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Community Affairs Legislation Committee
16/05/2014

BARTLETT, Mr Richard, First Assistant Secretary, Department of Health

CAHILL, Ms Fifine, Assistant Secretary, Department of Health

LEARMONTH, Mr David, Deputy Secretary, Department of Health

[11:30]

CHAIR: Welcome. You will be a little startled to know that this committee was running early today. I remind senators that the Senate has resolved that an officer of a department of Commonwealth or of the state shall not be asked to give opinions on matters of policy and should be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policy or factual questions about when and how policies were developed.

Officers of the department are also reminded that any claim that it would be contrary to the public interest to answer a question must be made by a minister and should be accompanied by a statement setting out the basis for the claim.

We do not have a submission from the Department of Health so could I ask one or all of you to make a short opening statement?

Mr Learmonth : Very briefly, as you know, this bill implements a measure from the 2013-14 budget from the previous government. It was designed to save $105.6 million over four years. The bill before the committee increases the general or upper threshold of the extended Medicare safety net to $2,000 from 1 January 2015 and removes some outdated administrative processes.

The bill does not affect people with concession cards or people who are members of a family eligible for family tax benefit part A. They are automatically eligible for the lower threshold, which is not changed as a consequence of this bill. Obviously, most people aged over 65 are not affected as most have concession cards.

I acknowledge also that the recent budget includes a measure to remove the existing Medicare safety nets, including the extended Medicare safety net, and to replace them with a single integrated Medicare safety net from 1 January 2016. The implementation of this measure, should it proceed, would mean that the extended Medicare safety net with the $2,000 upper threshold would be in place for one calendar year, 2015.

CHAIR: I might just kick off by making the point that a number of witnesses have suggested that people are currently confused about what is in and what is out in safety nets and that having two changes in a short period of time would lead to an increase in that confusion. Would you like to comment on that view of witnesses?

Mr Learmonth : I think changing the threshold does not change at all what is in or what is out, so I am not sure I follow the comment. What is in and what is out is regardless; the expenditure threshold at which benefits commence is all that is affected under this bill.

CHAIR: Thank you.

Senator MOORE: Mr Learmonth, I am confused as to why we did not have a submission from the department, particularly when this bill has been around for a long time. Also, there were a number of quite detailed submissions from other groups, which is normally a stimulant for the department to provide a submission which responds in part to some of those issues.

Mr Learmonth : At the end of the day, it is an extremely simple measure in that sense: it is a simple threshold change. The impacts associated with it are quite simple, and we stand ready to provide such information as would assist in your consideration of the bill.

Senator MOORE: And you advised the committee of the fact that you had made a decision within the department not to provide a written submission?

Mr Learmonth : I am not sure, Senator.

Senator MOORE: Can we check that? And I will check that with the committee.

Mr Learmonth : Certainly.

Senator MOORE: As you would realise, I am no longer in the chair's position, so I do not know, but we have had a fairly longstanding position here where we are happy to respond, as required, to the department's information but to just not get one. I do not know about the other senators, but we know what a busy week this has been for everybody, including the department. With excitement, I went to read my papers for today's committee hearing and found there was nothing from the department, which I found distressing.

Mr Learmonth : We will check. If we neglected to advise, I apologise.

Senator MOORE: That would be great. All the submissions came through, as you would understand, before the budget. They were unaware of other changes that were going to happen. You do not believe it will be confusing, in terms of people's understanding about how the safety net operates and where they fit within the system? You do not believe a 12-month change for one and another 12 months with different rules—because I believe, by looking very briefly at what I found out about what is going to happen with the new one, there are going to be different rules.

Mr Bartlett : The system currently has three safety net-like devices in it. There is the extended Medicare safety net, there is the original Medicare safety net and there is the greatest possible gap. For people dealing with it at the moment, there is a level of complexity as to how it affects them. Increasing the threshold for generals in the extended Medicare safety net, as Mr Learmonth said, to $2,000 is unlikely to add huge levels of complexity to those arrangements. The change in 12 months time is designed to replace those with a single safety net.

