Dissenting report - Australian Labor Party
The Health Insurance Commission (Reform and Separation of
Functions) Bill 1997 has two purposes. The main purpose is to separate Medibank
Private from the Health Insurance Commission (HIC) and establish a separate
corporation to be known as Medibank Private Ltd.
The second purpose is to allow the HIC to take on additional
functions, specifically health payment services and provision of health
The specific details of the legislation and the nature of
the evidence presented to the Committee by the various witnesses are adequately
summarised in the majority report.
With respect to the proposal to widen the role of the Health
Insurance Commission we are not opposed in principle to such changes provided
they do not in any way threaten the existing role of Medicare and the
Pharmaceutical Benefits Scheme (PBS).
However, the ALP Senators cannot agree with the majority
recommendation that the Bill proceed. We are not convinced that the main purpose
of the legislation is either desirable or in the public interest. In our view
the evidence provided to the Committee during the inquiry supports the
maintenance of the current arrangements namely that Medibank Private remain
within the HIC.
"Perception" of Competitive Advantage
The major reason advanced by those supporting the separation
of Medibank Private from the HIC is a "perception" that Medibank
Private enjoys a market advantage over other private health insurance funds.
Mr Schneider, representing the Australian Health Insurance
Association, explained it in the following terms:
since the introduction of Medicare, the private health insurance industry has
been concerned about the existence of a conjoint operation in which Medibank
Private has shared operations with a government program, Medicare. We have
historically believed that led to an unfair marketplace situation, so our
concern in relation to this legislation is principally to ensure that it does
achieve a level playing field as between Medibank Private and the private
health insurance sector. (Hansard Transcript of Evidence, p 1)
There are two other aspects
that we would wish to comment on. One is retail activity on the part of Medibank
Private. As we have pointed out, there has been much concern about one-stop
shopping in joint Medicare and Medibank Private offices, which has led to the
perception of commercial advantage, whether real or not. We would certainly
hope that from fund transfer day, as I believe it is called, that operation
would cease and that the Medicare transactions would take place in offices
separate from those operated by Medibank Private. Alternatively, of course, it
would be appropriate to offer a similar service via the private health
insurance industry. (Hansard Transcript of Evidence, p 2)
It is interesting to note that the concern of the AHIA is
with the "perception" that Medibank Private has some
advantage. During the hearing the AHIA was unable to provide any data or
evidence that the private health insurance funds had suffered as a result of
the co-existence of Medicare and Medibank Private. Rather they acknowledged
that such evidence was anecdotal and that it had, in any event, been disputed
by Medibank Private and the HIC on many occasions.
In his evidence Dr Loy, on behalf of the Department,
The aim of the government in
putting forward the bill to separate Medibank Private and the Health Insurance
Commission was, as has been mentioned several times during the hearing today,
to address the issue of the perception and reality of competitive neutrality,
first. (Hansard Transcript of Evidence, p 13)
However Dr Loy then went on to say:
That is not to say that the government accepted that there was
any real cause for concern. The arrangements that were made between the
government programs side of the Health Insurance Commission and Medibank
Private were as sensible and robust as could be desired. Nonetheless, there was
a perception and a reality of being able to establish Medibank Private on a
competitively neutral basis with other funds. (Hansard Transcript of
Evidence, p 13)
In his second reading speech the Minister stated that:
Through the separation, the government will ensure that Medibank
Private cannot be perceived to have any competitive advantage over other
private health funds through its association with Medicare or other government
program functions of the HIC.
This issue of competitive advantage has been examined
previously. As the majority report notes the Joint Committee on Public
Accounts in 1992 stated that it was "not persuaded by evidence that
cross-subsidisation occurs" and the Committee specifically noted that Medibank
Private, Medicare and the HIC were all subject to audit by the Australian
National Audit Office (ANAO).
Given that no real evidence has been presented to prove that
Medibank Private gains an actual competitive advantage by virtue of
co-existence within the HIC we are not persuaded that there is any good policy
reason to separate Medibank Private from the HIC and corporatise it. The
concerns of the private health insurance industry about "perceptions"
are not a sound basis for such significant change in the structure and
administration of a successful public enterprise.
Upon Medibank Private Members
The ALP Senators believe that members of Medibank Private,
and indeed, members of other funds, may be disadvantaged as a result of the
Firstly the Government has previously announced that 43
Medicare Offices will be closed. This reduces the number of Medicare offices
throughout Australia from 269 to 226. Whilst this decision was a separate
matter it nevertheless results in fewer offices providing dual services for
Medicare and Medibank Private.
It is further proposed, as a result of this legislation and
the separation of Medibank Private and the HIC that, in future, Medicare
offices will no longer provide services or facilities for Medibank Private.
Rather Medibank Private will be required to open their own new office
locations. Whilst the HIC was unable to state how many such offices would be
opened, and that the matter was still under discussion, the Community and
Public Sector Union indicated that their understanding was that 70 offices
would be established. This was not refuted by the HIC.
Thus, the net result of the government's changes will mean
that the number of Medibank Private outlets will be reduced from around 269 to
approximately 70. Given that reduction and the fact that Medicare Offices will
no longer provide the facility members of Medibank Private will no doubt suffer
a significant diminution in the availability of over the counter service. We
do not accept that such a change can be simply overcome by greater use of
telephone or electronic lodgement facilities.
