Monday, 4 December 2006
Medibank Private Sale Bill 2006
In rising to speak on the Medibank Private Sale Bill 2006 I declare that I am a card-carrying member of Medibank Private, and that appears on my register of interests. I say that so that no-one is in any doubt as to where I stand on this debate. Having declared my interest in this, I must say that I am opposed to the sale, which should come as no surprise to the people opposite. For a long time—not just over years but over decades—my family were members of another fund, which will remain nameless. As a result of the competitiveness in the industry and the uncompetitiveness of the fund, we left the fund to become members of Medibank Private. We shopped around, of course, and Medibank Private offered the best deal for our then family of five. I think that, as they have gained their independence, my children have each continued on in Medibank Private—I cannot be 100 per cent sure of that but I am reasonably sure.
I believe that because it was a significant not-for-profit fund it kept the other funds honest. Isn’t it strange that there is very much a similar situation in the superannuation industry, where we have large industry funds that are not for profit? Over a long period of time, they have kept the for-profit sector of the superannuation industry very honest, in my opinion. Without that, the for-profit funds would have gone ahead in leaps and bounds in terms of charges and, having been uncompetitive, would then have seen their popularity with contributors wane. But that has not been allowed to happen because of the substantial hold of the industry superannuation funds.
I will not speak for a long time on this bill this evening. My main purpose is to declare my personal circumstances. But I want to take a couple of minutes to peruse some of the opposition senators’ report and some of the second reading speech—that is another gem, but we will come to that in a few moments. I want to draw the Senate’s attention to the opposition senators’ report at paragraph 1.3, where it talks about the late decision by the government to release the CRA International report. Paragraph 1.3 says:
Later that afternoon, the Minister for Finance and Administration released the CRA report, which stated that ‘Medibank Private’s premiums will have to rise irrespective of who owns Medibank Private’.
It seems to me that that is a fait accompli. The report goes on:
… if privatised, Medibank’s technical efficiency could be improved and this could result in lower premiums.
Let us not mince words; technical improvement is generally a euphemism for sacking people and reducing labour. Beyond that, there is not much by way of efficiencies to be made, and that is the only way in which lower premiums could result. The opposition senators’ report goes on to say:
However, the report fails to mention that, as a ‘for profit’ fund, the benefit of any efficiencies would also be directed to shareholders, and not to members, as is currently the case.
Hence I drew the analogy with the industry superannuation funds, where there is no for-profit concept within the industry superannuation funds. All the benefits that accrue do not go in high salaries and high charges and fees and do not go back into providing a dividend to corporate shareholders; they go back directly to the members. Of course, once Medibank Private becomes a public company, it has a distinct imperative whereby it must return a dividend to the shareholders; otherwise, why exist? If it is operating efficiently, the only way to return the dividend is invariably to cut staff. That is the last thing we need in this environment. No case is given by the government as to why this should be and why it needs to be privatised. In paragraph 1.4, the opposition senators’ report says:
The Government asserts that the sale will increase competition in the private health insurance market. Again, because it is allegedly contained in the scoping study, evidence to support this contention has not been produced.
Isn’t that a surprise? You make a bland statement that privatising it will lead to increased competition, but when the evidence is called for, the evidence, sadly, is missing. Then at 1.6 the opposition senators’ report says:
The Government also asserts that privatisation will liberate the fund from administrative requirements associated with government ownership. Currently, these requirements include an annual corporate plan and statement of intent. A float would not lessen these reporting requirements but require the fund to report to the market rather than the minister.
The conclusion of the opposition senators was that this was not going to change the status quo. All it was going to do was to change the perception of how it looked and operated. The claim that it was going to free it from administrative requirements was not found to be true. Medibank Private is still going to be required in effect to have an annual corporate plan, a statement of intent and, of course, if it becomes a public company, it will be subject to the rigours of the ASX. I am not going to, as I say, delve into the full content of the opposition senators’ report but I think that the statements that were made are compelling indeed.
I want to take a couple of minutes to look at the spin that was placed once again in the second reading speech by the Special Minister of State. I have commented about a few second reading speeches on a couple of bills in recent times. I really think the government needs to take a look at getting someone to write better second reading speeches than are being trotted out in this parliament. There is generally no intellectual rigour to the second reading speeches. They comprise a number of bland statements and, because those statements are made, ipso facto they become facts of themselves. This is, for me, quite an unacceptable way in which legislation should be handled in this place. Let us look at the second reading speech. On the first page it said:
Members will be aware that my department and the Department of Health and Ageing are consulting industry on a range of reforms to the private health insurance industry.
It went on:
These reforms are aimed at:
- making private health cover more affordable;
- improving customer access to information about health insurance products, to help customers make decisions about the cover they need; and
- streamlining the regulation of the industry while maintaining the benefits of competition and strong prudential oversight.
This is a very nice motherhood statement but nothing that really goes to the core of providing a better service to people in their health-care cover in Australia. It is very easy for the government to say they are looking at a range of reforms that are making private health cover more affordable, but when you dig into the second reading speech you cannot find out how this proposal in any way leads to that outcome. There might be a hypothesis that this happens but there is nothing there that sustains the claim that is made.
