Should the Australian Government Privatize Medibank - Case Study Example

Should the Australian Government Privatize Medibank? Name Professor Institution Course Date Should the Australian Government Privatize Medibank? There are various arguments and suggestions that are offered towards the proposal of the Australian government to privatize Medibank. Some researchers, politicians and citizens of Australia have divided perceptions towards the move of the government, with some supporting the decision, while others finding the decision as unfair and unjust. The proposal has led to debates about the advantages associated with privatizing the Medibank organization but the major issue that has been in consideration from the government officials supporting the action is how the governments in Australia can increase the price or returns they get from the organizations and enterprises they decide to sell. In making a varied conclusion on whether the government of Australia should privatize Medibank or not, it is essential to consider some of the merits the government accrues from the sales. Additionally, it is important to evaluate the impact of the sale of the organization to private sectors to the common citizens in terms of service delivery, accessibility and cost. It is also important to analyze some of the possible ways that can be used to sell the organization as a way of creating a better understanding of the possible outcomes from the sale. Lastly, it will be of great significance to consider the functionality of Medibank, and the benefits people accrue from the services and products that the organization offers to them. An evidence-based and concrete conclusion with therefore be developed on whether to support or oppose the government’s proposal of selling Medibank to private sector. Medibank is a government-owned private health institution that offers insurance services to the public, and is considered to the largest Australian health insurance provider in the sense that it has more than 3.6 million members. This membership is evident to account for approximately 30% of the Australian market, and this makes the organization a fundamental organization not only in provision of the health insurance services, but also in enhancement of the economy of Australia. It was established in 1975 to offer competition to the private organizations that offered health insurance for profit, and has operated as a state business enterprise in the sense that from 2009, the firm has been operating as a commercialized business (Chowdhury, 2006). This follows the observation that it has been paying tax and dividends just as other health insurance organizations in Australia. It has highly regulated premiums as a way of ensuring that the returns that the organization makes from the services and medical or health funds it offers to the clients are well utilized not only in expanding its operations, but in reaching people from marginalized regions of Australia (Packham, 2006: 5). Privatization proposals for Medibank were initiated by Howard Liberal Government which proposed that in case it was re-elected in 2007, it would privatize Medibanl Private. However, the Labor Party policy stood on the regulation that Medibank should always be maintained as a Government Business Enterprise (GBE). As the chairman of the firm, Paul McClintock confirmed the need to privatize the firm when he was retiring, the then Finance Minister Penny Wong declined the suggestion stating that the Government has no plans to sell the organization to private sectors. From the budgetary perspective regarding the sale of Medibank Private, the proposal can be considered to be an attractive deal for the government. According to the observation of Shadow treasurer, the government is expected to raise $4.5 billion if it agrees to privatize the organization (Thomson, 2014: 9). It is evident that the organization makes an annual profit of approximately $ 200 million but most of these funds are paid as dividends to the state government. Comparing the performance of the organization to that of NIB which is relatively a quarter of Medicare Private, it is observed that as Medibank Private makes around $ 200 annually, it has a stakeholder capitalization of approximately $1 billion. This is an indication that selling the firm to private sector will enhance the economy of Australia as more capital will be generated annually. According to pure financial theory, the decisions that are made on whether to sell an organization or a profitable enterprise or not is considered to be neutral because of the number of parties that are directly or indirectly affected by the business. Thus, from the budgetary perspective, selling the organization to private sector is worthwhile (Reece, N. 2013: 17). Considering the economic perspective of the case, the aspect of selling Medibank Private to private investors can be considered to be right. This is because there are numerous events where governments need to be active players in the markets, and this is only possible when a checklist of those events is integrated on Medicare Private (Roin, 2013). This is an indication that there is no genuine reason why the government should continue managing or owning the firm because in one way or another, most of the returns from the organization will be returned to the government through dividends and taxes. One of the major influences that led to establishment of the organization was political influence, and the other was the need to compete with those organizations in the private sectors that were considered to be for-profit firms (Dovalina, 2006). With this understanding, it can be argued