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Health Legislation Amendment (Gap Cover Schemes) Bill 2000

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2000

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 

HEALTH LEGISLATION AMENDMENT

(GAP COVER SCHEMES)

BILL 2000

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Circulated by authority of the Minister for Health and Aged Care,

The Hon. Dr Michael Wooldridge, MP)  



 

HEALTH LEGISLATION AMENDMENT

(GAP COVER SCHEMES)

BILL 2000

 

OUTLINE

 

This Bill amends the National Health Act 1953 (NHA) and the Health Insurance Act 1973 (HIA) to provide for gap cover schemes The purpose of these schemes is to enable registered health benefits organisations to provide no gap and/or known gap private health insurance without the need for contracts.

 

The Medicare rebate covers 75% of the Schedule fee for in-hospital medical expenses while private health insurance covers the remaining 25%.  The “gap” is the difference, paid by the policy holder, between fees charged by doctors for in-hospital medical services and the combined health insurance benefit and Medicare benefit.

 

Current legislation allows the gap to be covered in circumstances where the service is rendered by or on behalf of a medical practitioner:

-         with whom the registered health fund has a medical purchaser-provider agreement; or

-         who has a practitioner agreement that applies to the professional service provided, with the hospital where treatment occurred, and that hospital has a hospital purchaser-provider agreement with the registered fund.

 

This Bill provides a third mechanism through which the medical gap may be covered by funds.  The operation of the gap cover schemes provided for in these amendments is in no way intended to affect the operation of any medical purchaser-provider agreements, hospital purchaser-provider agreements or practitioner agreement. 

 

The Government is committed to reducing or eliminating the gap as much as possible.  The Private Health Insurance Incentives Act 1998 (PHIIA) , which introduced the 30% Government Rebate on private health insurance premiums, provides that if a health fund on or after 1 July 2000 does not offer its members a choice of no or known gap policies, then the Minister may revoke a health fund’s status as a participating fund in the premium reduction scheme.  That is, the policy holders of funds that do not offer at least a no gap or a known gap policy by 1 July 2000 may only be able to access the rebate through their annual tax return or as a direct cash rebate from Medicare offices.

 

This Bill establishes the framework which allows health insurance funds to develop gap cover schemes, subject to Ministerial approval and review, to provide no gap and/or known gap private health insurance cover.

 

This Bill is designed to improve the attractiveness to consumers of private health insurance products in the market by allowing funds to provide no gap and/or known gap insurance cover. The current restricted availability of such cover has been a major contributor to the perception that private health insurance does not offer value for money, and has thus discouraged consumers from subscribing to health cover.

 

Research has found that consumers essentially want no gap or known gap insurance. This Bill will provide the framework to allow funds to design schemes that satisfy this market demand.

 

The main items contained in this Bill amend the NHA to:

·          enable a registered organisation to prepare a gap cover scheme under which it can offer no gap and/or known gap policies;

·          provide for Ministerial approval of gap cover schemes;

·          provide that much of the machinery related to gap cover schemes, such as:

-                  the form and content of applications;

-                  the Ministerial approval process, including the criteria for approval;

-                  the Ministerial power to impose conditions on the operation of schemes and to vary such conditions;

-                  annual reports and periodic reviews; and

-                  revocation and variation of schemes

will be contained in regulations.

·          empower PHIAC to obtain regular reports from registered organisations about matters relating to the operation of gap cover schemes and to provide advice  to the Minister on the operation of those schemes with particular reference to the extent to which the schemes genuinely reduce or eliminate the cost to consumers of hospital treatment and associated professional attention; 

·          allow a registered organisation to pay a benefit in excess of the Schedule fee if the service is rendered by or on behalf of a medical practitioner under a gap cover scheme approved by the Minister, by amending Schedule 1 to the NHA.  

The Bill also amends the HIA to provide for the automatic assignment of a contributor’s Medicare benefit to a registered organisation, an approved billing agent, a hospital or day hospital facility, or other prescribed person, as provided for under the terms of the gap cover scheme, when that benefit relates to a professional service rendered by a practitioner pursuant to an approved scheme.

