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Tuesday, 6 September 1983
Page: 400

Dr BLEWETT (Minister for Health)(6.06) —I move:

That the Bill be now read a second time.

The Health Legislation Amendment Bill and the related levy Bills not only represent a major social reform, but are an essential part of the Government's economic strategy. Not only do they embody a health insurance system that is simple, fair and affordable, but they represent an advance in the social wage and our accord with the trade union movement, and in moderating the impact of inflation. Medicare will play its part in economic recovery. This legislation embodies one of the major policies this Government placed before the people of Australia last March-and for which a clear and unequivocal mandate was received from the Australian people. Let there be no doubt about that fact-Medicare was a central plank in our platform. It was discussed extensively prior to the campaign and debated exhaustively during the campaign.

Unlike our predecessors, who shied away from any discussion of health policy at election after election, the Australian Labor Party placed firmly and squarely before the Australian people the health policies which are incorporated in this legislation. The tortured, contradictory and reactionary policies of our predecessors have led us back into the past. In 1969 Justice Nimmo wrote:

The operation of the health insurance scheme is unnecessarily complex and beyond the comprehension of many.

And to quote further:

The contributions have increased to such an extent that they are beyond the capacity of some members of the community and involve considerable hardship for others.

That is a statement from the 1969 report on health insurance, but I defy any impartial observer to say that these statements are not equally true of today. It is a measure of the circular nature of health policy in this country, and the waste of the last seven years of Fraser government, that we are here today fighting battles that should have been finally decided a decade ago. Mr Fraser's tragically broken promise that 'we will maintain Medibank' given in November 1975 has led us inexorably back into the past, back into dependence on those old Liberal allies, the private health funds, to run basic health insurance. The Fraser Government departed in March this year, leaving behind a health insurance scheme almost identical with that of its predecessor, the McMahon Government of a decade ago, with all its flaws, with all its inequities, discriminations and confusions.

What Mr Fraser bequeathed this country was a health scheme lacking in both universality and fairness. The latest Australian Bureau of Statistics survey shows that 1,953,000 Australians were without any health cover through either private insurance or the Commonwealth cover provided to pensioners, the unemployed and low income earners. The current health scheme has increased basic private insurance premiums to approximately $14 a week for a family. If we were not introducing the Medicare program on 1 February next year the cost of a ward bed in a public hospital throughout Australia would be $130 a day, and premiums would have risen even higher still. For those lower and middle income earners who do take health insurance, the costs have become a substantial strain on the family budget. The task facing the Hawke Government is thus much the same as that faced by the Whitlam Government, and I am proud that our solutions are much the same.

Unfortunately, the Fraser Government's gutting of the Medibank name and concept have meant that the word itself developed unfavourable connotations. Medibank has become linked in many people's minds with the seven years of confusion under the previous Government. But I do not resile from openly stating that the principles of the Medicare plan are similar to those of Medibank as it was originally introduced in 1975. There are two important differences. Firstly, Medicare will be substantially self-funding through the 1 per cent levy and a rearrangement of existing health insurance subsidies, whereas Medibank placed a considerable strain on Consolidated Revenue. That was due to an obstructionist Senate, which encouraged by the Australian Medical Association, the private funds and the other voices of reaction of the time, repeatedly rejected the Medibank enabling legislation. The Medibank Bills were only eventually passed at the Joint Sitting which followed the 1974 double dissolution, but unfortunately the levy Bills did not meet the criteria for submission to the Joint Sitting. I am pleased to say that while there has still been considerable opposition to our health insurance proposals, on this occasion the debate has been much more reasoned and rational in its tone. Our opponents have for the most restricted themselves to differences of opinion, rather than the litany of distortions and alarums of 1973 and 1974.

Secondly, the arrangements for reimbursing the States are different this time. I will go into the details of the current proposals later, but let me say that I think this difference reflects the tougher economic circumstances of the 1980s. Also, this Government is concerned to ensure that taxpayers' dollars are allocated to areas of greatest need. So our payments to the States represent a fair reimbursement of revenue that will be lost through removal of public hospital charges, rather than a generous increase in overall funding for all the States, except in the case of Queensland where the unique situation of Queensland's public hospital system is recognised by a $35m special grant in a full year over and above compensation payments.

We have sought in planning Medicare to produce a simple, fair, affordable insurance system that provides basic health cover to all Australians. In designing the Medicare program four attributes have been uppermost in the Goverment's mind. I refer firstly to simplicity. The simpler we make a health scheme the more chance it has of delivering the services to those who need the most. The more complex a health scheme, the more likely it is to favour the well -off, the articulate and those capable of manipulating a complex system. While the nearly two million people without health insurance or Commonwealth health protection are mostly low and middle income earners, the complexity of the current arrangements also allows the rich to avoid contributing to the community pool of health dollars collected through the insurance system. For those well enough off to meet their health bills throughout the year, and with a range of taxation deductions available through a careful arrangement of their financial affairs, health insurance is an unnecessary waste of money. Spared the cost of insurance premiums, they also know that the majority of their health bills will be refunded through the taxation system.

In contrast to those who have lawyers and accountants to organise their affairs , low income earners are expected to be able to cope by themselves with the bureaucratic complexity of the health care card system. An itinerant labourer on varying weekly incomes is asked to average his income from the last four weeks, check to see if it is less than $193 a week for a married couple, and notify the Department of Social Security if his income exceeds that average by more than 25 per cent in any one week. It is little wonder that many do not apply, as indicated in the 1982 health insurance survey details which showed that well over half a million people entitled to a government concession card were paying for private medical and hospital cover. Under Medicare people will not have to worry about falling behind in their payments and being caught with substantial bills. Every Australian resident will be covered automatically and the 1 per cent payment will be made along with, but separately identified from, the tax instalments in the weekly or fortnightly pay packet. For those who do not have pay-as-you-earn deductions the health levy payment will be calculated as part of their annual payment of income tax.

