| Publication: | The Daily Telegraph |
|---|---|
| Date: | 19 May 2009 |
| Section: | Breaking News |
THE three million members of the nation's largest health fund Medibank Private will be robbed of more than $120 million a year when the Federal Government starts clawing back 50 per cent of the fund's profits later this year.
In a little noticed Budget decision Finance Minister Lindsay Tanner announced last week that the government-owned health fund would be converted into a for-profit fund.
This means it would for the first time pay 30 per cent company tax on its profits and return 50 per cent of its after tax profit to the Government each year.
The decision would have robbed Medibank Private's three million members of about $120 million of its latest posted profit of $187 million. If that money was instead available to cut premiums on the fund's 1.4 million policies, they would be around $85 per policy per year lower.
Medibank Private gets no funding from the Federal Government - it is entirely financed by the premiums its members pay.
In 2006, a Parliamentary Library report raised questions about whether the government did in fact own the fund, which gets all its money from its members.
Mr Tanner said that his legal advice was that the government did own the fund.
He said the reason he wanted to tax the fund and take 50 per cent of its profits was that it was more competitive than privatised rivals.
Many of Medibank Private's major competitors have converted from mutual organisations into for-profit health funds in recent years. These private funds have to pay company tax and return a profit to shareholders.
Mr Tanner said this gave Medibank Private an unfair advantage over the for-profit health funds it competed against.
"That is reflected in its build up of financial reserves which is three times the minimum level required," he said.
Mr Tanner insisted the structural change would "not lead to any premium increases".
"The Medibank Private board has provided written assurances to the Government that these changes will not lead to premium increases," he said.
Yet at the same time he claimed unless the change was made Medi- bank Private would "have an unfair competitive advantage".
He said the fund would be able to offer "unsustainable premiums and its major competitors would not be able to compete".
Medibank Private was unavailable for comment yesterday.
