodore, of someone who you, Mr Acting Deputy Speaker Lindsay, would remember well: Mr Tom Aikens. One of the great history books of Australia stated that the two great speakers in Australia were Menzies and Aikens, but it was said that Aikens was better because he could resort to humour. Aikens tells the story of being invited to rejoin the Labor Party. He said, ‘What—join that mob of rogues and scoundrels?’ Labor said, ‘That’s unfair, Tom.’ Tom replied, ‘Theodore—Mungana?’ I am saying this at the expense of one of my great heroes Ted Theodore, but they said, ‘That is unfair, Tom. That money was divided up equally between all of the boys.’ I do not think things have changed a real lot.
I cannot speak with authority for metropolitan areas and I do not intend to. I do not represent them. But, as far as non-metropolitan Australia is concerned, the privatisation of the railways—or corporatisation, if I want to be technical—was an absolute disaster.
I turn to the privatisation of air transport. My grandfather was one of the original people involved in getting that airline off the ground. We lost our money. We put our money in again and we lost it the second time. Then we gave it to the government. That great movie—Ned Kelly, was it? No. I am struggling for the name. Young Einstein was another movie—
I am enjoying your speech, member for Kennedy, and you have used more than half the time allocated to you, but you have not actually mentioned anything about the bill yet. Could you just relate it to the bill and say, ‘Medibank Private Sale Bill’ once or twice in your speech, then you will be in order.
Mr Deputy Speaker, I take your admonition most seriously and I will come back to a closer perusal of the bill. However, to complete what I was saying, at the end of Young Einstein he says, ‘I’m going to give this E=mc2 theory to the government because you couldn’t trust anyone else with it’—and there are atomic explosions going off in the background. We gave up Qantas. That was not the smartest thing we ever did because Qantas has completely left the people, where it was birthed.
The people who put up the money to create this great asset for Australia have been completely abandoned by that airline. The only services they can get are at huge cost. They are not available to the ordinary person, who simply cannot fly on the airline. What does that mean? It means, as the member for Calare said, that if you think you might have cancer and you need to go down to the city for tests—which most certainly cannot be done anywhere in western Queensland—you do not have enough money to go down and do them. And you cannot afford to take two to three days off work, so it cannot be done. So whether it is the railways, Qantas or the banks, we got a dreadful deal out of privatisation. If Medibank Private is sold, I do not doubt for a moment that we will get the same sort of deal.
Let me be specific about the Medibank deal. The National Rural Health Alliance recently produced some figures, which were published in the Australian Journal of Rural Health. There are 55 dentists per 100,000 people in the major cities compared with 17 per 100,000 in western New South Wales and even fewer in western Queensland. Over one-third of practising dentists are over 50 years of age and 83 per cent of dentists work in the private sector. Medibank Private gives the government some ability to direct traffic. Every time the government gives away this bit of control, their ability to deliver services becomes increasingly difficult.
I hark back to my days in the Queensland government because they are most relevant to this bill. We did not need to privatise anything and yet we were the most successful as a private enterprise government in Australian history. I do not think a single person in this parliament—they may accuse us of many other things—could say we were not. Our political opponents in those days acknowledged—whatever else they might have said—the terrific success of the Queensland government in enterprise. We did not create the aluminium industry by selling off the Gladstone power station; we created the aluminium industry by building the Gladstone power station. One of very few places on earth you can walk in off the street and get free hospital treatment is in Queensland. We did that by holding control ourselves and having a determination to deliver services to the people not only in the capital cities but everywhere in the state of Queensland. I am not saying that people in the cities are faring much better with medical services than we are in the country, although they have better access to specialist services. There is no doubt that there will be a tremendous loss in the government’s ability to control, direct and deliver that most important of all services—medical health services.
If you say that the free market system will guarantee the delivery of services then I strongly recommend you read the books on Enron. Classic economic philosophy—or ideology; whichever word you use—says that if the supply decreases, the price will go up and then the supply will increase. In California, when the power supply went down, as the result of a drought and lack of hydroelectricity, the price went through the roof. So if the price went through the roof by taking a bit of power away from the system, the price could be sent through the clouds if you took a lot away. That is exactly what happened. Every one of the congressional and Senate inquiries in the United States clearly indicated that once you have a significant hold upon the marketplace, such as Enron and three or four other suppliers of power in California had, then you were able to manipulate the free market system.