Medicare will provide basic health cover free of the hassles and worries of the current private insurance scheme. It will also make health insurance fairer and affordable to every Australian because everyone will contribute towards the nation's health costs according to his or her ability to pay. This is in stark contrast to the current scheme, where the flat rate contribution means that a family earning just above the income limits for a health care card must pay 7.2 per cent of its total income toward basic health cover, whereas a family on $50, 000 a year pays only 1.4 per cent of its income for exactly the same cover. Medicare has income thresholds below which no levy is payable. The limits for this year will be $128.80 a week for a single person, and $214.25 a week for a married couple, increasing by a further $21.15 a week for each dependent child within a family. The threshold has been set at these levels to ensure that everyone who currently receives free health cover through a pensioner health benefits card, or a health care card for the unemployed and low income earners, will not have to pay the levy under Medicare.

The current system has different income limits for different entitlement cards so that pensioners can earn more than a low income earner and retain their health concession card. This discrimination is removed under Medicare as the same income thresholds will apply for everyone. Because we have adopted the higher pensioner income limits approximately 200,000 people who now just miss out on a low income health card will receive basic health cover under Medicare without having to pay any levy. Medicare will provide the same entitlement to basic medical benefits, and treatment in a public hospital by the hospital's doctors, to every Australian resident regardless of income. This universality of cover is obviously desirable from an equity point of view. In a society as wealthy as ours there should not be people putting off treatment because they cannot afford the bills. Basic health care should be the right of every Australian.

I reject the arguments of those opposite who say providing cover to everyone will encourage overuse of health services. There is no reason to expect that the two million Australians currently without any cover will use medical and hospital services more than the rest of the community, and to restrain overall health costs by excluding those two million people from treatment except in the direst emergency, as the current scheme does, is not a situation which this Government-or any other humane government-would allow. Beyond this obvious matter of principle, universality of cover also has many advantages in terms of efficiency and reduced administrative costs. Doctors and hospitals will have their bad debt problems removed overnight. This will significantly reduce doctors' practice overheads and in public hospitals reduce the amount of bureaucracy required to check whether a person is entitled to free treatment, record his private fund membership or chase him for payment if he falls into neither category. There are also significant advantages through universality in reduced payment delays for doctors and lower overall administration costs in paying medical claims through a single public fund, but I will go into those matters in more detail later.

However, it is important to state unequivocally right now that one of the Government's major objectives through the Medicare program is having the maximum number of health dollars spent on delivering health services rather than administering them. The conservatives opposite, through their opposition to Medicare, would lock governments and private practitioners into continued unnecessary waste on insurance services that have nothing to do with improving the health status of the Australian people. That should alert all of us to the fact that their opposition has nothing to do with principles or ideals-of which they are singularly bereft. Rather it is simple political expediency, and opposing for the sake of opposing, that has characterised many of their hollow statements on this issue so far.

I come now to the precise implementation of those proposals in the Bill before the House. Firstly, I refer to those who are eligible for Medicare benefits. They will be available to all persons ordinarily resident in Australia with the exception of members of diplomatic missions and other dependants. The Bill provides that the Minister for Health may make written declarations regarding the eligibility of persons or groups of persons who may or may not be entitled to Medicare benefits. To this point, the Government has agreed that eligible persons will include:

All permanent Australian residents, including repatriation beneficiaries and defence force personnel; persons visiting Australia who obtain approval to stay for at least six months, with eligibility to date from arrival in Australia;

persons visiting Australia who originally obtain approval to stay less than six months, but who are granted an extension which makes the total approved stay more than six months, with the eligibility to date from when the extension was granted;

persons visiting Australia who are residents of countries with whom Australia may in the future negotiate a reciprocal health care agreement;

persons who are residents of certain neighbouring countries who come to Australia for specialist hospital care, subject to rules laid down by State Health Authorities; and

Australian residents receiving medical services while travelling overseas.

Medicare benefits will be payable at the same rate and for the same range of services as are currently provided by the private funds on their basic medical benefits table. Clause 12 of this Bill sets out the rate of Medicare benefits, which will be 85 per cent of the schedule fee, with a maximum patient payment of $10 for any one item where the schedule fee is charged. The same level of benefit will be payable for all types of patients and replaces the present confusing and complex arrangements which provide for different levels of Commonwealth benefits according to type of patient and method of billing by providers. This change is an essential component of Medicare and will provide for equity, simplicity and efficiency. The move to a single level of Medicare benefits for all will mean a reduction in benefits presently payable for pensioner services and disadvantaged persons' services, with the increase in maximum gap from $5 to $10. However, this will not affect benefits payable for most general practitioner consultations and the effect on other benefits is only marginal.

The range of services covered by Medicare benefits comprises medical practitioners, certain surgical procedures rendered by approved dental surgeons, consultation services rendered by participating optometrists and services by accredited dental practitioners in the treatment of cleft lip and cleft palate conditions. Medicare benefits cover the full range of doctors' services including treatment by specialists, surgery, and diagnostic services such as radiology and pathology. They are also payable for medical services rendered to in-patients of public and private hospitals.

Following the entry into formal agreements by each State and the Northern Territory with the Commonwealth, all persons eligible for Medicare benefits will also be entitled to public hospital in-patient accommodation and treatment without charge, where that treatment is provided by a doctor appointed by the hospital. Out-patient treatment in public hospitals will also be provided without charge. Arrangements currently applying whereby benefits are not payable for medical and hospital services to compensable patients-that is, motor vehicle , third party and workers' compensation services-will remain unchanged under Medicare. However, I intend to examine together with the States and the general insurance industry whether it may be possible to simplify the administrative arrangements for these services at some future date.

To avoid a situation of one Commonwealth agency raising charges for which another Commonwealth agency is required to pay benefits, the Government has decided that charges currently raised for services received from Commonwealth Pathology Laboratories or Commonwealth medical officers will cease from 1 February 1984. Under Medicare doctors will be able to elect to direct bill for any patient and the Medicare benefit will be paid in full settlement of the account for that service. The present direct billing arrangements are limited to pensioner health benefit, health care and health benefit cardholders. There is also currently a three-tiered system of Commonwealth medical benefits-85 per cent for pensioners and the disadvantaged, 30 per cent for the privately insured and nil for the remainder.

Because of this categorisation of entitlement the previous Government decided that a person's eligibility for benefits has to be established before any payment can be made. This bureaucratic maze of cross-checking between the number on the assignment voucher and Social Security's entitlement records is the major reason for the current unacceptable delay in doctors receiving payment for their direct billed claims. The introduction of these checks earlier this year increased the number of claims being rejected from 5.5 per cent to 14.0 per cent and therefore increased the number of claims requiring double handling by over 150 per cent.

