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Health Insurance Amendment Bill 1991



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House: House of Representatives Portfolio: Health, Housing and Community Services Purpose To increase the difference between the Medicare rebate and the Schedule fee and to establish new safety- net provisions in relation to the maximum amount paid by families in a year for the difference between Schedule fees and benefits. Families will be required to be registered to be eligible for the new safety- net.

Background In order to understand the proposed changes contained in this Bill and the various reactions to those proposals, it is first necessary to examine briefly how the Medicare system works in relation to services performed outside hospitals. It is based on government approved fees (the Schedule fee) and benefits, which are 85% of the Schedule fee. For general practitioner consultations, the current fee is $22.50 and the benefit is $19.15. If the doctor uses bulk billing and charges the government direct, their remuneration is the benefit and the patient makes no contribution. In cases where the patient is charged, the Schedule fee is generally charged and the patient is required to contribute the difference. If more than the Schedule fee is charged the patient pays the increased amount. The proposal contained in this Bill will reduce the Government benefit, so that all but exempt patients will be required to contribute a minimum of $3.50. It is proposed that this will increase to $5 from 1 November 1992. Exempt patients are those who hold one of the various types of health benefit cards.

Associated with this change will be a tightening of the safety net provisions. As they currently stand, the safety net provides that where an individual has already contributed more than $246 in a financial year towards the Schedule fee for out of hospital services, they are eligible to receive benefits equal to 100% of the Schedule fee. The main change in the arrangements is that this level will now apply to families as well as individuals, so that while families benefit the position for individuals will remain unchanged.

In the explanatory memorandum to the Bill it is estimated that the changes contained in the Bill will save $166.6 million in 1991- 92 and $368.3 million in 1992- 93 when the measures will operate for the full year.

The measures to be implemented were announced in the 1991 Budget and aim to reduce the growth in spending on health insurance. The growth in services and costs is evident in the following figures which deal with the period 1984- 85 to 1989- 90: * GP consultations rose by 3.7% per person per year with benefits increasing by 82% over the five years; * pathology services increased by 7.3% per person per year and benefits paid grew by 56.6%; * radiology services increased by 4.8% per person per year and benefits paid increased by 68.7%. 1

The average annual rate of growth in the use of private medical services has increased marginally since the introduction of Medicare, with growth of 3.4% in the eight years prior to the introduction of Medicare and 4.3% since its introduction. A study by the Australian Institute of Health found that the major reason for the growth of servicing was not demographic changes, such as the ageing of the population, but was related to the increase in the number of doctors per person in the community. The argument is that with a fixed, minimum return to doctors due to the Schedule fee and with less patients per doctor, there is an incentive to increase the number of services performed per patient to maintain the doctor's income. The study found that while the number of services performed per doctor had remained virtually the same since 1984, the number of doctors had increased 17.7% quicker than the population. While there is a general oversupply of doctors, the problem is not universal, with shortages being experienced in some areas and principally in rural communities. 2

The oversupply of doctors has been acknowledged by the principal industry body, the Australian Medical Association (AMA). The President of the AMA is reported as saying that there are approximately 1 100 students graduating as doctors each year and approximately 18 000 already in practice. This gives a figure of one doctor for every 400 Australians, a figure the AMA is reported as saying it would like to see increased to 600 or 700. 3 To achieve the reduction in oversupply, the government and industry bodies have been discussing ways of encouraging doctors to leave the industry and to reduce the number of new doctors. To help achieve the latter, the AMA has proposed that there be restrictions on foreign doctors entering Australia. The government's response to this suggestion is contained in the second reading speech to this Bill where the Minister commented `The situation in Australia is now such that it can no longer afford to permit relatively unrestricted entry of overseas medical practitioners'.

