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Minister explains why selling Medibank Private will be better for consumers.

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Thursday 27 April 2006

Minister explains why selling Medibank Private will be better for consumers


ELIZABETH JACKSON: The Government's under fire this morning after revealing its plan to introduce a "smart card" for health and welfare benefits. Some, even within the Government's own ranks, fear the card could become a new national identity card and want more to be done to protect people's privacy. 


On another front there's also been broad criticism of Cabinet's decision to sell off Medibank Private. 


Doctors and the Opposition say the sale is likely to push up insurance premiums and while the Government doesn't disagree, it's not offering Medibank's members any guarantees. 


The Health Minister Tony Abbott told our reporter Gillian Bradford in Canberra that privatising Medibank will be better for consumers. 


TONY ABBOTT: They'll certainly get in the long run a better managed company to have a policy with. 


If you look at the Commonwealth Bank, if you look at Qantas, the people who did business with those formerly government-owned operations, I think have all in the long run benefited from the fact that they're now in private ownership and I think it'll be the same with Medibank Private. 


GILLIAN BRADFORD: You say better-managed company, but probably what members want to know is, is that going to bring down premiums? 


TONY ABBOTT: If the management is absolutely top level, if the business is run in accordance with the best business principles, if it's hungry to do better, yes they'll ultimately enjoy lower premiums. And it's interesting that the largest for-profit health insurer, BUPA, has generally speaking, very competitive premiums and quite low administration costs. 


So if you look at the actual experience of privatisation in the Australian context, privatised entities have done better afterwards than before. 


GILLIAN BRADFORD: A lot of mum and dad investors still have a bad taste left in their mouth after the sale of Telstra. These are the same people who are Medibank Private members. How are you going to keep them happy? 


TONY ABBOTT: Well the best way to keep people happy is to deliver good services and the Government believes that the competition is a much better guarantee of good services than government ownership. 


GILLIAN BRADFORD: Under the "smart card", the Government's estimating that's going to lead to three billion dollars in savings. It's a huge amount, so should the Government release that KPMG report that details those savings to show the public why there is such a good reason for this card? 


TONY ABBOTT: Yeah, look, it's not normally government practice to release these kind of documents and the three billion dollars worth of savings is inevitably an estimate, because we're talking about three billion dollars worth of savings over about a decade. 


So in the context of a social security system which runs to well over $50 billion a year and a total government benefits system that runs to something like $90 billion a year, even if there are only one per cent of savings to be generated, that certainly would add up to well over three billion dollars over a decade. 


So we're not talking here about widespread abuse of the system, we're just talking about inappropriate claiming at the margins, but even very marginal improvements when we're talking about such a massive system, can produce very big savings. 


ELIZABETH JACKSON: The Health Minister Tony Abbott.