The Health Department's somewhat antiquated computer hardware and systems and the previous Government's unresponsive attitude to increasing processing staff numbers as the lengthening dole queues increased the number of people eligible for direct billing are also partly responsible for the current delays. I have recently approved the employment of 111 temporary staff to help reduce the backlogs, but as long as we remain with the present insurance system it will be difficult to provide an acceptable turnaround time on claims. However, I am confident that because Medicare provides the same rate of benefit to all Australians and therefore removes the need for eligibility checking-combined with the modern, on-line processing systems of the Health Insurance Commission- the delay between lodgement of direct bill claims and receiving payment will be reduced to one to two weeks. Once this level of service is established and well known I expect many doctors will take advantage of the direct billing system. The greater the use of direct billing the lower administrative costs will become for doctors and the Government and the lower the cost of seeking treatment will become for the patient.

After the introduction of Medicare it is desirable that the private health insurance funds be able to wind down their medical benefit activities as soon as possible. The Bill therefore provides that benefit claims for medical services received prior to 1 February 1984 should be lodged with the relevant health benefits fund by 31 January 1985-that is, within 12 months as opposed to two years under the current arrangements. Where there is good reason for a claim to be lodged later than this date, or where the 'cut off' would impose undue hardship, the Minister will have discretion to allow a longer period. For services rendered after the introduction of Medicare the current time limits will apply. They are for direct billed claims to be lodged within six months of the date of service and for patient billed claims to be lodged within two years.

In line with the recommendations of the 1980 Jamison Commission of Inquiry into the Efficiency and Administration of Hospitals appointed by the previous Government we will be legislating to prevent both private health funds and general insurers from offering cover for the 'gap' between the Medicare benefit and the schedule fee. The reason for this is quite simple and practical. As the AMA stated in evidence to the Jamison inquiry:

Doctors generally believe that there should be a charge at the point of service .

In this report Jamison noted that 'it'-gap insurance-'underpins the practice of fixing charges above the schedule fee'. Therefore, if we allowed gap insurance we would not be saving people money. They would simply be paying $2 from their own pocket on top of their 100 per cent of schedule fee rebate, instead of $2 for the difference between the Medicare benefit and the schedule fee on a standard GP consultation. This would be in addition to the insurance premium for the gap cover, so overall most people are financially better off without gap insurance. It is only doctors who would be financially better off if gap insurance were permitted. For all of these reasons the Government will not allow gap insurance to be offered. In this way doctors will be encouraged to limit their charge to a level around the schedule fee and this will be important in containing Australia's overall health bill.

The private health funds will be able to offer insurance that supplements the basic cover provided by Medicare. All organisations registered under the National Health Act will offer that insurance in accordance with the community rating principle, which is that everyone pays the same contribution rate regardless of age, sex, family size or medical condition. The only exception is that single persons pay half the family rate. This is different to Medicare because Medicare is not an insurance plan in the commercial sense. Under Medicare persons do not contribute to ensure cover for themselves or their family for a specific period. Rather they will contribute towards a national health pool according to their income. Whether a person is single or a family member does not affect the ability to pay except in determining the low income thresholds for levy payments. All Australians will be entitled to the same Medicare cover and so they will draw from this pool according to their health needs. In this way Medicare is more a social service scheme, so it is inappropriate to differentiate between married and single people for determining their health levy payment.

People wishing to have private treatment in a public hospital or treatment in a private hospital will be able to insure for these costs. At the time of the election we planned that the basic private table would offer a benefit equal to the private bed charge in a public hospital. This charge was subsequently set at $80 a day. While it was always intended that this level of benefit would be payable in private as well as public hospitals the private hospital organisations pointed out that this level of benefit would not cover the cost of many private hospitals. It would therefore be necessary to have probably three additional hospital tables supplementing the basic private table at different benefit levels.

Such a gaggle of tables would only have created confusion and uncertainty and we were conscious of the dangers of creating a situation where sharp movements in hospitalisation patterns from the private to the public sector were likely. To simplify the hospital insurance options under Medicare and to prevent any shift occurring, the Government has decided to introduce a system of categorisation of private hospitals, to which I will refer in more detail later. What this categorisation system means to the general public is that differential benefits are paid from the basic private table, so this table will provide cover for private treatment in a public hospital and shared ward accommodation in most private hospitals. The range of benefit levels contained within the basic private table means that we expect there will need to be only one further supplementary hospital table providing cover for higher cost or single room accommodation and additional charges such as theatre or labour ward fees.

I should emphasise that there will be no need for anyone to take out hospital insurance if they are satisfied with the care provided in public hospitals by doctors employed on a salary or sessional basis by the hospital. For those who do want private treatment in hospital the basic private insurance premium will be about $5 a week for a family. Except for the introduction of Medicare public hospital charges would be rising to $130 a day throughout Australia by early 1984, and basic medical and hospital insurance premiums would be on average $14. 50 a week for a family. Because the abolition of the private insurance tax rebate is part of the funding of Medicare, that $14.50 basic premium becomes a cost of $10.15 a week after allowing for the 30 per cent rebate. On this basis a family would have to be earning more than $515 a week or $26,780 per annum before total health cover-that is, the Medicare levy and the private treatment in hospital cover-became more expensive under Medicare than under the current scheme. After allowing for two income families, it is still the case that two out of three Australian families earn less than $515 a week and will therefore pay less for this level of cover under Medicare than under the present scheme.

Sitting suspended from 6.30 to 8 p.m.

Dr BLEWETT —I now turn to ancillary tables or extras cover for dental and paramedical services, which has been a relatively neglected area of health insurance. The private funds currently generate most of their income from basic medical and hospital insurance, but with the medical sector removed they will be expanding the range and level of their ancillary benefits. People will be able to obtain cover for services such as dentistry, physiotherapy, home nursing, chiropractic and chiropody from these tables as well as the costs of aids and appliances such as artificial limbs and wheelchairs. Funds will no longer be able to restrict the membership of the extras table by requiring a person to be a member of another table also. With the reduced cost of basic cover to most people through the Medicare levy, these extras tables will prove an attractive option for many people. The Government believes that its role is in providing basic medical and hospital cover, and the decision on whether to take ancillary cover is then left to the individual. The other limiting factor is that inclusion of any or all of these extra services into Medicare would substantially increase its costs and therefore the levy would have to rise. This is undesirable in terms of offering people basic health cover at the lowest possible cost.

