Should the Australian Government Privatize Medibank - Assignment Example

Should the Australian Government privatise Medibank? Name: Lecturer: Course: Date: QUESTION 2: Should the Australian Government privatise Medibank? Introduction The debate on whether Medibank should be privatized has pervaded the Australian discourse since the national private health insurer was launched in October 1976. A review of recent media reports indicates that the debate gained new momentum in March 2006 after the Australian government confirmed its plans to sell it (TheGuardian 2013). The decision to sell the fund is based on the perspective that there ‘lacks a good public policy reason’ for the Australian government to possess a health fund. Privatizing is viewed by some quarters as likely to take out the perceived conflict of interest, with the government being both the owner of the primary health fund, as well as regulator of the industry (Aulich & O'Flynn 2007). According to Buckmaster and Davidson (2006), the sale of the privately owned health fund would bring more efficiency in healthcare although it may result into lower premiums for members. Building on these perspectives, this essay argues that Medibank should actually be privatized. Promote quality services Privatizing Medibank is likely to uphold quality in the Australian health care industry. Indeed, in 2006, the Australian government stated its objective for selling the fund as seeking to maintain quality levels and service for Medibank Private Contributors. This, however, ignites the question as to whether privatizing Medibank could actually affect the interests of Medibank Private Members (Alexander 2014). Basing on the recent concerns studies, Medibank could be believed to be providing quality services to its members. Complaints concerning Medibank are almost relative to its market share, which is to a small degree better than the industry standard, in relation to the proportion of contributions given back to members as benefits (Bennet 2013). Medibank also tends to increase premiums frequently, making it less attractive. The main concern, however, is whether there is any potential risk that the sale of Medibank could have. According to Kelly (2013), privatizing Medibank could make the insurer less focused on member’s interest. This would, however, be dependent on the kind of organization Medibank turns out to be following the sale. For instance, if Medibank turns out to be a for-profit fund, it would focus less on the member’s interests since it would also focus on fulfilling the shareholder’s interests. This is among the reasons that Medibank debated strongly for the sustainment of a not-for-profit industry within its 1996 submission to the Productivity Commission’s private health insurance inquiry (Buckmaster $ Davidson 2006). Promote larger public interest Privatising Medibank could promote larger public interest. Some opponents of the Medibank sale have suggested that privatising Medibank could place the historical role of the fund in promoting wider community interests and the interests of its members at risk. For instance, according to Deeble (2013), in case the fund is sold, the pressure on the government to lift the regulations and allow them chase after their members will be greater. In other words, Deeble (2013) opines that Medibank has generally inclined to prevent actions that may be of business interests if the actions are in disagreement with the obligations of the wider community. There is a proof that Medibank has historically tried to play the public interest role, proposed by Deeble (2013). For instance, an examination of Medibank’s submissions to the Commission’s private health insurance inquiry discloses that Medibank was a strong advocate for private health care. This active support on behalf of community rating is important for two major reasons. It was barely in the business immediate interests of a private health insurer to promote community-rating actively as opposed to risk-rating (Aulich & O'Flynn 2007). Next, by emphasizing social imperatives like equity and universality, Medibank offered an origin of advocacy and informed analysis that could challenge the debates of those who favoured the move from community rating to further risk-based ideas (Aulich & O'Flynn 2007). This indicates that there is indeed some evidence concerning Medibank’s positive role in advocating the function of wider social imperatives within the regulation of the privately owned health insurance industry. Technically, Medibank has played this role, since during its existence, it was run by the HIC, which operated it based on the same culture of equity and universalism (Buckmaster $ Davidson 2006). Promote competitive market for private health insurance Privating Medibank could trigger a more competitive market for private health insurance (Robert 2013). In fact, the government’s objectives for sale indicate its desire to promote a competitive and efficient private health insurance industry (Aulich & O'Flynn 2007). Indeed, analysis by Standard and Poor’s that any sale of Medibank is likely to affect the industry’s competitive dynamics significantly adds weight to reasons for privatizing Medicare. Even though Standard and Poor’s failed to specify what it implied by ‘affect the competitive dynamics,’ it appears to point at privatisation as being the primary force for change. Standard and Poor argued that the sale of Medicare may result into rationalization and larger concentration in the industry. Commenting on the Australian government’s policy to sell Medibank, Seccombe (2014) suggested that privatization would pose a threat to the fund’s role