The ethical way to pay out the proceeds of sale would be to distribute them to the people who have paid in, in proportion to their contributions.

Mr Ariel has allowed his - perfectly justified - distaste for the horde of leeches who regularly suck on the teat of IPOs, to colour his views on a perfectly sensible transaction.

He asks first of all, what is the prime objective of the sale. The "prime" objective is for the Government to get out of a business in which it has no legitimacy, as Government ownership adds no value to the process of insurance. Would you expect there to be a government insurer to insure your house, or your car? Same applies to health insurance. It is a commercial venture.

The next objective is to recoup as much money from the process as possible for the taxpayer. Mr Ariel canvasses a series of alternatives to an IPO. If any of these had been likely to produce a greater return, I am reasonably sure one of them would have been chosen, if only because the "financial community" would have taken slab of that process too, and they have only pecuniary motives.

His last question is of course the silliest". "Will the government guaranty [sic] that insurance premiums will not skyrocket?"

This would require the Government to simultaneously "guaranty" that the population will cease to get older, that medical science will stop innovating, and that the public health system will become more capable of serving the needs of the community in a timely and cost-effective fashion.

The sale of Medibank is simply an exercise in common sense.

Think of it this way. If Medibank Private did not already exist, would the government create it, and on what grounds?

The author seems to be of the impression that because it is government owned it isn't motivated by profit.

Medibank Private is a highly profitably government run enterprise. While it is certainly true that the government could use it's dominant position to force premiums lower, well, they haven't done that. Their Gross Margins are at the industry average of 13% and considerably higher than not-for-profits such as HCF.

Medibank Private has been able to use its government ownership to foster a feeling of trust and help it to gain significant market share, yet its prime motivation is profit.

The real tragedy was the loss of the dominant not-for-profit health funds, particularly MBF. Don't worry about Medibank Private, it is just another highly profitable corporation operating in health insurance.

There was a time, when we were the third wealthiest nation on the planet and a creditor one at that, when government function actually included ALL essential service provision, as a core government responsibility!
And the income derived, more than enough to cover all social security obligations, in the compact every government has with the people, their ALLEGED masters!
As others have noted, Medicare Private is not being privatized (selling the people's property to the people) because it is running at a loss, the only cogent reason a good manager has for divesting the portfolio of an asset!
But on highly flawed Ideological grounds alone, and or, to continue to afford to support GOVERNMENT FUNDED PRIVILEGE!?
So if this trend continues, what role is actually left for a government divesting itself of all core responsibilities?
An extraordinarily expensive debating club!?
Vultures that gather around successful enterprises, trying to work out even more complex ways to leech an entirely unearned share?
In living memory, we have at least one example, where the government funded ALL IT'S OPERATIONS out of government owned enterprise, and was so well managed, that the voting population, made sure that they were in the country, each June or July, in order to collect their share of the surplus to needs income!
And finally crueled by the same brand of professional parasites, who mounted a clever campaign that essentially said, the government has no business in business!
And turned the whole thing around, where the public incoming earning shareholder, were cleverly converted to tax payers, and their former healthy incomes, concentrated in fewer and fewer hands! The real goal of so called privatization!?
If we are to outsource and privatize all government service, why not do the same with government itself.
I mean, if all they are is to become an expensive debating club, eyeing off our remain civil liberties, filled to the gunwales with expensive political perks and entitlements!?
What real use are they, except as a parasitical leeches, sponging/taking a living from the makers; or, their so called Masters!?
Their masters?
Bah Humbug! Rhrosty.

Again sob, (3 times in just one week) I have to agree with my arch enemy, JKJ! Ha ha.
However, given dat iz nod going to happen, ve have no ozzer choice, but to uss zup any remaining medicare private entitlements!
Zen opt out, zay in fawor of a cheaper not for profit HFC?
Vich iz vot all health funds vere once, or ven zay vere first created, in order to pay for a wery superior class of public medicine!
Ver goot? Yah?
Rhrosty

The scariest thing about the sale of Medi-bank private is that it is sending us down the road of the American Health care system.

It is another nail in the coffin for medi-care and our public hospital system.

Lessons from America.
https://theconversation.com/creating-a-better-health-system-lessons-from-the-united-states-30266

<IPOs for state owned assets, as commonly conducted, serve little purpose other than to enrich so few at the expense of so many.>

This is so true, and who are the people most likely to make donations to the corrupt Liberal party?

Wow watch out Rhostry LOL - we'll make a libertarian of you yet, pretty soon you'll be consistently in favour of liberty, and then where will we be?

That's a red herring, Jardine K. Jardine.

>>The ethical way to pay out the proceeds of sale would be to distribute them to the people who have paid in, in proportion to their contributions<<

Small problem. Medibank Private ceased to be a mutual (i.e. owned by its members/policyholders) back in 2009, when the Rudd government turned it into a "for profit" organization, 100% owned by the government, and liable to pay tax on its profits. That was the opportunity to recognize the value of members' contributions, as happened with e.g. MBF when they were taken over by BUPA, and nib, when they IPO'd. Five years later, it is both an irrelevant exercise, and one that would be impossible to implement fairly.

And this is pure "there's a monster hiding under my bed" imagination, Wolly B.

>>The scariest thing about the sale of Medi-bank private is that it is sending us down the road of the American Health care system<<

Arrant nonsense.