The National Health Act currently provides that a waiting period of up to two months may be applied before basic benefits are payable. It is proposed that this two-month waiting period will be maintained for the private table under Medicare, but that a nine-month waiting period will apply for obstetric cases. Furthermore, because of the 'safety net' of free public hospital treatment under Medicare, it is considered unreasonable that persons should be able to take out private insurance specifically for hospital treatment for known illnesses. Accordingly, organisations will be permitted to apply a waiting period for benefits for pre-existing ailments of up to two years after a contributor joins an organisation or transfers to a higher table of benefit. It should be noted that section 81A of the Act becomes inoperative after 1 February 1984. This provides that pensioners and disadvantaged persons who lose their entitlement to free care under the present scheme will be entitled to take out private insurance for basic cover without the need to serve waiting periods. That is the present position. This provision will not be necessary as under Medicare every Australian will be automatically entitled to the same basic cover. A fundamental principle of the Medicare arrangements is that every Australian should be entitled to public hospital accommodation and treatment by the hospital's doctors without charge.

Against this background, the Bill will enable the Commonwealth to enter into formal agreements with the States and the Northern Territory in relation to the provision of public hospital and other health services. Heads of agreement, attached as a schedule to the Bill, provide the parameters for the agreements, which are required to be substantially in accordance with those heads. The agreements will, on the one hand, specify the range of public hospital services which the States are to provide without charge to eligible persons and, on the other, the financial arrangements to apply under which the Commonwealth will reimburse the States for revenue losses and any additional costs incurred in providing such services. The grants will comprise payments for:

Revenue losses and additional costs resulting from the removal of all in- patients and out-patients fees in respect of patients who elect to be treated free as public patients in public hospitals;

revenue losses resulting from a reduction in fees for private patients in public hospitals;

provision for the future payment by States of daily bed subsidies to private hospitals from the block grants (from, it is expected, 1 July 1985);

the payment of grants for community health purposes; and

provision for escalation of or variation to components of grants.

These compensatory grants will be additional to, and independent of, the identified health grants currently paid to the States within the Federal-State general tax sharing arrangements. The current estimate for such payments- excluding community health funds-to the States and the Northern Territory and in respect of the Australian Capital Territory for the period 1 February 1984 to 30 June 1984 is $198m. The estimate in respect of full year funding is $709m.

Included in these payments to the States is the offer of a special grant to Queensland of $15m in 1983-84 and $35m in a full year. These grants are offered to ensure that all States receive marginally more in additional receipts from the Medicare program than they contribute in additional outlays. Mr Speaker, I seek leave to incorporate in Hansard a table which illustrates how the Medicare financial arrangements are broken up between the States.

Leave granted.

The document read as follows-

Estimates of net outlays on Medicare, by State, full year


NSW Vic. Qld SA WA Tas (a) Total

Additional Outlays (b) (d) 629 484 220 163 163 57 1762 Additional receipts (and reduced outlays) (c) 621 472 212 145 143 45 1680 Net outlays +8 +12 +8 +18 + 20 +12 +82

(a) Includes Northern Territory and Australian Capital Territory.

(b) These include outlays for medical and optical benefits, compensation for revenue losses due to reduction and abolition of charges in public hospitals, special grant to Queensland, increases in subsides to be paid to private hospitals, gross establishment and administration costs, and increased outlays for the expansion of community health services.

(c) These include savings on the reduction in contributions to the Re-insurance Trust Fund, revenue from the introduction of a one per cent levy on taxable income, and savings from the abolition of the present income tax rebate on health insurance.

Dr BLEWETT —I thank the House. This table clearly shows that Queensland is not subsidising any other State, as the Queensland Premier is so fond of claiming in his desperate attempt to retain power by whatever means. In fact Queensland is the only State government which has its overall health funding situation improved by Medicare. All the other States are receiving grants which simply compensate them for revenue lost by removing and reducing charges. The Queensland public hospital system is being compensated for its revenue losses and receiving a special grant to revitalise its hospital services on top of this , and that is a recognition of the unique situation in Queensland. Every cent raised through Medicare in Queensland is being returned to Queensland, and the State Government will receive far more in health funding from the Hawke Government than it received in the last two years under Mr Fraser. Last year the Queensland Government received $93m in health funding from the Commonwealth Government. In the first full year of Medicare Queensland will receive $173m. Only Mr Bjelke-Petersen in an election year could complain about that sort of deal.

In addition to specifying the financial formulae to apply to the compensatory grants, the agreements will also encompass other essential matters, including the requirement that public hospital admissions be solely on the basis of medical need, without regard to health insurance status; and the Commonwealth- State consultative arrangements which will be set in train so that the financial and operational arrangements can be monitored and modified as necessary in the mutual interests of the Commonwealth and the States. This consultative process will also consider matters such as the development of peer review and hospital audits, the expansion of hospital accreditation, and the development of certificates of need for high technology equipment. The Government believes that these measures all have scope for achieving economies in the area that is unquestionably the most substantial generator of health costs in this country. The purpose of these consultative arrangements is to give effect to the Government's belief that the Commonwealth has a positive role in the broad national policy and planning aspects of public hospital provision.

For a considerable time, concern has been expressed by Commonwealth and State health Ministers about rights of private practice for salaried doctors in public hospitals. This concern has arisen partly from the variety of arrangements and schemes under which salaried doctors exercise their private practice rights, lack of detailed knowledge about how such schemes operate, and how the funds available under those schemes are applied. Receipt of medical benefits income by staff specialists provides them with a source of income, over and above their salaries determinations, which is generally accrued during the same working hours in which those salaries are payable. In effect, there is a double payment mechanism operating. The doctors receive a full salary, which can be considered to be drawn from both State and Commonwealth revenue to the extent that each contributes from State revenue sources and from Commonwealth cost sharing- identified health grant payments towards the cost of health services. Over and above that, the Commonwealth pays again through medical benefits.

