the business of health II

It seems the Teachers Union Health Fund has got itself in a spot of bother with government regulators over some of the financial deals the TUH board has done using members funds. In an article by Colleen Ryan as a sidebar to a feature on health funds in the AFR 13/6/03 (available online to those who have paid), she details how millions of dollars of members funds have been written off as provisions for losses.

The comparisons to Credit Union governance issues of the 1970’s are amazing. The WA Teachers Credit Union imploded over questionable investment practices during the WA INC era. It seems that health funds are a considerable distance down the same path. Here you have a bunch of amateurs (teachers in this case) ‘investing’ in some deals that Bond and Scase would have considered speculative.

The really frightening thing about the health fund scandal is the poor administration provided by under resourced regulators, similar to the APRA mismanagement of HIH. This is not chicken feed we’re talking about, Medibank Private turns over $2 billion and lost $175.5 million last financial year. The remaining 70% of the private health insurance market in Australia is run by over 40 other funds whose constitutions reflect the 19th Century mutual funds from which they grew. The boards of directors are responsible for taking $7 billion from contributors every year, distributing $2.4 billion in government rebates and spending $800 in management expenses.

The governance of most health funds are unreasonably influenced by the representatives of hospital owners (see Mayne sells hospitals) and operate with “the corporate governance structures….little better than those of the local tennis club”.

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