Successive Australian governments have developed a highly effective combination of a core taxpayer-funded system that is augmented by close to $16bn a year in voluntary private insurance subscriptions.

Nothing in the Medibank sale changes that balance. As "just another health fund", operating in a competitive market for a highly-valued service (healthcare), Medibank will need to be even sharper in future, as will all its competitors.

Which is an important consideration, given that a visible impact of Obamacare in America has been the creation of a level of competition between insurers that has actually slowed the growth of healthcare costs in the US. It's what competition is for, people.

There is not one single aspect of the Medibank IPO that brings us closer to the American system.

Don't listen to propaganda (and that includes the Medibank prospectus, of course). Take the time to work it out for yourself, from first principles.

The sale of Medibank private is in accordance with best practise.

1 The point of government is to deliver services that the private sector cannot deliver efficiently. That 70% of the market is private indicates that this is no place for a government owned company especially one insuring family pets.

2 The proposition that MP is a price leader that can keep prices low is fatuous considering that it is not by any means the lowest, and a privately owned company is not likely to shred its market share by raising prices.

3 The sale of MP will give to the treasury 100% of its value + 30% of future profits and employee paye.

Jardine,

You insist that in any privatisation the proceeds should be distributed to the people who paid into the fund. I suppose along the lines of the demutualisation of MBF and its reincarnation as part of BUPA.

There is a flaw in your argument. Most funds started as private enterprises, where those who paid into them took the risk that the funds will make a go of it.

Medibank however was established in 1975 through the Health Insurance Commission, a part of the Commonwealth government. It was not established as a private organisation. It was capitalised by all Australians, including those who opted for its rivals.

Pericles

You state that the "prime" objective is for the Government to get out of a business in which it has no legitimacy, as Government ownership adds no value to the process of insurance".

Really? You don’t believe that by competing in the health care market and in so doing:

a) sending a price signal to rivals when it comes to premium rises;
b) not only providing competition in an oligopolistic market but making money while doing so. Money that finds its way into Consolidated Revenue and not the pockets of what could become a cartel.

Surely the above two arguments makes the consumer/taxpayer better off?

You ask if I “would you expect there to be a government insurer to insure your house, or your car? Same applies to health insurance. It is a commercial venture”.

I beg to differ.
Finding money for health care, unlike home or automobile insurance is not an option. When the Crown exits this industry, in due course “consolidation” will occur. Higher premiums should follow. In tandem with lower payouts on claims.

You add that “the next objective is to recoup as much money from the process as possible for the taxpayer. Mr Ariel canvasses a series of alternatives to an IPO. If any of these had been likely to produce a greater return, I am reasonably sure one of them would have been chosen”

Again I beg to differ.

One of the unspoken rules in government is that : “the government will always do that which benefits the taxpayer most, so long as it does not conflict with what benefits the government most".

Selling Medibank for say $5.5 billion via an IPO and in the process enriching folk whose votes a government wants or needs by $500 m makes more sense to the spin merchants and lobbyists than selling Medibank say to a foreign insurer for $6 billion.

Wattle

Maybe my point was not clear. I am not opposed to Medibank being a for profit fund. The fact is that it doesn’t cost the Commonwealth to be in the health insurance business. In fact it makes money and that makes its way to Consolidated Revenue.

We can't turn the clock back to when it was a not for profit fund. Therefore my query is “how do Australians benefit from privatising a Commonwealth owned for profit fund’?

Wolly B

Yes I too fear that this sale is taking us down the American road with respect to healthcare.

Pericles

You state that “there is not one single aspect of the Medibank IPO that brings us closer to the American system”.

How long do you think it will take the Commonwealth to exit the role of arbitrating on health insurance premium rises and outsource that task to an “independent body”.

Independent of the taxpayer sure.

Independent of market players? I wonder.

An odd question, Jonathan J. Ariel.

>>You don’t believe that by competing in the health care market and in so doing:
a) sending a price signal to rivals when it comes to premium rises;
b) not only providing competition in an oligopolistic market but making money while doing so... etc. etc.<<

Pricing in this market is already closely managed by the government, through the Department of Health and Aging being required to approve the funds' price formulae for the following year. Furthermore, Medibank Private has had ample opportunity in the past, while in government hands, to provide a "price signal". They haven't done so.

You also fail to see the contradiction in your statement above. Reality says that the more "competitive" the pricing, the less profit will be available.

>>Money that finds its way into Consolidated Revenue and not the pockets of what could become a cartel.<<

Being involved in business purely because it makes money should never be front-and-centre in government policy. They should concentrate on those public services that the market cannot provide. The government has no legitimacy in what is a purely commercial enterprise. If they had, Coles and Woolworths would also be owned by the taxpayer.

And this is even odder.

>>Finding money for health care, unlike home or automobile insurance is not an option. When the Crown exits this industry, in due course “consolidation” will occur. Higher premiums should follow. In tandem with lower payouts on claims.<<

The government is already the major force in healthcare, using money collected from all taxpayers. "Finding money for health insurance" is very much an option for the individual. Consolidation may well occur, but is more likely to spur competition than decrease it. Which you would know, if you understood the industry.

>>How long do you think it will take the Commonwealth to exit the role of arbitrating on health insurance premium rises and outsource that task to an “independent body”.<<

The real question is, why do they need to arbitrate in the first place?

You clearly need to do more homework on how the industry actually works.