The political health of the Medibank Private sale

Despite its name, Medibank Private is owned by the Australian government, which wants to sell it – though not now until after the election.

One thing we can be sure of, though, is that public opinion won’t support it. In the 1980s, there was some popular support for privatisation, but it went into decline after major privatisations began in the early 1990s. Asked at an abstract level in 2005 (in the Australian Survey of Social Attitudes) whether privatisation brought more benefits than costs, 53% disagreed and 17.5% agreed. On more specific privatisations, some of the ‘don’t know’ respondents say ‘no’, with about two-thirds typically against the two main recent sale proposals, Telstra and Medibank Private. This was seen again in an ACNielsen poll published in yesterday’s Fairfax broadsheets, with 63% against selling Medibank Private off and 17% in favour. Newspoll recorded almost the same result back in April.

Politically, I believe that marketisation and privatisation are contrary agendas – though in a policy sense they are synergistic agendas. The pragmatic Australian electorate wants reliable, cheap services, and as I argued last year in Telstra’s case if things are broadly ok people will stick with the safe status quo. Telstra’s service levels have improved significantly since the telecommunications market was opened up, and so removed the ‘do something, anything’ frustrations that were probably driving pro-privatisation opinion. Similarly, Medibank Private operates in a competitive market already so it is hard to see how privatisation will create any significant consumer benefits, and indeed as the Newspoll found most people think premiums would rise if it was privatised (though in reality competitive conditions in the industry will be the main determinant of prices).

The government isn’t likely to win this debate, but far more significant privatisations than Medibank Private have proceeded without obvious political cost, so they may as well take the cash from a sale if and when they can.

12 thoughts on “The political health of the Medibank Private sale

  1. Andrew, I agree with your analysis, but does the Government want the cash in an election year? They’re privatising Telstra because they got the numbers (sorry) and don’t want to risk not privatising it. But another sale would leave them only with more cash for the FF that Labor can use to promise more infrastructure.


  2. Rajat – Fair point. Looked at in political terms, they won’t get electoral benefits from having the extra money, and they will suffer some negative sentiment in selling it. The current situation seems however to be quite unsatisfactory politically, since they will suffer the same political costs whether they do or don’t sell it.


  3. Do you think? Labour will try to make it into an election issue but one amongst many. The fact that it won’t be actually happening might keep the issue out of the news to some extent.

    It’s probably a separate post but I noticed that there often seems to be a delay between something actually happening and public opinion surveys (eg the delayed ‘bounce’ from this year’s Budget tax cuts). It’s almost like people need to have their opinions validated (or formed?) by newspaper/TV commentary before they will reveal those opinions to pollsters. If that is the case, the Government might think having Medibank as a relatively minor election issue invbolves less political cost than media commentary on the privatisation process as it unfolds.

    That said, I suppose the Government’s poor 1998 election performance (amongst other examples) suggests that people were concerned about the prospect of a GST.


  4. One of the things I find really odd about this entire issue is the strong opinions that people have against privatization — including many that use other private health insurers.


  5. Conrad – Views on these issues are confusing. People say that they don’t trust politicians and that they believe government services are getting worse, but somehow still think government is the best institution to run a commercial entity in a quasi-market.


  6. On that general question question about privatisation, did they have an “It depends” option? Because surely that’s the only sensible answer to such a question – the why and how both really matter.

    On the why, it’s hard to see any rationale for the government keeping Medibank Private. This is not to say the how won’t be stuffed up (we may see the classic privatisation problem – the pollies artificially boosting the sale price by implicit promises of future rents).

    Telstra really is a much more difficult question.


  7. I agree with you DD (and definitely on the Telstra part). I was just surprised that people really cared so much about Medibank private in particular, given that most people are not insured by them, and the fact that there are heaps of other providers (including non-profit ones) that offer essentially the same services (often cheaper). It seems hard to imagine that anyone would notice any particular difference if you simply removed Medibank private as a provider altogether.

    I’m also not even sure if these responses are coming mainly from people thinking the government can run things better (at least I wouldn’t bet on it). I wonder if people answering this survey are under the mistaken impression about what Medibank Private actually is and does.


  8. I have never been against privatisation in principle, but I am of the “it depends” persuasion.

    Telstra is a complete cock up at present.

    On the MediBank Private issue – I have been a member from the start coughing up in excess of $2k most years. I have stuck with it in the face of better deals because I have viewed it as a mutual society. I was making an investment in “my” mutual fund. If it goes for-profit not only will I feel ripped off but I’ll probably opt out of insurance altogether. I reckon I’m not alone.

    Private Health insurance costs will go up driven by both loads of customers dropping out and also a drive to profits.


  9. I think the rationale for postponing the sale was one of resources and focus on the part of the government. Privatisation programs tend to be en-masse firesales, as happened with a range of state-owned enterprises in NZ during the early-to-mid ’80s, or they are carefully managed one-off programs.

    The Australian experience with Qantas, the State Banks, the Commonwealth Bank, T1, T2 etc. would suggest that governments devote an extraordinary degree of focus on the details of each sale and do their best to deal with media or legal issues as they arise. The government has signalled that it is beyond their abilities to manage the fallout from more than one large-scale privatisation project at any one time, and that the scope for complex and contentious issues in the lead-up to next year’s election will be limited.

    Perhaps a newly-elected government, or one as desperate for liquidity as NZ was in about 1984-85, would juggle Medibank and T3 simultaneously. The Howard government today is neither, thus it won’t.


  10. FXH, if you are worried about for-profit medical insurance, then there are other providers out there that are not for profit. I have AHM (about to be demutualized — I’m not sure whether that means it will become for-profit), mainly because it is the cheapest. I’m sure there must be other non-profit ones out there.

    This is one of the weird things about health insurance and what people think about it. Lots of people are only too happy to give to private charities, but would balk at government ones, but somehow the government non-profit insurance provider is better than the non-government non-profit ones. (or is it that they think there should be both?)

    I wonder if you could ask people “what do you think about the governments 80 million sale of the SE Australian forestry plantation” [a name which I just made up] and still get the same ratio of answers.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s