At this point let me assure the House that the Government has no intention that rights of private practice arrangements be abolished; rather, that appropriate control mechanisms be developed. The concerns about the operations of private practice rights particularly relate to diagnostic services and some therapeutic services- pathology, radiology, radiotherapy and nuclear medicine-where there is not usually any direct doctor-patient contact, where there is substantial scope for generating additional revenue, and where there is a significant technical content to the service which is provided by the hospital rather than the doctor. For this reason the Bill provides that Commonwealth medical benefits are payable only for diagnostic services provided to in-patients and out-patients of public hospitals if the service is provided pursuant to a contract between the medical practitioner providing the service and the hospital granting a right of private practice, of a form accepted by the Commonwealth Minister.

It has been agreed with State Ministers that the content of the contract will be:

A All accounts to be raised by the hospital on behalf of the doctor.

B All charges to be at or below schedule fee.

C All revenue received for diagnostic services rendered under private practice contracts for full time specialists in a particular hospital to be treated as one fund.

D The fund to be applied in the following order:

1 Facility charges (recovery of costs) to the hospital in a form acceptable to the Commonwealth Minister.

2 Drawings by the doctor at a level determined by the State, up to 25 per cent of full time specialist salary.

3 Any residual to be applied following guidelines set by the State Ministers for Health.

My officers are currently negotiating with State health officials on how the conditions for visiting diagnostic specialists could be more equitable when compared with those proposed for salaried staff. However, I would stress again that these measures will be aimed at ensuring accountability measures are introduced into rights of private practice, and not at removing those rights.

The Government has also expressed considerable interest in reactivating community health services as a viable and less costly alternative to the more expensive institutional services, and, as a consequence, will be supporting this aspect of health care under the Medicare arrangements. The formal agreements with the States and the Northern Territory to which I referred earlier will also make provision for the funding of new and/or expanded community health services. The sum of $7.2m will be provided to the States, the Northern Territory and the Australian Capital Territory for such purposes for the period 1 February to 30 June 1984, and a total of $18m in a full year.

In addition the Commonwealth will retain $0.8m in 1983-84 and $2m in a full year for allocation to community health projects of national significance. With these funds I was able to make a grant of $100,000 a year for the next three years to the Lidcombe Workers Health Centre so that it can continue as Australia 's leading centre in dealing with occupational accidents and disease. The additional $20m in a full year will restore community health spending to the 1975 real levels of expenditure.

As I indicated earlier when referring to the basic private table to be offered by the health funds after 1 February next year, private hospitals are to be categorised, and the daily insurance benefit and Commonwealth bed subsidy will vary according to that categorisation. The reason for categorisation is that the steep increases in public hospital charges over the past two years have allowed private hospitals to piggy back their fee increases in line with those increases . That is reasonable in so far as the increases reflected increases in costs, but most of the increase resulted from the Fraser Government's $228m reduction in health funding to the States over those two years. This was a 32 per cent cut in the real level of health funding to the states.

Private hospitals are a very diverse range of institutions. At one extreme are the major surgical hospitals, mostly run by religious or charitable organisations, which provide a level of care and services comparable with that in the major public hospitals. At the other extreme are bush nursing and other small hospitals, generally located in rural areas, which, except for a few beds, provide a service similar to that of a nursing home. What is striking under the present insurance system is that, despite the large difference in cost structures brought about by the different level of care provided, the insurance benefits they receive are almost the same. So while the acute hospitals require this level of fees to survive, there is a substantial scope for profit in the medical or nursing hospitals.

By categorising private hospitals the benefit and bed subsidy they receive will be much more closely related to their services and cost structure. We are proposing a 3-tiered structure so that category A hospitals receive a $120 a day basic benefit and a $40 a day Commonwealth bed subsidy; category B receive a $ 100 a day benefit and $30 a day subsidy; and category C an $80 a day benefit and $20 bed subsidy. The total cover in the three categories of private hospital will therefore be $160 a day, $130 a day, and $100 a day. The Government believes that categorisation will allow the health fund's basic private table to offer cover for a shared room in most private hospitals, provided the industry is prepared to accept that from 1 February 1984 the benefit will reflect reasonable cost levels rather than the inflated fees that some hospitals charge now.

The categorisation will follow principles laid down by the Minister in regulations made under section 23H of the Health Insurance Act. The principles for categorisation will reflect factual measures of the type of services provided in the hospital. However the Minister will have due regard to the opinion of the State Minister before finally determining the hospital's category . Clause 45 of this Bill makes the Minister's decision on categorisation subject to administrative review by the Minister and also appealable to the Administrative Appeals Tribunal where a private hospital proprietor believes his hospital has not been correctly categorised in accordance with the principles as set down.

The Commonwealth currently allocates $86.7m to the private hospital industry through the bed day subsidy. The increased subsidy levels under Medicare mean that a further $46.5m will be allocated in the first full year of Medicare. The Government believes that the States should have the major role in planning the total health services available in the community. For this reason we believe that the daily bed payment to private hospitals would be more appropriately paid by the States. Most State health Ministers accept the logic of this transfer of functions. However they consider it to be legislatively and administratively impossible to have it in place by 1 February 1984. For this reason the Commonwealth will continue to make the daily bed subsidy payment to 30 June 1985 , but individual States can take over the function prior to that date if they wish.

The Government is aware of the shortcomings of the current arrangements relating to patients who are accommodated in either private or recognised hospitals for extended periods, and who are, in essence, nursing home-type patients. The existing arrangements for classifying long stay patients provide that after 60 days continuous hospitalisation patients are reclassified as nursing home-type patients and are required to make a non-insurable patient contribution towards the cost of accommodation, in the same way that a patient in a nursing home does. The fund benefit payable in a public hospital is reduced to the level of the standard nursing home benefit. In a private hospital the hospital's charge is reduced by the amount of the patient contribution.

