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Wednesday, 4 December 1974
Page: 3109


Senator WHEELDON (Western AustraliaMinister for Repatriation and Compensation) - I move:

That the Bill be now read a second time.

I seek leave to incorporate my second reading speech in Hansard.

The DEPUTY PRESIDENT-Is leave granted for the Minister to incorporate his second reading speech? There being no objection, leave is granted. (The speech read as follows)-

The Bill before the Senate contains provisions relating to a number of the Government's activities regarding health insurance and benefits authorised by the National Health Act. Following the election of this Government to office at the end of 1972, we embarked on a diversified legislative program directed to various aspects of our health insurance initiatives. They were twopronged. Our main effort, of course, was directed to the Government's own health insurance program- culminating with the passing of the Health Insurance Act and the Health Insurance Commission Act. This main effort was supplemented by investigations as to the manner in which the legislation authorising the present voluntary health insurance arrangements could be improved. Proposals directed to improvements to the legislation authorising the present health insurance arrangements were placed before the Government recently. We were then faced with a decision as to whether they should be proceeded with, in view of the imminence of our own health insurance program- scheduled for introduction on 1 July 1 975. On balance it was decided that we should proceed with proposals to improve the legislative controls directed to the present voluntary insurance arrangements so that the improvements to the legislation could apply for the remainder of the life of those arrangements.

The existing private health insurance scheme authorised by the National Health Act, in fact, is a system supported by extremely generous direct and indirect subsidy from the Australian Government and State governments. The health benefit organisations could not have grown to their present significance nor could they continue to operate, except for the very generous support that comes from Government sources, directly and indirectly. For instance, on average over 60 per cent of the cost of medical services covered by medical ' insurance is met by direct subsidy from the Australian Government through the health insurance scheme and by indirect subsidy from the same source through tax concessions, which are a cost borne by the Government. In the case of private ward treatment in a public hospital, for instance in New South Wales the fee charged to the patient is currently $39 per day. However, the average bed-day cost of a public hospital bed in that State is estimated to be at least $60 a day. Clearly there is an explicit direct subsidy here, and similarly from Australian Government sources there is a $2 bed-day subsidy paid directly to insured patients, special account subsidies which average approximately $4.50 a day over all patients, plus an indirect subsidy available through the taxation system when hospital fund contributions and net fees are claimed as a concessional deduction.

The overall effect is that Governments, that is Australian and State governments, are meeting in excess of 60 per cent of the average private ward treatment of a patient in a public hospital in New South Wales. Therefore it is clearly in the interests of the people of Australia that the system of a private health insurance scheme should be properly supervised by the Australian Government and it is the clear responsibility of the Government to exercise this supervision. The most important provisions in the Bill are designed to enable the responsible Minister to exercise more effectively this supervision of the operations of the health benefits organisations registered under the National Health Act in a way that will enable the Government of the day to achieve its objectives. The present Government recognises, as have previous Governments, the need for additional measures in this regard. There was established the Committee of Inquiry into Health Insurance, the Nimmo Committee, which presented its report during 1969, and the Senate also set up its own Committee to enquire into medical and hospital costs. At that time a matter of major concern was the financial policies followed by some of the health benefits organisations. Another matter of concern was that hospital and medical benefits should be more closely related to the fees being charged for hospital and medical services.

Following consideration of the report of the Committee of Inquiry into Health Insurance, amendments to the National Health Act were introduced by the previous Government aimed at rectifying some of the unsatisfactory aspects of the health insurance scheme including the two I have already mentioned. The previous Government also announced they would be sponsoring additional measures of the nature of those included in this Bill. The then Minister for Health, the Hon. A. J. Forbes, in his address to the House of Representatives dated 4 March 1970, made the following statement:

In addition to the new measures which I have just mentioned, the Government is considering the introduction of legislation providing for penalties to be imposed on funds' officers for serious neglect of their responsibilities, and enabling the replacement of funds' officers by appointed managers in certain circumstances, as proposed in the Nimmo Committee's recommendation 37.