However, following the measures announced in the Budget, the AMA has altered its position on the basis that it sees the changes as a threat to the availability of high quality medical care. In an open letter to the Prime Minister dated 22 August 1991, the AMA and other bodies state `The medical profession, represented by the AMA, all major Academic Colleges and Professional Associations views the budget announcement to changes in health care financing as a deliberate attempt to reduce the standards of medical care enjoyed by Australians.' While the letter was also concerned with the situation in major hospitals, it was focused on the reduction in the rebate.

The AMA's views were further stated in an address to the National Press Club by the Federal Vice President on 29 August 1991. In addressing the Medicare proposals, it stated `This Budget represents the rape of general practice. Its changes to health financing will have a devastating effect on the health care of Australians. The Government has proposed changes that will lead to the destruction of general practice.' It described the changes as `not a significant reform but are a desperate attempt to save money.' A moratorium on the changes was sought, so that the matters could be discussed in full with the government. The address follows `If the government agrees to a moratorium, we will talk.' The address also advised that the AMA and RACGP (Royal Australian College of General Practitioners) had advised their members that continued bulk billing of non- pensioners was `incompatible with quality medicine and as such they should cease forthwith.'

Another comment on the changes, by the Australian Hospital Association, the Public Health Association and the Doctors Reform Society, was released on 29 August 1991. Their Media Release noted their concern that the changes would undermine bulk billing and lead to a significant increase in GP fees. They also expressed concern that the higher patient charges would increase demand for services at community health centres and accident and emergency departments of public hospitals, which do not have the resources to cope with extra demand. As with the AMA, they called for the proposals to be postponed to allow further consideration.

The proposed increase in patient contributions has also been opposed by the ACTU, which has suggested that the Medicare levy be increased rather than an additional charge be placed on patients. It could be argued that the increased patient contribution, even with the improved safety net provisions to be discussed below, is comparable to a consumption tax as an equal amount is payable by all, regardless of their level of income, whereas an increase in the levy can be compared with the more progressive income tax system.

Not all bodies have opposed the increased patient contribution, with the Private Doctors of Australia being reported as holding the view that in relation to other expenses, they use the example of a packet of cigarettes, the proposed increase is small and would not prevent patients from receiving medical attention. 4

Another area of contention regarding the increased patient contribution relates to proposals to allow private health insurance to fill the gap between the rebate and the patient charge. The disagreement relates to the proper remuneration for a consultation as well as other matters. The AMA is reported to have argued that the Schedule fee is inadequate and has argued that the proper fee should be approximately $30 for a GP consultation. 5 This would mean a gap between the benefit and the fee of approximately $15, including the $3.50 patient contribution. It is proposed that private health insurance be allowed to cover the difference between this fee and the Government rebate. The Government has rejected this argument and will continue with the indexation of fees. If the Schedule fee remains, and with the safety net provisions meaning a maximum yearly payment of $246, the administrative costs of insurance are likely to make the premiums prohibitive. In a Press Release dated 29 August 1991, the Doctors Reform Society also opposed the introduction of gap insurance.

One area on which the parties appear to agree is the need for some type of price signalling for health care users. The government has referred to the need for `the judicious use of price signals to encourage both doctors and patients to be more selective in their use of medical services.' 6 In the address by the AMA Vice President mentioned above, it was stated `Patients are far more discerning about both the need for a medical service and the quality received when they have some direct financial interest in it by paying something.'

Another area of reform foreshadowed in the Budget, which will be discussed with the profession, is the introduction of practice grants that will complement fee for service payments. The proposal is that general practitioners will receive some of their remuneration in the form of grants with the aim of reducing the reliance on fees and encouraging more appropriate servicing. A comment in the address by the Vice President of the AMA referred to above may be linked to this proposal: `We are not interested in talking to government about turning general practitioners into public servants.'

Main Provisions Part II of the Health Insurance Act 1973 (the Principal Act) deals with Medicare benefits. Clause 3 will insert a new sub- section 8(1A), which contains a number of definitions, into the Part. The important definitions are those for: * patient contribution: Where the patient is charged and the safety- net does not apply, this will be the difference between the Schedule fee and the benefit payable. Where the doctor uses bulk billing for a prescribed GP service, it will be $3.50. Where the patient is entitled to concessional benefits, there will be no patient contribution. * safety- net amount: This will be $246 for the year commencing 1 January 1992 and this amount indexed for later years.