that the government was politically influenced to support the establishment of Medibank Private. From the political viewpoint, it is observed that the political systems are serious opposing the privatization. It is observed that there is a strong community in the political sectors that is opposed to privatization. According to the public opinion polls, there is a strong resistance to privatization, and this is supported by the fact that even those collations that have more supporters are opposed to privatization, an indication that even if the government decides to implement the project, the majority will oppose (Kemp, 2007). Since most of the nations in Australia are democratic, the rule of majority will win and the fact that political leaders in the countries have great influence, then it will be a challenge for the government to implement the proposal of privatizing Medibank Private (Compare Bel, 2006). The public has been demeaned by arguments that are not strong by individuals who are in support of selling the government-owned property, but these supporters fail to realize that the public do not need classes or campaigns to educate the on various elements of economic (Bernard, et al., 2009: 1731). The public knows the dangers associated with selling of assets especially those that are collectively attained through their respective governments in order to finance issues that are current. They consider it as the obligation of the government to devise new strategies of running their social, political and economic operations without interfering with what has been achieved (Aston, 2005). This argument does not imply that privatization is bad, but the issues or reasons that are fostered by the supporters regarding the need to privatize Medibank Private are not logical. Considering the reasons why the government decided to sell Medibank to private sectors, one of the fundamental reason is that selling the organization will contribute to an effective, efficient and competitive private health insurance industry. Privatizing the organization will help in maintaining the services and products offered at the organization at high levels for the customers who are with inclusion of both regional and rural Australia (Metherell, 2010: 21). Privatization of Medibank Private, according to the government will help in ensuring that the sale process treats the employees of the organizations in a fair manner, and this will be achieved through the preservation of accrued entitlements. The government argues that the sale of the organization to private sector will help in minimizing any post sale residual risk, and as argued by various researchers who have sufficient understanding towards the intentions of the government, the sale will reduce liabilities to the government (Amanda, 2004). Lastly, the government motives of selling the organization are aligned to maximizing the net sale that is derived from the sale. Generally, it can be argued that the sale of Medibank Private would greatly ensconce wealth inequality in the region, and the government has no powers to make the sale. It remains unseen that there will be positive returns from the sale of the organization to the public, and according to some economists, the sale of the organization would facilitate to the disappearance of dividends to the government. In attempt to secure the dividend, the government will be forced to initiate new practices that will affect the common citizens such as increasing taxation or reducing the government services. This will negatively affect the economy of Australia and its nations, and any individual who is deeply concerned about wealth inequality cannot at any cost have the courage to support the sale (David, 2014:13). According to the statistics that has been collected by various researchers and from polls, only 22% of the Australians are in support of privatizing Medibank, an indication that the government move of proposing on sale of the organization might not be successful. I can comfortably argue that it is not wise for the government to sell Medibank to private sectors because it will not only affect the economy of the country negatively, but will also affect the satisfaction of the members of the organization. References Amanda, M. 2004. "Medicare - Background Brief". Past E-briefs. Australian Parliamentary Library. Aston, H. 2005. "For sale: Medibank readied for $4b float". Sydney Morning Herald. Bernard, B. et al., 2009. 'Russian Privatization and Corporate Governance: What Went Wrong? 52 Stanford Law Review 1731 Chowdhury, F. L. 2006. ‘’Corrupt Bureaucracy and Privatisation of Tax Enforcement’’. Pathak Samabesh, Dhaka. Compare Bel, G. 2006. "Retrospectives: The Coining of 'Privatisation' and Germany's National Socialist Party". Journal of Economic Perspectives 20 (3): 187–194 David, M. 2014. Privatizing Government Services Doesn’t Only Hurt Public Workers. In These Times, p. 13 Dovalina, J. 2006. Assessing the Ethical Issues Found in the Contracting Out Process. Applied Research Project. Texas State University Kemp, R. L. 2007. "Privatization: The Provision of Public Services by the Private Sector," McFarland & Co., Inc., Publishers, Jefferson City, North Carolina, USA and London, England, UK. Metherell, M. 2010. "Medibank slashes benefits". The Age. p. 21 Packham, B. 2006. "Election fight over $2b Medibank plan". Herald Sun, p. 5 Reece, N. 2013. "Hanging on to Medibank is a national health hazard". Sydney Morning Herald. p. 17 Roin, J. 2013. "Privatization and the Sale of Tax Revenues". SSRN eLibrary. Thomson, P. 2014. "Medibank Private sale 'tantamount to theft', says founder". The Canberra Times, p. 9 Read More