Senator MOORE: In terms of the co-payment to Medicare when you see a doctor, when does that cut in?

Mr Bartlett : That cuts in on 1 July 2015.

Senator MOORE: So that will not apply to anything to do with this legislation?

Mr Bartlett : It will apply for the last six months of the three safety nets that I talked about.

Senator MOORE: Is it possible to get from the department some kind of flowchart to show me and hopefully others exactly what cuts in when and what the changes are? That would be very useful.

Mr Learmonth : Would you like me to go back to the start, Senator?

Senator MOORE: It would be really useful to see exactly. Certainly, in the last week or so anyway, there have been questions about whether $7 is going to be an out-of-pocket expense. Is $7 going to be an out-of-pocket expense for the extended Medicare safety net?

Mr Bartlett : No, Senator, it is not.

Senator MOORE: For the last two-quarters of the life of the bill that we are discussing now, should it be accepted, the $7 per visit will not count as an out-of-pocket expense?

Mr Bartlett : It will not count towards the safety net threshold or the safety net payments once the threshold has been reached.

Senator MOORE: Can you give me any background as to what the difference was between the 12 something and the 2000? What was the basis of the decision? The decision was a budget saving.

CHAIR: How did you decide where to set the new—

Senator MOORE: What was the science behind changing it from the previous level to 2000?

Mr Learmonth : It was a decision of government in the budget context.

Senator MOORE: I understand it is a decision of government. I want to know whether there was any science about it. Does that constitute some percentage of what out-of-pockets are? Not the rationale behind the decision, because of course you cannot tell me, but the basis of the figure.

Mr Bartlett : There has been a longstanding concern about the safety net and the safety net's growth. A range of capping measures have gone through over a period of time. It is fair to say that every time things are capped there is a drop in expenditure, but then it takes off again. A logical way to deal with that ongoing growth is to look at the threshold as well as what applies to reach that threshold. That is the logic. To give the example of cataracts, when the cataract item was capped there was a significant increase in anaesthesia costs for cataract procedures. When that item was capped, there was a significant increase in expenditure on diagnostics. At some point you can go through and cap items as you go, but there is a logic in saying, 'Let's look at how the safety net overall is working.' The threshold is one way of dealing with that.

Senator MOORE: And people working the system.

Mr Learmonth : If you recall, I think there were two occasions on which certain items were capped, given particular spikes and expenses that were happening. If you look at the items which were not subject to a benefit cap, in the 12 months between 2012 and 2013 the safety net expenditure on those uncapped items grew by 70 per cent.

Senator MOORE: That is the kind of data that the department can share with us?

Mr Learmonth : Yes.

CHAIR: Could you give us the figures on that, either now or later?

Mr Learmonth : On the actual expenditure?

CHAIR: The 70 per cent.

Mr Learmonth : I can give you that now. For those uncapped items, the increase from 2012 to 2013 expenditure on the safety net went from $97.9 million to $163.9 million.

CHAIR: Wow.

Senator MOORE: We always know that, when there is a system, people work out ways to work the system. I think that is a given. You are aware of the evidence we have before us about how people have different views about safety nets as a way of operating. That debate will continue, but it is about, when we have got one, how we use it. My specific question—and I know I have screwed up how I ask this—is: is the difference in amount between the $1,200-and-something and the $2,000 based on any particular modelling?

Mr Learmonth : I do not think we can illuminate further for you, beyond it being a decision of the former government in budget.

Senator MOORE: I am not asking about the basis of the decision; I am asking: does that figure—which, if I do my maths right, is somewhere around $600—represent how many visits to a doctor over a period of time?

Mr Learmonth : The difficulty in commenting on what you are saying is that there is no single cost for a visit to a doctor. If you have a look at the way in which the safety net issue is now, the largest single use of the safety net is artificial reproductive technology.

Senator MOORE: Followed by obstetrics generally?

