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Health Insurance Amendment (Safety Net) Bill 2015



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ISSN 1328-8091

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BILLS DIGEST NO. 54, 2015-16 24 NOVEMBER 2015

Health Insurance Amendment (Safety Net) Bill 2015 Amanda Biggs and Alex Grove Social Policy Section

Leah Ferris Law and Bills Digest Section

Contents

Purpose of the Bill ............................................................... 3

Background ......................................................................... 3

Greatest Permissible Gap (GPG) .............................................. 4

Original Medicare Safety Net (OMSN) ..................................... 4

Extended Medicare Safety Net (EMSN) ................................... 4

Issues with the current safety net arrangements ................... 5

Committee consideration .................................................... 6

Community Affairs Legislation Committee .............................. 6

Senate Standing Committee for the Scrutiny of Bills .............. 6

Policy position of non-government parties/independents ..... 7

Australian Labor Party ............................................................. 7

Australian Greens .................................................................... 7

Other non-government parties and independents ................. 7

Position of major interest groups ......................................... 7

Patient out of pocket costs ...................................................... 8

Complexity ............................................................................. 10

Family arrangements ............................................................. 10

Financial implications ........................................................ 10

Statement of Compatibility with Human Rights .................. 11

Parliamentary Joint Committee on Human Rights ................ 12

Key issues and provisions................................................... 12

Schedule 1—Amendments to the Health Insurance Act 1973 ....................................................................................... 12

New definitions ................................................................... 12

Date introduced: 21 October 2015

House: House of Representatives

Portfolio: Health

Commencement: Sections 1 to 3 commence on Royal Assent. Schedule 1 commences on 1 January 2016.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website.

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Repeal of EMSN, OMSN and GPG and establishment of new Medicare safety net ..................................................... 12

Registering a family ........................................................... 14

Confirming the membership of a family ........................... 14

Consequences of changing the registration of a family after the safety-net threshold is reached ......................... 15

Where children are registered in more than one family ................................................................................. 16

Concluding comments ....................................................... 18

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Purpose of the Bill The Health Insurance Amendment (Safety Net) Bill 2015 amends the Health Insurance Act 1973 (HIA)1 to replace the existing Medicare safety nets, which assist patients with gap and out of pocket costs for out of hospital services, with a single Medicare safety net.

Broadly, the Bill:

• inserts new definitions in respect to eligibility for the Medicare safety net

• repeals existing provisions around the operation of the Original Medicare Safety Net (OMSN), the Extended Medicare Safety Net (EMSN) and the Greatest Permissible Gap (GPG)

• inserts provisions that specify the operation of a single Medicare safety net, including new safety net thresholds and accumulation amounts and

• inserts other provisions clarifying when and to whom Medicare benefits are payable, and other minor amendments.

The Bill proposes to retain the 80 per cent safety net benefit available under the existing EMSN, subject to a new cap (defined as 150 per cent of the schedule fee, minus the standard Medicare rebate). It proposes lower expenditure thresholds than under the EMSN—$400 for concession card holders, $700 for FTB(A) families and ‘confirmed’ singles,2 and $1000 for all other families and unconfirmed singles.3 The amount of out of pocket costs that will be allowed to accumulate toward the safety net threshold will also be capped to 150 per cent of the Medicare fee, minus the rebate.

In addition, the Bill proposes amendments that expand and streamline benefit arrangements for families and add greater flexibility. For example, it proposes to allow couples who live apart because of illness to register as a family and pool their out of pocket expenses, which is not currently allowed.4

Background Medicare benefits are available to help patients meet the cost of clinically relevant medical and health services provided by registered practitioners. If the practitioner chooses to bulk bill (by accepting the Medicare benefit as full payment for the service) the service is free to the patient. Nationally, around 77.9 per cent of all Medicare services are bulk billed.5

The payment of benefits only applies to a professional service listed in the Medicare Benefits Schedule (MBS). Generally the benefit is set at 85 per cent of the schedule fee, except for the following:

• for services provided by a general practitioner (GP) to non-referred, non-admitted patients, or for services provided on behalf of a GP by a practice nurse or Aboriginal and Torres Strait Islander health practitioner, 100 per cent of the Schedule fee