Recommendation 37 of the Nimmo Committee to which Dr Forbes referred reads as follows:

That organisations and their officers be subject to penalties for any failures to comply with the conditions imposed by and under the National Health Act.

The relevant paragraphs of the Nimmo Committee Report are 14.15 to 14.18 and I would refer all honourable senators to those findings of the Nimmo Committee.

It was recognised by the previous Government, and it has caused concern to the Minister for Social Security (Mr Hayden), that where an organisation does not comply with the Act, or actions taken under the Act, ultimately the only course of action available is to cancel the registration of the organisation. This is a most unsatisfactory punitive measure as the penalty falls on the contributor, who is deprived of Australian Government benefits. Furthermore, deregistration would effectively end any control the Australian Government could exercise over reserves. This could, in certain circumstances, be a most unhappy situation for contributors whose money has, in fact, been accumulated in reserves if, for instance, a deregistered fund no longer required to responsibly administer its affairs in the interest of contributors at the direction of the Australian Government, could direct that reserve money into some other commitment which bore no benefit for contributors and over which they had no influence or in which they held no equity. It should be borne in mind, however, that deregistration is the least preferred option. The trouble at the moment is that there are no other options and in an extreme case of a private fund flouting the reasonable directions of Government, nothing but this extremely punitive and unsatisfactory measure is really available to Government, if it wishes to ensure that funds properly discharge their responsibilities to contributors. Following careful consideration of this situation, the Government has framed provisions similar to those in the Insurance Act to protect the interests of contributors which are compatible with the intentions of the previous Government as made clear in the statement by the then Minister for Health. This Government also believes these to be proper measures which should be included in Federal legislation relating to aspects of private insurance to ensure that the administration of such insurance arrangements can be adequately supervised in the interests of contributors.

The Bill includes provisions to enable the Minister, where he believes it to be in the contributor's interests, to request an organisation to show cause why it should not be investigated in relation to specified matters. Where the organisation fails to satisfy the Minister, and he believes it to be in the contributor's interests, he may appoint an inspector to conduct an investigation into specified matters relating to the affairs of the organisation. The Bill further provides that after he has considered the report of the inspector, the Minister may take such action consistent with the Act as he considers appropriate. This may include making an application to the Australian Industrial Court for the appointment by the Court of a judicial manager to manage the affairs of the fund or for the fund to be wound-up by the Court.

Provision is included in the Bill to require a judicial manager, appointed by the Court, to conduct the affairs of the fund with the greatest economy consistent with efficiency and to report to the Court, as soon as possible, as to the course of action to be taken in. relation to the fund. This could include recommendations to return the fund to its former management; to transfer all or part of its affairs to another organisation with the consent of the other organisation; or that the fund be wound-up. The Bill provides for funds to be wound-up under the supervision of the Court upon an application and in accordance with a scheme submitted by the Minister, the judicial manager or the organisation conducting the fund. All schemes for winding-up are to be subject to confirmation by the Court which may vary the schemes. The Court is required where practicable to effect the transfer of contributors to a fund to be wound-up to a fund conducted by another registered organisation.

As I stated earlier the arrangements I have outlined are along the lines of arrangements provided for in the Insurance Act and I believe all honourable senators will welcome their enactment as a positive step forward in the protection of the interests of contributors to health benefits funds. The Bill also contains provisions to provide greater flexibility as to the manner in which reserves of medical and hospital funds may be utilised. There has been considerable controversy recently regarding the reserves of funds and it will be to the general advantage of both the funds and the Government if the rigidity at present contained in the Act regarding the reserves is removed. The rigidity arises mainly from sections 67 and 68 of the present Act which provide that the reserves must remain in the fund which has accumulated them and cannot be used for any other purpose, not even to support some other fund of the organisation that is also registered under the National Health Act. To quote an actual example, the reserves of the hospital fund of a leading organisation in Victoria stand at the equivalent of 6.4 months contribution income, whereas the reserves of the medical fund of the same organisation stand at a deficit equivalent to 2.4 months contribution income. Surely it would be a sensible approach to follow if the excess reserves in the hospital fund could be transferred to remove the deficit balance in the medical fund. The BUI provides therefore that an organisation will be permitted to apply to the Minister for the transfer of reserves from one registered fund to another registered fund. It also provides that the Minister may direct the transfer of reserves in this way where the Registration

Committee- the expert committee established under the National Health Act- so recommends.