As I have said in this place on many occasions, the problem with members opposite is that when they were little boys and little girls their mummies and daddies never had them play Monopoly. If they had, they would know that when you get hold of all the utilities you can quadruple the price you charge for electricity or for water. But I played Monopoly when I was young, and I know the rules of the game well. If they think this is not playing Monopoly, then they believe in the tooth fairy.
I have mentioned the Commonwealth Serum Laboratories—they had a lot of fun. The Commonwealth Bank had a lot of fun. Telstra are going to have a lot of fun. The people who will pay the price will be ordinary, average Australians—the sorts of men who fought tenaciously to create these wonderful institutions for Australia. And they were not all on the right-hand side of the House, where I am standing; they were not all in the Labor Party. They were on the other side of the House as well. The Commonwealth Bank was kicked off by King O’Malley, but there is no doubt that every conservative government enhanced and solidly backed that bank. The pygmies who are ruling Australia now consider themselves intellectually superior to Bob Menzies, Jack McEwen and Ben Chifley. They are not. The failure of privatisation in Australia is already on record. I cannot believe that a government would continue with it. (Time expired)
It was only fitting that the member for Kennedy was able to finish his contribution. He always makes a very interesting contribution. I can see from his contribution to the debate that he will not be supporting the sale of Medibank Private. He mentioned near the end of his speech that the conservative government established an act in 1952 to regulate private health funds. When we talk about Medibank Private, we should talk about how it was created. It was created in 1976 to mitigate the adverse effects on Medibank as a result of the election of the Fraser government. Like all tory governments—the Howard government is no different—the government realises that Labor’s policy of having a universal health system is so popular that they cannot abolish it. They can hurt it; they can slowly erode the benefits of a universal health system.
The Fraser government, with its Treasurer John Howard, was in the same position then in some respects as the Howard government is in now. It could not go to an election proposing the abolition of Medibank, but it started to tear it down. That was an unpopular move. It had to mitigate the effects of the policies that were hurting the universal health system that was introduced by the Whitlam government in its first term, in October 1976. Just a year after the introduction of that universal health system, Medibank, the government sought to mitigate those effects. Medibank in the end was a pillar in the creation of a dual public-private health system. It was, and is still today, a non-profit entity. It has national coverage and has become Australia’s most popular health fund, representing 30 per cent of the private health insurance market. It is a very important player in the field.
Therefore, it is important to discuss in this place whether we should sell or not sell Medibank. It is alarming not to see the government defending its decision to sell. One would have thought that after the member for Kennedy had spoken in the debate a member of the government might have wanted to explain to the Australian public via this chamber why they should sell this important organisation and why there is a need to sell it after the next federal election. But not only is no government member prepared to contribute to this debate, which shows how little regard the government has for the chamber or for the health system of this nation, but also the Minister for Health and Ageing has chosen to gag the debate. I am informed that there are even more Labor members wanting to contribute to this important matter of public policy. At half past one today they will be denied that right. So members representing constituents across the land will be denied entering into a debate about whether we should sell or not sell Medibank Private. It is a disgrace that the government is not able to defend its position. The government is choosing to announce the sale. The government thinks that, by announcing that the sale will not occur until after the next election, the Australian people will somehow not hurt them at the next election.
The Australian people are far smarter than that. I believe they are concerned about the potential sale of Medibank Private. The decision to sell Medibank will be one of the matters that will be before the Australian people at the next election. There are many others. There is the extreme and unfair Work Choices legislation that is affecting many workers across this country already. That legislation will increasingly affect workers in this nation—the way in which penalty rates and award conditions can be removed and employers can sack employees unfairly, without those employees having any recourse to question the decision. All of those things are occurring. The Australian public will make up their minds as to whether they want to have an extreme and unfair industrial relations system. There is the decision for us to enter the war and not return the troops from Iraq. The Australian public is increasingly concerned about climate change and global warming. Again, the government is failing to act.
