The public servant who created Medibank Private has lashed out at the federal government by saying its plan to sell the business and keep the profits is tantamount to theft from its customers.
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Ray Williams, now aged 94 and living in a retirement village in Canberra, has kept away from the public gaze for decades but anger at the Abbott government's decision has cajoled him to speak out.
His argument is that Medibank Private has only been sustained by member payments, except for one debt – which was repaid - in its early stages.
“When I started as the original general manager of Medibank Private on October 1, 1976, I got an advance of $10 million from the Treasury,” he said.
“In the early 1980s that [money from Treasury] was totally repaid.
“The government can't sell something it doesn't own - I can't get anybody to understand and it irks me.
“No government money is invested in the organisation.
“It can't be described as anything other than theft.”
While the government argues the sale will be positive to the broader community by increasing funds that can be used for taxpayers, Mr Williams said the benefits should flow through directly to customers who had paid money to Medibank Private.
“Instead of paying the money to government they should be reducing [members'] premiums,” he said.
Mr Williams and others had suggested the idea of a government-run insurer that would help keep solely private operators honest.
The new prime minister Malcolm Fraser needed a way to fund Gough Whitlam's popular but expensive public health scheme called Medibank – the forerunner to Medicare.
Mr Fraser imposed a levy but gave taxpayers the option to avoid this if they bought basic private health insurance.
But a mechanism was needed to make sure the private companies were kept honest.
According to the book The Making of Medibank, Mr Fraser rang health minister Ralph Hunt in the middle of the night to talk about a government administered insurer and said something along the lines of: “We'll call it Medibank Private so they can't say I abolished Medibank.”
Mr Williams, a World War Two infantryman, said that within three months of starting, Medibank Private was the biggest operator in Australia.
“It still is,” he said.
Canberra MP Gai Brodtmann said Mr Williams presented a compelling case that was worthy of investigation.
Her party opposes the sale for a different reason, in that the company is a strong source of government revenue.
“Medibank Private members have every reason to be outraged by the sale. The government has failed to explain how they will prevent this sale from putting upward pressure on private health insurance premiums and adversely affecting members,” she said.
As of Friday, the government has not made a decision on whether to give policyholders priority in the share float, expected early next year.
Labor's finance spokesman, Tony Burke, said the sale would cost taxpayers in ongoing revenue of up to $500 million a year but there was nothing to stop it because enabling legislation passed in 2006.
The first major asset sale by the Abbott government could net taxpayers as much as $4 billion in 2014-15. The money will be spent on infrastructure later.
The minister said the government was well within its rights to sell Medibank Private because its customers bought health insurance and not fund memberships.
Mr Cormann said the company's ongoing revenue for taxpayers had been exaggerated by Labor and added the previous government had raided an unsustainable amount in dividends.
The Commonwealth owns all shares in Medibank Private and the company must report to the Finance Minister regularly, according to its governance statement.