 

 

FINANCIAL IMPACT STATEMENT

 

The Health Legislation Amendment (Gap Cover Schemes) Bill 1999 will have no significant impact upon the finances of the Commonwealth.

 



 

REGULATION IMPACT STATEMENT

 

This Regulation Impact Statement relates to the Health Legislation Amendment (Gap Cover Schemes) Bill 2000 and amendments required to National Health Regulations 1954 dealing with gap cover schemes.

 

The problem

 

The gap has proven one of the most intractable problems facing the private health industry and is a major contributor to the perception that private health insurance does not offer value for money.   The gap is the difference between fees charged by doctors for in-hospital medical services and the combined health insurance and Medicare benefit.

 

For private patients receiving in-hospital medical services, the Medicare rebate is 75% of the Medicare Benefit Schedule (MBS) fee.  Health funds are required to cover the remaining 25% of the MBS fee and can cover the full doctor’s fee, when the doctor charges in excess of the MBS, only where the doctor has a negotiated agreement, either directly with the fund, or with a hospital that has a negotiated agreement with the fund.  In contrast, public patients are covered for one hundred per cent of costs in most cases.

 

Doctors have been reluctant to enter into agreements with the funds and hospitals.  A significant cause of this reluctance has been the perception by doctors that formal agreements are  “the first step towards US styled managed care”, regarding them as a potential threat to their clinical independence.

 

Hospital Casemix Protocol data in 1997-98 indicates that the average medical gap for an episode in a private hospital was $151.  The average medical gap for an episode in a public hospital was $69.  However, for some procedures the gap payment can be much higher.

 

The Government determines the MBS fee.  Fees are generally adjusted on an annual basis having regarded selected economic indices.  The average MBS fee per service has increased by approximately 80% since the introduction of Medicare in 1984.  That increase is in line with the increases in the Consumer Price Index (CPI) for the same period.

 

However, doctors determine their own charges based on their views of what the market can bear. It is not uncommon for specialists to charge differently for the same service, depending on the circumstances of the patient.

 

Consumers essentially want no gap or a known gap in return for their insurance premiums. It is one of the major causes of complaint about private health insurance, particularly when the requirement to pay the gap is not realised by the patient prior to receipt of the bill for services.

 

The private sector makes an invaluable contribution to the overall viability of the Australian health care system, and for this to continue a way must be found to cater to the consumer’s demand for no or known gap services.

 



Desired objective

 

The objective is to allow for private health insurance contributors to be provided with a choice of products that offer either no medical gap or known medical gap payments.  Such a reform would be consistent with the Government’s desire to make private health insurance more attractive to consumers, to stabilise the health insurance participation rate, and take some of the pressure off the public hospital system.

 

The Government is keen to redress the decline in membership and to ensure that Australia’s health system offers choice as well as universal access (and has a vibrant private sector to make that possible).

 

This measure is part of the Government’s overall strategy to address the decline in health insurance membership.

 

To address affordability, the Government introduced the 30% Rebate on private health insurance on 1 January 1999, which is equal to 30% of the cost of private health insurance premiums.  The Rebate is available to everyone who has a policy provided by a registered fund, whatever their level of cover or type of membership. The Government has also taken steps to stimulate product innovation through, for example, the introduction of loyalty bonuses and private sector coordinated care trials, and is increasing industry stability through measures such as Lifetime Health Cover.

 

 

In addition, a Senate amendment in relation to the Rebate legislation requires all health funds to offer no or known gap policies by 1 July 2000, to ensure they are eligible to continue to offer the Rebate as a premium reduction. 

 

The Government does not have a preference for the development of no gap as opposed to known gap products. This should be a matter for individual choice and the market place.

 

Options

 

Option 1 - maintain current arrangements

 

Contributors could continue to pay the gap when they use their private health insurance for in-hospital medical services.

