Mr ROCHER(12.47 p.m.) —This Health Insurance (Pathology Services) Amendment Bill is about improving the efficiency of Medicare by bettering the contributions to health care by Australian pathology services. As the honourable member for Bradfield (Dr Nelson) has mentioned, it is the product of negotiations between the coalition, the Royal College of Pathologists of Australasia and the Australian Association of Pathology Practices.

At the outset and in his regrettable absence, I wish to congratulate the Minister for Health and Family Services (Dr Wooldridge) on the consultative approach he has seemingly adopted in putting together this bill. The coalition went to the last election with a promise of being more inclusive, open and consultative than the then government. And yet, as I will make clear, during the Taxation Laws Amendment Bill (No. 4) 1997 debate, the alarm bells have been ringing amongst professional and industry groups about the government's apparent disregard for independent, expert opinion on policy.

It is pleasing to note that such a criticism does not appear to be justified in this instance. I have had feedback on this legislation from three pathology practices which operate in my electorate. Each of them indicated their general agreement with the changes proposed in this bill and have noted the importance of the two national pathology organisations being involved in the decision making process.

One of the intended consequences of the bill is a bolstering of the powers of the authority of the Health Insurance Commission, the HIC, in its battle against overservicing. The Health Insurance Commission's 1995-96 annual report makes it clear that one of its key functions is to detect, investigate and prevent inappropriate practice by service providers. This includes the services provided by pathologists.

The government has expressed concern at the unlawful or unethical arrangements between some medical practitioners and pathologists that encourage the commission of pathology services where they are not really required. It has good reason to be concerned, Mr Deputy Speaker, because the practice of overservicing could become a major problem for the Medicare scheme. The government is anticipating that the measures contained in this legislation will cap the growth outlays on pathology services at six per cent a year, coincidentally the same as the provisional tax uplift factor—just an unhappy coincidence.

However, it gives no indication of the potential savings in its financial impact statement in the explanatory memorandum, except to say that the bill will:

. . . reduce the level of inappropriate pathology activity that imposes costs on the government.

The Australian National Audit Office, the ANAO, produced a report into inappropriate medical practice in 1996-97. It noted that:

An organisation should have an estimate of at least the order of magnitude of the leakage of funds it manages, in order to decide whether its response is proportionate to the problem.

Official figures show that the HIC had recovered—or was in the process of recovering—more than $1 million of Medicare benefits which had been paid incorrectly to service providers and patients in the year 1995-96. However, this figure severely under-represents the true cost to revenue of Medicare fraud in this context.

The 1996-97 Auditor General's report on the Health Insurance Commission revealed that an estimated $135 million was lost in sham claims by medical practitioners and Medicare card holders in the year 1994-95. Even more alarming than this figure was the comment by the ANAO that:

The small sample used to derive these estimates means that it is possible that the leakage could be up to three times higher than estimated.

On that supposition from the ANAO, it is possible that Medicare fraud could have amounted to more than $400 million in one year. It is little wonder that our public health system promises to fall apart at the seams.

While these figures are only estimates, the ANAO report stated that the Health Insurance Commission had agreed to consider releasing a report into Medicare fraud in this year of 1997. That will allow it to draw on three years of data and offer a more accurate assessment of this risk. The audit office supported such a move, saying that:

The knowledge of the magnitude or value of leakage is important both for management purposes and for accountability.

It went on to note that:

Publication of these estimates will assist the commission in its education role, and encourage greater attention amongst all stakeholders, to the importance of antifraud action.

Two parties were identified as being the `primary beneficiaries' of appropriate medical practice. They include health consumers `who then receive the most suitable medical treatment', and the government, `if savings can be identified from inappropriately high levels of service'. To my knowledge, the Health Insurance Commission has yet to produce any such document. I wonder whether the Minister for Health and Family Services, had he been here seeing his legislation through the parliament, could advise us of any state of play on this point.

It must be acknowledged that it is difficult to quantify overservicing in pathology services in the figures I have mentioned. However, it is clear that the government must take decisive action if it is to combat Medicare fraud of any persuasion. As I mentioned, the government aims to cap growth in outlays on pathology at six per cent per annum. Anecdotal evidence from the United States of America suggests that the concept of capping may actually exacerbate the problem of ballooning costs in the health industries.

In the October-November 1996 edition of Healthcover, it was noted that volume performance standards—that is, where a target rate is set for a year and future annual updates are measured against this figure—have increased the cost to the American equivalent of Medicare. That journal noted:

The problem is that a single crude target does not have very strong incentives for individual physicians to change their behaviour.

It went on to say that:

In fact, it may have some perverse incentives, because they say, `Well, the volume is going up by all those other guys and if I am going to maintain my income, I am going to have to increase my volume, because I know the next year it is going to be offset'.

I am interested to learn whether this concern was noted by the Minister for Health and Family Services when the decision to cap pathology costs was made.

This bill is not, nor does it pretend to be, the answer to all of Medicare's ills. It is just one part of what must be a comprehensive overhaul of our public health system if we are to avoid its total, or something approaching total, collapse.

In the year ending June 1996 a staggering 196 million Medicare services, including those for pathology services, were processed by the Health Insurance Commission—196 million in a year. The most recent census figures put Australia's resident population at approximately 18.3 million. A quick crunching of figures indicates that this equates to the provision of around nine medical services to every Australian man, woman and child in a year. That is getting well on the way to one visit to a medical practitioner a month, statistically. Of course, the reality is that most people do not visit a medical practitioner anywhere near this often. On the flip side, there are those who visit their GP and other practitioners more often than they go to their hairdresser or barber.