In the decision to sell Medibank Private, you see the government’s ideological obsession about privatisation, about selling off an institution that was created by the Fraser government. I always say to people: ‘I am not suggesting the government is only extreme or unfair in certain areas when compared with former Labor administrations. Look at the way this government operates in the area of industrial relations, and certainly with its decision to sell Medibank Private, when compared to the Fraser government or governments preceding the Fraser government’—in other words, other tory conservative governments. Medibank Private is the creation of a Liberal-National Party government, and it is going to be flogged off. Sufficient reason for the sale has not been given.
As I said, Medibank Private currently has 30 per cent of the private health insurance market. In its early days it undoubtedly contributed to keeping premiums down as its competitors continually undercut them. You could say that Medibank Private has been the Australian Democrats of the private health insurance industry, that they have been keeping the so-and-sos honest. Unfortunately, if the bill for the sale of Medibank Private passes, I fear that Medibank Private will head the same way as the Australian Democrats appear destined to be heading.
A number of reasons have been put forward by the minister for health—although I do not see them being echoed in this place now by members of the government—about why we should sell Medibank Private. They are not compelling reasons. It seems to me there is a burden upon the government to explain why there is a need for change and what the supposed benefits are. There are essentially two arguments used by the government. Firstly, they assert it will lower all private health insurance premiums. Secondly, they assert that the government should not be both a participant and a regulator in the same industry.
I would like to turn my attention to those two government assertions as to why there should be a selling-off of this institution. I would argue that there is no evidence to support the claim that a privatised Medibank Private will lower premiums. Apart from the fact that the government have a poor track record on predicting declining premiums, the government’s logic here just does not stack up. Where is the money going to come from to provide a return to those who buy shares in a privatised Medibank Private? The government argue that lower administrative costs would be a result of the sale but this is not supported by the facts.
The facts show, effectively, that Medibank Private already has the lowest administrative costs in the industry. They are certainly well below the industry standard. So how can it be argued that we need to sell Medibank Private to lower the premium when already the Medibank Private premium is lower than the industry average? That certainly is contrary to the logic of the arguments raised by the Minister for Health and Ageing. Until now, Medibank Private has never paid any dividends to anyone. Any profits have been ploughed back into reserves. If the profit or surplus is too high, then the following year’s premiums are adjusted. If Medibank Private is sold and the government takes away the reserves, whoever buys it will have to invest a lot of money—some estimates are close to $1 billion. This is likely to push premiums up rather than reduce them. As Medibank Private is the country’s biggest insurer, any premium rise by Medibank Private will allow its competitors to raise their prices too. So all the people in the community who have private health insurance should be alarmed—not only the members of Medibank Private—as should the competitors. The regulation of Medibank Private by government since its inception on 1 October 1976 has ensured that it is not easy for private health insurance companies to raise their premiums.
It is important to place this argument in the context of the history of health provision in this country. It was a conservative government that created Medibank Private. It did so because its decisions to diminish the service provisions of Medibank at the time were hurting the Australian public. It created this institution to mitigate those effects and now we have a conservative government seeking to privatise its own scheme. We say that the arguments which have been proposed—certainly the argument that premiums are going to fall as a result of the sale—just do not add up.
Concerning the alleged conflict of interest, for all practical purposes I am hoping to illuminate the House and the government about matters to do with Medibank Private. The government has placed the Australian people in the dark because no cogent argument has been put forward by the Minister for Health and Ageing, or by the government frontbenchers, as to why we are to sell Medibank Private. I am in the dark.
is as in the dark—metaphorically and physically—as we are about this decision. It is unfathomable. It is a difficult one for us to come to grips with because effectively the government are abolishing a scheme which they created to mitigate the effects of their having attacked Medibank.
We know that when the Minister for Health and Ageing says in this place that the government is the best friend Medicare has ever had he does so ironically. If it is ever in a parliamentary question, he should be asked to sit down because he would be using irony. We know that; it is an in joke. He turns to government members and says, ‘This government is the best friend that Medicare ever had,’ and they all have a laugh because they know what he means—that they will boil the frog slowly on the universal health system. They want to corrode it; they want to destroy it. We know that. One of the ways they are going about that is by selling an institution which they created in 1976.