 

Option 2 - increase the MBS for schedule items where there are significant gaps

 

The Government could raise the level of the MBS for those items where contributors are most likely to face gaps.

 

Option 3 - supplementary gap insurance

 

This option allows funds freedom to provide supplementary insurance to cover gaps.  This kind of ‘add-on’ product could only be offered if legislative changes were made to allow payment above the MBS without a formal agreement between funds and doctors and/or hospitals.

 

Option 4 - gap cover schemes

 

This option is to allow the health insurance industry to develop schemes, subject to ministerial approval and review, which would enable registered health benefits organisations to provide no gap and/or known gap insurance policies.  Where a scheme has been approved health funds would be able to fully meet the difference between the 75% Medicare benefit and the cost of the medical service.

 

These schemes would be entirely voluntary arrangements between health funds, doctors and hospitals.  Schemes will provide an additional mechanism to the current provisions provided by health insurance legislation that allows health insurers to pay above the MBS (Medical Purchaser Provider Agreements and Practitioner Agreements).  Unlike the formal contract arrangements these schemes have the support of the AMA.

 

The following is provided as an example of arrangements that might develop as a gap cover scheme.  A fund might agree to provide 100% medical cover for members who are treated by doctors who have agreed to participate in an approved gap cover, but would limit benefit payments to the MBS made in relation to charges by other practitioners (that is, contributors, in some instances, would still have an unknown gap payment to meet). This agreed benefit may be related to the MBS or the AMA schedule fees or funds may prefer to establish their own schedules.   These arrangements might be negotiated on an industry wide basis, or with reference to a particular hospital, or group of hospitals, or to particular craft groups.

 

Approvals of schemes by the Minister would be by reference to certain criteria specified in the regulations.  The regulations will also provide for periodic reviews by the Minister of the operation of schemes.  These criteria, which will be the subject of further development in consultation with the industry, are:

·          the scheme must be a genuine scheme that would reduce or eliminate gaps;

·          the scheme contains proposals under which patients are offered informed financial consent, that is, a contributor to a fund is informed of any amounts that they can reasonably be expected to pay in respect of the professional service, including the amount of any Medicare benefit, health insurance benefit and the amount (if any) that the contributor may be liable to pay for the professional service;

·          where appropriate, the scheme provides for simplified billing arrangements;

·          the fund must demonstrate the scheme will not have an inflationary impact;

·          arrangements made by the fund to ensure that contributors will not be disadvantaged by revocation of the scheme;

·          the scheme requires all parties to maintain the professional freedom of medical practitioners involved in the scheme, within the scope of accepted clinical practice, to identify appropriate treatments in the rendering of professional services to which the scheme applies.

 

This option provides for the automatic assignment of a Medicare benefit from a contributor to the registered organisation, an approved billing agency, a hospital or day hospital facility, or other prescribed person as provided for under the terms of the gap cover scheme, in circumstances where the professional service occurs as part of an approved scheme. 

 

Impact analysis

 

Affected parties

 

The groups primarily affected by the problem of the gap and the consequent decline in private health insurance membership are:

 

·                    private health fund members;

·                    consumers prepared to purchase private health insurance if no or known gap cover is available; and

·                    private health insurance funds.

 

In addition, other groups such as health professionals, private hospitals, public hospitals, Commonwealth, State and Territory governments are affected by any shift in demand between private and public sector health care.

 

Option 1 - maintain current arrangements

 

Impact on the industry

 

Health funds will continue to lose members because of frustration with an often unknown medical gap.

 

Impact on contributors

 

Private health insurance is the way most favoured by Australians to gain access to the hospitals and doctors of choice.  If the uninsured medical gap continues more and more people will perceive that health insurance is not offering value for money and adverse selection will continue.

 

Impact on the Commonwealth Government

 

Addressing the gap is perceived to be the most important reform of private health insurance still to be achieved. Each year, private health insurance contributes around $3 billion in hospital benefits and the private sector cares for roughly a third of all hospital patients. This contribution is invaluable to the financial viability of the Australian health care system, and each and every fall in health insurance participation feeds directly through into the public system as greater numbers of people become entirely reliant on the public system for their health care. 

