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Health Legislation (Pharmaceutical Benefits) Amendment Bill 1991

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House: House of Representatives

Portfolio: Aged, Family and Health Services



To require, with some exemptions, pharmacists to use the Claims Transmission System (CTS) to supply information and to comply with the rules made by the Secretary when making a claim; and to restrict the availability of subsidised pharmaceutical benefits to `eligible' people.


The Commonwealth provides subsidies on the cost of pharmaceutical benefits where the cost of the drug exceeds the contribution limit for the relevant patient. The level of contribution required depends on the category into which the person falls, e.g. are they general patient or the holder of a Health Care card, and there is a general safety net so that high volume users do not have to contribute after a certain number of scripts have been filled in a year.

Under the scheme, the pharmacist fills the script, charges the relevant patient fee and submits a claim for payment of the Commonwealth subsidy. There are two methods for the submission of claims for payment by the Commonwealth, PHARMPAY and CTS, with CTS being the newer system. Basically, under PHARMPAY, a pharmacist submits a claim to the Health Insurance Commission (HIC) based on the prescriptions that have been filled. The HIC receives returns from pharmacists which detail the drugs provided and the patient to which the service was provided. The returns are reviewed on a manual system which, amongst other matters, checks the entitlement of the patient. There is not a total review of the claims, with the review largely being effected through an audit of the various claims. In a paper dated October 1989, the HIC estimated that approximately 3-4% of claims had no entitlement to a subsidy. 1 The PHARMPAY process was not designed to record information about individuals or family groups, and, as such, cannot record the eligibility of individuals for the subsidy before the script is filled, this being largely determined at subsequent clerical checks and spot audits. Where it has been subsequently assessed that the patient was not eligible for the level of subsidy provided, the reimbursement to the pharmacist is adjusted. Section 99 of the National Health Act 1953 provides that payment is not authorised where the patient was not entitled to receive the subsidy. Thus, if the pharmacist incorrectly identifies the eligibility of the patient for a subsidy or the drug provided, they may suffer financial loss. Claims are paid 30 days after receipt, even if processed before this date.

The alternative system, CTS, was introduced to help overcome backlogs in the PHARMPAY system. CTS is based on the pharmacist entering the data needed for a subsidy and this information being transmitted to the HIC through either electronic means or the provision of a floppy disk. This process has the advantages of helping to alleviate backlogs by reducing the processing work of the HIC and reducing the keying errors associated with processing pools. The Government encourages the use of CTS through, amongst other measures, the payment of an incentive and the payment of CTS entitlements when they are processed, which is usually within 15 days of receipt. This system is now used for 55-60% of subscriptions.

While the proposal to extend the use of CTS was announced in the 1990 Budget, rumours of the policy appeared in February 1990. The proposal was seen as part of an extended use of a new Medicare card that would be introduced due to the lack of security with the current cards. The allegation was that pharmacists would be required to input a person's Medicare card and prescription information into a reader connected to the HIC before any subsidy would be payable and this information would be connected with information from other Departments and agencies. Privacy concerns were raised by the Privacy Commissioner and the AMA, amongst other bodies. The Minister denied that the proposal had been approved and rejected claims that the system would establish an `Australia card by stealth'.

The changes announced in the 1990 Budget centre on expanding the role of CTS, requiring the greater use of CTS and tightening the eligibility criteria for the subsidy. The CTS scheme will be expanded by allowing the flow of eligibility information from the HIC to the pharmacist, in addition to the current flow in the other direction. The information will allow the pharmacist to determine the subsidy the person is eligible for and will be conclusive evidence for the pharmacist that this level of subsidy is payable. This is connected to the incentive for the pharmacist to expand the use of CTS as if the pharmacist uses CTS in this regard, they will be guaranteed the level of subsidy indicated. This will reverse the current situation where the pharmacist bears the cost where they made a mistake in the person's eligibility.

The other change announced in this area was the restriction of benefits to eligible people as defined under the Health Insurance Act 1973. Basically, this is intended to be people eligible for Medicare benefits and the main group excluded will be overseas visitors. It is estimated that this will save $6 million per year. This raises the possibility that pharmacists may refuse to supply subsidised benefits to people they don't know unless the person provides proof of their eligibility, which will most easily be done by providing a Medicare card. The Privacy Commissioner and the Pharmacy Guild are reported to be satisfied with the proposals. 2

Main Provisions

The functions of the HIC will be extended to include the provision of dedicated computer facilities to approved suppliers (i.e. pharmacists). The HIC's computers are to be able to provide status information (see below) and the HIC is to obtain from the Departments of Social Security and Veterans' Affairs requisite information in respect of people who receive a benefit from the Departments. Requisite information is defined to include matters such as:

* age, sex and current address;

* the type of benefit provided;

* the name, age and sex of any dependents of the beneficiary; and

* the identification number allocated to the person or dependent.

Part 3 of the Bill (clauses 6 to 17) will amend the National Health Act 1953 (the Principal Act). Clause 4 will insert a number of definitions into the Principal Act, the more important of which are those for:

* no-benefit prescription: a prescription in respect of a person who is not an eligible person or who cannot establish that they are an eligible person ( Note: eligible person is not defined in the Principal Act);

* status information: this is information regarding whether the person is entitled to receive benefits free or at a concessional rate.

Clause 10 will amend section 87 of the Principal Act to provide that, in respect to no-benefit prescriptions, pharmacists are to charge the Commonwealth price for the drug. (Basically, the Commonwealth price is the unsubsidised price of the drug.)

Proposed section 87AA provides that an approved supplier may obtain status information regarding a person requesting the supply of drugs. The information supplied will be conclusive evidence as to the persons status (clause 11).

Clause 14 will substitute a number of new sections into the Principal Act. Proposed sub-section 99AAA (4) provides that, except if proposed section 99AAB applies, approved suppliers must use the CTS system to supply information, while sub-section 99AAA(5) provides that if CTS is not used the information must be supplied manually. Proposed sub-section 99AAA(8) provides that the Minister is to make rules relating to the information to be supplied, claim procedures, the processing of claims and the making of payments. Such rules will be disallowable instruments. The rules must be complied with for payment to be made.

Proposed section 99AAB deals with those exempted from the requirement to use CTS. This will include medical practitioners; those pharmacists subject to the approval of an amalgamation agreement; pharmacists providing benefits in isolated areas; and those who are subject to a proposed section 99AAC declaration. Proposed section 99AAC will allow the Secretary to declare that an approved supplier is not subject to the CTS requirement. Such decisions are to be made according to the guidelines made by the Minister which will be disallowable.


1. Health Insurance Commission, Strategy Proposal for the Management of the Pharmaceutical Benefits Program, October 1989, p. 2.

2. The Age, 30 May 1991.

Bills Digest Service 18 June 1991

Parliamentary Research Service

For further information, if required, contact 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.