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Thursday, 24 March 1994
Page: 2195


Senator LEES (Deputy Leader of the Australian Democrats) (1.12 p.m.) —The Health Legislation (Power of Investigation) Amendment Bill 1993 represents the second stage of the government's attempt to tackle fraud and overservicing within Medicare and the pharmaceutical benefits scheme. This bill will complement last year's Health Legislation (Professional Services Review) Amendment Bill, which established a system of peer review to address problems of overservicing. Basically, this bill before us today picks up where the other bill left off and gives the Health Insurance Commission increased powers to investigate fraud against Medicare.

  The government has been forced to take action in this area because it could no longer ignore the mounting evidence that medifraud and overservicing was costing Australian taxpayers a great deal of money. In 1992 the government received two reports dealing with fraud and overservicing within Medicare and the pharmaceutical benefits scheme. One was from the Commonwealth Auditor-General, the other from Mr Harvey Bates on behalf of the Health Insurance Commission. The Auditor-General found there was a lack of prosecutions and disciplinary action against unethical practitioners and that the Health Insurance Commission's performance in this area had shown virtually no improvement since the early 1980s.

  Significantly, the Auditor-General also said the commission's legislative powers were deficient and recommended changing the legislation in order to get tough on fraud and overservicing. He expressed concern about the length of time it was taking for the Australian Federal Police and the Director of Public Prosecutions to complete cases referred to them by the HIC and recommended giving the commission the power to deal directly with the DPP instead of having to channel everything through the Federal Police.

  Harvey Bates also found that existing legislation did not provide a satisfactory base to support any investigation into significant fraud. Among other things he suggested major legislative change which included giving the HIC adequate audit and entry powers. In response to these two reports the Health Insurance Commission set up a special legal unit to develop the legislative framework.

  The legal unit was particularly anxious to address criticisms of the commission's almost total lack of statutory audit verification powers and it proposed audit powers along the lines of the Australian Taxation Office's desktop audits. The commission was aware that clinical records might be needed to be examined as part of the audit process and, after consultation with the Privacy Commissioner, it set out a protocol to be adopted in all cases where it was necessary to view those clinical records.

  Before these proposals could get off the ground, Senator Richardson decided to instruct the commission to discontinue its consultations with community groups and effectively excluded the commission from discussions on fraud and overservicing held between himself, the department and the AMA. Senator Richardson effectively secured the cooperation of the AMA for the first time on these matters, and congratulations are due to the AMA for recognising the need to cooperate and to get involved as the need to tackle this problem was becoming very evident.

  The estimates of the extent of this problem vary enormously. In early 1980, based on computer profiles and bulk-billing practices, the Department of Health estimated the extent of fraud and overservicing to be at least 7 per cent of the total medical benefits expenditure by the Commonwealth and health funds. In 1982, the cost of fraud and overservicing was conservatively put at $100 million a year. If the same estimate were applied to today's budget, we would have a figure somewhere around $400 million a year. In the US, the General Accounting Office, the financial investigative arm of Congress, estimates that about 10 per cent of the US health care expenditure is wasted on fraud. If that were applied here we would end up with a figure of some $600 million. Harvey Bates put the figure at around $400 million. The fact is that we do not have a clue. We do not have all the evidence and information that we need—because we have not been tackling the problem—to put an actual figure on the size of the problem.

  I guess it is a bit like tax avoidance: people say that we cannot do anything about tax avoidance because we really cannot estimate the size of the problem; we just do not know what is going on. Somehow that is seen as constituting a reason for not doing anything. We have been facing the same problem with medifraud. Some doctors argue very strongly that the estimates of the extent of fraud are vastly over-exaggerated. We do not know the details to be able to arrive at a figure. We clearly do not have a system which is able to pick up fraud. Certainly we do not have a system at the moment that is able to prosecute it. But it does not mean that we stand back and let it continue just because it cannot be quantified. We know the system is not working properly; we know there are serious deficiencies in the Health Insurance Commission's powers to investigate; we know we have a poor record in investigating and prosecuting medical practitioners for fraud; but we do know that when we do prosecute for fraud we recover substantial sums of money.

  I congratulate the government for finally getting serious and agreeing to do something about it. This bill, which moves to strengthen the powers of the Health Insurance Commission, signals that the government is finally getting serious about fraud and overservicing. In effect, this bill removes the Australian Federal Police from the investigation and prosecution process and gives those powers to the Health Insurance Commission. I would describe it as a reasonable set of powers to obtain relevant evidence. Contrary to the assertions made by the Medical Practice Defence Committee and a few others, I do not believe that the Health Insurance Commission sought these powers. Indeed, its preferred option was a system something like the desktop audit process that the Taxation Office has.

  The new powers given to the commission include the power to require a person to provide information and produce documents; the power to inspect premises and equipment used in the provision of services that attract Medicare benefits; and, subject to a warrant being granted by a magistrate, the power to actually search and perhaps seize documents. We do not accept these powers lightly or agree that they should be handed over lightly. We have gone through quite an extensive committee process and asked quite a number of questions about how these powers are going to be used. I believe we have come up with a reasonable compromise. If we add in the government's amendments, we are almost there.

  It should be noted that, contrary to some assertions, there are other bureaucracies that have similar powers of search and seizure. In particular, I emphasise customs, parks and wildlife and certain child protection officers who also have similar types of powers to move in, search and seize.

  During the course of the examination of the bill by the Senate Standing Committee on Legal and Constitutional Affairs, a number of concerns were raised about key provisions in the legislation. I believe the minister has responsibly dealt with most of those, and the AMA is now largely satisfied with the bill. It has a couple of notable reservations which I will raise during the committee stage. Indeed, the Democrats will move amendments to the legislation by the time we reach the committee stage at some hour later today. We are in the process of having the amendments drawn up after our final consultations late last night.

  However, other more extreme objections to this legislation that have been raised reflect political and professional agendas. The minister has quite rightly rejected a number of these claims. We have also rejected them because what we have now and will have in the final product to come out of the committee stage will be in the best interests of the Australian taxpayer and the Australian public health system. In conclusion, I stress that the Australian Democrats will support this legislation and will move amendments during the committee stage. We hope to be able to distribute those amendments shortly.