When you compare this government with even previous tory administrations you see that this is an extreme government. These decisions—to enact the Work Choices legislation, to sell Medibank Private—reflect a government full of arrogance and hubris. We know why this is occurring—because they have the power to do so. If they had a minority in the Senate, they would not be suggesting this. They think they now have the power to do absolutely anything. If I had time and it was relevant to this debate, I would talk about what the government did to the Senate committees, how they found themselves chair of every committee. That has had a number of consequences and is a symptom of a government that is not in touch with the Australian people and is certainly now pursuing its ideological obsessions.
The industrial relations stuff that the Prime Minister has been ranting on about for 30 years is now upon us. His dream is becoming Australia’s reality—or Australia’s nightmare. And the reasons for the sale of Medibank Private are the same—no cogent argument, not good public policy. In fact the argument of reducing premiums is contrary to all evidence, which suggests that the premiums will rise. Therefore, this is not rational argument that has been put forward cogently by the government.
The government know they have the power. They no longer think they have to explain why they want to make changes to the Australian society that we love. They no longer believe they have to put up arguments. In this debate, there are no government members. The reason why the government have to gag the debate is, firstly, to show us how powerful they are; secondly, they do not have anyone to contribute to the debate. After I have finished, another Labor member will contribute to this debate, which will finish at 1.30—gagged by the government because they do not have any cogent arguments as to why Medibank Private is to be sold. If they had decent arguments, you would expect them to put them forward. So this gag is not just about hurting us; it is about allowing the government to avoid explaining the inexplicable. Why would you sell Medibank Private when you know it has been keeping premiums down?
There is one other concern that the shadow minister for health and the Leader of the Opposition raised today, and that is the concern about whether a debt will be owed to members of the fund upon the sale of Medibank Private. As we have heard from the Leader of the Opposition and others, some very good, independent advice has been provided by the Parliamentary Library that suggests that, upon the sale, there will be a debt owed to members of the fund. The response from the government was, ‘We paid for some private advice, and our lawyers told us that there will be no problem, there will be no debt; there will be no entitlement owed to members of the fund.’ So we have to decide whether we will support the independent advice provided by the Parliamentary Library or whether we will listen to the advice that the government paid for and wanted to hear. Our choice is between the advice provided by the government and the independent advice provided by the Parliamentary Library.
I know who I will be listening to with respect to this matter. The library has raised some serious concerns with respect to that. Indeed, in the Bills Digest it says:
... 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 Research Brief 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 entitlements is discussed ....
Mr Deputy Speaker, some serious advice has been provided by independent experts, and the government have chosen to ignore them. Instead, they listen to the advice of Blake Dawson Waldron—which they paid for; and, of course, he who pays the piper calls the tune. The government do not care to give a reason. They do not even try to find an argument. They will not allow the debate to continue beyond 1.30 today. They will not allow people who represent constituents across this country to defend Medibank Private.
This government is arrogant and out of touch, and it is using its power to crush debate in this place. It will force this bill through this chamber and will not allow people to speak. It will then force this bill through the Senate and we will have sold an institution that was created by a former conservative government to mitigate the effects of their decisions about Medibank in 1976.
The Australian public have to understand this fully and must not be fooled by the arguments of the Minister for Health and Ageing. The arguments are not reasonable, and they do not make sense. I am sure that, come election day, there will certainly be a referendum on this decision. I know many Australians will decide they want to keep Medibank Private in government hands and they will not support the sale.
I thank the member for Gorton. Might I advise the House, simply out of courtesy on the advice that was provided by the sergeant, that the interruption to the light was caused by a lightning strike. I think it would be churlish of me to suggest it is a judgement upon either side of the House on the merits of this argument, but it is an act of God and we are temporarily in the dark.
Nonetheless, just like the member for Gorton, I am in the dark about the government’s motives for the Medibank Private Sale Bill 2006. I obviously want to indicate my support for the shadow minister for health in opposing this plan to sell Medibank Private, Australia’s largest private health insurer. Medibank Private was established by the Fraser government in 1976 as part of its demolition of the Whitlam government’s pioneering, universal health insurance program—the original Medibank. At the time it seemed a retrograde step but, in practice, Medibank Private proved to be a great success, in part because of the prestige of the Medibank name. Medibank Private now has three million policy holders—29 per cent of the health insurance market.
