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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?
Fat
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?
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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.