As I noted in a previous debate, the recent Productivity Commission report into private health insurance asserted that the demand side of the Medicare equation was in dire need of modification. These figures certainly give added weight to any such claim. The report stated very clearly that a lacklustre attitude towards our universal health care system now pervades the Australian community. As a general rule, we simply do not appreciate the true cost of the services made available to us through the so-called `free' Medicare system.

Most medical professionals do not condone overservicing, of course. Indeed, the 1996-97 Auditor-General's performance audit of the Health Insurance Commission found that most fraud detected by the HIC came from `complaints by the public or by members of the medical and pharmaceutical professions' who refused to condone what they saw as improper behaviour. Those pathologists who do practice ethically should not be concerned with the government's move to ensure that a notice identifying them as licensed pathologists is to remain visible on their premises. The Australian National Audit Office identified prevention of inappropriate practice as a key role of the HIC. By ensuring that licences identifying registered pathology centres are more visible, the Health Insurance Commission should become more pro-active in preventing overservicing.

In a buyer beware market, new subsection 23DNK(1) of the act will offer a greater level of protection to the consumer. Patients can still opt to have tests done at non-licensed pathology centres, but they will not be eligible for a Medicare rebate on those services. That is entirely reasonable.

The current penalty for non-compliance by a pathology centre is a mere $100 fine. This amendment seeks to increase the penalty to $1,000. In the scheme of things, this figure represents a mild penalty, considering that an individual's health may be put at risk if tests are conducted in an environment that fails to meet good Australian pathology standards. However, a $1,000 fine will certainly be a greater deterrent to opportunistic practitioners than the current $100.

Item 13 of the bill amends section 133 of the principal act and will allow the HIC to prescribe certain penalties for minor offences. As with the changes to licensing, that will not detrimentally affect reputable pathologists. Rather, the government claims it will allow for more rapid and less expensive disciplining of minor pathology violations.

Evidence suggests that speedy action on the part of the HIC can lead to a reduction in inappropriate practice. For example, the Health Insurance Commission recently produced a report that suggested that where they had acted to caution practitioners suspected of inappropriate practice, they made savings of $40,000 of Medicare expenditure per intervention in the first year of counselling. The HIC extrapolated this figure to calculate that they may currently be achieving `savings of up to $19 million per year through counselling, through reduced expenditure which would have otherwise occurred.' If that figure is accurate, it represents—

Mr DEPUTY SPEAKER (Mr Nehl) —Order! If the advisers in the chamber wish to conduct extended conversations they should leave the chamber. The honourable member for Curtin.

Mr ROCHER —As I was saying, if that figure is accurate, it represents a very significant saving to revenue indeed. Information like that should be made available to the general medical community, if it is not already, to further encourage appropriate practices. But I understand that that does not occur. The Auditor-General's report stated:

The annual report—

that is, the Health Insurance Commission's annual report—

does not contain any indication of the magnitude of leakage through fraud or the magnitude of inappropriate practice and the savings achieved through counselling.

It was further noted that the 1995-96 portfolio budget statement for Human Services and Health contained scant information on the cost to the community of inappropriate practice. This is also the case with the two subsequent budgets that were handed down by the present government. Surely if this information is at hand, it should be published widely to communicate the very real, and maybe ever growing, problems that plague Medicare.

The government is right to tighten up the provisions relating to `act of grace' payments where pathology organisations fail to have their licence renewed. The explanatory memorandum notes that there may be occasions where pathology centres fail to submit the necessary application and fee for the renewal of their licence because of circumstances beyond their control. This may be the case, but in the interests of maintaining uniform standards in pathology services this should be the exception and not the norm.

Just as every other business is required to meet compliance cost obligations or face the consequences, so too should those in the field of pathology. Pathologists are aware of the onus to renew their licence on an annual basis and should therefore include a little forward planning in their calendars to prepare for that eventuality. Further, the Health Insurance Commission already alerts applicants whose licences are about to expire that they need to renew them immediately. The amendments in this bill will still allow for act of grace payments to be made to pathologists in certain circumstances, but it will now be the responsibility of the minister to authorise such payments. It is to be hoped that this will see a reduction in the costly and burdensome process involved with the backdating of Medicare benefits to the service provider.

Importantly, this bill also contains a provision that will protect the rights of pathologists who are not granted act of grace payments by the minister. Item 11 in the bill stipulates that any person who unsuccessfully appeals to the minister for a review of a decision to not backdate an approval may put their case to the Administrative Appeals Tribunal.

It is important that this bill be passed in order to maintain the integrity of our Medicare system. As I have outlined in earlier debates, overservicing is not common to the majority of medical practitioners. Only a fraction of professionals have come under the scrutiny of the Professional Service Review Scheme in the past. One would hope that by upping the penalties this figure will decline even further and any future growth will be headed off.

It is also crucial that the Health Insurance Commission utilises the additional powers it will gain once this legislation is proclaimed. Professional bodies, including the Australian Association of Pathology Practices and the Royal College of Pathologists, reportedly share concern that the professional review division of the HIC is not as active in pursuing Medicare fraud as it should be. It is incumbent on the Health Insurance Commission to allay these fears by actively and indiscriminately identifying offenders.