Last year its membership grew by 24,000. It is the market leader in the health insurance field and sets the terms on which the rest of the industry operates. As Medibank Private is a not-for-profit insurer, the level at which it sets its premiums helps guarantee that private health insurance remains accessible to those Australians who want it.
Medibank Private is a highly successful business. Let me quote that well-known iconoclastic commentator and deputy editor of the Herald Sun, Terry McCrann, who last month wrote:
CEO George Savvides has done a sensational job in his five years at the helm, taking [Medibank Private] from a $175 million loss in 2002 to the latest $200 million profit, on the basis of an attractive mix of $2.85 billion of premium income and $2.45 billion in benefits paid. Income from members is largely going back to them in payments.
This will of course end if Medibank Private is sold off, as the government wants. No-one is going to invest their money in a not-for-profit company. If the private sector is going to buy Medibank Private it will do so in the expectation of profits—after all, that is why private investors make investments. Thus there is no doubt that premiums will rise if Medibank Private is privatised. I quote Professor John Deeble, one of the architects of the original Medibank and a former director of Medibank Private. He said:
A commercial buyer would want more profits, premiums would go up and incidentally, the government would meet 30% of that increase through the private health insurance rebate.
Let me make it clear that Labor does not have a fetish for state ownership, as some opposite have alleged. As other speakers have pointed out, the Hawke government had an extensive program of government asset sales. We sold Qantas, CSL and the Commonwealth Bank, the latter despite its iconic status for some people in the Labor Party as a symbol of state enterprise. We did this because we believed at the time that there was no longer any public interest in keeping airlines, banks or pharmaceutical companies in public ownership. Labor today believes that those fields of enterprise which belong in the private sector should be sold to the private sector and operated in an open and competitive market, subject to proper regulation to safeguard the public interest.
But that does not mean we favour the complete abandonment of public ownership where it clearly serves a public interest—a public interest which would not be served if a particular enterprise were sold off. That was clearly the case with Telstra, where despite numerous inquiries the government has not been able to show how a privatised Telstra, operating for profit in competition with other telecom firms, would be able to continue to meet its vital community service obligations, such as providing telephony and internet services to people in regional and remote Australia at a reasonable cost.
The coalition parties also take this view when it suits them and the constituencies they represent. Do we hear government members calling for the deregulation and privatisation of the marketing of Australian agricultural products such as wheat? Of course not. When it comes to wheat, the National Party clings to the single desk, which is a euphemism for a state monopoly on wheat marketing. The National Party will die in a ditch before we have free trade and a free market in wheat and other agricultural products in this country. But with this government, what is good enough for the wretched Wheat Board, packed with crooks and mates, is not good enough for a clean, profitable, public agency like Medibank Private. What a contrast! Keep the crooks and get rid of a clean and efficient public company.
If there was a strong case for keeping Telstra in part-public ownership in order to serve a legitimate community interest, there is an even stronger case for keeping Medibank Private in public ownership. Not only does it serve its own three million members; as the member for Gorton, the member for Lalor and the Leader of the Opposition have pointed out, it also serves to anchor the whole health insurance industry, ensuring that most of the industry continues to operate on a not-for-profit basis and that premiums remain relatively affordable.
There is plenty of evidence that the private health insurance industry in Australia is not particularly well run and that it does not deliver a particularly high level of service to the Australian people. That is why a relatively low proportion of Australians choose to have private health cover and why so many prefer to rely on the health insurance system they pay for through their taxes—Medicare. But the industry would be in infinitely worse shape were it not for the benchmark of service and affordability that Medibank Private provides. To borrow a phrase from our friends in the Senate: it serves to keep the bastards honest. Let me once again quote that notorious socialist Terry McCrann:
Why should we hand this sort of income generation to the private sector? Should heath insurance make ... profits anyway? Aren’t they supposed to be non-profit?
And if Medibank is privatised, who would then keep the bastards honest?
Who then would keep the bastards honest? That is a question that will resonate around Australia. This issue will affect the government in all seats around Australia, including in marginal seats where a large number of people have Medibank Private policies and really doubt the wisdom of this government policy.
