Dr WOOLDRIDGE (Health and Aged Care) (4:01 PM) —by leave—As members would be aware, the government decided in the context of the negotiations around the agreement of the Royal Australian and New Zealand College of Radiologists covering the three years from 1998-99 to 2001-02 to introduce Medicare benefits funding for magnetic resonance imaging machines. This decision was announced on 12 May 1998 as part of the 1998 budget. It was announced at that time that eligibility for benefits was to be limited to machines that were in place or on order on that day. Subsequently, the government decided to require operators of machines to notify the Health Insurance Commission of any machines they considered to be eligible by no later than 11 October 1999.

Last Friday I received a minute from the Managing Director of the Health Insurance Commission advising me that 111 machines have now been notified to the commission. Of these, 59 were in place on 12 May 1998, the date of the 1998 budget, and 52 were claimed to be on order on that day. No fewer than 13 of the machines claimed to be on order last May were advised to the Health Insurance Commission in the fortnight before the cut-off on 11 October this year—that is, in the last week or so, 13 radiologists have just remembered that they spent $3 million 18 months ago on an MRI machine. Of the 52 on order, 48 were ordered between 10 February, when negotiations with the royal college commenced, and the budget on 12 May 1998. I table a minute from the Health Insurance Commission.

While the Health Insurance Commission is continuing to investigate the bona fides of orders, their investigations so far indicate `that a significant number of the applications have question marks around both the accuracy of the date itself claimed for the contract and the conditional nature of the contract'. Given that an additional 13 machines have just turned up and given the comments from the Health Insurance Commission, I have decided to recommend to the Executive Council meeting this Wednesday a regulation to limit access to Medicare benefits to those machines that were on order on 10 February 1998 when formal negotiations with the Royal College of Radiologists got under way.

This is an interim measure that will ensure that an advantage does not accrue to any person who may have taken advantage of backdating of a contract, a non-binding contract or any form of inside knowledge as a result of the negotiation process to order a machine before 12 May 1998. The regulation will take effect from 1 November to ensure that people who have MRI scans booked are in no way disadvantaged. Where a machine is located outside a capital city, is operating as of today and where no other machine is readily available, that MRI will be able to continue to operate, thus not in any way disadvantaging people in rural and regional Australia.

In total, the measure I am proposing will leave in place a Medicare benefit subsidy for at least 66 machines—the 59 that were in place on 12 May, four that were ordered before 10 February 1998 and at least three machines that were on order on 12 May 1998 for location in regional and rural areas and unknown to the Health Insurance Commission to be in operation as of today. If there are other machines operating in regional and rural areas as at today, they too will be included.

I should remind the House that the extension of Medicare benefits to these 66 machines has widened access to MRI technology in a way that those opposite were not prepared to fund when in government. The regulation will in no way be retrospective as it will only limit benefits from 1 November 1999. Doctors with machines operating or on order that are affected by this regulation may be disappointed but have no reason to complain. They took their own counsel and claimed to order machines with irrevocable contracts without any knowledge that the government would agree to allow Medicare benefits for services for those machines.

As I have said before, the proposal to extend Medicare benefits to MRI services dates back to at least the Australian Health Technology Advisory Committee report in 1997. Following this report, I stated publicly that I would like to see MRI better funded. It was also widely known the college was discussing this with the government in the context of a possible broad financing agreement that would cover all radiologists. These negotiations were specifically authorised by the Expenditure Review Committee and noted in its minutes. The negotiations were with the representatives of the college who were expected to seek the views of their membership about the arrangements.

I do not know whether or how members of the profession may have gained inside knowledge or if indeed any inside knowledge existed. In the weeks before the budget, MRI suppliers were openly and aggressively offering non-binding contracts to radiologists. The apparent rush of orders may be explained by this, combined with some backdating. If one has had to sign a non-binding order or backdate an order, by definition you could not have had advance knowledge of the measure. Whatever the cause, the larger number of orders than I ever contemplated and the advice that a significant number have question marks around them require more resolute action than to await possible legal action by the Health Insurance Commission.

In view of concerns that have been raised about the integrity of the process of negotiating the diagnostic imaging agreement, I am today writing to the Auditor-General, Mr Barrett, asking him to conduct a probity audit of the process and to report to parliament as soon as possible. When I have written to Mr Barrett, I will table a copy of the letter.

I have also been informed that Health Care of Australia is one of the companies that had machines on order on 12 May 1998. Given that it is such a large provider of radiology services, there is nothing surprising in this. At that stage, however, Dr Barry Catchlove was the Managing Director of Health Care of Australia—although he informs me, having announced his retirement, that he was no longer involved in the day-to-day running of the business. He was appointed as Chairman of the Health Insurance Commission from 30 July 1998.

Dr Catchlove advised me last Friday that he has applied for leave of absence from his position in the commission while it concludes its investigations into the machines ordered by Health Care of Australia. I seek leave to table Dr Catchlove's letter to me. I would like to make it clear that there is no suggestion of any impropriety in the conduct of Dr Catchlove. The investigation by the Health Insurance Commission to date has been carried out at arms-length from the board of commissioners and the chairman has had no contact or involvement in any way with the investigation. Further, Dr Catchlove was not involved in and nor did he have any knowledge of budget negotiations with the college. However, Dr Catchlove has told me that, in view of the possible perception of the conflict of interest and so that we can maintain absolute probity in this matter, he considers it appropriate to take no further part in the affairs of the Health Insurance Commission until any investigation of the activities of Health Care of Australia has been completed.

When the government decided to extend Medicare benefits to MRI, it did so on the understanding that the number of machines in the country was on the basis of the 1977 Health Technology Committee's report finding—that is, that it was about right, but some increase might be warranted, particularly to ensure appropriate access across Australia. It now appears that the number of machines in place or on order is considerably in excess of what is required to meet the needs of the Australian population. On the other hand, the 66 machines that will now be eligible for Medicare benefits may not be the optimal number given further advancements in diagnostic imaging. They also may not be optimally distributed across Australia. When MRI was introduced to the Medicare Benefits Schedule, I announced that there would be a review after 18 months. I have now decided to bring forward this review by several months. I am deciding on the terms of reference for the review and I will table them when they become available.

The terms of reference will ask the review to recommend, among other things, the appropriate number and distribution of machines and to identify options to achieve this. At that time, the government will review the interim regulation that I have announced today to operate from 1 November. I will announce the membership of the review shortly and I will ask it to report by the end of February next year.

As for the Health Insurance Commission investigation, I will make available all necessary resources to ensure that it is conducted in a thorough and timely manner. I am loath, however, to rush this investigation, as to do so may limit the likelihood of the success of any prosecution that might be appropriate. When I receive the final report from the Health Insurance Commission, I will consult the Attorney-General and the Australian Government Solicitor as to what further action, if any, should occur.

I have no doubt that the majority of radiologists are honourable and honest people. It would appear, however, that a significant number have behaved in a manner that can be described only as a scam. Had people behaved in a similar manner in the share market, they would be expected to be treated with the utmost severity. I have no intention of allowing precious taxpayers' money that could be used in our immunisation, asthma or diabetes programs to go into the pockets of radiologists who have behaved improperly. This measure was designed for the benefit of the Australian public. It has dramatically increased the availability of MRI services. It was not designed for the benefit of radiologists, and it will not be allowed to be.