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Monday, 11 November 1991
Page: 2867


Senator PATTERSON (9.21 p.m.) —Tonight we are discussing the Hearing Services Bill 1991, which gives effect to the Government's decision in October 1990 that the National Acoustic Laboratories hearing services program would become a statutory authority to be known as Australian Hearing Services. The functions of the authority will include the provision of hearing services to eligible persons; research and development in the assessment of hearing; hearing aids; hearing loss prevention; the effects of noise on the community; and the development of standards in relation to hearing products, certain noise levels and the provision of hearing services.

  This Bill does not alter the availability of the services provided by the NAL. It does, however, provide for the making of regulations to set charges for hearing services. The Commonwealth announced in this year's Budget that a $25 annual fee will be imposed to cover the annual supply of batteries. The charge is per individual, but will not apply to families in receipt of family assistance supplement, nor children of eligible clients. Most hearing aid users would pay $50 to $100 if buying batteries at normal retail prices.

  The development and maintenance of a reliable and innovative supply of hearing aids and appliances is important to people with disabilities. Nearly one in 10 Australians suffers from hearing impairment and this ratio leaps to one in three in the age group of 65 years and over. With an increasingly aged population, hearing services must be prepared and equipped to cope with an increase in the demand over the next decade. I expect that they will also need to cope with what may be an unexpected demand from younger people who, as recent reports have shown, suffer hearing loss which is very similar to those in the over 65 years age group as the result of being exposed to loud noises in discos and through their Walkmans. That is an area that we ought to be addressing as a community.

  The hearing services subprogram is administered by the Disability Programs Division of the Department of Health, Housing and Community Services. The subprogram provides hearing rehabilitation services to eligible persons through a network of 46 permanently staffed hearing centres and 65 visiting centres located in major towns and cities in all States and Territories, as well as hearing impairment prevention services and advice.

  The National Acoustics Laboratories is responsible for the design, purchase, distribution and fitting of hearing aids free of charge to hearing-impaired people eligible for assistance under the hearing services subprogram. NAL also undertakes repairs, battery issue, follow-up and after care services, and is involved in research, hearing loss assessment and diagnosis.  NAL fitted about 66,795 hearing aids in 1989-90 compared with 64,567 in 1988-89. The main client groups of NAL are holders of pensioner health entitlement cards, persons referred by the Department of Veterans' Affairs and service personnel, and persons under the age of 21 years.

  The National Acoustics Laboratories has been subject to a number of examinations. In 1981, the Industry Commission report stated:

The existing manufacturing arrangements are not subject to normal market competitive pressures and, hence, tend to encourage inefficient resource use. The arrangements proposed by the Department of Health, if implemented, would do likewise.

The report went on to say:

A number of witnesses stated that hearing aid technology is always advancing, resulting in new features and new models being released on a continuous basis by the world's major manufacturers. NAL was criticised for being slow to adopt new technologies and, in some cases, for not adopting them at all. As a result, it was claimed, NAL's aids were inferior to imported models and would not gain acceptance on the commercial market.

Laubman and Pank estimated that 16 per cent of its customers were entitled to a free aid but, instead, chose to purchase a commercial aid. Another retailer stated that, although it was company policy to advise prospective clients on the free aid benefits, a high proportion of persons eligible for these free aids purchased commercial hearing aids.

The NAL did not receive totally favourable reports at that time. The Auditor-General conducted an audit of the South Australian regional office of the Department and hearing centres in Adelaide in 1989. In audit report No. 20 1989-90, the Audit Office noted:

The AAO considered that the allocation of resources in conjunction with client case workloads between centres should be continually reviewed so that resources can be applied to hearing centres in an efficient manner.

It went on to say:

The AAO noted that the allocation of resources did not match the client case workload carried by the hearing centres. The lengthy client waiting times at some hearing centres are considered to be evidence in support of this conclusion.

In October 1989, the Industry Commission was asked to inquire into and report on tariffs and other measures subject to influence by governments in Australia which affect the availability and costs of aids and appliances for the disabled. It was also asked to look at the reasons for any high costs of imported aids and appliances within the Australian market.

