Judith Adams (WA, Liberal Party) Share this | Hansard source

The sale of Medibank Private is common sense. Governments, as you have heard, are not good at running businesses; it is best left to businesspeople to run businesses. The Howard government has been publicly discussing the sale of Medibank Private for four years. In 2002 we first announced the scoping study and possible sale. In June 2003 we announced that we would not proceed with the sale at that time but never ruled it out for the future. In August 2005 we announced that we would be refreshing our scoping study, which led to the decision to sell. In April 2006 the government announced that it would proceed with the sale of Medibank Private.

Unlike Senator McLucas and her party, we believe in private health insurance and we believe in the private health insurance rebate. This motion is the usual story of Labor attacking the government’s policy simply because it has no alternative policy. All Labor has is a negative scare campaign which implies that the sale will force up premiums. This is simply untrue. Just as selling Qantas has not increased airfares and selling the Commonwealth Bank has not increased interest rates, selling Medibank Private will not increase health insurance premiums.

The second part of this motion is about whether the government is divided. I think not. The government have been completely up-front with the Australian people about our intentions and will proceed with the sale. The government is not divided on this issue—not at all. We are united in our desire to see the private health insurance industry becomes stronger, more effective and competitive. The industry generally will benefit from the largest health fund being privately owned and competing on a level playing field.

Competition for members between funds is the best way to limit premium increases. A study by Carnegie Wylie & Co. concluded that a privately owned fund would be able to be more efficient through lower management expenses and through scope for expansion into new business areas. These greater efficiencies mean that a privately owned fund does not put upward pressure on premiums. There are already five for-profit private health insurance funds and there is no evidence that these for-profit insurers charge higher premiums than other health funds. Selling Medibank Private will make private health insurance more competitive and keep a lid on premium increases. A good example of how the private sector can keep the lid on premium increases is, as we have heard before, a company called BUPA. It operates the privately owned, for-profit funds Mutual Community in South Australia and HBA in Victoria. While average premiums across the industry have increased by 35 per cent over the past five years, BUPA’s premiums have only increased by 25 per cent. So the premiums of this for-profit health insurer are actually getting lower relative to the mutual and government owned funds.

Senator McLucas states that the government is divided on the sale. As far as I am aware the only discussion going on at the moment is whether we will sell Medibank Private by public share offer or by trade sale. Senator Minchin has stated his personal preference for a share market float. This would give all Australians a chance to own a part of the company—with consideration given to giving an additional entitlement to the existing members. A public share offer would keep Medibank Private a strong and independent player in the private health insurance industry, while subjecting it to all the commercial disciplines of the stock market. The final decision on the form of sale will follow advice from the sale advisers. This government wants to give Australians the choice to have the option of private health cover. Selling Medibank Private will make private health insurance more competitive by bringing full commercial discipline to its process. Currently there are 38 health funds. If people are not happy with Medibank Private, they have the option of choice. If Medibank Private or any health fund increases its premiums, their members will leave. Labor do not give the Australian public much credit, do they? Private health insurance customers have full portability. If they are unhappy with the premiums they are paying, they can leave one fund and go to another. If they do this, there is no loss of benefits and no waiting periods.

The commercial advice has been that Medibank Private can be more efficient in private ownership. A fully commercial, privately owned Medibank can be more efficient in private ownership, through lower management expenses and through scope for expansion into new business areas. A privately owned Medibank Private could expand into other areas, such as other forms of insurance, other medical products or other financial products—and through this greater scope be a more efficient operation. It is through more efficient operation that a health fund can further restrain premium growth. The sale of Medibank will not affect the rights that contributors have under the terms of their existing individual health insurance policies. Recognising the continued loyalty of Medibank Private’s customers and staff, the government’s sale objectives commit to considering the interests of staff and members during the sale of the company. Industry regulation, specifically the principle of community rating, prevents adverse risk pricing for the sick and elderly. The intent of community rating is to facilitate affordable access to private health care for all Australians. It means that everyone pays the same premium for their health insurance regardless of health status or claims history. The sale of Medibank Private does not affect the government’s commitment to community rating. Legislation and regulations, including prudential requirements, which apply to all entities in the private health insurance industry protect consumer interests.

Health insurance premiums will continue to rise as the cost of medical technology and the cost of professional medical staff continue to rise. Premiums will not rise any more as a result of this sale. On Saturday, 3 June the Australian newspaper reported comments by the former Australian Health Insurance Association Chief Executive Russel Schneider—and we have heard comments from him quoted by those opposite—in an article entitled ‘Medibank sale won’t boost fees: industry’ that the government’s proposed reforms could lower prices. Mr Schneider said that a continued not-for-profit presence would also keep prices low. I quote:

“There’s a strong not-for-profit component in the health insurance system. That will act as a competitive pressure to ensure costs stay low,” he said.

