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Wednesday, 1 April 1987
Page: 1916

Mr PORTER(7.09) —I address my comments to the appropriation under Appropriation Bill (No. 4) 1986-87 of an additional $13m of taxpayers' funds by way of compensation to pharmacists for the costs imposed on them by the Government as a result of its administrative incompetence under the pharmpay system. Under pharmpay, chemists submit pharmaceutical benefits scheme prescriptions to the Department of Health for payment of the appropriate subsidy. The Department established the pharmpay system for processing these claims. Pharmpay involves the reinterpretation of the prescription by a pharmpay clerk; the clerk then codes the prescription and manually enters it into a computer. The benefit is then determined and a cheque is issued to the chemist. In other words, the prescription is written by the doctor, read and filled by the chemist and then reread, coded and entered into a computer by a public servant.

Instead of accepting the chemist's claim and applying a strict random audit process, the Government set about duplicating the work done by the chemist. The system was fully operational by late 1984 and by the beginning of 1985 delays in payments began to appear and a backlog of claims built up. In 1985-86 $150,300 was allocated for overtime to reduce the backlog of claims which had already built up in the short period that the system had been operational. In other words, it rapidly became obvious that the system, even though it employed over 800 data entry clerks, could not keep up with the rate at which chemists' claims were being lodged. As the processing of scripts fell behind payments to chemists began to be seriously delayed. This meant that although the chemist had filled the prescription and was out of pocket for the cost of the drug, nevertheless the Government's payment of the patient subsidy was not forthcoming.

In order to overcome the problem the Government then started to make monthly payments to chemists based on the anticipated average volume of chemists' scripts rather than paying on the basis of actual prescriptions lodged. These average payments were issued on the understanding that at some time in the future the actual scripts would be processed and reconciling payments would eventually be made. However, last November the Attorney-General (Mr Lionel Bowen) notified the Department of Health that this method of payment was illegal, so two weeks ago the Government introduced legislation to amend the National Health Act to allow the Department to legally make payments to pharmacists based on estimates of the actual number of scripts filled. The important point to make is that soon after the introduction of this new system it was clear that unless significant administrative changes were made to improve the processing of prescriptions the system was bound to fail. The evidence clearly indicates that the Government failed to take the appropriate administrative action to improve the processing of these scripts. Now we are asked to appropriate $13m as compensation to the pharmacists for the costs they have had to bear as a result of this Government's gross administrative incompetence.

Let me make it clear that I am not making this criticism with the benefit of hindsight. On 25 November 1985 I raised exactly the same concerns about the Government's administration of the pharmpay system as I have tonight. Let me quote from the speech I made on that day:

This arrangement for the payment of pharmacists for PBS drugs is a bureaucratic nightmare, the current pharmpay scheme fails every test of efficiency and cost effectiveness which I can think of.

I recommended then that a new system of payment be devised, being an integrated system whereby the information generated by pharmacists in the filling of prescriptions could be used for the payment of any government subsidy. The Government has subsequently picked up that recommendation, but two years later. That delay will cost the taxpayer dearly. On 29 March 1985 the Minister for Health (Dr Blewett) wrote to pharmacists acknowledging that his system was not working. He told the pharmacists:

Payment will be on an average price basis calculated using your individual claims' profile adjusted as necessary to reflect the 1 December 1984 `Across-the-board' price increase.

He concluded his letter to the pharmacists by saying:

I regret any inconvenience which you have experienced caused by delays in payment during the past months.

But, as I say, it is over two years since that letter was written and only now is the Government coming to grips with this disastrous administrative nightmare. The Minister has now written, almost two years later, advising pharmacists of the compensation arrangements the Government is now seeking to implement. He started off his letter by referring to his earlier correspondence regarding the failures of the Pharmpay system, and he said:

As an interim measure, I advised you that my Department would make payments to you on an average price basis calculated on your individual claims profile.

Note the Minister's words `as an interim measure'-two years, he says, is an interim period. Clearly it is not. It is clearly outrageous and all taxpayers are now being asked to pay for his incompetence. The Minister explains that if they were to proceed with the reprocessing of all advanced paid claims the length of time to complete the task would vary from State to State. In Queensland reprocessing, he claims, would be completed this year. In Western Australia it would be 1988 before the claims were processed and in New South Wales and Victoria it would not be before 1989. In other words, it would take another two years to process all the claims which have been building up under this Government's administration.

Consideration interrupted.

The CHAIRMAN —Order! It being 7.15 p.m., I shall report progress.

Progress reported.