Fresh doubts have emerged about the planned sale of Medibank Private following the discovery of documents which show policyholders were the owners of the health fund’s assets, not the federal government.
An inspection of the fund’s annual financial accounts before 1997 by The New Daily reveals that members were officially recognised as equity holders in the business for four years between 1993 and 1996.
The existence of these disclosures is potentially devastating for the federal government’s claim to full ownership of Medibank Private. They indicate that ownership of the fund might be contestable and could lead to compensation being sought by policyholders if the sale proceeds. The government hopes to pocket $4 billion from the sale of the insurer.
Inevitably, they raise profound questions about the ability of the Abbott Government to bank all the proceeds from the planned sale of the country’s largest health fund.
The disclosures also highlight the methods used by the federal government in 1997 to get its hands on the fund’s assets.
The balance sheets of Medibank Private before 1997 clearly show that members owned the net assets of the enterprise – not the federal government.
Here’s how the 1994 balance sheet was presented to policyholders:
The balance sheet clearly states that members owned the net assets of the business, which then stood at more than $350 million.
Here’s how that $350 million was apportioned to members in each of the states in 1994:
These financial statements were presented to Medibank Private members as an accurate record of the position of the fund. Moreover, the accounts were exposed to rigorous scrutiny by government auditors.
However, the accounting policies of Medibank Private were changed in 1997 as the newly-elected Howard Government moved to establish government control and ownership of the fund.
Without any explanation in the notes to the 1997 accounts, the term “members’ equity” was removed from the balance sheet by government accountants and replaced with a new concept known as “fund equity”.
Here’s how the 1997 balance sheet was presented to members:
In December 1997 the government directed the Health Insurance Commission to transfer equity of the fund to a new government-owned company, known as Medibank Private Limited.
This is how the Commonwealth became sole owner of Medibank Private – through a controversial mix of artful legislation and accounting sleight of hand.
Was this an act of theft? Or just an example of sharp administration?
George Lekakis has been an investigative journalist for 20 years. He has worked at the Herald-Sun, the Australian Financial Review and Alan Kohler’s Eureka Report. He currently teaches investigative and business journalism at Monash University.