The Government Plans to Sell Medibank Private - Article Example

Name: Professor: Date of Submission: The Government plan to sell Medibank private Question 1 The return of Abbott government is believed to create an asset recycling pool of funds. This is eventually going to give several states an increase in their value of assets. The increase in value would enable the state to have some investments in building new infrastructures; like ports, roads and railways. The federal coalitiongovernment has formed a great privatization push to own the Medibank private. According to the finance minister Matthias Cormann,this health insurance company would be put on sale as an initial public offering. This was expected to happen in the next financial year. Most of the banks have their estimates ranging between $4 and $6 billion, on the sale of Medibank. In the account to this, the private manager of Medibank has made claims that as a move to cut down the cost to the patients, then there would be some restrictions to some private hospitals. Savvides analyzed that with this new idea of privatization of Medibank, and then the organization would expect a total member population of about 4 million and as 30% shared in the health market. This report was given on the 1ts of October SMH. It’s important to note that this announcement came in just before a meeting of the federal state and the treasurer that took place on the 28th of March. From this meeting, Joe Hockey, was very happy with the historic agreement, which would lead to an achievement of millions of dollars from the sale of public assets.47 years ago,Medibank was considered to be an ideal idea of what makes up a Labor Company. According two great health economists, Dr.Moss and leader Whitlam, this move would bar the plan to make the health insurance voluntary and fragmented. The healthcare services would be less affordable to quite a number of the Australian population. In this era, health funds are providing financial returns to the shareholders in business, also known as the big insurance. Most of the health private insurers in the market, do not actively serve their shareholders by protecting and also advancing their care models. This move would have resulted to the best health outcomes for the Australian members, from the largest non-governmental organization. The coalition movement conveys that asset recycling is an insurance model for low cost services. Late October, there was a release of a prospectus on the listing of the company on the stock exchange in December. All this, was a great trick to win the communities confidence but in the real sense, patients would end up as the greatest losers in the private Medibank. This sounded like implementing the American –style model insurance to the Australian US-style. With the sale of Medibank which is a public asset, then it follows that public enterprise will have been handed over and the substantial business profit will have been reduced to 1% at the current bargain prices. This is large scale theft from the public purse. For 15 years, the sale of public sector facilities in Australia has escalated alarmingly. In the 90’s, when Hawke-Keating was in the labor government, there was the sale of Qantas and Commonwealth in the neoliberal crusade. What followed was the privatization of Telstra in 2006 and many other public assets in an attempt to grab off people’s property. Medibank private and the federal government, has carried out various campaigns to reassure the Australians that, this latest privatizations would not cause a rise in the premiums.Mathias Cormann the finance Minister, raised his concerns and pre-registered the offer of Medibank.This was majorly to enable policyholders to acquire 3.8 million preferential rises in the shares. This was meant to take place before October 15th.senator Cormann had very strong believe that by maintaining regulatory regime and strong competition in the sector, then the premiums would not go higher. Cormann denied any other investor the chance to buy more than 15% of the total share in the insurance company. This was contrary to what medibank Sales Act stipulated. This was to curb the previous price estimates that ranged to about $4 billion. The Act which had been pushed through in 2006 by Howard was halted, and by public opposition he was stopped from selling Medibank Private. He had planned to implement the sale of this company if his government was re-elected in the 2007 elections. The selloff plan failed after his government lost the election and since then the offer has never been finalized. Last year medibank recorded a tax profit of $315 million, but once the private property is sold to the public, then all these gains will be lost. The organization has been able to pay a total of $1.1 billion dividends in the last four years to the treasury. This is why; Cormann believes that the privatization of Medibank Policy will benefit both the taxpayers and policy holders. Once Medibank is in private hands, then it will have great flexibility to expound growth opportunities. The Australian dwellers will also enjoy high quality health care services that are also accessible. Catherine King, the labor health spokesperson, and ABC reporter raised her concern about the federal opposition. Medibank private had 4000 insurers and 3.8 million policy holders. This showed that it had around 30% in the market of the health insurancemarket. With this privatization, it is also predicted that the bank’s annual dividends would be approximately $500,000 which would be a gain in terms of the sale prices. In 1976, when Medibank was introduced, it is believed that had the government been a little more involved in its management, then it would have yielded more outcomes. This was in comparison to when it is handled by the private sectors.Malcom was the liberal Prime Minister then and was a strong oppose of the sale of Medibank in 2006.Whitlam