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The Australian Government Intends To Sell Medibank Private. Describe Why Medibank Private Was Originally Established And Critically Discuss The Government's Reasons For Privatising This Organisation.

991 words - 4 pages

Medibank Private has been Australia's largest and only national private health fund since it was established in 1976 by the Fraser government. It was set up for a combination of reasons, mainly that it would increase competition in the private health insurance sector and strengthen the government's capacity to reform and regulate the industry (Scotton & Ferber, 1978, p.183). In April 2006 the commonwealth government announced its intention to sell Medibank private. It said there was a conflict of interest in being both the regulator of the whole private health insurance industry and the owner of its largest single competitor (Abott & Minchin, 2006, pp. 2-3).Medibank (public) was introduced on the 1st of January 1975 by the Whitlam Labour Government as a compulsory health insurance scheme. The scheme provided for universal coverage of the population for medical expenses. On the 11th of November 1975 the Whitlam government was dismissed and the Liberal Fraser government came to power. The Fraser Government promised to keep Medibank as part of its election platform. However, it induced changes (Medibank Mark II). Part of these changes included the introduction of new regulatory controls on private health funds. The new requirements on the health funds included the provision of a specified basic insurance package, entry into the reinsurance pool, new data collection and reporting standards and coverage for all applications irrespective of risk status (Sax, 1984, p.136). The existing health funds representatives expressed to the government that it would have difficulty in meeting the new requirements. As a result the government conceived of Medibank Private as a way of overcoming the lack of cooperation from existing private health funds by imposing demanding competition. This competition would improve the whole private health insurance sectors standards, and subsequently producing more accessible private health for Australians.According to health policy commentator, Sidney Sax (1984, p.136), the government wanted to avoid a dispute with the unions, the establishment of Medibank Private was probably also a response to strong pressures from the union movement. Sax argues, the decision to establish Medibank Private was, in part, 'influenced by a wish to defuse union attacks over the Medibank changes'. Because the change of the 2.5 Medibank levy would offset gain to private enterprise the unions were angry about this Medibank change (Sax, 1984, p.136).The government has argued that 'there is no policy reason for the government to continue to own a health fund' (Abbot & Minchin, 2006). The government has also suggested that a privatised Medibank Private is likely to be more efficient because it will create even more competition in the private health insurance sector and, as a result, reduce premiums. (Abbot & Minchin, 2006). Opponents of the sale have suggested that there are important policy reasons for maintaining the current ownership...

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