Finance Minister Mathias Cormann flagged last year in a private letter to the chair of Medibank Private that a decision on the privatisation of the giant health insurer would be taken by March 20.
On October 13, Senator Cormann wrote to the chair of Medibank Private, Elizabeth Alexander, and did not grant her request to re-appoint a key Medibank director for another full term on the board. (Read the letter below.)
Senator Cormann instead told Ms Alexander that he would appoint director Jane Harvey for a term of three months until March 20.
“This extension will provide government with sufficient time to consider the future composition of the board in the context of the scoping study into the sale of Medibank,” the Minister wrote.
In a letter dated September 19, Ms Alexander told the Finance Minister that Ms Harvey played a “valued and important” role on the Medibank board, and that her current term was due to expire in December.
Ms Alexander noted that Ms Harvey chaired the Medibank Private’s audit and risk management committee and argued that her “continuity is critical at this crucial time.”
The government has said that it expected to receive the second final phase of its Commission of Audit – which will consider further privatisations − by the end of March.
On Tuesday, Senator Cormann told the ABC’s AM radio program that work on the scoping study was “just about complete” and that there was “no good reason” that the government should continue to own Medibank.
“Obviously we’re not going to sell Medibank Private no matter what,” the Minister said.
“We want to get advice … through the scoping study on a whole range of relevant aspects of the sale, including whether the market conditions are right, what the most appropriate sale method would be, the timing, cost and relevant regulatory issues and so on. And that work is just about complete.
”What we’ve said when we announced the scoping study in October is that we would receive the report back at the end of February − we’re on track for that − and we will then be able to consider that report in the context of preparations for the next Budget which is due on the second Tuesday of May.”
The government argues that it can sell Medibank Private because it competes against 34 other health insurers in a long-established competitive market.
However, Medibank is Australia’s biggest health insurer, with about 29 per cent of the market or about 3.8 million Australians. In the 2012-13 financial year, it had revenue of $5.8 billion but comparatively modest net profit of about $233 million, and new private owners would seek to boost its profits.
Private owners would aim to cut costs. Medibank now has about 4800 employees, including 1500 health practitioners who have some 2.5 million patient interactions every year.
Medibank Private is also the sole provider of heath services to about 80,000 members of the Australian Defence Force.
The correspondence between Senator Cormann and Ms Alexander was released under the Freedom of Information Act.
The Labor Opposition has criticised the government for advertising a $2000 a day contract for a communications adviser to promote the Medibank sale.