There is an allied provision that concerns the special accounts operated within medical and hospital funds by registered organisations. These special accounts which are authorised by Part VI, Division 2 of the National Health Act, ensure that contributors continue to receive medical and hospital fund benefits which otherwise they would be denied by the pre-existing, chronic or maximum benefit rules of the organisations restricting the payment of fund benefits. The Government has been very concerned at the tremendous rate of escalation of the cost of these special accounts. For medical and hospital funds combined, Government expenditure on them has risen from $22m in 1970-71 to $55m in 1973-74. The estimated expenditure on special accounts in the current financial year is $77m and this must be revised upwards due to substantial increases in hospital charges. This escalation in Government spending arising from underwriting the activities of health benefits funds through the special account mechanism has occurred at the time when there were extremely large reserves accumulated by the funds. It has now reached the stage where overall 20 per cent of hospital fund benefits are met by the Government through the special account and to quote an example, Government expenditure is now almost one third of the expenditure of one of the major funds on hospital fund benefits.

The special accounts machinery provides a hidden subsidy to medical and hospital benefits funds and the structure of the legislation is such that the system can be manipulated to the advantage of organisations. Of course, most organisations do use the special account machinery in a responsible fashion, but I am concerned that not all approach it in this way. For example, the fund benefits paid from the special accounts for the medical and hospital funds operated by the Medical Benefits Fund of Australia in Queensland increased from $672,000 in the period July to September 1971 to $1,664,000 in the period April to June 1974. Further, the number of contributors transferred to the medical and hospital special accounts of that organisation increased from 277 and 2 1 8 respectively in the period July to September 1971 to 930 and 790 respectively during the period April to June 1 974. It must be realised that the special account system was designed by the previous LiberalCountry Party Government to prop up the health benefits funds. The transfer of contributors by an organisation to a special account it operates is entirely at the option of the organisation in accordance with its rules relating to contributors with pre-existing ailments, who exceed a maximum benefit level or who, in the case of the hospital special account, are chronically ill. The existing legislative provisions are loosely framed to permit the organisations to take advantage of the subsidy provided through the special account arrangements to a much greater extent than this Government believes is proper. There is not even power in the Act for the responsible Minister to withdraw the special account subsidies from an organisation.

The fairly wide margin of interpretation permitted organisations is particularly reflected in the statistics to which I have just referred for the Medical Benefits Fund, Queensland. These figures indicate that this organisation has, since 1971, availed itself more and more of the special account subsidies. This Bill does not propose any revolutionary change to the special account machinery but it does provide that, where it is proper for him to do so, and when he has received a recommendation of the Registration Committee that the moneys standing to the credit of a fund may properly be reduced, the Minister may direct that a portion of any excessive reserves held in a medical or hospital fund may be used to finance, in part, medical and hospital benefits for the long term and chronically ill members of the fund. The specific provision is contained in new section 74c and visualises portion of any excessive reserves being credited to the organisation's special account for the purpose of providing benefits to high drawing members who, as I have just mentioned, are usually the long term and chronically ill. In any one year in which the Minister makes a direction under this new section, the amount to be transferred is limited to 25 per cent of the amount of the special account defict of the fund in the last completed financial year.

There are provisions in the Bill for directions of the Minister given under new section 74c to be the subject of review. It is intended that the reviews should be conducted by the general administrative appeals tribunal, legislation for which is being prepared by the AttorneyGeneral. However, if it is necessary for a review to be conducted in the interim period before the appeals tribunal is established the Bill provides for an independent tribunal to be established specifically for the purpose of reviewing directions by the Minister. It is intended that the tribunal which may be established by this Bill will comprise three members. One will represent the interests of health benefit organisations, another the interests of contributors to the organisations and that the third member would be a qualified accountant.