Where the patient's doctor considers that the patient has a continuing need for acute hospital care, the doctor may issue a certificate under section 3B of the Health Insurance Act in which case the nursing home-type arrangements do not apply. Currently there is no review mechanism relating to the issue of such certificates. The Government considers these arrangements to be unsatisfactory and, as a result, this Bill reduces from 60 days to 35 days the period after which a patient is automatically reclassified as a nursing home-type patient, unless an acute care certificate is issued by the patient's doctor. In deciding to reduce the statutory period to 35 days, the Government had regard to the fact that this is five times the average length of stay in hospitals.

A further refinement of the current arrangements will be the establishment of a review mechanism in the form of acute care advisory committees which may review a medical practioner's decision to issue a certificate and recommend to the Director-General of Health that such a decision be affirmed, varied or revoked.

From 1 February 1984, the new nursing home-type patient arrangements will apply in all States, with their introduction in New South Wales from that date. The effect of these new arrangements will be that an insured patient in a private hospital who is classified as a nursing home-type patient will be paid $80 per day less the patient contribution. The payment will be frozen at this level until such time as it is equal to the standard nursing home benefit plus patient contribution. Private hospitals will then be receiving the same amount as public hospitals for their long stay patients. However, the Commonwealth daily bed subsidy will be paid at the rate applicable to the category of hospital in which the patient is accommodated.

For a nursing home-type patient in a recognised hospital, who elects to be treated as a private patient, the current arrangements will continue to apply; that is fund hospital benefit reduces to the standard nursing home benefit. In the case of public patients there will be no accommodation charge, but the patient contribution will still be payable.

Clause 67 of the Bill amends the Health Insurance Commission Act to confer the Medicare functions of the Commission. The Health Insurance Commission will act as a single public fund for the provision of Medicare benefits to the Australian people. There are several reasons for the Government taking this decision after careful consideration of all the options for administering Medicare benefits. Firstly, it is undeniable that the single funds will be able to perform the task equally efficiently but at a much lower cost. The 1981-82 report by the Department of Health on the operations of the health funds showed total medical fund management expenses of $148.4m, of which $98m can be apportioned to the cost of providing basic medical benefits. In determining the overall cost of administering basic medical benefits under the current health scheme the $20m per annum cost to the Health Department or administering direct billing for pensions, the unemployed and low income earners must also be considered. Taking these two amounts together the cost of administering basic medical benefits payments is to the order of $130m in 1983-84 dollars. The Commission will administer the same benefit payments for $86m in a full year. This is a saving of $40m per annum when compared with what it costs to administer the same benefit payments under the present complex private insurance scheme.

The initial establishment costs of Medicare will be $56m in this financal year which, when added to the operating costs from 1 February 1984 of $34m, means that the gross administration costs of Medicare will be $90m in 1983-84. The savings incurred through the single public fund operation will recoup the initial establishment costs of $56m in less than two years. The economies of scale involved in having a single public fund operation must produce significant administrative savings. This fact is recognised in the platform of the Australian Democrats which states:

Under the present health insurance arrangements there is considerable waste of members' funds in advertising and in duplication of staffing and computer equipment.

It also states:

A national health scheme must be easy to understand, simple in operation and designed to eliminate unnecessary costs, including those in administrative procedures whether in government of private organisations.

The Health Insurance Commission can provide a convenient network of branch offices that will make cash payments to Medicare benefits and receive claims for cheque payment through the use of 280 offices throughout Australia. The private funds currently support a structure of about 1,000 branch offices because there are often the offices of several different funds located close together in a suburban shopping centre or metropolitan business district. This duplication of facilities in the private insurance system must make a single public fund operation less costly. Similarly, the private funds cannot claim that they will employ 2,000 extra staff and run Medicare more cheaply. In a labour intensive industry such as health insurance the cost of this number of extra staff cannot be compensated by internal cost advantages through competition. This is where in choosing the Health Insurance Commission the Government is not appointing a public monopoly, rather it is handing the administration of Medicare to an efficient, progressive organisation which has coped remarkably well with the changes of different situations thrust upon it over the past ten years.

In 1975 the private health funds were all given the opportunity to act as agents for Medibank. No major fund took up the offer and the Voluntary Health Insurance Association of Australia now cites as a major reason for this refusal the fact that it believed the Medibank claims assessing system would be hastily installed and result in problems and confusion. It believed that if it accepted the agency offer and acted as the public contact point it would be blamed for any problems that occurred. As a result of its refusal to run Medibank the Health Insurance Commission was entrusted with the task of achieving the 1 July 1975 deadline without any major public inconvenience. It is this ability to take on a massive task of implementing a universal health program such as Medibank within a tight timetable-a task the private funds then believed was impossible- which gives us the confidence in Medibank Private's ability, the Health Insurance Commission's ability, to implement the Medicare program.

Having successfully administered a public fund for more than three years, the Health Insurance Commission had its functions reduced to that of another private fund by the November 1978 health scheme changes. The removal of the public function left it with 3,000 surplus staff and a computer system which was not appropriate to its future needs. Within 14 months Medibank Private had developed an on-line claims processing system that is at least equal to the best in Australia. The efficiency of its processing system has enabled Medibank Private to remain competitive despite its higher salary rates and additional superannuation liability for all employees. From the 1978 changes Medibank Private was left to cope with the gradual rundown of surplus staff members as its staff levels had been an unnecessarily heavy cost. Its management expenses have fallen steadily from 15.5 per cent of contribution income in 1980-81 to 11. 3 per cent in 1981-82 to 10.1 per cent in the last financial year.

There has been some criticism of Medibank Private operations in the smaller states. Australia-wide it has been able to obtain 23 per cent of the already crowded private insurance market, but in some states its smaller market share has affected its relative efficiency. However, the efficiency of the organisation is illustrated by the situation in Victoria, where Medibank Private has a comparable market share of its major competitor, HBA. In that State Medibank Private had a management expenses ratio of 11.6 per cent in 1981-82 compared with 12.5 per cent for HBA. Denials of comparability by HBA are nonsense. The Auditor-General's scrutiny of Medibank Private to ensure a fair proportion of administrative costs is far more stringent than for any private health fund. It cannot be denied that the discipline of the market-place has been a major factor in achieving this outstanding management record. It is one of the important reasons why we want to continue having the Health Insurance Commission operate Medibank Private as well as the Medicare function. Competition in the private insurance market will keep the Health Insurance Commission a lean and efficient organisation and these qualities will also extend to its Medicare operation, allowing it to run a universal fund at the lowest possible cost to the taxpayer.