Customers of Medibank Private have enjoyed the availability
of co-location with Medicare and from their own evidence the other funds have
not found this to be a difficulty for their fund members. In an era when the
virtues of the "one-stop shop", especially in respect of government
business enterprises and services, are being recognised it seems incongruous
that customers of Medibank Private and Medicare should be affected by such
Further, these changes will have a significant impact in
rural and regional areas as customers will be unable to use their local
Medicare office and may have to travel long distances to any new Medibank
Secondly, whilst the Government says that this legislation
has no financial impact on the Commonwealth, and the HIC claims that it can
manage the separation so as there is no increase in costs, we are concerned
that ultimately there could be increased costs to the fund members.
It has been acknowledged that the establishment and success
of Medibank Private has had a beneficial impact upon the private health
insurance industry. It has increased competition. It has reached number 1 and
this has been achieved under its present structure. Nothing has been put
forward to suggest that this would not continue or that the proposal to
separate and corporative will dramatically improve it.
The establishment of new offices will inevitably involve
costs. In answers provided after the hearing the HIC estimated that the fit
out cost of an office will be around $80,000. If 70 new offices are opened
that is a total cost of $5.6 million. Additional establishment costs can be
expected for new computer systems, rentals or purchase of property,
advertising, administration, etc.
Such costs together with the loss of economies of scale and
reduced competitive force may lead to increases for members of Medibank Private
and across the industry generally. Even if such establishment costs are
ultimately absorbed by closures or transfers it still seems unnecessary to
implement such changes for no real public benefit.
This legislation will, if enacted, make it much easier for Medibank
Private to be privatised.
The private health funds, who strongly support this bill,
have in the past advocated that Medibank Private should be privatised. In its
submission to the Industry Commission in 1996 the AHIA expressed the view that
"the Commonwealth has no more role in operating a private health insurance
organisation than in running an airline". (Industry Commission, Report No.
57, February 1997, p. 92)
The Industry Commission's Report also noted that National
Mutual Health Insurance "considered that Medibank Private should be
de-linked from Medicare and privatised" and that Australian Unity
"considered that Medibank Private could first be corporatised and then
ultimately privatised". (Industry Commission, Report No. 57, February
1997, p. 92)
The Government has stated that it does not intend to
privatise Medibank Private and that the legislation will ensure that it remains
in government ownership. During the hearing the Chairman of the Committee also
stated on a number of occasions that the Government intended to tighten the
provisions to prevent future privatisation in the absence of parliamentary
approval. However despite these assurances the Government is no longer
proposing to amend the bill to this effect.
Given such an about-face this bill must increase the
prospects of privatisation.
The CPSU gave evidence of the concerns of the Union and its
members employed by the HIC particularly in Medicare/Medibank Private offices.
These were outlined by Mr McKenna as follows:
Of considerable concern to our members has been that section of
the legislation which deals with the forcible transfer power of the minister,
or his or her delegate, to transfer someone against their will to Medibank
Private Ltd. Staff turnover in the Health Insurance Commission is not high and
there has always been a very enjoyable mix of work between the government
program work and the Medibank Private work. It is fair to say, for example,
that someone who may have only just joined the Medibank Private operations of
the Health Insurance Commission will be forcibly transferred against their
will, if they do not wish to transfer, by virtue of the section in the
legislation which gives that binding power to the minister or his or her
The second major concern we have in relation to the industrial
aspects of the legislation is the 12-month mobility right. There is a standard,
if you like, in the Australian Public Service of three years mobility for
someone who has left the Public Service to be employed by a Commonwealth owned
statutory authority; they have what is called a three-year mobility right back
into the service. We cannot see any real reason why that standard does not
apply in relation to the separation of Medibank Private from the Health
Insurance Commission. We would specifically point you to section 28(4) of the
bill which we would seek to be changed from a 12-month mobility right to a 36-month
In conclusion, we would say that this legislation is
unnecessary. There is nothing here to be fixed. The Commonwealth ownership of
the Health Insurance Commission and, thereby, Medibank Private Ltd has been a
very positive development in the private health insurance industry over the
past couple of decades. (Hansard Transcript of Evidence, p 8)
The CPSU also expressed concern that, whilst they did not
expect big job losses as a result of this legislation, eventual privatisation
could lead to redundancies.
Mr McKenna summed up the concerns in the following comments:
Senator Forshaw -
Mr McKenna, can you see any advantages in this proposal at all for either Medibank
Private or the Health Insurance Commission generally or the public?
Mr McKenna -
Frankly, no, for all those three parties. This is going to be a very disruptive
exercise over the next 12 months to separate 1,200 staff and establish them,
not only in a different business entity but also physically move them. In some
states, they even have to go to the expense of physically relocating staff into
new Medibank Private buildings, and that seems to be an unnecessary cost and an
unnecessary change on the working lives of our members. We are still looking
for the rationale that underpins this legislation.
I point to the minister's original media release from 10 April
and, again, the second reading speech just recently where he uses the word
`perception' repetitively, that there is a perception of competitive advantage
through co‑location. That might be the perception of the private health
insurance industry, but if you go through the quite rigorous statutory cost
apportionment guidelines and the minister's own cost apportionment guidelines
which must go through Treasury, above and beyond the statutory ones, there is
no real basis for that perception. It seems an unnecessary piece of legislation
in response to a perception. (Hansard Transcript of Evidence, p 10)
The ALP Senators agree with this
analysis. Medibank Private has proved over the years to be a successful health
insurance fund. Its current structure as part of the HIC is adequate and
appropriate. We do not believe that separating it from the HIC and
establishing it as a separate corporate entity will advance either the public interest
generally or the interests of the fund members. The legislation is
unnecessary and should be rejected.
|Senator Michael Forshaw
(ALP, New South Wales)
|Senator Kay Denman
|Senator Sue West
(ALP, New South Wales)
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