The Bill before the Senate also includes provisions relating to four matters associated with the administration and payment of nursing home benefits. The proposed new definition of Government nursing home' in sub-clause 3 (i) and other clauses provide for public nursing homes in the Australian Territories to be exempted from nursing home admission and fees supervision under the National Health Act as are public nursing homes in the States at present. Clause 15 provides for a specific power to vary by regulation the rates of additional Australian Government nursing home benefits for pensioners with pensioner medical service entitlement and their dependants and the rates of nursing home fund benefits for insured patients.

Clauses 16 and 25 include provisions amending section 57b and 73c of the National Health Act to provide for an increase in the nursing home patient contribution from $2.55 a day to $4.55 a day. Sections 57b and 73c are machinery provisions which are invoked only where the approved fee for a nursing home patient is less than the aggregate of the nursing home benefits payable and the patient contribution. In this situation, the invoking of these provisions means that nursing home benefits are reduced with the effect that patients in all nursing homes pay the same patient contribution. This contribution will be $4.55 a day or $3 1.85 a week and is fixed so as to leave a patient in receipt of the standard rate single pension plus supplementary allowance with approximately $4 a week for personal spending. Clause 42 provides for the incorporation of the rates of additional nursing home benefit, as currently prescribed by regulation, into the Eighth Schedule of the National Health Act with effect from 15 October 1974. There are also a number of provisions in the Bill to effect machinery amendments to the National Health Act to delete provisions relating to the payment of handicapped children's benefits, to clarify the provisions regarding directions by the Minister under section 73 b and to enable provisions in the National Health Act relating to the supervision of registered organisations to override State laws where the statutes are inconsistent.

I now turn to the two matters provided for in the Bill which fall within the portfolio of my colleague the Minister for Health (Dr Everingham). As announced in the Treasurer's

Budget Speech, stoma appliances and home dialysis equipment and supplies will be made available free of charge to those who need them. This is yet further evidence of the Government's determination to provide a high quality health care service and of its acceptance of its special responsibility to assist those members of the community who are sick or disabled.

The Bill will allow for the preservation of the existing hearing aid scheme provided for under the repealed section 9A. It also empowers the Minister for Health to arrange for the provision of such medical or surgical aids, appliances and equipment as are prescribed in Regulations under the Act on such conditions as the Minister thinks fit. It also provides for the making of modifications to a building, vehicle or equipment necessary for the treatment or rehabilitation of the sick or disabled. It is intended, once the necessary regulations have been made, to distribute stoma appliances free of charge through hospitals and stoma associations and home dialysis equipment through hospital dialysistransplantation centres. The Government is at present considering extending the range of aids, appliances and equipment to be made available and the Bill, as drafted, will permit the extension of the scheme from time to time as the needs of disabled groups in the community are assessed.

The second matter provided for in the Bill which comes within my colleague's portfolio relates to pharmaceutical benefits dispensed through friendly societies' dispensaries. The National Health Act now restricts in some respects the services that can be given to the general public by some dispensaries run by friendly societies. At present the number of friendly society dispensaries with full approval to dispense benefits to the public has been taken up in both Queensland and South Australia and there are currently 7 dispensaries in Queensland and 5 in South Australia which have only a limited approval to dispense benefits to members of the society, their wives and dependent children under the age of 16 years. The Bill provides that the number of dispensaries with full approvals in Queensland and South Australia be raised to permit dispensaries with limited approval in those States as at 1 November 1974 to be granted full approval. This amendment will have the effect of improving the pharmaceutical service in those States without increasing the number of pharmacies.

The Bill further provides that full-time student dependants of members, up to the maximum age provided for in the rules of the friendly societies concerned, be afforded the same benefits as parent members and children under the age of 1 6 years. Mr President, I commend the Bill to the Senate.

Debate (on motion by Senator Rae) adjourned.







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