 



Option 2- increase the MBS for items with gaps

 

Impact on the industry

 

Doctors are currently charging what the market will bear. If the MBS was increased to reduce or eliminate gaps without an agreement from the profession not to increase fees (or without control of doctors’ fees) doctors could simply increase their charges to restore the patient contribution.

 

While it is acknowledged that the skill and/or the workload required for some doctor interventions would justify an increase/reduction in some MBS levels, a move to increase the MBS for items where gaps are common would by and large simply reward those areas of medicine where commercial advantage allows them to bill above the MBS in the first place, rather than optimising expenditure on the best health outcomes. 

 

Funds would have to make increased payouts.  Health funds are required by legislation to pay 25% of the MBS, as the MBS increases so would fund benefit payouts. 

 

Impact on contributors

 

Gaps may be temporarily removed but there would be no mechanism to prevent them from reappearing. As noted above, the temptation with any increase in the MBS would be for doctors simply to increase their charges to restore the patient contribution. 

 

Premiums would increase as health funds would need to increase their benefit payouts.

 

Impact on the Commonwealth Government

 

It would be a significant cost to the Government.  The value of medical gaps for in-hospital services (insured and uninsured) was $260 million in 1997-98.

 

Option 3 - supplementary gap insurance

 

Currently, funds can cover members’ costs fully when doctors charge above the MBS only where formal agreements are in place.  Under this option, funds would be able to offer supplementary insurance, as an ‘add-on’ product to cover the gap, separate and additional to their existing hospital tables, instead of entering into negotiated agreements.  These supplementary ‘add-on’ products would not be subject to an approval process wherein funds would have to demonstrate that they would not have an inflationary impact (as is the case with option five).  Nor would these products be bound by the current agreement framework.  There is a real danger that if doctors’ fees were not controlled under an agreement, some doctors might respond to higher fund benefits by raising their charges to reinstate the patient contribution.  It is not Government policy to allow unregulated above-MBS payments, as without negotiated agreements in place which would cap charges, increases in Government expenditure and inflation could result.

 



Impact on the industry

 

‘Add on’ gap products may result in adverse selection.  People who are sicker or older (and therefore more likely to use hospital services) would be highly attracted to such products.  If, as expected, these are the people who are most likely to take up ‘add on’ gap insurance, this option would simply result in the elderly and the chronically ill sharing the cost of gaps, and premiums would likely be very high. 

 

Other groups may be attracted to ‘add on’ products, for example, the highly risk averse or very wealthy.  This may help to reduce the problem of adverse selection, however consumers who feel they are unlikely to use health services in the near future would probably not perceive such a product to be value for money.  These products would probably do little to achieve a stabilisation of the participation rate or to attract new members.

 

The industry view is that such a product, attracting as it would high users of health care, would need to be very highly priced if it was to be self-funding.

 

Impact on contributors

 

Allowing supplementary gap insurance would provide consumers with a wider choice to better match their individual circumstances.

 

However, such cover would be most likely to be purchased by people who expect to make high use of health services, or for a small proportion of people for whom price is not a factor.  The high risk of adverse selection would make the premiums expensive, which would decrease the attractiveness of these products for most contributors. 

 

‘Add-on’ gap cover products would not offer an incentive for wide participation in line with the Government’s objective.  These products would not help to achieve reduction or elimination of gaps across the board for all private health fund members.  Contributors who choose not to purchase such products, or are unable to afford the extra cost represented by ‘add-on’ gap cover would still be faced with unknown gaps.

 

Impact on the Commonwealth Government

 

This option by itself would have little impact on the Government. 

 

Option 4 - gap cover schemes

 

Impact on the industr y

 

These schemes will provide the industry with the flexibility to determine the mechanics of achieving no or known gap products.

