Senate debates

Monday, 4 December 2006

Medibank Private Sale Bill 2006

Second Reading

4:39 pm

Photo of Lyn AllisonLyn Allison (Victoria, Australian Democrats) Share this | Hansard source

I was earlier this afternoon speaking about the savings that Medibank Private has been able to pass on to its members either through reduced premiums or services through its quite aggressive, if you like, negotiations with hospitals and medical specialists. Medibank Private has managed to hold cost rises to just 6.2 per cent when many of its rivals were increasing premiums by eight or nine per cent. It did not need to be privately owned to drive down premiums or get better deals for its members, and the government has not explained why it needs to be privately owned now.

The bill does of course allow for existing assets of the fund, assets that were built up from contributions of existing policy holders, to be turned over to the new shareholders. That ignores the matter of whether the government is entitled legally or morally to sell off assets that have been built up by contributions from those members. The AMA in its media release on 5 September said:

The AMA, while not wishing to comment on the legality of the situation, doubts the morality of the sale given that much of the value of Medibank Private is in its financial reserves which were not contributed by the government but rather, extracted from the members in compliance with regulatory requirements. This does not imply any criticism of the regulatory requirements. Reserves are necessary for proper prudential management of private health funds.

There are of course legal concerns. The Parliamentary Library research brief notes this in September. It said that there were legal doubts about the ability of the government to sell Medibank Private without compensating members. The government was quick to get its own advice that contradicted that. The Library subsequently provided in the Bills Digest a complete rebuttal of the advice the government was given.

The bill includes a clause specifically anticipating the risk of a compensation claim and allowing for the taxpayers to pick up any compensation tab. We say selling Medibank Private to existing members would not only seem to be the more just option but also seem to mitigate any risks of future compensation claims. The AMA endorsed this idea. It said:

If the Government no longer wishes to be involved as an operator of a private health fund, there is a strong case for mutualising Medibank Private and retaining the equity with those who have contributed to it, namely the members.

But, when it comes down to it, this sale is about filling the government’s coffers. The government will stash away from this sale about $2 billion, and there is nothing in this bill to tell us what will be done with that money. The government says it will give $500 million of the proceeds to the National Health and Medical Research Council for research grants but that is not guaranteed in this legislation. It could well turn out to be a non-core promise.

The Democrats would support more funding for medical research, and how good it would be if the government redirected some of the $2.5 billion that it spends every year on private health insurance rebates into research but, sadly, not likely. Even if the government does give $500 million to health research, there is still another $1.5 billion. The outstanding issue therefore is what to do with that extra money, and we have heard nothing from government on that.

The sale of Medibank Private does not do anything to address the health needs of the community but, at the very least, all of the money from the sale should go towards better health care. We do not oppose privatisation per se, as I said earlier today, but we do not support it without justification either. The government has provided no compelling reason to sell Medibank Private, and there are many uncertainties about the effect of the sale. Wanting to get their hands on the $1.5 or $2 billion that will come from the sale is not a good enough reason to sell off an asset that has been built up by members.

I foreshadow my second reading amendment, which has been circulated on sheet 5144 revised. It says:

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

That amendment would at least tell us about the industry and about what needs to be done in order to make it viable, efficient and competitive rather than having this sort of knee-jerk approach that the government has taken and any sense that this sale might actually do that.

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