Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Treasury Place, Melbourne: transcript of doorstop: Medibank Private's $175 million loss, medical indemnity insurance, AFL grand final.

Download PDFDownload PDF


Stephen Smith MP Member for Perth Shadow Minister for Health and Ageing


E & OE

Subjects: Medibank Private’s $175 million loss, medical indemnity insurance, AFL grand final

SMITH: Two issues today. Firstly, Medibank Private and secondly medical indemnity insurance.

Today, Medibank Private have announced a record $175 million loss. For Medibank Private’s 3 million members, what this means is a loss of $60 for each individual member and over $200 per family.

This comes on top of the increases in premiums that we saw the Government approve in breach of an election promise at the beginning of the year. A 9% average increase in premiums for Medibank Private, a 16% increase for its most popular product and a 66-100% increase for excesses. That cost families who are insured with Medibank Private anywhere from $150 to $250.

It also comes on top of the Government’s announcement on September 11, again in breach of what John Howard described as an “absolute” and “honest guarantee”, that the Government would allow automatic CPI increases each year for private health insurance premiums.

On the basis of the current CPI of just under 3%, that’ll see increases for Medibank Private - for families who are insured by Medibank Private - of anything between $50 and $100 next year. So, I think this puts in place a very grave risk that there’ll be further premium increases above and beyond that for Medibank Private.

This is in breach of the Government’s election commitment that there would be downward pressure on premiums and premiums would be reduced. The Government as well must explain whether it knew about these losses when it approved Medibank Private’s premium increases in the first quarter of this year.

Just on medical indemnity insurance, the Commonwealth and State Health Ministers are meeting today. I hope the State Health Ministers put the pressure right on Kay Patterson on medical indemnity insurance.


The Federal Government has been dragging its feet very badly on this issue and today I’ll be outlining a comprehensive plan that the Commonwealth should adopt to bring the medical indemnity insurance problem under control.

This includes pursuing uniform tort law reform through the States, a greater role for the ACCC to ensure that patients aren’t unreasonably or unfairly hit with the on costs of medical insurance, introducing what’s described as open disclosure legislation to reduce the risk of litigation, ensuring that there is a national effort on improving clinical outcomes and reducing risks - as this is an area where we can’t just focus on tort law reform - ensuring there’s greater prudential supervision by APRA and also the Commonwealth undertaking a role for the medical defence organisations so far as re-insurance is concerned.

So, the Government can’t simply wait until we have another medical indemnity insurance or UMP crisis. They need to act urgently and I hope the State Health Ministers today really put the weights on Kay Patterson and the Commonwealth to ensure that we finally get some Commonwealth action on medical indemnity insurance.

JOURNALIST: … think people will leave private health insurance [inaudible]?

SMITH: Well, I think the great risk now is that people who are insured by Medibank Private, Australian families under financial pressure, in the run-up to the election John Howard told them that their private health insurance would become more affordable, it would be more attractive and their premiums would be reduced. That’s what he said to them.

Medibank Private members have seen since the election a 9% average increase, 16% for Medibank Private’s most popular product and a 66-100% increase for their excess payments. That’s cost families anywhere from $150 to $250. With the CPI automatic increase that can go to a further increase of between $50 and $100 next year and now what do they see?

They see a $175 million record loss. That’s $60 per individual member, $60 each for each one of Medibank Private’s 3 million members. That’s $240 per family, so those families who’ve been slugged this year by an increase of between $150 and $250 can quite rightly ask the question, did the Government know about these losses when they approved Medibank Private’s private health insurance premium increase slug earlier this year?

The great danger now is that people will start to walk away from private health insurance and if that’s the case, that’ll be a direct consequence of John Howard saying one thing before the election and another thing happening after. Before the election he said premiums would go down, all we’ve seen since the election is premiums go up.

JOURNALIST: … selling Medibank Private? [inaudible]


SMITH: Well, I don’t believe that Medibank Private should be sold off and certainly you wouldn’t want to sell Medibank Private off in advance of looking very carefully at the competitive nature of the private health insurance industry.

Medibank Private is the dominant player, it’s the only national player and the grave risk of privatising Medibank Private is that you will see in the private health insurance industry the same adverse consequences we’ve seen with the partial privatisation of Telstra, the dominant player in the telecommunications market: costs go up and services go down and quality of services are reduced. So, this is certainly not the time for Medibank Private to be privatised.

As well, I think the Government has to now very clearly outline to the Australian public what it knew about these losses and whether it knew about these losses when it approved Medibank Private’s 9% average premium increases earlier this year.

JOURNALIST: …Medibank Private… reaching a better financial position. Are you confident…? [inaudible]

SMITH: Well, I’m certainly confident that Medibank Private is sustainable. This hasn’t had an adverse impact on its reserves so there’s no doubt that as the only national private health insurer, the only national player, the dominant market player, that it’s certainly in a good state so far as the long term is concerned.

But if you were insured with Medibank Private you are entitled to ask the question. Medibank Private has just lost $175 million, that’s $60 on average per member, $240 per family. That’s roughly the equivalent of the premium increases that families were subject to earlier this year.

They’re entitled to ask the question, did my family’s premium increases pay for the losses and would someone mind explaining to me the detailed nature of those losses and did the Government know about those losses prior to approving the premium increases.

JOURNALIST: … scoping study… give away the Government’s hand? [inaudible]

SMITH: Well, the Government’s made it crystal clear that it’s ideologically obsessed with flogging off Medibank Private. We saw the scoping study approved in the Budget. Regrettably, I don’t think the Government will be deterred in any way by these results, they’re ideologically obsessed with flogging off Medibank Private. Joe Hockey was out there a few weeks ago saying that was the Government’s view. So, I don’t think that this will deter them in any way. What I think the public should focus on and the Parliament should focus on ultimately is whether it’s a good policy idea or a bad policy idea to flog off Medibank Private. My strong view is that it’s a very bad idea to flog off Medibank Private.


JOURNALIST: …grand final this weekend … who are you backing?

SMITH: Who am I backing? Well, when it was just the VFL I had some sympathy for Fitzroy. Now that’s it’s the AFL, I come from an outlying State, so I’m going for the Brisbane Lions.

JOURNALIST: [inaudible]

SMITH: Oh, I think it will be a close contest. I think Collingwood will do a lot better than some of the pundits are predicting. I think it will be a tough game. But, in the end the Lions will get over the top and there will be many people in Fitzroy who’ll enjoy that.


Contact : Andrew Dempster - 0407 435 157 or 02 6277 4108