Wednesday, September 06, 2006

Medibank Private Sale

Senior Federal Government ministers have been spruiking the possible sale of Medibank Private. (private health insurer) Health Minister Tony Abbott, Treasurer Peter Costello and Finance Minister Nick Minchin have all issued press releases saying how a share float would be good.

They suggest:

  1. a privately owned and operated Medibank Private would be able to reduce upward pressure on premiums in the industry.
  2. bring a competitive and pro-commercial tension and enthusiasm to this industry
  3. greater accountability and better governance to this company


  1. Did privatising the Commonwealth Bank reduce upward pressure on bank fees? Does employing a new CEO, Board, Company Secretary mean lower costs? The history of new executives and boards in companies is that their salary packages balloon. Look at Sol Trujillo's salary package, or the salary packages offered to new bank CEOs!
  2. Has (partially, soon fully) privatising Telstra brought enthusiasm to investment and metropolitan and regional maintenance of lines and infrastructure? Some new developments in metropolitan areas don't get access to broadband.
  3. Are these ministers suggesting that Medibank Private, as a Corporation, is not meeting its accountability and governance requirements? Are government corporations that bad?? There has been no hint of problems from ASIC. Why would a minister denigrate a government-owned corporation? So he can sell it cheaply to achieve political ends?

Whether a government should sell a revenue-generating corporation that provides a service, and which does set competitive premiums for the industry is the real question.

Do YOU want to sell and let "market forces" drive the price up?

The Analyst

Postscript 12-September-2006

Following surveys showing that 2/3 of Australian voters do NOT want Medibank Private sold, Federal politicians had different responses:

  • Health Minister Tony Abbott was rationalising that selling Telstra (T3) AND Medibank would be too much for the market! Poppycock - the market copes with multiple share prospectuses at once. But there is an election next year and T3 is already unpopular, especially with rural and regional voters.
  • Human Services Minister Joe Hockey believes that the Government should continue to try to sell Medibank - the old "crash through or crash" philosophy.

The bottom line: I believe the government should retain Medibank Private. As a government-owned corporation, it helps to set the standards for other commercial Health Funds.

The Analyst