We do not wish Medibank Private to obtain a monopoly position in the private insurance market as this would sacrifice many of the cost advantages I have just outlined. For this reason we have been willing to place limitations on Medibank Private's membership so that its share of the private insurance market is restricted. The window into the private insurance market-place that Medibank Private will provide is also essential to our policy of reduced controls over the private funds' operations. We believe that private insurance can be much more effectively regulated by the use of Medibank Private as the 'honest broker' in the market.

The other major argument in favour of having a single public fund operate Medicare is the timely and accurate supply of data on doctors' services in the detection of fraud and overservicing. The continuation of the present system whereby 63 different organisations supply that data means that the accumulation of doctors' profiles is dependent on the speed of the slowest fund. The Health Insurance Commission is currently the timeliest and most accurate fund in Australia, with a 99.97 per cent accuracy level in the statistical data it supplies to the Health Department for fraud and overservicing purposes. While the overall responsibility for investigating fraud and overservicing will remain with the Health Department it is pertinent to note that the Health Insurance Commission has been among the most active of the private funds in pursuing suspected cases of fraud. In fact, the amendments to the Health Insurance Act contained in clause 58 of this Bill which make bribery by a proprietor of a private hospital an offence largely came about through the efforts of Medibank Private in pursuing what it correctly considered to be a rip-off of contributors ' funds, but which the inadequacy of the current laws prevented it taking to court.

The final factor in favour of having the HIC administer Medicare was that, as I outlined earlier, the Government would find it impossible to entrust such an important program to the private funds, considering their opposition to Labor's health policies throughout the past decade. While there would be a relationship of trust if the Health Department were to operate Medicare, it would have neither the experience to administer such a large benefit payments organisation nor the administrative efficiency that accrued to the HIC through its five years of operation in the private market.

In seeking consensus with the private funds on the introduction of the Medicare program the Government has offered a range of concessions. There are three main reasons for the concessions announced: Firstly, to guarantee a continuing substantial role for the private funds and ensure Medibank private could not gain unfair commercial advantage through the Health Insurance Commission's operation of Medicare; Secondly, to minimise the possibility of redundancies caused by Medicare's introduction; and Thirdly, because Medicare will provide basic cover to all Australians there is no longer a need for the Government to regulate the funds' operations so closely. Clause 73 of the Bill gives the Minister a general power of direction from the Health Insurance Commission. All directions made by the Minister must be set out in the annual report which is subsequently tabled in the Parliament.

Once the Parliament has agreed to this power of direction I will be making three directions in relation to Medibank Private's operations. Firstly, Medibank Private membership will be limited in each State and on each table to the numbers as at 30 June 1983. Secondly, Medibank Private operations will be limited to their present 195 offices. The greater overall work volumes following Medicare's introduction may mean some transfers to larger premises at an equivalent site. However, Medibank Private will not be able to operate from the 86 new Medicare offices which will be opened before 1 February 1984. Thirdly, to ensure that the Health Insurance Commission's operation of Medicare and Medibank Private does not give Medibank Private an unfair advantage in lower administrative costs that could be passed on in lower contribution rates, I will be directing that the management component of all their contribution rates must reflect average industry costs. These directions under section 8J of the Health Insurance Act will apply up to 30 June 1986, at which time these policies will be reviewed.

Clause 101 of the Bill creates a new section 73BAB in the National Health Act which means that funds will operate under a minimum reserve policy rather than the current maximum reserve policy. The change to minimum reserves means that the Government's concern is to ensure the financial viability of each fund, but we will not be controlling the contribution rates to reduce the reserve levels of a profitable fund. Clause 101 also creates a new section 73BAC which allows the Minister to remove restrictions from the private funds as to the sorts of business they can carry on in addition to their health fund activities. Provided these other activities are entered into on a normal commercial basis this will allow the funds to set up their own companies and diversify into other activities such as general insurance, travel agencies, retirement villages, et cetera. Following their loss of medical insurance from 1 February this diversification potential will allow them to retain staff in new activities after 1 February.

Clause 128 of the Bill allows the Minister to approve merges between solvent funds. This will facilitate industry rationalisation in what is still a crowded private insurance market as funds will no longer have to go through the current costly and time consuming winding up procedures involving the Federal Court of Australia. Clause 119 of the Bill amends section 78 of the National Health Act. Funds will no longer require the approval of the Minister to change its rates of contribution or benefits and conditions of operation of all tables. As I outlined earlier, because Medicare provides basic cover to all Australians the Government no longer considers it necessary to regulate the funds beyond ensuring that overall financial viability and deciding the general principles for their operation. To this end clause 78 of the National Health Act has been amended to limit the requirements for ministerial approval to the benefits and conditions on the basic table only. These conditions go much into the way to providing the de-regulation the private insurance industry has sought for many years but neither Labor nor Liberal governments felt able to grant while they were responsible for providing basic health cover in our society. The concessions on restricting Medibank Private's operations clearly prove that this Government has no intention of seeking monopoly control of the private insurance industry.

One of the issues raised during the discussions with the private funds was the question of employment of fund staff. This question was also raised during the discussions I had with the Australian Council of Trade Unions. All along the Government has made it clear that employment preference would be extended to employees of the private health funds who sought employment with Medicare and who were affected by the introduction of the new program. The transfer of staff from the private health funds to Medicare will be handled with efficiency and compassion. At this stage let me however lay to rest the claims that have been made that at least 5,000 people will lose their jobs because of Medicare. These claims, Mr Deputy Speaker, are widely exaggerated and based on figures calculating the size of the private health insurance industry which are much exaggerated. The private health insurance industry has traditionally had a high turnover rate of employees and, when this is taken into consideration along with the diversification opportunities the Government will offer the private funds, the employment prospects of fund staff will be maximised. As well negotiations are proceeding with the Department of Employment and Industrial Relations and the Public Service Board to further expend the employment prospects of affected private fund staff.

