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privatising Medibank Private « Previous | |Next »
April 5, 2006

So the Howard Government is going to privatise Medibank Private. It will be flogged to ensure the best possible sale price for the Commonwealth.

What then happens to the public interest of ensuring better health outcomes for Australians? Does not the sale mean that premiums will increase? Who is to ensure that there will be competition between pirvate health insurance funds? Who is there to force premiums down?


We have a highly subsidised private health industry that delivers a poor health product without a strong regulator. Who will now keep the private health insurers honest? Who will now consciously steer the health market in a given direction to achive better health for consumers? Which fund will now act as a health broker using its market power to purchase cost-effective services for members at the most competitive price commenssurate with account quality and safety considerations.

Jack Waterford in the Canberra Times outlines the possibilities of the sale that make the market less not more competitive.The first possibility is this:

Suppose, for example, that one of the bigger existing health funds took over Medibank Private, with its three million contributors and 29 per cent of the market. Would greater competition - and lower premiums - be more likely with a single player having half the market?

I presume the ACCC would say something about that, would it not? The second possibility is:
Suppose instead that the Government did something some ministers have mused aloud about - breaking up Medibank Private, perhaps into regional chunks. Would that improve its economies of scale, and lower administrative costs presently running significantly below those of its competitors?

That is the dismembering option as the other funds may be interested in stripping off parts of Medibank Private in order to improve their own national coverage. That leaves us with 3 health funds controlling 80 per cent of the market. The second possibility is not likely to produce improved performance of the private health insurance.
The third possibility is:
Suppose it were bought up by a merchant bank. Machealth would be too clever to run it into the ground, but how much temptation would it face to enhance the "value" of its product by shedding, through cost structures, the expensive customers? And given the history of supine responses by health ministers to demands for premium increases - in spite of increasing general taxpayer subsidisation of private health care - how confidently could one expect hard questions to be asked of the big end of town?

None of the possibilities are reassuring are they?

| Posted by Gary Sauer-Thompson at 4:50 PM | | Comments (6)


Gary - wherever did you get the notion that the so-called 'public interest' had anything to do with it:-) What does it mean anyway?

That prize turd Minchin couldn't even spell it, let alone define it, and it certainly doesn't pop up in his personal KPIs.

re 'the so-called 'public interest' had ...What does it mean anyway?'


Better and more cost effective care for the Australian population so they lead healthier lives.

Gary - agreed, but it's not on the radar in Canberra :-)

one question to ask is: Does the ALP concern itself with public interest? Minchin's position is that Medibank Private operates on a commercial basis, it competes in a commercial interest and the industry it competes in is highly competitive. Therefore there's no longer any basis for the Government to own the commanding heights of the health insurance industry.

Presumably, given their vision of the provision of equitable health care, the ALP would, or should, argue that bringing in private health insurance in as a main stay for health care, without government control over it gives us a real health care problem.

Medibank Private will be sold now the Government controls the Senate.

So where does the ALP stand on regulating the price of premiums and quality of service provided by the private health funds?

Do you know?

Gary - apart from friendships with a couple of seriously deluded souls who are Labor Party members, I have no connection with the Labor Party. I don't live in Canberra any more so my opinions are based on my own reading of events from the mainstream and alternative (web-based) media. If you're suggesting that the Labor Party should take a principled approach to this issue and advocate for a mechanism to regulate increases in the price of health care, I'd probably agree with you. If you're suggesting they're unlikely to actually do so, I'd probably also agree with that. As I understand it, the argument underpinning public ownership of MB was that it acted as a brake on premium increases. We're MB members and from our costs, I'd guess my analysis is that it's not working. I genuinely couldn't give you a view whether the sale of MB would result in increased competition and hence lower premiums, or more concentration and higher premiums. The system is definitely broken, I simply don't know enough about it to suggest what could be done to fix it, regardless of any potential impact on the Budget. Sorry!

re you comment:

If you're suggesting that the Labor Party should take a principled approach to this issue and advocate for a mechanism to regulate increases in the price of health care, I'd probably agree with you. If you're suggesting they're unlikely to actually do so, I'd probably also agree with that.

If we are to have self-help based on a private health insurance industry, then we need an ACCC of health to help make sure the health industry work better so we consumers don't get ripped off.

We watch to see how the ALP suggest what could be done to improve the health care system.

It seems to me that the ALP still thinks that the best way to improve health care is through the public system. Health care is not just hospitals--its also primary health care. I cannot see any governemnt trying to put all independent health practitioners on salary.