The public case for Medibank Private
Sydney Morning Herald
Thursday February 25, 2010
I own Australia's biggest share portfolio. I own the Australian Submarine Corporation and Medibank Private. And I own half of Australia Post, Australian Rail Track Corporation, Defence Housing Australia, the National Broadband Network Company and the Australian Government Solicitor. My portfolio includes a small share in Snowy Hydro Ltd, a Canberra office park, a couple of ships, and the Albury-Wodonga Corporation.Of course, I own these shares on behalf of everyone else, as Finance Minister. As plain Lindsay Tanner, I don't directly own any shares at all. It isn't quite the same as being a genuine tycoon, but it does give me a significant role in a number of important public policy areas, and a good insight into the opportunities, and limitations, of government-owned business.The factors which determine whether an enterprise should remain in public ownership vary from business to business. The merits depend on the nature and role of the enterprise, not some "four legs good, two legs bad" approach to public ownership.Last week the opposition promised to sell Medibank Private. Its commitment was laced with the usual references to the evils of government owning businesses and paid scant attention to Medibank Private's role in our health system or its recent track record. John Howard started the process of selling it in 2006, and I terminated it the following year. I guess I shouldn't be surprised they've reverted to type.Medibank Private is Australia's largest private health insurer. It has consistently delivered excellent results in recent years. In last year's budget we converted it into a company paying tax and dividends, so it now competes on equal terms with other profit-making major private health funds. It's difficult to see how a private owner would make it run more efficiently, and any benefits in debt reduction from a sale would be largely cancelled out by the loss of dividends to the government.A more fundamental reason for keeping it in public ownership is its role in health reform. Some people on the left of politics too often dismiss private health insurance as intrinsically bad. It is an important part of our system that can contribute substantially to better community outcomes.Medibank Private has a good record on premium increases compared with the industry average. It is now reforming its business approach to play a more proactive, innovative role in better health outcomes and lower costs. Medibank Private now has 50,000 members enrolled in health management plans. Instead of passively pocketing premiums and paying claims, it now works actively with members to manage chronic conditions, improve health outcomes, and reduce their call on clinical services. Other private health insurers are starting to follow suit. This approach, only in its early stages, promises to play an important role in delivering better health outcomes, on cost and quality of life.Health insurance is highly regulated and consumers aren't in the same position they are with other purchases. There is little incentive for insurers to cut premiums, and limited capacity for consumers and competition to put downward pressure on prices. That's why having a government-owned insurer actively pursuing these outcomes is a good idea.Our Liberal opponents regard private health insurance as an entitlement to be subsidised, not a means of delivering better health outcomes. The government is committed to scaling back the rebate for high income earners, but the Liberals are blocking this reform in the Senate. That'll cost the budget more than $9 billion over 10 years, a peculiar stance from a party claiming it would lower the deficit. Treasury modelling shows few would drop their insurance because of these changes. People on salaries like mine would still get insurance, but without the taxpayer subsidy.Private insurance has an important role to play in delivering better health outcomes. By targeting the rebate to those who need it, and encouraging Medibank Private's transformation into an active promoter of better health, the government is emphasising the importance of the sector in the total health picture. Our opponents are putting ideological obsessions ahead of public policy outcomes.By blocking reform of the rebate and proposing to sell Medibank Private, the conservatives show they have little interest in maximising the value that private health insurance delivers to the overall system.Lindsay Tanner is the federal Finance Minister.
© 2010 Sydney Morning Herald