Wednesday, July 16, 2008

First asset privatisation?

The New Zealand National Party has continued its programme of releasing policy slowly, quietly and by stealth (so as to not frighten voters). Today they quietly released a statement confirming its worst-kept secret, that it plans to privatise ACC (accident insurance).

National says "Incentives for employers to improve safety practices are poor in a scheme in which similar premiums are charged regardless of an employer's workplace accident record.” That’s certainly true, but that doesn’t mean the solution is to wreck what we already have.

The problem with National’s plan is that private insurance companies are interested in making profits, as any good private company should be. Accident victims, on the other hand, need good, complete and thorough care. The American healthcare experience has clearly demonstrated that these two goals are incompatible. In order to maximise profits, private insurance companies will inevitably cut benefits and delay payments.

ACC works by spreading the risk among a large pool of people paying into it. Reduce the size of the financial pool and ACC will not be able to compete on price without also cutting services and benefits. Meanwhile, all the profits from the private companies will be sent overseas.

Add it all up and privatising government services like ACC doesn’t work out in the taxpayer’s advantage, not when reforms haven’t been tried.

One thing National said I do agree with: “New Zealanders are entitled to feel secure that the entitlements guaranteed by law will be delivered efficiently and reliably.” I just don’t believe that National’s beloved privatisation is capable of delivering that.

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