In order to further protect consumers from inappropriate premium increases, the government is retaining the ministerial premium approval process with clear criteria against which applications for increases will be considered. If any health fund were to apply for premium increases that are clearly excessive, they would be rejected. The sale will also have the benefit of giving us the resources to put more money into health research. We announced in this year’s budget that the sale was allowing us to put an additional $500 million into medical research grants, through the NHMRC, and $170 million into the establishment of a research fellowship scheme. I applaud the government on this. Rather than have taxpayers’ funds tied up in a health insurance business, it makes more sense to use those funds for medical research.

In an article titled ‘Health insurers need competition’, Francis Sullivan, the Chief Executive of Catholic Health Australia, agrees, stating:

... taxpayers over the years have contributed to Medibank Private’s success.

The fact that it can be liquidated for a substantial amount provides the government with an opportunity to address some serious issues of social disadvantage, most glaringly in indigenous and mental health services.

I certainly hope some of this money will go towards research in these areas.

I have seen the Parliamentary Library report that Labor is hanging its hat and its debate on. I join my parliamentary colleagues in labelling this report inaccurate and, I feel, somewhat misleading. The report’s fundamental conclusion is that the government is not free to sell the underlying fund of Medibank Private. This statement is not correct. The government’s longstanding legal view is that the government owns Medibank Private in full, both legally and beneficially. The fact is that the government established this fund 30 years ago, the government put in working capital and the government has taken the risk of owning this firm.

This view has been reaffirmed by the legal advice from Tom Bathurst QC, which was tabled recently. Mr Bathurst confirms that the Commonwealth does own the shares in Medibank Private Ltd and is free to sell those shares. Medibank Private Ltd is not a mutual fund. Mr Bathurst goes on to state that Medibank contributors do not own the funds in Medibank and that, as a result, contributors have no basis on which to seek compensation in the event of a sale. When people buy car insurance from IAG, AAMI or GIO, they are not buying a share in the company; they are buying insurance. If people go to a private hospital, they are not buying a share in a private hospital. The Labor Party are wrong in claiming that we cannot sell Medibank Private and they are wrong to oppose the sale generally.

The government will not abandon our plans to sell off Medibank Private as it is part of our plan for a strong, effective and competitive private health insurance industry. In the same Australian Financial Review article, Francis Sullivan added:

Medibank Private should be sold. It no longer justifies government ownership. Over the past decade Medibank Private has aggressively secured 30 per cent of the health insurance market. It has built a reputation for rigorous and at times ruthless negotiations. Its behaviour is unashamedly commercial. Its agenda is solely to prevail in the price-competitive world of private health care.

This is not the core purpose for governments. In other words, Medibank Private has outgrown its government’s parentage.

In conclusion I would like to mention a few of the other reforms announced by this government to improve the private health insurance sector.

On 26 April 2006, the government announced a package of measures designed to improve competition in the industry, provide value to consumers and ensure the sustainability of the private health sector. The total value of the package is approximately $60 million over four years. These changes will allow funds to offer broader health cover products so that they can provide access to a wider range of private healthcare services. For the first time, health funds will be able to provide cover for preventive health care. These products will be supported by changes to risk equalisation and the inclusion of outreach ‘hospital in the home’ services. Coming from a rural area, I certainly support this initiative.

These changes are designed to increase the value of private health insurance for consumers and to enable health funds to better manage rising health costs by allowing them to contract with the most safe and cost-effective provider of healthcare services. Being able to compare products of health funds is important. Requiring health funds to provide standard information about their products is a prerequisite for easier comparison of products. The establishment of an industry website by the Private Health Insurance Ombudsman will meet the need for access to unbiased information about health funds and their products. The website to be managed by the ombudsman will be a tool people can use when comparing products and health funds.

Lifetime Health Cover has been an important initiative. To reward those long-term health fund members with a Lifetime Health Cover loading, the loading will be removed once the member has had private health insurance for 10 years and continues to have private health insurance. To assist consumers to better understand the benefits of private health insurance and the changes to be introduced, a general communication campaign will be undertaken in 2007. The benefits and government incentives for private health insurance will be promoted to people who may be about to incur a Lifetime Health Cover loading. Medicare Australia will be writing to notify them of their deadline. In line with these changes, the medical profession as a whole will be obliged to disclose the costs associated with a hospital procedure, enabling members to make an informed choice about their treatment.

Together these initiatives should add choice, certainty and value in private health care and ensure that the private health sector continues its vital partnership with the public sector. There will be further consultation with the private health industry before the introduction of the wider private health insurance reform legislation. The government will not abandon its plans to sell off Medibank Private, as it is part of our plan for a strong, effective and competitive private health insurance industry.

I ask the Labor Party: why does the government need to own one of 38 competing private health funds? There is no policy reason for the government to own a health fund. The government believes that businesses are best run by businesspeople, not bureaucrats. I support the sale of Medibank Private.