labor government, was universally and publicly known to own the Medibank health care organization. Toabolish this, Malcolm Fraser mobilized his government and succeeded in coordinating the largest ever nationwide strike. It was led by the Trade Union of Australian Council. Medibank private, at the time has joined the union and this led a strong opposition for its removal. Medicare system is universally recognized as the public healthcare system. The insurance funds always co-existed with this system which made the controversy so evident. The public sector was seen to have its own business interests at heart. Unless a future government or person comes up with new and genuine reforms regarding the extension and radicalization of the healthcare systems, then the creeping privatization might never end. Nevertheless, if the Medibank Private ends up in the hands of big companies, then the profits might be so enormous and know no bounds. The health care will become a market commodity and not a social right. Question 2 Medibank was noted to have traded the highest stock in the Australian market with 259 million shares having changed hands. Medibank chief executive George Savvides echoed Senator Cormann’s confidence that the privatization would not, of itself, drive premium increases, or job losses. For the premium cost of ant firm to keep going, then a constant consumption should be maintained. In Australia, if the premium shares of Medibank will shoot then the consumption of healthcare services should be evident for both the young and ageing population. In a three year span, there has been a positive trend of 8%, which has made Medibank the market leader in the health insurance sector. Medibank has undergone tremendous changes in the market world for the last 38 years.Business was expanding in some areas but in concurrently pruning was considered very necessary. There was a great shortcoming that was observed since there was noticeable declining product marginal and hence the reduced profits in the firm. With the privatization of Medibank,then the economy converged to a steady state and investment was only sufficient to provide health services to those who could afford. According to great economists,the government could be said to have applied the endogenous growth theory to the Australian population. The government embraced this theory to postulate that by privatizing Medibank, then they would exploit the endogenous factors in the market. This growth model, assumed that relevant research and development should be critically carried out. The Australian government, is a profit maximizing firm that is positively aiming at raising the market gain and shares of Medibank The government after making Medibank a public asset, will continue to invest in the public infrastructure (ports, roads and railways).This eventually creates a positive dynamic effect on the investment share. The Harrod-Dorman theory (GDP), would also build its assumption on such a case of the privatization of Medibank.The theory was built in the late 1930’s and 1940’s.This was when most of the industrialized countries were being dragged into states where unemployment rates were very high and great decline in the gross market domestic shares. This was majorly because of recession. According to senator Cormann,there was only a 15% ownership limit, which created a conflict since the government was the industry regulator at the time. With the application of the GDP theory by the Australian government, will be equivalent to the national income rise. Consumer surplus is actually the difference between the amounts the consumer pays or the services or goods, and the amount they would have willingly paid for the same. The demand curve is the willingness curve for the consumer to pay. Graphically presented, the consumer surplus is the upper side of the market price and under the demand curve (area c). The diagram is a symbolic representation of the consumer surplus as imposed by the privatization of Medibank. Medibank consumer surplus graph (example) Consumer surplus= (base × Height) ÷ 2.In the above example; ((40-0)× (3600- 2000)) ÷ 2 (64000)/2 = $ 32000 The producer surplus will be presented by the minimum price at which the producer would will to supply a particular level of output. In figure 1,it is represented by letter (h).The main difference between the amount that producers receive (Medibank private),and the minimum amount they would be given to actually release the output, and in this case it would be affordable healthcare services universally. It is found in the area above the supply curve and below the current market price. Producer surplus = (base × height) /2; in the above example ((40-0) × (2000-200)) /2 = (40×1800)/2 = $32000 The Total Surplus summarizes the effect created by the trade on the welfare of different groups within a particular country. In the case where the government plans to privatize Medibank, then the total surplus is determined by the total profit share gains.it would be analyzed by considering if more citizens are able to access good and affordable health services. This eventually will lead to a vast growth of the whole economic diversification. The example below helps us to understand the effect of trade and its welfare on different groups within the world. With the understanding of the consumer and producer surplus of the Medibank Private, the graph (figure 3) summarizes the net effect of the sale of motorbikes in the United States. International sale of the motorbike market in the world (figure 3) The understanding of the consumer surplus and producer surplus are considered to be very important in most economic applications in the world. For instance, they are useful in determining the efficiency cost of taxation in a firm. For a long time, Medibank has suffered annual policyholders’ growth and also the net gain. This led to a great expectation in its management