One of the advantages of a not-for-profit health insurance system is that it is able to offer health cover for people who might be considered poor risks in a strictly commercial sense—that is, people with pre-existing health conditions, people with disabilities, the middle-aged and the elderly. A health insurance system based solely on profit-seeking would try to exclude all these people from cover, because they are statistically far more likely to make expensive claims than the young or the healthy. Once you privatise a company, you create pressure to allow that company to operate in a way that will maximise its profits. Indeed you create a moral obligation to do so because you cannot ask people to invest their money in a company and then regulate it in such a way that it remains unprofitable.
That is the hook the government has got itself on over Telstra. The management of Telstra know that they will not be able to meet Telstra’s current community service obligations and at the same time return a profit to shareholders. That is why they are telling the government that the full privatisation of Telstra must be accompanied by the full deregulation of the telecom industry. Many argue that to do otherwise would be to perpetuate a fraud on investors. The government does not want to hear this advice that they should be made to pay full market rates for their phone and internet access, because it is unacceptable to people in regional Australia who form part of their constituency through the National Party in particular. Obviously the further out you are in rural, regional and remote Australia the higher the costs of telephony and the internet. People in rural and regional Australia are quite right to object to this. The government is trying to get off this hook by demonising Mr Trujillo and his colleagues, but the fact is that they are giving the government correct advice, and the government cannot change these unpalatable facts by denying them.
If this is true in the case of Telstra, it is even truer in the case of Medibank Private. Full privatisation of health insurance will lead inevitably to pressure for full deregulation. And full deregulation will lead to the exclusion of poor-risk people from private health cover as the health insurance industry concentrates on competing for the business of people judged to be good risks. As Professor Deeble said:
There will be bigger pressure on the government to deregulate and let them chase their good risk members and all that sort of thing if Medibank Private is sold, because Medibank Private has always acted like the conscience of the industry. That’s what it was set up for and that’s what it’s always done. Now selling that removes that pressure.
Mr Deputy Speaker Kerr, there are many things I admire about the United States, as you know, but its system of health insurance is not one of them. Under its fully privatised health insurance system, there are 45 million people—15 per cent of the whole population of that great country—who have no health cover at all. They are mainly the poor and the elderly. This has been made worse by the sharply declining number of companies which provide health cover to their employees once they retire. Health cover used to be part of a lifetime employment package offered by companies in the United States and, indeed, in most of the Western industrialised world.
As we recall, the efforts of the Clinton administration, led by Mrs Hillary Clinton—hopefully the next President of the United States—to fix this state of affairs were defeated in Congress. That, in my opinion, was a tragedy for a country which I greatly admire but which is certainly far from perfect. I hope a new administration in the United States after 2009 will again tackle this issue.
Meanwhile, we in Australia should profit by studying the situation of our friends in the United States, which was the situation in Australia before the introduction of Medibank by the Whitlam government and then Medicare by the Hawke government. The Australian people should understand that if it were not for Labor we would have a health insurance system like the United States has now. That is one of the key choices that the Australian people will face at the next election and that they have faced over the last 20 to 30 years.
The Prime Minister has said several times that he does not intend that Australia should have an American-style health system. But, since he also said that Australia would not have an American-style education system and that we would not have $100,000 university degrees, we know how much those kinds of promises are worth. We on this side of the House are determined that Australia should not be forced to go back down the road that leads to a society based on inequity and unfairness, where the well-off majority have access to fully insured health care and the less well-off minority do not.
Although this bill sets the stage for the privatisation of Medibank Private, the sale itself is not scheduled to go ahead until 2008—after the sale of Telstra is complete. No doubt this is because the government knows that Medibank Private would be a much better investment than Telstra—given the mess that it has made of Telstra—and doesn’t want to give investors the choice. Obviously, people would invest in Medibank Private if it were to come onto the market and they had an opportunity to do that first. They know that this company, operating under its current circumstances, is inherently sound.