 

The value of medical gaps for in-hospital services for the insured was around $200 million in 1997-98.  All other things being equal hospital premiums would need to rise by 6% if funds were to fully cover existing in-hospital medical charges.  However, higher premiums are likely to be ameliorated by the effect on the participation rate because of a perceived improvement in value for money.

 

These schemes are a response to very strong demand for no gap private health insurance.  They will also provide for simplified billing and informed financial consent.  The ability to cover gaps will make private health insurance a better value product for many existing and potential consumers.  This will help to stabilise the declining health insurance participation rate and will complement other measures being taken by the Government to stabilise the industry such as the 30% Rebate and the introduction of Lifetime Health Cover.

 

The regulations will specify criteria for the approval of gap cover schemes.  These criteria will include provisions that funds applying for approval of schemes must demonstrate, to the satisfaction of the Minister, that the operation of the scheme will not have an inflationary impact.

 

With the introduction of these schemes there is some prospect that doctors will have to accept some limitation on their ability to charge whatever they like ie. they will need to adhere to some sort of schedule of fees.  For many this fee might represent an increase over their usual charges.  Others may be prepared to lower their charges in return for access to a source of patients (health fund members with that particular product) and a reduction in bad debts due to the simplification of billing procedures and the assignment of the Medicare benefit to the health fund, an approved billing agent, a hospital or day hospital facility, or other prescribed person as provided for under the terms of the gap cover scheme.  Others might be motivated to limit their charges because of the obvious benefit to their patients and the private health industry as a whole.

 

The industry is unlikely to develop stand-alone no or known gap products as this would encourage adverse selection.  It is more likely that existing products will progressively cover the gap as gap cover schemes are introduced.  This is what has occurred so far with gap coverage under existing arrangements.

 

Health funds will need to provide information to their current and potential clients on what will be covered by products which provide either no or a known gap.

 

Impact on contributors

 

Consumers will be able to purchase products that provide for either no or a known gap. Health insurance will be seen by many contributors as representing better value for money.

 

As is the case with some policies offered under the current agreement framework, it is possible that the design of some health insurance policies offered under a gap cover scheme will not provide the contributor with a known or nonexistent gap in relation to all episodes of treatment provided by all doctors in all hospitals. In cases where a contributor receives treatment from a practitioner who is not a party to the scheme, that contributor may face an unknown gap.

 



Impact on the Commonwealth Government

 

Health insurers and doctors would need to agree on some sort of schedule fee for there to be no or a known gap.  The acceptance of schedules other than the MBS could create pressure on the level of the MBS and hence Commonwealth outlays and could undermine the MBS itself.  It could be seen as an acknowledgment that the MBS has not kept pace with medical costs and doctors claims of inadequate indexation.

 

Given the diversity of charging practices, fixing a price at any one level is likely to result in over-paying many doctors.   However, in deciding whether to approve a scheme the Minister must have regard to whether the scheme will have an inflationary impact.  The regulations will also provide for periodic reviews by the Minister of the operation of schemes.  Also, because these schemes are voluntary, its impact will obviously depend upon the extent to which doctors agree to such arrangements.

 

Increasing the perceived value of health insurance will encourage contributors to maintain their coverage.  In turn this will help to take pressure off the public hospital system.

 

Gap cover schemes require only minor legislative change and represent an extension of existing policy measures to address the gap, rather than a new policy direction.  Thus, schemes are ideally suited to the tight timeframe imposed by the Rebate legislation, which necessitates the availability of a workable alternative to contract based approaches to addressing the gap well in advance of the deadline.

 

Consultation

 

The views of all relevant stakeholders have been canvassed. Health funds and their representative bodies, peak medical bodies and consumer groups all support the preferred Option 4.  A solution to the gap problem is increasingly being seen by all stakeholders as an essential reform.

 

Health insurers did not support option 3 - supplementary gap insurance, because of the identified problems of adverse selection and the likely cost of the product.

 

The Government will continue to seek input from stakeholders in its implementation of the proposed arrangements.

