Government moves to sell Medibank Private

Saturday, April 5, 2014

The first cab off the rank in the federal Coalition government's great privatisation push has now been confirmed: Medibank Private. Finance minister Mathias Cormann announced on March 26 that the government-owned health insurance company would be sold off through an initial public offering in the next financial year.

The announcement came just before a meeting of federal and state treasurers on March 28, which resulted in Commonwealth Treasurer Joe Hockey boasting of a "historic agreement" for the state governments to sell off billions of dollars of public assets.

In return the Abbott government would provide an "asset recycling pool" of funds, which would be used to give states a further 15% of the sale value of the assets, to reinvest in new infrastructure projects, such as roads, ports and railways.

This use of the "asset recycling" cover for privatisation is a gigantic confidence trick on the community, designed to camouflage the fact that the sale of public assets is theft from the public purse on a grand scale. It will merely hand over public enterprises, which often make a substantial profit for the government treasury, to big business and the 1%, at bargain prices.

The neoliberal crusade to sell off and outsource public sector facilities began in Australia in the 1990s under the Hawke-Keating Labor government, with the sale of Qantas and the Commonwealth Bank. It escalated in the past 15 years with the John Howard government's privatisation of Telstra and the sale of other public assets.

At the state level, Liberal and Labor governments have outbid each other to flog off the people's property to the private sector over the past 25 years.

Cormann said the government would not speculate on a sale price of Medibank Private, but previous estimates have ranged up to $4 billion. He said that no one investor would be able to buy more than a 15% share in the company, as stipulated in the Medibank Sale Act which the Howard government pushed through in 2006.

Howard was stopped from selling Medibank Private by public opposition at the time. He pledged to implement the sale if his government was re-elected in 2007 — but lost, so the sell-off plan has sat on the table since.

Medibank Private made a pre-tax profit of $315 million last year. It is a profit-making operation, the gains of which will be lost to the public purse once the asset is sold. In the past four years, Medibank Private has paid $1.1 billion in dividends to the treasury.

In response to the government announcement, Labor's health spokesperson Catherine King said the federal opposition had concerns about the impact of the sale on the insurer's 4000 staff and its 3.8 million policy holders. Medibank Private now holds about 30% of the private health insurance market.

"It's really up to the government to guarantee that this won't lead to an increase in private health insurance premiums," King said, the ABC News reported on March 26. The opposition said the sale would increase the budget deficit, because the government would lose Medibank's annual dividend payment of up to $500,000. It also would not, under budget rules, be able to mark the eventual sale price as a budget gain.

The ALP opposition assistant spokesperson on health, Stephen Jones, condemned the government's decision on March 27. "It will impact on the premiums of people paying private health insurance.

"Expect another big whack. As the biggest insurer in the market, what Medibank does, others will follow."

Remarkably, former Liberal prime minister Malcolm Fraser wrote a letter to Jones, then convener of the Save Medibank Alliance, a coalition of organisations and individuals opposing the proposed sale of Medibank Private in 2006.

It said in part: "When Medibank Private was introduced in 1976, we believed that if the government were actively involved in the business, we would have a better handle on costs and outcomes than if it were done by private enterprise. I believe it would be a great pity if Medibank Private was sold and that it would lead to escalating fees."

It should be noted that the Fraser government had moved to abolish the Whitlam Labor government's original publicly owned Medibank universal health scheme that year — provoking the biggest, nationwide general strike called by the Australian Council of Trade Unions in Australian history. Medibank Private was, in part, a concession to the strong union and community opposition to the removal of Medibank at the time.

Private health insurance funds co-exist with the public Medicare system, introduced by the Bob Hawke Labor government in 1984. Private health insurance, in principle, is contradictory to the operation of Medicare as a universal, public healthcare system.

Nevertheless, the privatisation of Medibank Private should be opposed by all labour movement and community organisations as yet another blow against the public sector in the interests of big business. Medibank Private should be kept in public hands until a future people's government can implement a genuine, universal healthcare system by the extension and radical reform of Medicare.

The entire Australian healthcare system, including Medicare, is under attack from creeping privatisation, outsourcing and higher charges and fees. This includes the proposal by the federal government's Audit Commission to introduce a co-payment for GP visits (possibly $6), which could be considered for the upcoming federal budget in May.

Speaking at the Save Medicare rally at Sydney Town Hall on February 15, Brett Holmes, general secretary of the NSW Nurses and Midwives Association, said: "Privatising public health and moving towards an expensive and inefficient US-style managed care system is clearly on this government's agenda.

"That is a system where insurance companies decide what care is provided to patients based on their level of insurance cover. And most acute care is provided by profitable corporations.

"Make no mistake, co-pays or any other initiative in the guise of helping to fund Medicare marks its death knell ... There is no evidence that a co-payment for GPs or emergency departments will control costs effectively or that it will improve health outcomes."