that would aim at decreasing the cost and increasing the productivity. If the Australian government imposes an excise tax on the purchase of Medibank healthcare firm, then this would create a wedge between the price that will be paid by the consumers and the price that is received when the producer falls. This difference is equal to the tax available per unit. It really would not matter if the finance minister Mathias Cormann,writes a cheqeue to the government, on what tax to impose on producers or the consumers as well. The tax that is set wholly depends on the price elasticity of the supply and demand. In the case study, the higher the price quotation on the sale of Medibank, the burden entirely falls on the consumers. This leads to increased prices of health services to the citizens of Australia. It causes a deadweight loss to the society. Question 3 After Medibankis privatized,it immediately gains the monopoly power. This entirely means that all its production decisions and managerial processes will involve several people in the government.These people may sometimes have very conflicting interests.If Medibank plans to maximize the profits from the current market value of $3.6 billion,then it would have to change its general organization.This means, it would be established as alegal system that has total authority handled by the shareholders.These would include the pathology and the medical Centre Health scope Centre. From the general equilibrium literature, the monopolized firms would entirely come up with a decision making model, driven towards profit and revenue maximization. The graph below is a demonstration of a monopoly firm that deals with ice-cream bars. It managed to maximize the revenue and the profits as well. (Fig 4) Question 4 The Australian government has put up attractive incentives in order to attract all interested partners. They believe if the float becomes successful, then the retail investors will have several avenues. This scenario proves that the government based healthcare is quite superior to the market based one.Medibank has very minimal profit margins but once it is privatized, then there are chances that it will be more efficient. In the Market based organization, Medibank would incur very high management expenses as compared to the industry. This in summary proves that Medibank has the potential to grow cutting of cost as well as establishment of efficient programs. The insurance premiums would rise since at the government level, there are more incentives to reach the health ministry. Since the government expects a great cost to be experienced while providing free health care, then taxpayers will be made to look up to the health insurances. Medibank also stands the chance to expand its travel, and pet insurance, which is a drive towards growth. This would lift it from the levels of dominant market share in Queensland and Victoria. Question 5 There was a joint survey of Canada United States healthcare policies, that was carried out between 2002 and 2003.The review showed that the health statue is not very different but the disparities are seen in the income related health issues. In America, the poor were known to have poor health but in Canada all Citizens could access health facilities equally.US health policies were always aimed at spending quite a huge sum of income on healthcare yet inequalities were evident. The insured Americans had similar advantages to the Canadians unlike the poor uninsured ones. There is a very conspicuous difference in the way the two countries in the way the healthcare services are delivered. The Canadian citizens, can access all healthcare services publicly unlike the Americans who must have a medical cover. On the other hand, the healthcare services in Australia are found to be universal. The government makes this possible by paying the cost of all the services in the public hospitals. This policy does not include any copayment for the patients. This is an advantage to the patient since they do not pay any extra cost. Secondly, the Australian health policy, aims at encouraging individuals with high income levels to get private insurance. This helps also to avoid congestion in the public centers and also ensure individualized care is accessible in the private health centers. Work cited Barro, R, Martin, X,Economic Growth, (2005).539 pp. New York, NY, USA. Claudia S, Jean, M. et al,Comparing Health and Health Care Use in Canada and the United States. Health Affairs, (2014). Retrieved on Dec from;http://content.healthaffairs.org/content/25/4/1133.long Deborah S, Medibank Private sale could unleash cutthroat competition, critics warn. Federal politics, (2014). Retrieved onOct 25th from; http://www.smh.com.au/federal-politics/political-news/medibank-private-sale-could-unleash-cutthroat-competition-critics-warn-20141024-11b2y6.html Donald N, Stengel,Principles of Managerial Economics, (2014). Retrieved from; http://catalog.flatworldknowledge.com/bookhub/reader/5572#stengel_1.0-ch02_s03 Jim, M, Green left weekly Patients to lose out from Medibank Private Sale, (2014). Retrieved on Saturday, October 18, from; https://www.greenleft.org.au/node/57548 Jim, M, Green left weeklyGovernment moves to sell Medibank Private, (2014).Retrieved onSaturday, April 5 from; https://www.greenleft.org.au/node/56202. Michael, B,Medibank shares: how the float is performing, Australian business review, (2014). Retrieved on Nov 25th from; http://www.theaustralian.com.au/business/news/medibank-shares-how-the-float-is-performing/story-e6frg906-1227134106959?nk=c63c6c4df6c7b1ded14de0f4b3c89051 Mike, K,Medibank Private: 10 reasons to register for the IPO.The Motley fool, (2014). Retrieved on Oct 8th from; http://www.fool.com.au/2014/10/08/medibank-private-10-reasons-to-register-for-the-ipo/ Thomas, A,International economics, Retrieved from;http://www.mhhe.com/economics/pugel12e/keygraph/graphkey1h.html# Read More