I do not know how this bill is going to improve ‘customer access to information about health insurance products, to help customers make decisions about the cover they need’. I am quite comfortable with the cover that I have had with Medibank Private now over a number of years. Privatising it does not seem to me to be going to make one iota of difference to my access to information about health insurance products. The information about health insurance products is already out there on the web and in a number of different forms and I can access it at my desire. The last dot point, about ‘streamlining the regulation of the industry while maintaining the benefits of competition and strong prudential oversight’, is questionable indeed. Undoubtedly, the prudential oversight is going to be the same whether it is a public or a private company. The second reading speech then went on to say:
There is no sound policy reason for the Australian government to continue to own a health fund.
That is just a bland statement. There is no reason that the Australian government cannot continue to own a health fund either, so making a simple statement like that does not of itself justify the sale. One would expect that they would then try to justify that statement. But the minister made no attempt whatsoever. It went on:
Competition between funds is the best way of keeping a lid on premiums.
Again this is a bland statement. It is a throwaway line without any justification. There is nothing to say that the sale of Medibank Private will go in any way to lessening the competition between funds and thereby keeping in an already existing state the lid on the premiums that we pay. One of the things that people constantly complain to me about is the ongoing increases that seem to take place annually, as they can, on adjustment of the premiums that people pay to these health funds. Again, I think that is very much a throwaway line in a second reading speech without any justification. Then the minister’s second reading speech goes on to say:
The private health insurance industry will also benefit from the largest health fund being privately owned and competing on a level playing field.
I would have thought that they might have attempted to try to explain that but there is no attempt at all. Again, it is another very bland statement for which there is no justification. So something has to happen with the speechwriters from the government’s side to at least lift their game and put some intellectual rigour into the second reading speeches. The minister’s second reading speech at page 2 went on to say:
Decisions about implementing the sale of Medibank Private will be made in the context of the Australian government’s objectives for the sale …
There were a list of dot points and I am not going to go through all of them. But the first was:
- to contribute to an efficient, competitive and viable private health insurance industry …
Again there is no substantiation of that at all from what I can see. It is again a bland comment that we are supposed to accept because the government have made this statement that it is going to happen. The next dot point said:
- to maintain service and quality levels for Medibank Private contributors, including—
and this is the normal throwaway line—
- in regional and rural Australia …
So you have to bring regional and rural Australia into it somehow, somewhere to make this justifiable. But, again, there is no evidence to sustain what the minister’s second reading speech says. Last but not least of the five dot points is where they say:
- to ensure the sale process treats Medibank Private employees in a fair manner, including through the preservation of accrued entitlements …
That is big hearted indeed. But there is no justification beyond the sale as to what the future of Medibank Private employees will be—none whatsoever. They are just being treated as one would reasonably expect them to be treated in the transmission of a sale: fairly and equitably. You cannot ask for more than that. But to give this as a reason justifying the sale beggars belief. Then in the minister’s second reading speech it says:
Claims that the sale of Medibank Private will somehow be the cause of an increase in premiums for health cover are unfounded.
I would think that if one is taking away the not-for-profit operation of the fund then there are going to be increased costs in the fund by returning a dividend to the owners of the fund. Unlike a mutual fund, where the dividend is returned to the contributors to the fund, this would no longer apply. After all, the owners of Medibank Private would want a dividend—and, if they do not, they are commercial idiots. That is the only term I could use to describe them. But under that paragraph the minister says:
Competition for members between funds is the best way to limit premium increases. Consumers, and the industry as a whole, will benefit from the largest health fund being privately owned and competing on a level playing field.
My golly gosh—what a group of words that ends up being! It gives no justification. I am glad to see you agree with me over there. There is no justification whatsoever, no substantiation—just again a throwaway line that this is going to limit premium increases. Some people might believe in the tooth fairy, the fairies at the bottom of the garden or a number of other mythical creatures—but I do not. And I do not believe that any justification has been given in the minister’s second reading speech that will show that this will happen. Purely and simply because the minister states it does not mean it is going to happen. Then it says:
Consumers, and the industry as a whole, will benefit from the largest health fund being privately owned and competing on a level playing field.
It was bad enough to say it once, but they have repeated it. So it looks as though the justification for anything in a second reading speech is not to say it once but repeat it twice or three times and that, if you repeat it often enough, it becomes the truth. Simply put, there seems to be no justification in the minister’s second reading speech for this sale, other than that it fits in with the ideological disposition of this government to get rid of this valuable service that is provided to a large number of Australians—and, for a large number of Australians, at a price that they can afford. It would not be the largest fund if it were not a competitive fund. And there is nothing to say that, by its transmission into being a privately owned company, this will in some way magically change the competitiveness of this company or put pressure on the marketplace to keep premiums low. I would say that what is not broken, leave alone. Leave it where it is: in the hands of the public and under the scrutiny that it is currently subject to. There seems no reason for this sale to be rushed through this parliament at this stage. It has been advocated that the sale will take place for some time well into the future. So leave what is not broken alone at this stage and let us see this bill consigned to the backlogs for quite a while into the future.