in offering competition to the health insurance private sector. Recently, the commission’s 1997 report noted that Medibank appeared to have played a catalytic function in increasing competitive pressures within the industry. Although it is not clearly shown from the reports, it seems that based on Medibank submissions, the identified competitive pressures were mostly in the areas of efficiency and innovation (Aulich & Wettenhell 2008). With respect to innovation, Medibank has debated that its new products development, such as those planned to produce a lower priced entry level to private health insurance, have been vital for maintaining and gaining its present national market share. Other funds have also indicated a strong record in relation to administrative efficiency. Other health insurers have varying levels of influence in specific states in Australia though Medibank continues to dominate in each state. Medibank’s firm national presence implies that Medibank has substantially assisted in setting the health industry standard for low costs of administration (Buckmaster $ Davidson 2006). Promoting growth of private health insurance industry Privatising Medibank is likely to encourage growth of other healthcare industry. In fact, the government has stated that promoting the growth of the private health insurance industry as one of the reasons for seeking to privatise Medibank (Aulich & O'Flynn 2007). Medibank’s national presence and large size provide it with advantages in terms of negotiating quality and cost with health care services providers through HPPAs (Hospital Purchaser Provider Agreements). McAuley (2014) argues that providers of healthcare services such as medical specialists and private hospitals have a strong market power hence they need to be faced by strong insurers. Medibank’s network development of preferred hospitals that have accepted certain quality criteria and cost is an example of how it makes use of its strong bargaining power in negotiating with health care service providers (Bennet 2013). As part of the negotiations, Medibank insisted that hospitals would be expected to provide price discounts when the number of treated members went up beyond certain levels. Cost containment Privatizing Medibank is likely to cut the cost of payments for treatments. According to media reports, Medibank also looked for limits on which it would fund intensive care and limits for particular treatments, as well as the duration it would pay for patients to be admitted in hospital (TheGuardian 2013). The health fund also tried to enforce set payments for treatments in which hospitals are required to meet all costs. Arguments could be made that any model of sale that had the possibility to cut down the negotiating strength of Medibank could be fairly considered to put the role played by the health fund in controlling costs at risk, since it challenges the market power of health care service providers (Aulich & Wettenhell 2008). It can be equally argued that any kind of sale that affected the increase in national presence and size of Medibank could enhance the fund’s role in containing costs by testing the healthcare providers market power (Buckmaster $ Davidson 2006). Conclusion Medibank should actually be privatized. As discussed, privatizing Medibank is likely to uphold quality in the Australian health care industry. Indeed this rationale has been strongly supported by the Australian government, which stated its objective for selling the fund as seeking to maintain quality levels and service for Medibank Private Contributors. Privatising Medibank could also promote larger public interest. Some commentators have suggested that privatising Medibank could place the historical role of the fund in promoting wider community interests and the interests of its members at risk. Privating Medibank could trigger a more competitive market for private health insurance. In fact, the government’s objectives for sale are in line with its desire to promote a competitive and efficient private health insurance industry. Privatising Medicare is likely to cut costs of treatment paid by health insurers. Privatising Medibank is also likely to encourage growth of other healthcare industry. Reference List Aulich, C & O'Flynn, J 2007, “From Public to Private:The Australian Experience of Privatisation,” Journal of public administration, vol. 29 no. 2, pp. 153-17 Aulich, C & O’Flynn, J 2007, “John Howard: The Great Privatiser,” Australian Journal of Political Science, vol. 42 no. 2, pp. 365-381 Aulich, C & Wettenhell, L 2008, Howard's Fourth Government: Australian Commonwealth Administration, 2004-2007, UNSW Press, Sydney Alexander, C 2014, To sell or not to sell government assets, that is the question, viewed 7 Oct 2014 Bennet, M 2013, "Medibank sale has advisers circling," The Australian, viewed 7 Oct 2014, Buckmaster, L & Davidson, J 2006, The proposed sale of Medibank Private: historical, legal and policy perspectives, Information analysis and advice for the Parliament, no.2, pp. 3-36 Deeble, J 2013, "A Healthy Beginning: The Origins of Medicare," Australian Economic Review vol 46 no. 2, pp191-195 The Guardian 2013, Is selling Medibank a good idea? It remains to be seen, theGuardian, viewed 7 Oct 2014 Kelly, J 2013, We won't sell Medibank Private: Wong, Business with the wall street journal, viewed 7 Oct 201 4 McAuley, I 2014, Medibank Private IPO: no sure thing for investors, The Conversation, viewed 7 Oct 2014 Robert 2013, Time for Medibank to really go Private?, Australian medical association, viewed 7 Oct 2014 Seccombe, M 2014, The troubled campaign to privatise state assets, The saturday paper, Read More