Australia Will Raise $5 Billion by Privatizing its Biggest Health Insurer

Australia’s federal government is about to raise almost $5 billion by privatizing its largest health insurer:

Australia hopes to raise up to Aus$5.51 billion (US$4.82 billion) through the sale of the country’s largest health insurer in an initial public offering, Finance Minister Mathias Cormann said Monday.

Cormann said the sale would remove the current conflict where the government is both the regulator of the private health insurance market and owner of the largest market participant. Medibank provides cover to 3.8 million people.

The government has previously said Medibank is one of 34 competing funds in the private health insurance market in Australia and that a scoping study had found no evidence that premiums would rise as a result of the sale. (AFP via Yahoo! News)

Australia has been shrinking the role of government in health care. Although a national single-payer scheme was established in 1975, the federal government re-introduced private choice within a few years. Indeed, Medibank Private is the descendant of the original single-payer plan, Medibank.

Today, almost half of Australians have private health insurance. Largely, this was a result of the federal government partially re-introducing underwriting in the late 1990s so that insurers could charge premiums that were more actuarially accurate to an applicant’s age. Previously, age could not be considered in setting premiums. The reform encouraged people to buy hospital insurance by age 30. Every year of delay results in an increase of 2 percent. So, if one dawdles until age 50, one will pay about 40 percent more.┬áThis is far from pure actuarial accuracy, but in a health system run by politicians, it is quite a strong achievement.

Obamacare does the opposite: Discouraging people from signing up because they can enroll every year starting November 15 through February 15 of the next year. So, a healthy young person can risk the consequences of being uninsured for no longer than ten months. This is one reason why healthy young people shun Obamacare coverage.

An article written in 2008 by a former colleague of mine gives American readers more details and context about Australia’s increasing privatization of its health sector.

Comments (4)

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  1. Santiago says:

    I see a very dangerous trend here. You have an aging population in the USA that’s going to be increasingly pulling on money provided by government programs, yet a young population that is hesitant to buy into them – leaving them gravely underfunded.

    • John R. Graham says:

      The U.S. is very resistant to these necessary changes, in health care and elsewhere. For example, Canada reformed its Canada Pension Plan (Social Security) so that it is funded, not pay as you go, over a decade ago.

  2. John Fembup says:

    @Amber

    I think “Deadlock” is objectionable mostly to people who want something which a majority of Americans don’t support. And for some others who have not really thought it thru.

    If there is a majority favoring what you want, it will eventually be legislated. (A clear exception is Obamacare which has never enjoyed majority support among Americans).

    But our system is designed to avoid most kinds of legislation that do not have clear majority support among the people. Thus “deadlock” is the expected-and proper government situation when the people are evenly-divided over any particular issue.

    If otherwise we would be living in a virtual dictatorship, not a democratic republic.