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House: Senate

Portfolio: Health

Commencement Date: 1 January 1994

Purpose

To change the safety net arrangements applying to general patients under the Pharmaceutical Benefit Scheme (PBS), by increasing the limit at which concessional benefits are available and removing the second tier of entitlement which previously provided free pharmaceuticals.

Background

Under the PBS which has been operating for more than 40 years, the Government subsidises the cost to consumers of prescribed drugs. In the 1990/91 Budget the Government announced the introduction of a $300 cash safety net for general contributions and an increase in the maximum contribution per prescription from $12 to $15. Once an individual family had expended $300 in general contributions for prescribed pharmaceuticals in a calender year, a concessional card was issued and $2.50 was then payable for prescriptions up to a maximum of $50, after which an entitlement card was issued and pharmaceuticals were then free for the remainder of the year.

The same Budget announced the introduction of a charge of $2.50 per prescription for holders of Pensioner Health Benefit and Health Benefit cards (pharmaceuticals had previously been free for this group). Pensions were increased by $2.50 per week to compensate the loss of free pharmaceuticals. A cash safety net of $130 was introduced for concessional contributors, after which pharmaceuticals were free for the remainder of the calendar year.

In the 1991/92 Budget the maximum general contribution increased to $15.70 per prescription through indexation.

In the 1992/93 Budget, indexation increased the maximum general contribution to $15.90 per prescription and the maximum concession contribution to $2.60. The safety nets increased to $309.90 and $135.20 respectively.

In the 1993/4 Budget the maximum general contribution increased to $16.00 through indexation. The Budget also announced changes to the safety net arrangements applying to general patients. The changes simplify the scheme by providing for only one limit of $400 after which prescriptions will cost $2.60. This abolishes the previous two tier scheme which provided concessional rate pharmaceuticals after reaching $312.30 and free pharmaceuticals after spending a further $52.

The changes both increase the safety net limit and abolish the provision of free pharmaceuticals for general patients, who become eligible for the concessional rate only, after the $400 limit is reached. There are no changes to the existing safety net arrangements in respect of concessional beneficiaries.

The Government notes that the cost of operating the PBS increased by 25% in 1992/93 over the previous financial year and cites an ageing population, the development of new, expensive drugs and a tendency to stockpile drugs as the likely causes 1. The changes outlined are an attempt to reduce the cost of the PBS. The Budget figures for 1993/93 and estimates for subsequent years 2, and expected savings resulting from the changes to the scheme 3 are as follows:

Expenditure Savings

1993/94 $1529.0 mil $12.4 mil

1994/95 $1669.7 mil $32.0 mil

1995/96 $1791.2 mil $33.4 mil

1996/97 $1924.9 mil $34.9 mil

Main Provisions

Clause 2 provides that the Act commences on 1 January 1994.

Clause 4 increases the safety net limit for a general patient or a general patient together with the members of her or his family, to expenditure of $400, after which the patient becomes eligible for a concessional card. It also omits the second tier of the safety net by removing the eligibility for an entitlement card (providing free pharmaceuticals) after a person or her family have spent an additional $52.

Clause 6 reflects the increased safety net by directing that providers of pharmaceutical benefits charge a general patient who has reached the new safety net limit, $2.50 for each prescription. It also adds a new subsection which clarifies the amounts to be taken into account in determining the expenditure level for the safety net limit.

Clauses 4, 5, 6, and 7 add notes to various sections dealing with the safety net limit and amounts payable for pharmaceuticals, stating that the amounts are periodically adjusted using a set formula contained in section 99G of the National Health Act 1953 which relates to CPI increases.

Clause 9 provides that the general patient safety net is not to be indexed in 1994.

Endnotes

1. Second Reading Speech, National Health Amendment Bill (No. 2) 1993, p.1.

2. Budget Statements 1993/94, Budget Paper No.1, p. 3.77.

3. Second Reading Speech, National Health Amendment Bill (No. 2) 1993, p.2.

Merrin Mason (06 2772476)

Bills Digest Service 5 October 1993

Parliamentary Research Service

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Commonwealth of Australia 1993

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Published by the Department of the Parliamentary Library, 1993.