Bad medicine: the sale of Medibank Private

The ABC also reported that Sen. Cormann stated that the Government wanted to sell Medibank Private at the "right time" to maximise the sale price.

Heads-up Senator. Maximising proceeds is not a function of the "right time", but of the "right time" and the "right means". Just ask any real estate agent.

On Monday, the Senator while spruiking the IPO claimed on the Seven Network's Sunriseprogram that the value of Medibank would be "set by the market" and that "in 2014 there is no reason for the Federal Government to still be running a private health insurance business".

The facts the Senator omitted could fill Sydney Olympic Park's ANZ Stadium:

1. In an IPO, the value set by the market, evidenced by the share price at the end of the first day of trading minus the listing price is synonymous with a loss to taxpayers. That gap, be it minimal or yawning, will expose just how mispriced the share offer was, and by inference, how many millions of dollars were gifted shareholders and advisors (at the direct expense of all Australians, the current owners of Medibank);

2. The Senator crooned that "the government is out to achieve the best possible net return" to taxpayers. He said this as though there is compelling evidence that an IPO is the best means to do so; and

3. The Senator dismissed the role of government in the healthcare space, as though we have perfect competition amongst healthcare insurance providers. On the contrary Senator, there is indeed a role for government involvement in owing a player that commands 30% of the market. For one thing, the government's ability to temper premium rises for a dominant player (itself) sends a powerful message to other market participants.

If we assume the Commonwealth's argument that Medibank must be sold, why are alternatives to IPO not publically canvassed? Alternatives include:

a) Sale to a private equity group;

b) Trade sale, say to a US HMO (Health Maintenance Organisation) or an Asian equivalent;

c) Sale to a foreign pension fund;

d) Sale to a foreign sovereign wealth fund (Singapore? UAE? Norway?); or