The government has announced that it hopes to raise $4 billion from the sale of Medibank Private. But like many of its budget ‘savings’ it might find that it has to rely in this case on the High Court rather than the Senate to decide if the $4 billion ‘saving’ can be realised.
The case has been made by many people that the government is not the owner and certainly not the sole owner of Medibank Private. A view is strongly held that Medibank Private is owned by members/policy holders of Medibank Private. There are 3.8 million members. There is not much doubt that Medibank Private’s equity including accumulated reserves has come overwhelmingly from members’ contributions. At 30 June 2013 issued capital was $85m. Retained earnings were $1.3b. The market value of Medibank Private is estimated to be $4b by the government’s financial advisers. .
Medibank Private was first launched in 1976 with operations placed in the hands of the Health Insurance Commission (HIC).
An examination of Medibank Private’s accounts by The New Daily (George Lekakis) reveals that before 1997
- In 1988 the Chairman of Medibank Private, Fred Miller, wrote to Health Minister Neal Blewett that ‘Medibank Private is a non-profit organisation based solely on its contributors’ funds. The government has no financial interest in Medibank Private’s assets and reserves. Medibank Private’s assets and resources are the property of its contributors.’ This view by the Chairman was spelt out many times in statements and financial disclosures.
- Members were officially recognised as ‘equity holders’ in the business from 1993 to 1996.
- The balance sheets of Medibank Private before 1997 clearly show that the members owned the net assets of the company and not the government.
The accounting treatment of Medibank Private was changed in 1997 by the Howard Government. This established government control and ownership of the fund.
- In 1997 the term ‘members’ equity’ was removed from the balance sheet and replaced with a new concept of ‘fund equity’.
- The Howard Government then directed the Health Insurance Commission to transfer equity of the fund to a new government-owned company known as Medibank Private.
It would seem that the actions of the Howard Government and later the Rudd Government were designed to extinguish the rights of the members/contributors.
The Australian Government can acquire the private assets of citizens under Section 51 of the Constitution but the acquisition must be on ‘just terms’. It is arguable that extinguishing completely the rights of contributors – the early ‘equity holders’ – can hardly be said to be on ‘just terms’.
I must confess that I have a personal interest. I have been a contributor/’equity-holder’ since 1976. I have contributed tens of thousands of dollars in premiums. Most of it has been a waste of money, but I suppose it gave me something called ‘peace of mind’ but not much more.
Who owns Medibank Private? The High Court may be called upon to tell us.
In my blog of March 26, 2014 ‘Privatising Medibank Private, who cares’ I argued the all health insurance, whether public or private is parasitical. Warren Buffett described PHI as the tapeworm that is destroying the US health system.