• for professional services to a patient as part of an episode of hospital treatment (other than public patients), 75 per cent of the Schedule fee and

• 75 per cent of the Schedule fee for professional services rendered as part of a privately insured episode of hospital-substitute treatment.6

Medicare helps fund many services, but patients may still be liable for some of the cost. Medicare sets a minimum fee for a service (the schedule fee) and the benefit amount (usually 85 per cent of the fee, also called

1. Health Insurance Act 1973, accessed 29 October 2015. 2. A confirmed single is someone who has confirmed their single status with Medicare Australia. The confirmation process is specified in new subdivision K. 3. New subdivision L specifies that an unconfirmed single is someone who has not confirmed their status with Medicare Australia and is not a

concessional card holder, not an FTB(A) person or a person confirmed as part of a family. 4. Other examples are described in the Explanatory Memorandum, Health Insurance Amendment (Safety Net) Bill 2015, pp. 6-7, accessed 3 November 2015. 5. Department of Health (DoH), ‘Quarterly Medicare statistics’, DoH website, updated 14 August 2015, accessed 21 October 2015. 6. Health Insurance Act 1973, subsection 10(2).

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the rebate), but a medical practitioner is still free to set their own fees.7 This means that patients can face high costs even after receiving a Medicare rebate.

Two concepts are used to describe the costs that patients can incur when accessing Medicare services:

• ‘Gap amount’. This refers to the difference between the MBS schedule fee and the MBS benefit (rebate) that the patient receives and

• ‘Out of pocket costs’. This refers to the difference between the MBS benefit and the fee charged by the doctor. Out of pocket costs are made up of any gap amount plus any fee that the doctor charges in excess of the MBS schedule fee.8

Over the years, three measures have been introduced to help ameliorate high costs for patients. The first two measures described below relate to the gap amount, while the third relates to out of pocket costs.

Greatest Permissible Gap (GPG) The Greatest Permissible Gap (GPG) has applied since Medicare commenced in 1984. The GPG ensures the gap between the MBS fee and the 85 per cent benefit cannot exceed the prescribed GPG amount (which is indexed annually to CPI). The GPG particularly helps ameliorate high out of pocket costs associated with higher fee out of hospital services.9 If the gap between the schedule fee and the Medicare benefit would otherwise exceed the GPG, the benefit is increased to ensure the gap payment is equal to the GPG amount. For example, if the schedule fee for a service is set at $800, the benefit is normally 85 per cent of this, or $680, leaving a $120 gap for the patient. The GPG is currently set at $79.50 (it was indexed on 1 November 2015) so the benefit for the service increases to $720.50, meaning the patient only has to pay a $79.50 gap.10

Original Medicare Safety Net (OMSN) The Medicare Safety Net was introduced in 1991. Originally it was intended to help offset the cost of a newly introduced $2.50 patient co-payment, which was later withdrawn, while the safety net was retained.11 The Original Medicare Safety Net (OMSN), as it is now called, reimburses patients when they incur gap expenses for out of hospital services above a set threshold. As noted, gap expenses are defined as the difference between the Medicare benefit (usually 85 per cent of the schedule fee) and the Medicare schedule fee. Once gap expenses exceed the prescribed threshold patients receive 100 per cent reimbursement of the schedule fee for the remainder of the calendar year for out of hospital services. The current annual threshold is set at $440.80.12 OMSN only applies to gap expenses incurred by individuals (not families).

Extended Medicare Safety Net (EMSN) In 2004, the safety net was expanded to provide additional benefits and extended to cover expenses incurred by families. The Extended Medicare Safety Net (EMSN) operates so that once cumulative out of pocket expenditure on out of hospital services exceeds an annual threshold, the Medicare benefit increases to cover either 80 per cent of further out of pocket costs or the EMSN benefit cap for the remainder of the calendar year (whichever is lower). The EMSN benefit cap is generally set at 300 per cent of the MBS fee (that is three times the fee) up to a maximum of $500.13 The EMSN is paid in addition to the OMSN and the Medicare benefit. Medicare benefit caps are recorded automatically through Medicare Australia’s claiming systems and are applied at the time of processing the claim for payment.14

7. The 1946 Constitutional amendment which gave the Commonwealth powers to provide medical, dental and pharmaceutical benefits placed a restriction on these powers, ‘but not so as to authorise any form of civil conscription’ (Australian Constitution, subsection 51 (xxiiiA)). This has been interpreted so as to prevent the Commonwealth from setting doctors’ fees.