 

Conclusion and recommended option

 

The Government considers that the options of maintaining existing arrangements, increasing the MBS for selected items and supplementary gap insurance are not viable options. 

 

Option 1 - maintain current arrangements, would see the continued decline in the credibility of, and hence demand for, private health insurance.

 

Option 2 - increase the Medicare Benefit Schedule, may remove gaps temporarily but they would most likely return within a short period of time. This option would be a significant cost to the Commonwealth and increase the cost of private health insurance as benefit payouts increase with the MBS.

 

Option 3 - supplementary insurance to cover gaps would be expensive because of adverse selection and the lack of a Ministerial approval mechanism might endanger the system as a whole.  Contributors without this product would still be faced with unknown gaps.

 

Option 4 - gap cover schemes, is the preferred option.  This approach offers an additional option for the funds to offer no or known gap insurance products.  The measure has the potential to see the issue of in-hospital medical gaps addressed in the short to medium term.

 

Although under the Rebate legislation funds are required to offer no or known gap policies in order to offer the Rebate as a premium reduction, the manner in which they choose to implement such policies is entirely a matter for the fund.  The preferred option provides scope for different arrangements for the various participants and therefore it is very flexible.  It is the first time health funds and doctors have been able to agree on a strategy for dealing with gaps.

 

Implementation and review

 

The preferred option will be implemented through amendments to the National Health Act 1953 and the Health Insurance Act 1973 .

 

Each of the schemes will need to be approved and reviewed by the Minister.  The effectiveness of this measure will be addressed on a regular basis.  These reviews will be based on reports from the funds, which will be provided to the Minister on an annual basis.

 

 

 



 

 

HEALTH LEGISLATION AMENDMENT

(GAP COVER SCHEMES)

BILL 2000

 

 

NOTES ON CLAUSES

 

Clause 1: Short title

 

This clause provides that the amending Act may be cited as the Health Legislation Amendment (Gap Cover Schemes) Act 2000 .

 

Clause 2: Commencement

 

This clause provides that the Act commences on a day or days to be fixed by proclamation or otherwise on a day six months from the day of Royal Assent.

 

Clause 3: Schedule(s)

 

This clause provides that the Acts specified in the Schedule are amended as set out in the applicable items in the Schedule concerned.

 

SCHEDULE 1 - GAP COVER SCHEMES

 

Introduction

 

The Schedule amends the National Health Act 1953 (NHA) to allow registered organisations to submit gap cover schemes to the Minister for approval under which health insurance funds can provide no gap and/or known gap cover.  The Schedule also makes a consequential amendment to the Health Insurance Act 1973 (HIA) to permit the assignment of a contributor’s Medicare benefit to a fund, approved billing agent, hospital or day hospital facility or other prescribed person, when that benefit relates to a professional service rendered by a practitioner pursuant to an approved scheme.

 

Health Insurance Act 1973

 

Item 1

 

This item inserts a new subsection (2AA) into section 20A of the HIA.

 

Section 20A of the HIA deals with the circumstances under which assignment of a Medicare benefit may occur, or is taken to occur.

 

The new subsection 20A(2AA) provides an additional circumstance in which assignment of a Medicare benefit may occur.  Where:

-                  a Medicare benefit would be payable to a person in relation to professional services rendered to a patient in a hospital or day hospital facility; and

-                  the person has entered into an applicable benefits arrangement with a fund which covers his or her liability for fees and charges in relation to that professional service; and

-                  the professional service is provided under a gap cover scheme that has been approved by the Minister;

 

the person will be taken to have assigned his or her right to the payment of a Medicare benefit for those services to:

-                  the fund; or

if provision is expressly provided for such assignment under the terms of the approved scheme to:

-                  an approved billing agent;

-                  the hospital or day hospital facility;

-                  a prescribed person.

This provision enables the payment process under gap cover schemes to be simplified, making it consumer, and doctor, friendly. Automatic assignment of the Medicare benefit relating to a service provided under an approved schemes frees the patient from the need to claim the Medicare benefit directly, and allows a consolidated payment incorporating both Medicare and private insurance benefits to be made to the treating practitioner.

 

Item 2

 

This item amends subsection 20A(2D) of the HIA as a consequence of the amendments made by Item 1.  The effect of this amendment is to provide that the assignment circumstances set out in subsections 20A(2A), (2AA) and (2C) are mutually exclusive.

 

 

National Health Act 1953

 

Item 3

 

This item inserts a definition of gap cover scheme at subsection 4(1) of the NHA. A “gap cover scheme” is a scheme prepared by a registered organisation under which it is able to offer no gap or known gap policies.

 

Item 4

 

This item inserts a definition of known gap policy at subsection 4(1) of the National Health Act 1953 (NHA). A “ known gap policy” is a private health insurance policy that will provide a benefit for all but a specified amount or percentage of the full cost of hospital treatment and associated professional attention, for the persons insured by the policy.

 

Contributors to such policies will have certainty as to the maximum amount they will be liable for in relation to professional services covered by the known gap policy. Such knowledge will address one of the more frequent causes for complaint in this area, which is that currently in many situations the “gap” payment that the policyholder will be expected to cover is not known prior to it being incurred, which lessens the attractiveness of private health insurance.

 

Item  5

 

This item inserts a definition of no gap policy at subsection 4(1) of the NHA. A “ no gap policy” is a private health insurance policy that covers the full cost of hospital treatment and associated professional attention for the person or persons involved.  Such policies will provide consumers with certainty that additional expenses will not be incurred for any services covered by the policy.

 

Item  6

 

This item inserts a new Division 4A after Division 4 of Part 6 of the Act. This Division contains machinery provisions dealing with the approval, variation, review and revocation of gap cover schemes.

 

73BDD - Registered organisations may apply to Minister for approval of gap cover schemes

 

Subsection 73BDD(1) allows a registered organisation to prepare a gap cover scheme at any time.

 

Subsection 73BDD(2) provides that subject to any relevant regulations, a registered organisation may apply to the Minister for approval of a gap cover scheme. This subsection also provides that a scheme is of no effect unless an approval by the Minister is in force in relation to it.

 

Subsection 73BDD(3) emphasises that the Minister’s approval of a scheme does not limit the further application of the Trade Practices Act 1974 (TPA) or the Competition Code of any participating jurisdiction in relation to that scheme.

 

Broadly speaking, the TPA prohibits anti-competitive trade practices, such as:

-         anti-competitive agreements which have the purpose or effect of substantially lessening competition in a market in which the parties to the agreement operate;

-         agreements that contain an exclusionary provision. Sometimes referred to as a “primary boycott”, these are agreements between persons in competition with each other which exclude or limit dealings with a particular supplier or customer or a particular class of suppliers or customers;

-         agreements that fix prices;

-         secondary boycotts where action by one person in concert with a second person (where “a person” can be an individual, corporation or trade union) hinders or prevents a third person from supplying or acquiring goods or services from a business; or

-         misuse of market power.

 

The onus will be on registered organisations to develop schemes which comply with the TPA and Competition Codes.

 

Subsection 73BDD(4) clarifies that any arrangement entered into for the purposes of a gap cover scheme does not constitute a hospital purchaser-provider agreement, a medical purchaser-provider agreement or a practitioner agreement. A gap cover scheme, and any attendant arrangements which enable the scheme to operate, are different in kind from other agreements under the NHA which rely on contractual arrangements.  

 

Subsection 73BDD(5) provides that regulations must be made in relation to the approval of gap cover schemes by the Minister dealing with:

-                  the form, content and manner of dealing with these applications;

-                  the criteria to be considered by the Minister; and

-                  the power of the Minister to impose and vary conditions on these schemes.

 

These regulations are mandatory. They will provide detail necessary for the Ministerial approval process to function efficiently.