The benefit payable is dealt with in section 10 of the Principal Act which will be amended by clause 4. The main amendment is that the benefit payable in respect of a prescribed GP service where the patient is not a concessional beneficiary. The benefit will be 85% of the Schedule fee less $3.50 for the year commencing 1 November 1991, $5 for the next year and this amount indexed for future years. If the Schedule fee exceeds the benefit payable by more than the greatest permissible gap ($26.80 indexed), the benefit will be the Schedule fee less the greatest permissible gap. Clause 7 will amend section 20A of the Principal Act to make it clear that a doctor who bulk bills may charge $3.50 for a prescribed GP service where the safety- net provisions do not apply.

The definition of concessional beneficiary is also contained in clause 4, and includes those receiving a social security pension, a pension under the Veterans' Entitlements Act 1986, a person who receives a benefit under the Social Security Act 1991, a person receiving a family allowance supplement, people receiving certain benefits under the Veterans' Entitlement Act 1986 due to war service, disadvantaged people under the Principal Act and pensioners under the National Health Act 1953.

Clauses 4 and 7 will commence on 1 November 1991 (clause 2).

Clause 5 will insert a number of new sections dealing with the amendments to the safety- net. Proposed section 10AA provides for the registration of families, which will include the person applying for registration, their spouse and any dependent child. Where a child is under the joint control of two people they may be registered in each family. The family safety- net is dealt with in proposed section 10AC. Year is defined to be the year commencing on 1 January 1992 and subsequent calender years. Where, in a year, a claim is made in respect of a registered family and this claim takes the medical expenses incurred by the family to or above the safety- net level, the benefit payable is to be increased by the amount of the patient contribution in relation to that claim. Where a child is registered with two families, the full amount of the expense is to be treated as incurred by the relevant family where the Commission is satisfied that the adult of that family incurred the expense. In other cases, the expense will be divided between the families. Where a family is registered before 1 April 1992, expenses incurred earlier in the year will be included in the calculation and eligible for reduced patient contributions. If the registration occurs after this date, the expenditure may be taken into account for the calculation of the safety- net limit, but not for the payment of the patient contribution. Provisions for individuals are similar, without the registration requirements (proposed section 10AD).

Where the Commission is satisfied that a family is about to become eligible under the safety- net provisions, the Commission must write to the family to confirm that the composition of the family has not changed. The family will not be eligible under the safety- net until it has answered the query (proposed section 10AE).

A safety- net concession card is to be issued to a family or individual where the Commission is satisfied that the medical expenses incurred reached or exceeded the safety- net level. Cards are to be issued to each member of the family and cards are only to be issued in respect of the year of issue (proposed section 10AF).

Remarks The current dispute may be compared to the previous dispute between the Government and the medical profession regarding pharmaceutical benefits. Both involve the increasing costs to the Government of subsidised health services and the proposed restructuring of a professional industry. However, there is a major difference in that this dispute has seen virtually all representatives of the profession taking similar stances. The matter has already become emotive and political and it can only be hoped that the major problem of oversupply of doctors, and the best means to address this matter, will not become lost in such a debate.

References 1.Budget Related Paper No. 9, p. 5. 2. Ibid., p. 4. 3. Australian Financial Review, 19 August 1991. 4. Canberra Times, 27 August 1991, p. 12. 5. Australian Financial Review, 23 August 1991. 6. Budget Related Paper No. 9, p. 12.

Bills Digest Service Parliamentary Research Service For further information, if required, contact the Bills Digest Service (277 2439) or the Education and Welfare Group on 06 2772410.

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Commonwealth of Australia 1991

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Published by the Department of the Parliamentary Library, 1991.