8. DoH, ‘Meeting the Extended Medicare Safety Net (EMSN) threshold’, DoH website, 21 October 2015, accessed 29 October 2015. 9. Out of hospital services include GP and specialist attendances, services provided in private clinics, and many pathology and diagnostic imaging services. Services at day surgery facilities are normally classified as a hospital service. 10. DoH, Medicare Benefits Schedule book, operating from 01 November 2015, DoH, Canberra, 2015, p. 18, accessed 3 November 2015. 11. A Biggs, ‘GP co-payment proposal: lessons from the past’, Flagpost, Parliamentary Library blog, 30 April 2014, accessed 21 October 2015. 12. Department of Human Services (DHS), ‘2015 Medicare Safety Net thresholds’, DHS website, updated 9 January 2015, accessed

21 October 2015. 13. DoH, ‘Extended Medicare Safety Net’, MBS Online website, updated 23 March 2015, accessed 21 October 2015. 14. Ibid.

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Caps on EMSN benefits were introduced following the findings of a 2009 independent review of the EMSN.15 This review found that EMSN expenditure was growing at a faster rate than Medicare spending and had contributed to a significant increase in average provider fees, particularly in some specialities. It also found that most EMSN benefits were distributed to the most socio-economically advantaged, and were not providing assistance to those who were most disadvantaged. Initially caps on EMSN benefits were introduced for selected out of hospital MBS items identified as having excessive average fees (obstetrics, pregnancy related ultrasounds, cataract surgery, hair transplantation, and a varicose vein procedure). Following a second review of the EMSN in 2011, caps were introduced for most out of hospital services.16

Two further measures have attempted to address safety net expenditure: the lifting of the general EMSN threshold from $1,248.70 to $2,000 as of January 2015, and pausing indexation of the thresholds.17

Issues with the current safety net arrangements In introducing this Bill, Minister Ley argues that the existing safety nets are unnecessarily complex, making it difficult for patients and providers to understand their entitlements. While the capping arrangements introduced in 2009 slowed the rate of growth in safety net expenditure by 42 per cent,18 the Minister remains concerned that safety net expenditure remains too high. Last year Medicare safety net expenditure totalled $414 million, significantly higher than the $206 million forecast.19 As a proportion of Medicare expenditure (just over $20.3 billion in 2014-15), Medicare safety net expenditure represents around 2 per cent.20

According to the Minister, some medical providers continue to charge excessive fees, and current safety net arrangements may be encouraging less safe practices as providers undertake more complex procedures out of hospital in order to take advantage of the EMSN.21

The provisions in this Bill, she argues, will ‘restrict excessive fee inflation by medical providers and hopefully encourage current billing practices by some health providers to become more proportionate to Medicare fees’.22

Calls for safety net arrangements to be simplified have been made previously, notably by the independent National Health and Hospitals Reform Commission (NHHRC) which considered the issue of safety nets in its 2009 report. The NHHRC argued:

[T]here are currently multiple safety nets and a patchwork of government programs that partially meet the costs of some services. We need a simpler, more family-centred approach that improves the affordability of health care. 23

Subsequently, the NHHRC recommended a review of safety net arrangements, with a view to replacing the existing arrangements with a simpler, more family-centred, approach.24

There is evidence that some medical providers continue to charge excessive fees, particularly some medical specialists, where competitive pressures are less potent. According to Dr Michael Grigg, President of the Royal Australasian College of Surgeons, ‘some surgeons charge 10 times the fee recommended by the Australian Medical Association’.25 The rate of bulk billing among specialists is among the lowest of all medical providers—

15. Centre for Health Economics Research and Evaluation (CHERE), Extended Medicare Safety Net review report 2009, report prepared for the Department of Health and Ageing (DOHA), DOHA, Canberra, 2009, accessed 21 October 2015. 16. CHERE, Extended Medicare Safety Net: review of capping arrangements report 2011, report prepared for DOHA, DOHA, 2011, accessed 21 October 2015. 17. A Biggs, