The Privatization of Medibank - Case Study Example

The Privatization of Medibank Student’s Name Institutional Affiliation Word Count: 1617 Introduction Medibank is a healthcare insurance in Australia that has a current market share of 30% (6 million policyholders) out of the thirty-four health insurers (Baer, 2008, p.260). Baer has added that the liberal government in 1976 formed this insurer with an aim of providing cheap medical cover to its citizens. Unfortunately, as from the year 2009, Medibank changed its role of not-for-profit organization; thus, it started commercializing its operations. Logically, this suggests that the organization commenced to pay taxes and dividend to the government and shareholders that aided in relieving the public of the tax burden. Notably, there are plans to sell the Medibank Private in the financial year 2014/2015, which has raised so many questions not only among the politicians, but also among the Australian citizens (Al-sharqi, 2012, p. 453). In this paper, the writer seeks to evaluate the likely impacts of such a sale by giving supporting and opposing opinions. Proponents for the Privatization of Medibank The individuals who firmly believe that privatization of Medibank is in line with the societal expectations have a number of reasons. Firstly, these proponents say that the Australian government should apparently define its role in the insurance market. Presently, the government is a regulator as well as a market participant in the medical insurance industry, which contradicts its responsibility. It would be wise if the government precisely defined its role by being a one-sided party in the insurance industry. Simply speaking, the government should strive to be the regulator only so that it protects the public interests. It is worth mentioning that taking such positions would also help the government cleanse its name in the public who would have already formed a tainted image as well as reduce ambiguity that may stem out of being an authorizer and a participant. Sometimes, the other private competitors feel that the Australian authority knowingly betrays them so that Medibank remains one of the largest insurers. Secondly, the government will realize a one-time gain from the sale of Medibank organization. The purchasing power of a unit sum of money depreciates with time due to the investment risks, inflation and rising exchange rates. Therefore, if the sale of the Medibank were to take place today, one would realize more valuable cash. Surprisingly, the funds that the government realizes from the sale can go into development activities. In view of this, it implies that the government can start income-generating projects that target to uplift the standards of living of the community (Al-sharqi, 2012, p. 459). Constitutionally, the relevant authority has a responsibility of providing its citizens with vital infrastructures and social utilities. Consider, for example, government ministries can use the sales proceeds to set up and improve conditions of learning institutions, health centers, electrification, roads, communication and network systems and public halls. Thus, the proceeds benefit both the government and its citizens. A third note is that the sale would have no effect on the level of premiums. An empirical study shows that there is little likelihood of an increase in premium contributions. According to Scoping Study, there are no enough evidences to conclude that the cost of the cover will rise up(Australian Department of Finance, n.d.). Financially, the sale will have no impact on the public domain. Furthermore, the privatized Medibank must provide sufficient grounds and adequate justifications for an alteration in the premium level. The process of scaling up the premium rates follows the bureaucratic ladder where each stage critically scrutinizes the provided justifications. Knowingly, every department points out weaknesses in the proposed rates; hence, rates will only change in rare cases. It follows that if the government were to privatize the firm the public would be sure of continued quality services and products. Besides, the privatized Medibank has to offer competitive, but affordable terms to all its stakeholders. Another note is that the government authority relating to regulation of insurance providers shall continue to exist. In regard with this, the government shall expect Medibank to adhere to the set regulations just as the other competing health insurers are doing (Wang, et al., 2011, p. 2111). For example, a rise in the premium rates is subject to scrutiny from the Private Health Insurance Administration Council. Further, after the council scrutiny, the Ministry of Health has to approve the proposed bill. The government has clearly stated that as a privatized corporation, Medibank still has the role of providing consumers with high level of services. Thus, quality and consumer satisfaction are some of the primary goals that Medibank has to fulfill once privatized. The relevant authority has reported that the sale process will take place in the prescribed manner and in accordance with the existing regulations. Here, the responsible person will only disclose information of material relevance to enable wise-decision making; hence, the public will comprehensively follow the sale process. Importantly, the sale of Medibank means that there will be increased competition that assures the customers of improved quality of goods and services. Opposing Side Contrarily, other people feel that no one should privatize the Medibank Private. One of the reasons is that such a sale would raise the tax burden on the citizens. As pointed earlier, Medibank pays tax that assists in reducing tax burden because it has turned to being a for-profit organization (Goot, 2005, p.32). The Rudd government taxed its citizens less significantly than the Howard administration because it was receiving incomes from Medibank (Aulich &O’Flynn, 2009, p.371). Therefore, the sale would financially challenge the taxpayers, as they will have an extra tax burden to take. The second reason is that the government would