 

Subsection 73BDD(6) provides that the criteria specified in the regulations to be taken into account by the Minister in determining whether to approve schemes must include the provision of particulars sufficient to demonstrate, to the satisfaction of the Minister, that the operation of the gap cover scheme for which approval is sought will not have an inflationary impact.

 

This provision ensures that arrangements to cover the gap which are negotiated under gap cover schemes will not result in increased medical fees, nor increase the total cost borne by consumers of health services. This will guarantee that gap cover schemes will genuinely reduce or eliminate the current in-hospital medical gap.

 

Section 73BDE - Other matters concerning gap cover schemes

 

Subsection 73BDE(1) enables regulations to be made relating to the operation and regulation of gap cover schemes approved by the Minister.

 

Subsection 73BDE(2) states that the regulations must provide, in relation to each approved gap cover scheme:

-                  for the provision of annual reports by registered organisations to the Minister in respect of the operation of the scheme; and

-                  for the provision of a copy of such reports to the Private Health Insurance Administration Council (PHIAC).

 

Subsection 73BDE(3) provides further details on matters to be included in the regulations in relation to scheme annual reports. The regulations:

-                  must provide for the form and content of such reports;

-                  must provide for the date by which each report is to be provided to the Minister and to PHIAC;

-                  may provide for the Minister to permit the provision of a report after the date on which it would usually be required in certain circumstances;

-                  may provide for the initial report to be provided in respect of a period of more or less than a year in certain circumstances.

The provision of annual reports to the Minister on the operation of gap cover schemes will enable continual monitoring of the effects of the schemes in practice. This will ensure that schemes are achieving the results they were designed to provide, namely a real reduction in the level of out-of-pocket payments by patients with private health insurance. As the Minister will remain informed of the impact of schemes, conditions may be imposed, or variations made to conditions, to ensure that progress is continually made toward the elimination of the gap. 

 

Subsection 73BDE(4) provides that the regulations made in relation to gap cover schemes may also include, but are not limited to, the following matters:

-                  periodic reviews of scheme operations by the Minister;

-                  revocation of schemes by the Minister in circumstances identified by regulation;

-                  the capacity of registered organisations to seek variation or revocation of  schemes, or conditions imposed on schemes, in circumstances identified by regulations;

-                  the review of specified decisions under the Administrative Appeals Tribunal Act 1975 in relation to specified decisions relating to the approval, revocation or the conditions of operation to which they are subject.

 

Item 7

 

This item inserts a new paragraph (bc) after paragraph 82G(1)(bb), to expand PHIAC’s functions to include obtaining regular reports from funds about matters relating to gap cover schemes and providing advice to the Minister on the operation of those schemes. PHIAC will report with particular reference to the extent to which schemes genuinely reduce or eliminate the cost to consumers of hospital treatment and associated professional attention.

 

PHIAC’s independent monitoring will provide a concrete basis from which to assess the efficacy of gap cover schemes, and aid in the determination of any condition or variations which might appropriately be applied to schemes.

 

Item 8

 

This item adds a new subparagraph (eb)(iii) after (eb)(ii) in Schedule 1 of the NHA. This allows the benefit provided by a fund to exceed the gap between the amount paid under the Health Insurance Act 1973 and the Schedule fee when a service is rendered by or on behalf of a medical practitioner under a gap cover scheme approved by the Minister. 

 



 

 

 

HEALTH LEGISLATION AMENDMENT (GAP COVER SCHEMES) BILL 2000

 

ABBREVIATIONS USED IN NOTES ON CLAUSES

 

 

          fund                                        health benefits fund

 

          HIA                                         Health Insurance Act 1973

 

          MBS                                       Medicare Benefits Schedule

 

          Minister                                  Minister for Health and Aged Care

 

          NHA                                                 National Health Act 1953                 

 

          organisation                            registered health benefits organisation

 

          PHIIA                                     Private Health Insurance Incentives Act 1998

 

          registered organisation           registered health benefits organisation

 

          scheme                                    gap cover scheme

 

          TPA                                        Trade Practices Act 1974