I represent a fairly affluent electorate where the majority of people have private health cover—and many with Medibank Private cover—but I also represent many low-income people, the elderly and recent immigrants. These are the people who will suffer the most if the health insurance industry is fully privatised and, as a consequence of that, fully deregulated. As the member for Lalor has pointed out, there are many people who are not in those categories who will be shocked that the government has taken the advice of Blake Dawson Waldron, their paid-for lawyers, rather than the advice of the impartial people in the Parliamentary Library. The government advice is that the participants in Medibank Private do not have prior rights in any sale of that organisation. I think the government is stepping into both a legal and ethical minefield here.
There are a lot of people who are traditional government supporters, Liberal supporters—the member for Goldstein is sitting at the table; I am sure there are many people in his electorate who are participants in Medibank Private—who would oppose this sale. I do not think anyone in my electorate, no matter how well off they may be personally, would want to see an Australia in which a substantial proportion of people are left without affordable health cover. That would be the effect of this government’s open agenda for privatising Medibank Private and its covert agenda for gutting Medicare—handing over health cover to a health insurance industry free from the moderating influence of a publicly owned Medibank Private. We will be happy to fight the next election on a policy of preventing such an outcome.
I would like to start my comments this afternoon with a letter to the editor which was published in the Age on 5 September this year. It is signed by Robert Corcoran, who is not only a constituent but also my dad. He wrote:
Although they do not physically provide any medical treatment or hospital accommodation, the various health funds do the real work of collecting insurance money and returning much of it to help pay medical costs. Leaving aside the more fundamental subject of the fairness or otherwise of the present piebald system, the topical question is whether this financial service could be provided more effectively by selling Medibank Private.
Shareholders in a sold Medibank Private would certainly expect a return on their investment better than bank interest—and, based on its estimated price of $1.5 billion ... this would require an annual payment of much more than $100 million a year to the new shareholders. What effect would this have on already steadily increasing premium rates?
Perhaps we would all be better off if the Government turned its attention to restoring and improving the effectiveness of the universal system of Medicare, especially by reducing waiting times. Then we could all be assured of appropriate treatment, whether able to afford expensive private health insurance or not.
The purpose of the Medibank Private Sale Bill 2006 is to amend the National Health Act to allow the government to sell Medibank Private. The government has said that it will not sell Medibank immediately, but it wants this legislation in place so it can sell it in 2008. Since 1976, Medibank Private has been controlled by the Commonwealth government. The fund is a not-for-profit. It has about three million members and about 28 per cent of the private health insurance market across Australia. It has about a third of the market in Victoria, Queensland and Tasmania and 44 per cent of the market in the Northern Territory. It is the only fund which operates in every state and territory in this country. There are over 40 health funds in Australia, five of which are for-profit. These funds cover about 31 per cent of the market.
Mr Deputy Speaker, I raise a point of order. Could you clarify for members of the House who would be about to vote on the second and third reading stages of this bill whether or not, in your view, if a member were also a member of Medibank Private, that would raise a pecuniary interest about which they ought to be concerned in respect of exercising a vote.
I have had advice from the clerks in relation to this matter, and I thank the Manager of Opposition Business for raising the issue in the interests of members who may be subject to a view that they have an interest in the fund, who may have expressed some concern. Standing order 134 provides that a member may not vote in a division on a question about a matter, other than public policy, in which they have a direct pecuniary interest. House of Representatives Practice indicates that public policy may be defined as government policy not identifying any particular person individually or immediately. I have had a look at the precedents in the past, and it does seem that, for example, the ownership of shares generally in a company has not excluded persons from participating in votes where their interests have been affected simply as a shareholder in a company that would be affected by a change in policy. So in that manner the precedents do not seem to indicate that members would need to disqualify themselves on the basis of the previous application of standing orders, as the matter before the House could be thought to and would relate to a matter of public policy.
The chair, of course, has no reason to ascertain the individual circumstances of members as to whether any might have any specifically additional interest that might be material in relation to their right to vote upon the matter. However, it is open for any member to raise, under standing order 134, a motion challenging the right of members to participate in a division, afterwards. That appears to be the only manner that is open in those circumstances. But, on the precedents that I have been able to ascertain from the Practice and the clerks I would advise that it would seem that, whether or not there is a pecuniary interest in the circumstances, it would not preclude a member exercising a right to vote in the House.
That the bill be now read a second time.