miss receiving benefits in form of dividends, which suggests deficit of the national budget; thus, hindering the progress of public projects. The presence of social utilities and amenities determines the level of living standards of that community. Vividly, the sale of Medibank is highly likely to lead to backwardness, increased poverty level and resources inequality; hence, widening the gap between the rich and the poor. Of importance, existence of wealth discrepancies is and has never been the intentions of any responsible government authority; thus, the government would act contrary to its norms if it allows the privatization of Medibank. Besides the aforementioned views, the sale of Medibank private would have an effect of reducing government services to its citizens (Cook, 2006, p.195). For instance, once the sale process is complete, the government forgets about some of the incomes it was receiving from that insurer. The sale shows that the dividend income to the government disappears (McAuley, 2013) yet the citizens expect it to perform optimally. Therefore, the administration will have to recoup that income through exploiting the citizens. Consequently, this generates pressure as the community members strive to earn their daily breads. Moreover, only 22% of the entire Australian population and 32% of coalition supporters are after the privatization. Logically, the government may experience increased resistance, complaints, and negative commentaries that have the effect of having hard times while dealing with the public. In some instances, the public may be unable to bear with such hardships and turn into revenge say through causing unrest, riots, organized coups, strikes and conflicts. Significantly, the relevant authorities and leaders emotionally and psychologically suffer. In fact, acts of violence always have consequences of reduced productivity and wastage and destruction of property; thus, a sluggish economy growth. An important point is that the proponents of the sale should provide more justice against the government ownership. In relation with this, one should remember that what matters is not who heads the organization, but its purpose and how to achieves this (Aulich, 2011, p.207). Accordingly, Medibank purpose is to provide affordable health insurance services as well as provide the government with revenues. Hence, as long as Medibank can responsibly execute those functions, it actualizes the organizational mission and vision statements. The issue of removing the government as the participant would only make sense if the government obscures the realization of the organizational goals. Fortunately, the government smoothens the road towards the actualization of the dreams. Closely related with this is that the government fairly treats all the firms in the health insurance market. It is vivid that the government has no preferential privileges to Medibank; thus, it fairly and diligently exercises its power. Precisely, it implies that, by being both a regulator and an insurer, the government does not act contrary to its expectations. Therefore, there are no sufficient grounds to claim that the governmental duality has hazardous effect on either the parties. The sale of the Medibank is likely to be a uniformed decision for the Australian residents. The act of privatizing of the Commonwealth Bank of Australia has many lessons for wise people to learn because valuation revealed that the sale involved a loss of approximately $3.4 billion. Here, collective owners transferred wealth to the buyers, which is a bad decision. Additionally, it is an indicator of inefficient use of public resources, as the country would not optimally enjoy the benefits of such a sale. Instead of the sale, the government should consider learning from the mistake of the Commonwealth Bank of Australia incidence to prevent occurrence of such an error in the near future. If the same mistake occurs, everyone would question the government integrity; hence, loss of public confidence and trust. From the above discussion, it is apparent that the sale of Medibank has merits and demerits. After critical analysis of both sides, it is precise that the demerit side has more weight due its hazardous effects relating to financial, political, economic and social issues. Therefore, the Australian government should not privatize the Medibank Private. Otherwise, the administration is highly likely to encounter stressful experience in its day-to-day activities. References (2013). Is selling Medibank a good idea? It remains to be seen. Retrieved from http://www.theguardian.com/commentisfree/2013/dec/14/is-selling-medibank-a-good-idea-it-remains-to-be-seen. Al-sharqi, O.Z. (2012). Healthcare development in the kingdom of Saudi Arabia, Australia and the USA: A comparative analysis. Journal of King Abdulaziz University: Economics & Administration, 26(2), 447-472. Aulich, C. (2011). It’s not ownership that matters: It’s publicness. Policy Studies, 32(3), 199-213. Aulich, C., &O’Flynn, J. (2007). John Howard: The great privatizer? Australian Journal of Political Science 42(2), 365-381. Baer, H. (2008). The Australian dominative medical system: A reflection of social relations in the larger society. Australian Journal of Anthropology, 19(3), 252-271. Cook, B. (2006). Privatizing health: The demise of Medicare. Australian Journal of Social Issues, 41(2), 195. Department of Finance, Australia. (n.d.). Frequently asked questions- Medibank sale. Retrieved from http://www.finance.gov.au/property/medibank-sale/medibank-faq.html. Goot, M, (2005). Politicians, public policy and poll following: Conceptual difficulties and empirical realities. Australian Journal of Political Science, 40(2), 32. McAuley, I. (2013). Privatizing Medibank: Good business hamstrung by bad politics. Retrieved from http://theconversation.com/privatising-medibank-good-business-hamstrung-by-bad-politics-13526. Wang, C. et al. (2011). A proposed framework for understanding the forces behind legislation of universal health insurance-lessons from ten countries. Health Services Research, 46(6), 2101-2118. Read More