Is it a Good Decision to Privatize Medibank - Essay Example

Should the Australian Government privatise Medibank? Contents Contents 2 Introduction 3 Discussion 3 Conclusion 7 References 8 Introduction In 1976 when fund commenced the operations Medibank was been founded as Australia’s largest national and the only national private health insurance company Medibank getting privatized is been discussed on large scale. The company is the largest service provider of both health insurance and health solutions to the customers in Australia. It is well known for its high quality service and products that are been provided to the customers on a regular basis. The company has grown at a good pace over the years. But government of Australia is been trying to privatize the company. With the help of this report it can be seen whether it is good decision by the Australian government to privatize the company rather than keeping it as a national health insurance company. The issue is more critical as it is the only national health insurance company in the country and once it gets privatized than the role of government in providing health insurance to the customers does not exist at all. Discussion The company Medibank is one of the largest in Australia in the health insurance industry. In an annual basis the company pays around billions of dollars worth of money to the hospitals for medical claims been done and it has its link with more than 600,000 hospitality service companies which helps in serving and providing hospitality facility to millions of citizens in Australia and provides them to have a safe and healthy life (Medibank, 2014). The government of Australia decided to privatize this company in November 2013 and Medibank also welcomed this decision seeing it as a huge opportunity for the business and also for the customers. Government of Australia had to take this decision because of the following series of events that took place from 1976 till present. In 1978 the Medibank standard got abolished and the operation of Medibank Private was made a sole responsibility of HIC. A huge decline in the percentage of population looking to insure for treatments in hospitals because of the introduction of Medicare. The percentage dip was from a considerable 60% in 1984 to 30.6% in 1998 (Medibank, 2014). In 1998, the Medibank Private got separated from the HIC and thus a new corporate has been established as Medibank private limited in 1998. Gradual increase in the market share of private health insurances. It incurred a loss of $175.5 million in 2001-02 because of the 20% rise in the benefit outlays which is related to the increase in cost of utilization of resources and also cost of the health care services (McIlroy, 2014). Thus this decision taken by the government to privatize Medibank is due to the uncertainty in the health insurance sector, changes in the governmental policy and reduction in demand of health insurance among the customers for treatment in hospitals. Because of the increasing competition in the private health insurance sector the private companies are made to come up with better facility and also innovative ideas to provide to the citizens to make sure they can get a lot of competitive edge over the competitors present in the market in the same industry. Government of Australia believes that with the privatization of Australia’s largest health insurance company the company will get a lot of benefit as the performance level of the company will increase in a good manner and also the efficiency of the company can increase by a good percentage (Claude, Céline, Anne and Lucia, 2004, pp. 45-49). The company’s administrative cost is far below that the industry standards which does show that the company is lacking behind even after such nice performance. The sale of the company will help to increase the promotion and marketing of the company which will help it to increase its brand awareness and also attract more number of customers. The brand name of the company is already very huge in the market of Australia thus a good promotion and marketing strategy will help the company to attract more customers and also provide a lot of competitive advantage to the company over the other competitors in the market. This ultimately will provide better hospitality facility and also health service for the customers, thus improving the health conditions of the country by a huge way (Martin and Parker, 1997, pp. 23-29). The privatization of the company will also allow the company to increase its revenue as at the moment the revenue for the company is very low thus it is affecting the operations of the company in a huge way. It will also bring better work culture in the organization and also increase the productivity in the company as new standards will be implemented and thus make the employees work in more efficient way thus utilizing the resources in more optimum way (Knapp, 2000, pp. 232-235). This will reduce the amount of wastage and thus help in reducing the cost by a good amount. This will provide more fund for the company which it can provide to the customers so that they can have a good healthy treatment from the hospitals (Feyter, 2005, pp. 78-84). Private health insurance companies provide the best of hospitality facility to the customers based on the insurance package that is been taken