Mr Learmonth : No. The next one is specialist consultations. There are a range of things in there.

Senator MOORE: So there is no magic to say why $2,000 should be the gap as opposed to $1,900?

Mr Learmonth : There is not a formula that says it was two of X or two of Y. It was simply a judgement made by the government in the budget.

Senator MOORE: Based on no science. But that is a fair thing. That is what happens with decisions. Also, $2,000 would seem to be a figure that people could understand, more than the $1,200-and-something that it was before.

CHAIR: Indexation was what sent it there.

Senator MOORE: But obviously not between now and then. The other point—and other senators will have questions—is about the communication aspect, that this bill removes the requirement for individual people to get written notification that they are heading towards the end of a period, going into a next level. Can you give us some information about why and how and what is the communication process?

Mr Bartlett : The intent is not to remove the need for DHS to communicate; the intent is to remove the means by which they communicate. What has happened is that we have had people at DHS counters who are essentially going through where their safety net entitlement is up to and getting information on that, which DHS are then having to confirm in writing, which may or may not be what the person wants them to do. What this is about doing is, essentially, acknowledging that there are a range of ways in which DHS can communicate. That communication will continue. There is no intent to reduce the information people get about where they are up to in terms of safety net entitlement or to ensure that they are aware that they are approaching the threshold. It is about, if you like, liberalising the way in which that communication occurs, to reflect technology changes and a range of other things.

Senator MOORE: Can it still come in by writing?

Mr Bartlett : Yes.

Senator MOORE: Right, because that is not clear.

Mr Bartlett : As I say, it is not designed to remove DHS's obligation to communicate; it is designed to enable them to do it in range of ways.

Senator MOORE: So you are removing the absolute need for written communication and replacing it with a commitment to communication which may be written?

Mr Bartlett : Yes.

Senator MOORE: Some of the evidence has proven that people still want to get letters.

Mr Bartlett : Yes, sure.

CHAIR: Who chooses the method of communication?

Mr Bartlett : My assumption, based on a very brief conversation, quite a while ago, with DHS is that they will communicate with the person and it is up to the person whether they receive wish to receive written confirmation or not.

CHAIR: The client decides? That is my question.

Mr Bartlett : That is my understanding, but we can confirm that for you.

Mr Learmonth : If it is helpful, we will consult with DHS and provide you with better detail on that.

Senator MOORE: It is interesting, because it is a particular part of the legislation. Apart from anything else, that clause has been put in there. So that is a DHS responsibility?

Mr Learmonth : Yes. We will get you some further detail.

Senator MOORE: That would be great, and if there is any data at all about what their expectations are about what is the form people would most like to receive it in, that would be very useful. I am sure the Centrelink side of DHS would have a background in communication with clients, so, if there is any of that knowledge that could cross over, that would be good. Thank you.

Senator SMITH: Mr Learmonth, in your opening remarks, I did not quite hear the full comment but you reflected on the effect of this particular change for those over 65. Could you just elaborate on that?

Mr Learmonth : Certainly. I simply commented or reflected on the fact that most people over the age of 65 have concession cards and will thus be unaffected by this bill.

Senator SMITH: That is right. If I understand the bill correctly, the lower threshold has been quarantined from any change—

Mr Learmonth : Yes.

Senator SMITH: and the change only affects the upper threshold. In regard to this legislation, the effect will be a $700 increase in the threshold for a six-month period because we have the new government's budgeted changes coming into effect.

Mr Learmonth : It will be a 12-month period. The safety net works on a calendar year. So it starts on 1 January 2015. The new, simplified safety net announced in the budget by this government takes effect on 1 January 2016.

Senator SMITH: The ACOSS submission draws heavily from the report that was commissioned by the Department of Health called the Extended Medicare safety net review report 2009. Did you see that in the papers?

Mr Learmonth : Yes.

Senator SMITH: Do you have a comment? It just quotes from the report. It does not provide a commentary on the accuracy or otherwise of the report. I am just wondering whether or not you can talk a little bit about that report by Savage.

