The Australian Government intends to sell Medibank Private. Describe why Medibank Private was originally established and critically discuss the Government's reasons for privatising this organisation.

Essay by H_DivisionUniversity, Bachelor'sA+, October 2006

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Medibank Private has been Australia's largest and only national private health fund since it was established in 1976 by the Fraser government. It was set up for a combination of reasons, mainly that it would increase competition in the private health insurance sector and strengthen the government's capacity to reform and regulate the industry (Scotton & Ferber, 1978, p.183). In April 2006 the commonwealth government announced its intention to sell Medibank private. It said there was a conflict of interest in being both the regulator of the whole private health insurance industry and the owner of its largest single competitor (Abott & Minchin, 2006, pp. 2-3).

Medibank (public) was introduced on the 1st of January 1975 by the Whitlam Labour Government as a compulsory health insurance scheme. The scheme provided for universal coverage of the population for medical expenses. On the 11th of November 1975 the Whitlam government was dismissed and the Liberal Fraser government came to power.

The Fraser Government promised to keep Medibank as part of its election platform. However, it induced changes (Medibank Mark II). Part of these changes included the introduction of new regulatory controls on private health funds. The new requirements on the health funds included the provision of a specified basic insurance package, entry into the reinsurance pool, new data collection and reporting standards and coverage for all applications irrespective of risk status (Sax, 1984, p.136). The existing health funds representatives expressed to the government that it would have difficulty in meeting the new requirements. As a result the government conceived of Medibank Private as a way of overcoming the lack of cooperation from existing private health funds by imposing demanding competition. This competition would improve the whole private health insurance sectors standards, and subsequently producing more accessible private health for Australians.

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