Finally, it is with regret that I note the continuing negative attitude of the Opposition to Medicare. The shadow spokesman for health, the honourable member for Mackellar (Mr Carlton), continues to regard medical and hospital services as market commodities rather than basic rights for all Australians. He has made it quite clear that he would abandon Medicare immediately on attaining Government. On 22 July this year he told a health symposium at Sydney University 'The diffidence that in 1976 prevented us'-that is the Liberals-'from moving swiftly away from the earlier model would not be repeated'. Perhaps fortunately, his leader does not share that view. When pressed on the matter at the National Press Club on 7 July 1983 he could only provide the following gnomic utterance ' We will have to make our assessment of the extent to which Medicare has permeated the Australian community at a later date'. I am confident that through the full implementation of Medicare we will achieve such permeation through the Australian community such that Medicare will remain the basic form of health cover until the end of the century.

While the Federal Opposition remains negative I acknowledge that the Australian Democrats have voiced some disquiet on particular features of Medicare. Their leader even speculated recently that the Government would not really be that sorry to see Medicare stopped because this would assist the Government to keep the Budget deficit down. I would point out first of all that a $25m saving this year in abandoning Medicare would have only a very marginal impact on a Budget deficit of $8,361,000,000. But more importantly, Medicare is vital to the Government not only as a social policy on its own merits for providing simple, fair and affordable health cover to all Australians but also as a key element in the social wage policy and a key element in guaranteeing wage moderation over the coming year. The union movement is supportive of Medicare because the greatest benefit of the scheme will go to low and middle income earners who make up the majority of its members. Average family earnings are just over $400 a week and at this level the family would pay only $4 a week in the health levy. This is a saving of $10.50 a week when compared with the estimated cost of private insurance by early 1984 and the saving will represent extra cash in the weekly pay packet of wage and salary earners. Medicare is also estimated to reduce the consumer price index by 2.6 per cent over the first two quarters of 1984. Thus Medicare plays a major role in the anti-inflation strategy of the Government.

For all these reasons Medicare is a vital policy for the Hawke Labor Government but we are not prepared to accept fundamental changes to that legislation at the behest of the minority parties. The Government will be judged on the success or otherwise of Medicare.

Mr Groom —Hear, hear!

Dr BLEWETT —It must, therefore, have the final say on the basic machinery to implement the scheme. No government could abdicate that responsibility. I am glad to find the honourable member for Braddon agreeing. Medicare is a policy on which the Government kept every commitment made during the election campaign. My only concern with the minders in the Senate is to ensure that someone keeps them honest to their own election undertakings. We have a clear mandate from the people to enact the Medicare program in all its fundamentals.

The Medicare program and its costings were made freely available for public scrutiny and debate over 12 months prior to the election. This is in sharp contrast to the five schemes of the previous Government all of which were hatched in secrecy and none of which were presented to the electorate. So let there be no talk from the Opposition benches of not having mandates. Their health schemes had to be hidden away at election times not promoted as a major policy initiative as Medicare was in February and March of this year. As for the claim that Medicare may have a mandate but not its administration through a single public fund such as the Health Insurance Commission, let me refresh some memories on this point. First of all, the Medicare policy document which has been freely available since February 1982 has as its first statement following the introduction 'all Australians will be guaranteed automatic entitlement under a single public insurance fund'. Then again earlier this year we issued a booklet entitled Labor's Health Plan-Summary of Arguments for use during the election campaign. The book was widely circulated and freely given to journalists and the public with queries about Medicare. In a section comparing the Liberal health scheme with the Labor health plan it was stated, 'Having some 80 health funds is administratively inefficient and costly'. It then went on to state, 'Having a single public fund for all medical insurance is cost efficient- advantageous of scale, reduced administrative and advertising costs'.

It seems that only a few members of parliament are unaware of this commitment. The members of the funds themselves were under no illusions as was pointed out by John Short in an article in the Sydney Morning Herald on 25 May 1983 when he wrote: 'the funds have known for the past three years that the ALP is committed to having its Medicare scheme run by one public health fund, namely, Medibank. And if the honourable member for MacKellar and Senator Haines wish to continue this 'nobody told me' charade I would remind them of my speech to the Australian Hospitals Association in Adelaide late last year entitled 'Consistency and Consensus in Labor's Health Policy', later reprinted in the Australian Health Review. They were both present during that section of the course because we all spoke from the same platform. During my speech I stated:

While we will not found our system on the private health agencies we recognise they have a continuing, if subordinate, role to play. There will be substantial opportunities for the private funds to supplement the public fund with forms of hospital cover and to provide a wide range of ancillary covers.

In this legislation we are honouring precisely that commitment.

Further, during the election campaign the Voluntary Health Insurance Association of Australia produced a spurious costing document on Medicare and circulated it widely among the Press and the then Government. This was the basis for many stories about Medicare having a 2 or 3 per cent levy, but let me just cite one in particular. The Age in an article of 26 February 1983 entitled ' Medicare Levy would Double Say Funds' quoted the VHIAA's Executive Director as stating 'medicares deficits would total $1,800m after three years of operation' and 'in its first full year of operation medicare would face a deficit of $253m and by 1987-88 the annual deficit would rise to $1,805m'. However, following the election they had to concede that these figures were grossly inaccurate and thus they issued a revised draft of the costing document. The magnitude of their deliberate or negligent errors in their election propaganda was such that:

the three year Medicare deficit became $496m instead of $1,800m;

the first full year cost became $162m instead of $253m at election time, and

the 1987-88 deficit became $614m instead of $1,805m at election time.

Whatever the reason for these errors, the damage was done before the post- election corrections were issued. I ask the House to consider the competence and integrity of an organisation that put forward such figures during the campaign- and these are the people to whom the Opposition would ask the Government to entrust the running of Medicare. Having witnessed the strident and at times malicious campaign waged by the private funds against Medicare I am sure that very few electors went to the polls on 5 March believing that the Labor Party could or would entrust Medicare's operations to the private funds. Only by ignoring all of these statements and all of these activities is it possible to deny that the ALP has a mandate to operate Medicare through a single public fund . For too long confusion, continual change and complexity have been the hallmarks of Australia's health insurance system. The Government's Medicare policy which this legislation enacts, reverses the confusion, changes and complexities of the past. No longer will health insurance be a costly necessity for Australian families. It will, Mr Deputy Speaker, be their right. I commend the Bill to the House.

Debate (on motion by Mr Carlton) adjourned.