Mr Bartlett : What the report highlighted, and I think what ACOSS have picked out in their comments, is that, if you look at medical expenses normally, concession card holders are around 36 or 37 per cent of the population but use more than 50 per cent of services, whereas when you look at the safety net the numbers are around about 65 to 70 per cent general patients and a similarly reduced proportion of concessional patients. So the statements they make there are the ones that indicate that you would expect, because it is more weighted towards general patients and less towards concessional patients, to see more use of it being made by people in more affluent circumstances than is the case with other services more broadly.

Senator SMITH: The comment about services in the upper threshold being accessed by those in the higher quintile is an accurate statement?

Mr Bartlett : There were comments to that effect in the report.

Senator SMITH: That is right. This is a quote from the report:

Consistent with the fact that people in affluent areas incur more out-of-pocket costs, we found that some 55% of EMSN benefits are distributed to the top quintile of Australia’s most socioeconomically advantaged areas, whereas the least advantaged quintile receive less than 3.5%.

That is an accurate statement?

Mr Bartlett : That is an accurate statement. It again reflects comments that have been made in the media in recent days about the relative rates of bulk-billing in different parts of the country. If you are not incurring a co-payment, you are not going to get to the safety net.

Senator SMITH: That is right.

Senator PERIS: The National Seniors Australia submission raises concerns about it being inequitable for single people to have to reach the same threshold that applies to couples and families. Can you explain why the safety net does not distinguish between single and non-single healthcare consumers?

Mr Bartlett : That has been a longstanding approach to this particular safety net. The safety net that was announced in the budget will differentiate between singles and families. So this one has taken the approach it has taken; the new one will take a different approach that does actually recognise that that difference exists.

CHAIR: I will ask two questions following on from the other submissions. One relates to the concerns that rural and regional Australians do not reach the safety net to the extent that people in other areas do, based on survey figures claiming that they do not have the same ability to pay. Is this reflected in your experience, and is it about availability of services or cost of services—or both?

Mr Bartlett : It is very difficult for us to know for sure what is driving particular outcomes. The data that we have will not necessarily tell us, although logically you would have to expect that a significant part of what you are describing is about access. If you are accessing fewer services, then clearly you are less likely to reach the safety net. The data that we have suggests that people in rural areas access fewer services than people in metropolitan areas, so you would expect that to have a flow-on effect in terms of safety net access.

CHAIR: The other issue that came up—I think National Seniors, and others, made the comment—was that consumers found it difficult to source information about what was covered by the safety net and what was not. What is the primary source of information for that?

Mr Bartlett : The primary source of information is a website, MBS Online; it has the Medicare Benefits Schedule. I will not pretend that that is the easiest read that people are ever going to find, but in some ways the safety net, in terms of coverage, is perhaps actually fairly easy—it is out-of-hospital services. The other source of information that consumers can use is the DHS phone line, and DHS will walk them through it.

CHAIR: So you can ring DHS and say, 'Is my hip included?'

Mr Bartlett : Yes. Essentially, out-of-hospital services are eligible to be counted towards the extended safety net threshold or receive it when it is there.

Mr Learmonth : Basically, it is that it is out of hospital and is Medicare rebatable that counts.

CHAIR: I think there is some confusion around specialist treatments, allied health, and other areas that were causing people some—

Mr Bartlett : Again, I think that if people have questions there is the DHS phone line. Equally, if they are in a Medicare office they can ask questions. There are a range of places they can go to work out what is going on if they wish to seek that information.

CHAIR: One of the witnesses commented that MBS Online was down almost every time they went to their surgery. Have you had any feedback about the functionality of MBS Online?

Mr Learmonth : That is operated by DHS.

CHAIR: They would feed back to you, would they not, if it was down for two days or something?