  In its final report, entitled Aids and Appliances for People with Disabilities, the Commission assessed that the NAL's monopoly position had adversely affected the efficiency and performance of hearing services in many areas. It found that, firstly, it has restricted choice and led to long waiting times; secondly, those persons eligible for assistance who are not prepared to wait have had to obtain private sector services at a cost to themselves; and, thirdly, it has increased prices for those not eligible for assistance and has inhibited the growth of a wider range of hearing related services for the entire Australian community.

  The Commission considered that the objectives of the program could be achieved with greater efficiency and equity. The key to achieving those aims was to introduce greater competition. The Commission did not consider the continued separation of the market to be in the best interests of hearing-impaired people. The Industry Commission's report, Aids and Appliances for People with Disabilities, stated:

As long as the fundamental sources of NAL's poor record—its monopoly and lack of exposure to market disciplines—remain unaltered, there is no firm basis to expect sustained improvement.

The Commission concluded:

. . . the current segmentation of the market between NAL and other service providers be ended and that competition should be introduced across the whole market, and that the Government's proposed collaborative arrangement would not be in the community's best interests and should be set aside.

The reasons for this conclusion included the fact that the five-year contract period would isolate NAL clients from technological developments by other firms during that time, and that the contract winning manufacturer would have access to 65 per cent of the Australian market until 1997 and, thereafter, be in a privileged position to dominate the private market as well.

  One important point that must be acknowledged is that almost all the submissions received by the Industry Commission were strongly supportive of NAL's continued involvement with children. Given the fact that there has been, I suppose, considerable criticism of NAL in both the House of Representatives and the Senate, I want to relate a story of a friend of mine who used to come and teach my students in a speech therapy course at the Lincoln Institute of Health Sciences. I thought it was important for students in speech therapy to meet a mother of children with hearing loss. She used to come most generously and give of her time to discuss the problems she faced in having three of her eight children with very severe hearing loss.

  One comment my friend would make to the students concerned the service she had had from NAL; she had a long and continued relationship with it. She very much appraised the service that it gave in understanding the needs of the children. For example, it made appointments out of school hours as often as possible so that the children would seem less different than they would if they had to go and have appointments during school time. It made sure that it did not program the three children one after the other. NAL understood that it could not expect all three to wait in a row. It was quite understanding compared with some of the other services that my friend reported where people got quite upset that maybe those three children were attended to while two other siblings were at their wits end after waiting for the end of three or four hours of appointments.

  I most especially want to add that not all the comments I have had about NAL have been negative. In particular, it backs up the comments made about the NAL dealing with children. Of course, NAL has had a monopoly on this age group. The reluctance of the private sector to take up this segment of the market is partly a reflection of the fact that its scope for involvement is limited by NAL's monopoly on the under 21 age group. The Hearing Aid Council of Australia said that the private sector has not picked up and run with children because children have a place to go and parents can go there for nothing. A number of commercial firms indicated to the Industry Commission that they would employ audiologists with experience with children if permitted access to NAL's clientele. So it is not as if the private sector is unwilling to do it; it is just that up until now NAL has had a monopoly in that field.

  Another matter raised in the Commission's report was that the hearing services program has a significant influence on the structure of the Australian hearing aid industry. First, certain groups within the community have access to hearing aids free of charge. Secondly, successive Commonwealth governments have decided that these hearing aids will be dispensed solely by NAL. Thirdly, NAL is not permitted to compete with the private sector in the fitting and sale of aids to hearing-impaired people not eligible for free hearing aids under the program.

  NAL has accessed nearly 65 per cent of the market, and therefore is not subject to normal competitive pressures. As a result, NAL audiologists have considerable influence over the types of hearing aids available to a large part of the market. Private suppliers are limited to competing for about 35 per cent of the market. This has restricted opportunities for private suppliers of both hearing aids and hearing related services.

  Throughout both IC reports there was much criticism of NAL lagging behind the private sector. The Australian Science and Technology Council, ASTEC, said:

. . . provided several examples of where the introduction of new technology by NAL has lagged behind the private sector, sometimes by many years. These included post-auricular aids (introduced by the private sector in 1957 and by the NAL in 1972), binaural fittings (private sector 1961, NAL 1971), compression circuitry (private sector 1967, NAL 1985), FM systems (private sector 1974, NAL 1985), all in-the-ear/canal aids, programmable aids and remote control aids.

So ASTEC is saying that NAL is lagging 15 years or so behind the private sector.