by the customers. This helps in increasing the focus over the customers as they get the acute level of treatment and the accurate facilities that are needed by the customers based on the package they have been enrolled for (Kotler, 2001, pp. 12-17). While on other hand privatizing the health sector will also have a lot of negative impacts. The private health insurance companies tend to charge more from the customers to increase their profitability. The companies look to take wrong and illegal paths for increasing their market share and revenue by a good percentage (Fitzroy and Herbert, 2007, pp. 112-115). This are like they charge more from the customers but they provide the package which is of less costing to the customers. For the customers to have faith on the private companies when it is related to health sector is very difficult thus they tend to look from options from the government. Thus if the government of Australia privatizes the Medibank than customers won’t be left with any national health insurance company and all the health insurance companies will be private in the country (Moore, 1963, pp. 64-72). This will affect the customers also in a huge way as they will find it difficult to rely upon a particular company for health insurance as all being private the amount of risk is high. With risk factor being high in case of health sector people generally tend to fear a bit more and look to search for the safest place (Kozami, 2002, pp. 134-137). Apart from this there are many other private insurance companies in the country and with Medibank becoming privatized the amount of competition will be very high. Other companies have already set up nicely and have created a good market share in the country thus it will be very difficult for Medibank to create its brand image again in a new way as a privatized health insurance company (Pride and Ferrell, 2011, pp. 124-132). Looking at both the positive and the negative points with regard to the decision made by the government for privatizing Medibank it can be seen that this decision will have a huge impact in the health insurance industry of the country (Cunningham and Harney, 2012, pp. 89-96). In case of Medibank, government of Australia plans to privatize the entire process by keeping a certain hold over the company’s procedures thus not allowing the particular private company who buys it to have complete rights over the company. Thus for Medibank to be privatized in this manner will help it a lot to get the competitive advantage from the other private companies present in the country and also will make the customers to have faith on the company for taking health insurance plans for their treatment in the hospitals (Wright, 2006, pp. 68-74). Conclusion Thus looking at this report it can be seen how privatization of a particular company does creates a lot of impact on the company’s policies and practices. With regards to the health insurance sector the customer satisfaction and providing the best service to the customers is very important to ensure that they can have a safe and healthy life with all the facility. The government of Australia has made the right decision to privatize the only national health insurance company in the country and also have some role on the company which will benefit the company and also the customers in huge way. The company will get a good promotion and marketing thus the brand awareness of the company will be increased by a huge amount and also because of the presence of the government the company will not be able to misuse its power thus provide the best of facility and service to the customers. References Claude, B. Céline, K. Anne, V and Lucia, W. 2004. Development Centre Studies Privatisation in Sub-Saharan Africa Where Do We Stand?: Where Do We Stand?. America: OECD Publishing. Cunningham, J. and Harney, B. 2012. Strategy and Strategists. London: Oxford University Press. Feyter, K. 2005. Privatisation and Human Rights in the Age of Globalisation. London: Intersentia nv. Fitzroy, P. and Herbert, J. M. 2007. Strategic Management: Creating Value in a Turbulent World. USA: John Wiley & Sons;. Knapp, E. 2000. The Brand Mindset. New York: McGraw Hill. Kotler, P. 2001. Marketing Management. London: Prentice Hall. Kozami, A. 2002. Business Policy and Strategic Management,2e. New Delhi: Tata McGraw-Hill Education. Martin, S and Parker, D. 1997. The Impact of Privatisation: Ownership and Corporate Performance in the UK. London: Psychology Press. McIlroy, J. 2014. Government moves to sell Medibank Private. [Online]. Available at: < https://www.greenleft.org.au/node/56202>. [Accessed on 2 may 2014]. Medibank. 2014. About us. [Online]. Available at: < http://www.medibank.com.au/about-us/privatisation/>. [Accessed on 2 may 2014]. Medibank. 2014. Corporate-Information. [Online]. Available at: < http://www.medibank.com.au/About-Us/Corporate-Information/An-Overview.aspx>. [Accessed on 2 may 2014]. Moore, E. 1963. Social Change. Prentice New Jersey: Hall Inc. Parliament of Australia, Department of Parliamentary Services. 2016. The proposed sale of Medibank Private: historical, legal and policy perspectives. [Online]. Available at: < http://www.aph.gov.au/binaries/library/pubs/rb/2006-07/07rb02.pdf> [Accessed on 2 may 2014]. Pride, W. and Ferrell, O. 2011. 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