Mr Bartlett : There are a couple of things there. There is a DHS one, and that maybe what has been talked about, and there is an MBS Online system, which we are responsible for. As far as I am aware, the MBS Online system that we are responsible for is available all the time. As I said, it essentially provides a search engine to let people work their way through the MBS. It is not the easiest document to work your way through, so you can get into the site and get the information—and it is available—but it is not the easiest read in the world.

Mr Learmonth : It is certainly not something that we have heard, that the site has been down for any significant duration.

Mr Bartlett : But the question is whether what is being referred to is that side or the DHS alternative, and I do not know the answer to that one.

CHAIR: This was from one of our witnesses, who I think is probably a fairly experienced health products consumer. I think he meant MBS Online when he said MBS Online.

Mr Learmonth : It would be news to us.

CHAIR: Perhaps you might like to check and see if there have been any concerns about that.

Senator MOORE: I have some questions about the cost of this implementation. In the original budget papers that came out when it was put up it was costed out until financial year 2016-17—that is how the papers read—and there were a series of savings that were going to be linked to the budget item. If I am correct—I am very visual, so I like to see things written down—the new system is going to come in in 2015-16, is that right?

Mr Learmonth : Calendar year 2016. The safety net is a calendar year.

Senator MOORE: But the budget estimates process would be financial year, would it not?

Mr Learmonth : Yes.

Senator MOORE: So then it is across the board.

Mr Learmonth : There would be a bit attributable to each side—the book end.

Senator MOORE: Financial year 2015-16 is where the change comes—if this one comes in—and the new one would come in in the middle of that year.

Mr Learmonth : In the middle of 2016.

Senator MOORE: As it was originally proposed—and I think there has already been some slippage, because we are debating it now as we are heading towards 2014—there was going to be a cost of $0.1 million in 2013-14, a saving of $7.8 million in 2014-15, a saving of $48.5 million in 2015-16 and a saving of $49.4 million in 2016-17. I am just reading it off; that is how it goes. You might have to take this on notice; I really want to find out the costings on it. What are the costs involved if we implement this new system out of this bill, which will live for one financial year, and what would be the differential between the cost of setting it up and the savings? That is a question I would like to ask. Also, as it is going to be replaced in the next financial year, I would imagine the two lots of savings that have been considered in this document would no longer be savings—because we would be looking at a whole new system then. Is that right?

Mr Bartlett : That is right, Senator. We will come back and confirm that, but—

Senator MOORE: That would be very useful.

Mr Bartlett : I would have thought that the costs of implementing this are going to be very small system costs with the Department of Human Services. But we will confirm that.

Senator MOORE: It would be systems, I would imagine.

Mr Learmonth : It is a fairly simple parameter change.

Senator MOORE: Yes, but I would just like to know what is involved in that. This was introduced purely, as we all know, as a budget savings measure. But this one is not going to continue except for the one year. So I want to know what the net effect of that will be.

Mr Learmonth : We will spell that out for you, Senator.

Senator SMITH: In the submission by National Seniors Australia it says:

This increase to the threshold for the Extended Medicare Safety Net targets all consumers, regardless of their financial capacity to afford their health costs.

That is not a correct statement, is it? This initiative is quarantined below a threshold.

Mr Learmonth : Yes, you are correct.

Senator SMITH: Under the proposal in this legislation, where were the savings being utilised? Are they just coming out of the health budget?

Mr Learmonth : Just out of the health budget—that is the short answer.

Senator SMITH: Am I correct in saying that the changes to the safety net proposed by the new government will be used for the medical research fund?

Mr Learmonth : Yes. The minister has made it clear that the published savings in the health portfolio associated with this budget will indeed go to the medical research fund.

CHAIR: I thank the witnesses who have given evidence to day. I also thank Hansard and the secretariat.

Senator MOORE: I think we need to tell the department when we need the information.

Mr Learmonth : We should be able to get it to you very quickly.

CHAIR: We are reporting within a week or so, so if you are able to get it to us as quickly as possible that would be good.

Mr Learmonth : We will do so.

CHAIR: Thank you very much.

Committee adjourned at 11:27