Ian McCauley, writing in New Matilda in April last year, said: "Two-thirds of our $60 billion [federal budget] revenue gap is due to health-care spending. But the push to privatise health and move it 'off budget' must be fought — or hospital stays will soon become unaffordable.

"PHI [private health insurance] is essentially a 'privatised tax,' collected by NIB, HCF or Medibank Private, rather than by the Australian Taxation Office, to fund our shared health care needs ... Worse, because of its demonstrated incapacity to control service providers' costs, combined with a tendency to consumers to over-spend on health insurance, PHI results in high over-use and over-charging, a situation most clearly manifest in the USA where health care costs are now 18 per cent of GDP, compared with our 9 per cent.

"We should be wary of the PHI industry ... We need to see the PHI for what it is — an industry with a high bureaucratic overhead and with every incentive to see its market expand — rather than as part of our health care system."

If Medibank Private is sold to big business, this profit before human needs character of the PHI will then know no bounds. Health care in this country will take another major step in the direction of being a market commodity, rather than a social right for all.

Both British and Australian conservative governments are moving in the direction of a privatised US-style model of health care. It is crucial that the labour movement and the community in this country mobilise to oppose the privatisation of Medibank Private, which is a further step along the road to a fully market-based system — based on private profit, not human needs.

From GLW issue 1004



A question of Endless profit?

Endless profit beyond the rate of inflation in a free market is impossible, without government intervention at some level. To better explain I can law out some key points below.

* Any market is fixed in size and the rate of inflation monitored, so when companies seek to increase profits, the profit made does not magically appear its made from things such as winning market share from other business or job cuts when faced with little market growth or a loss in market share.
- To correct this the government then is lobbied to support business and take the brunt of the cost of the profit war in the form of unemployment costs and bailouts for large losses made by the failing companies (this is in itself a direct conflict of the principal of a free market where tax is lowered and business given greater freedom within their markets)

* Globalization simply combined each individual market into one large fixed market pool, therefor the growth of one individual market could continue at the expense of an off-shore market, meaning over time one sector or market may grow in strength while other markets crumble.
- In Practice the bigger economies or the more aggressive government's were the winners in that as profit goes overseas a declining market means job loss and a loss in tax revenue for government's that are then lobbied for bailouts and while also covering the costs of increased unemployment (the job losses amplified by cheaper labor in other economies and the drive for profit which leads to the shift of jobs from one economy to another)

* Manufactured growth in a limited global market means the ability of the free markets to lobby the various government's into subsidizing growth though debt ownership to ensure that the market and the companies vying for continued growth beyond inflation can continue a little longer.
- With massive job losses and a collapse of a market on the line a Government then continues to support a free market in direct conflict of what a free market stands for and takes the debt into itself to allow for this to continue while paying interest on the debt back to various elements in the free market to do so.

* What this means for situations like the sale of Medibank Private is simple that the market is unsustainable without taking in debt a government can not afford to pay without regulating a free market it supports with said debt ownership. Assets like this are sold to the debt holders earning interest of debt for across the board profit that can not be self supported in any fixed market.
- A loss of assets lowers the ability of a government to maintain itself effectively and gives ownership of public assets to private or offshore interests (this is not a bad thing in itself but when given the need to continue growth in any market the choice of which market losses out is an easy one)

In summery when a government has to sell off its assets, it is proof that subdividing a system not able to survive on its own will bring down an economy and more importantly the people in a economy, with assets owned offshore it has been seen what it means for a people who then find themselves stuck with massive budget cuts and strict austerity.
In a user pays system where to government no longer owns any assets of its own, the people are the ones who suffer if they can no longer afford to survive when the rule of profit is applied to every resource and every resource is a market with unsustainable profit growth.

At some point there will be winners while the rest will fall in the looser category, this is not a take at foreign interests or individual private interests. Its simply stating there is a limit to any economy/market and in this its people vs people as the point of a free market is simply having the freedom to have more then another.
So for a system to continue to serve to greater good of the people it must first stop choosing the winners and looser's in this struggle to sustain profit and protect its assets from individual ownership over public ownership.

Australia is a great country but to sustain the profit of both internal markets and offshore markets, the Australian government relied on its wealth of resources (aka: mineral resources) and debt, with the fight to gain the maximum benefit for mineral remeasures lost and the need to sell assets to pay debt the crunch time is coming faster then ever (if one was to say selling off major assets lowers debt and its repayments over look the reasons for the debt in the first place and the effects a lack of internal revenue has on a governments ability to raise future funds to support what is still an unsupportable system).

In finishing to find change we as a global society must recognize that to evolve as a global society means coming to peace with our need to profit at the expense of others and of the limits of the global economy/market to create a fairer system that supports the average person while not choosing the winners from the few.

I hope this has given you some things to think or ponder on and wish you a great day.
Kind Regards