  With a monopoly in about 65 per cent of the market, it is very important that NAL keeps pace and is in fact a leader in hearing aid provision and research and ensures that it is able to supply hearing aids of the type demanded by clients. On 21 December 1989, the Government announced that the NAL would be run along the lines of a government business enterprise and that its central laboratory in Sydney would be placed on a commercial footing so that it operated on a user pays basis. The Government called for expressions of interest from a number of Australian and international companies interested in entering a collaborative arrangement with NAL.

  The objectives of the proposed arrangement included: to ensure cost effective hearing aid supply for an initial five-year period; to ensure long term cost effective supply of hearing aids to current NAL clientele; to utilise the concentration of professional and technical expertise of NAL in helping hearing-impaired people to function effectively; to retain and enhance hearing aid design, development and manufacturing expertise in Australia; and to take advantage of potential commercial opportunities for NAL's products, services and reputation in Australia and overseas.

  Under the arrangement, hearing aids will be manufactured in the production facility in Fortitude Valley. That commences in the second half of next year for release to the National Acoustics Laboratories hearing centres following full trialing of the products by 1 July 1993. Once the factory is in full production by 1994, AHA will be producing some 600,000 units which will include both hearing aids and remote controls. It is estimated that approximately 70 per cent of those units will be for export at a value of around $25m annually. Royalties of $9m are expected to be received by the Government over the period of the contract.

  The Minister for Health, Housing and Community Services (Mr Howe) announced the joint venture on 17 October between NAL and AHA. AHA is a joint venture between Crystalaid, a wholly owned Australian company, and Ascom Audiosys, a hearing aid manufacturer and subsidiary of the Swiss telecommunications company, Ascom. They will jointly research, develop and manufacture hearing products for use by clients of the hearing services subprogram and for sale on exports.

  To date, it sounds as though I have been totally in agreement with what the Government is doing, but it does concern me that apparently only a selected group of private firms were invited to tender for the collaborative arrangement. If this is the case, it is possible that the result of the tender was not the most competitive. The establishment of NAL as a statutory authority underpins this joint venture arrangement.

  It is claimed by the Government that a number of advantages would accrue from this proposal. The NAL stands to earn royalties of at least $2.6m on all exports with projected royalties of over $9m over the period of the contract. Streamlining the operations of the NAL has already seen dramatic reductions in waiting times in all the hearing centres. As a statutory authority, the NAL has further scope for improvements in the costs and timeliness of its services and will have low cost state-of-the-art hearing aids for Australians.

  However, I hold a number of reservations. The Industry Commission report clearly recommended that competition be introduced into the whole market and recommended against the setting up of a monopoly. Doubts have been expressed that the level of exports claimed is achievable. The benefits of advances in hearing aid technology will be restricted for people under the hearing services program. Prices will not be subject to competition.

  Although this Bill establishes yet another statutory authority, the Opposition supports the Bill and hopes that the establishment of the Australian Hearing Services Authority will promote the development of aids and appliances for people with hearing disabilities. I sincerely hope that if the arrangements do not achieve the desired results, the Government will review the situation for the sake of all Australians with hearing impairments.

  One last point I wish to raise concerns matters raised by the Standing Committee for the Scrutiny of Bills. The Committee has a number of concerns that are outlined in its Alert Digest No. 16 of 1991. I ask the Minister whether a response has been made to the Committee and, if so, whether the concerns of the Committee have been allayed. It is good to see a member of the House of Representatives raising this matter; we are training them gradually. Dr Woods, the shadow Minister for health, raised this issue in the House of Representatives and I was hoping that the Minister would have responded, because he has had due time. He has received the report and he has also heard the comments made by the shadow Minister.

  I must admit that I do not hold out much hope for a positive response from the Minister, given that the Committee's sixteenth report of 1991 noted that while the Minister's responses were most informative, they were provided almost four months after the legislation was passed. This comment was made in response to the Community Services and Health Legislation Amendment Act 1991, the Health Legislation (Pharmaceutical Benefits) Amendment Act 1991 and the Therapeutic Goods (Charges) Amendment Act 1991—not one Bill, but three, and the Minister's reply was four months late. Here we have another one. I am hoping—but I think I might be hoping in vain—that the Minister will have responded to the advice from the Committee for the Scrutiny of Bills.