John Menadue. Privatising Medibank Pte – who cares?

Mar 26, 2014


This is a repost from 28 November 2013. My own view is that all the private health insurance companies, including Medibank Pte are parasitical and undermine Medicare. The only important political issue in my mind is whether the policy holders who have contributed over decades to Medibank Pte should receive appropriate recompense rather than the government taking the money for itself.  John Menadue

I won’t lose any sleep if the Abbott Government proceeds to privatise Medibank Pte. It is anticipated that the sale could realise $4 billion. That will go almost half way towards the $8.8 billion that Treasurer Joe Hockey is providing as a reserve fund for the Reserve Bank, even if the Bank didn’t ask for it.

Whether all of that $4 billion should go to the Treasury from the sale of Medibank Pte is a moot point. Don’t the policy-holders, some with as many as 37 years membership, have an entitlement to some of that accumulated value? I declare a personal interest as I became a contributor to Medibank Pte when it was established by the Fraser Government in 1976.

Medibank Pte was established then because of the Fraser Government’s hope that it could be an alternative to the universal health insurance scheme which the Whitlam Government introduced and which later became known as Medicare under the Hawke Government.

I am quite indifferent to whether Medibank Pte is publicly or privately owned. As Ian McAuley and I set out in an article for the Centre for Policy Development in January 2012, private health insurance is ‘high in cost and low in equity’.  See this article on my web by clicking on ‘website’ at top left hand of home page, then ‘health’ and then article of January 2012.

Whilst Medibank Pte. Is publicly owned, it acts just like all the other health insurance firms that are privately owned.  I t serves no special social role. It is the largest health insurance fund out of the total of 40 funds. It has a market share of about 30% followed by BUPA with about 27%.

I won’t repeat all of my objections to government subsidies for health insurance firms which cost about $7 billion p.a. for the taxpayer. But my objections remain strong.

  • The administrative costs, including profit, of health insurance funds including Medibank Pte are three times those of Medicare. Just look at the money they waste on television advertising.
  • With government approval, health insurance premiums have increased every year at well ahead of the CPI. The increase in Medibank Pte premiums are close to the industry average.
  • Private health insurance benefits high income earners at the expense of low income earners.  The more wealthy Australians use health insurance to jump the hospital queue
  • Gap insurance by health insurance funds has underwritten the largest increase in specialist fees in 25 years.
  • These health insurance firms limit the ability of Medicare to put a cap on cost increases, particularly by private hospitals and private specialists who are paid multiples of the salaries paid to equally competent specialists in public hospitals.
  • The US is the stand-out example of the havoc which high cost private health insurance (PHI) can cause. As I pointed out in my blog of March 4, 2013, ‘If the US had a health service like those in countries without heavy reliance on PHI, such as Australia, it could solve its budget deficit problem.’ Health services in the US scream out ‘Beware of private health insurance’.

I have been a member of Medibank Pte for 37 years. It has been a waste of money. All it provided was some irrational ‘peace of mind’. I have found it hard to admit to myself that all those tens of thousands of dollars in premiums I paid over 37 years have been largely wasted. In the same way health bureaucrats in Canberra, under pressure from very powerful vested interests find it difficult to face the fact that their policy advice to governments on the subsidies to high cost  health insurance companies has resulted in appalling public policy.

My forlorn hope is that an Australian Government will one day eliminate the $7 billion corporate welfare which the Australian taxpayer presently provides to PHI. There would be a bonus in money saved by the government, but more importantly it would shore up Medicare’s position as a single payer that could better control costs. Until that happy day occurs, I don’t really care whether Medibank Pte is public or privately owned. It makes no difference.  It is part of a high cost parasitical industry. All private health insurance is undermining the universal, efficient and equitable public health insurance system called Medicare.

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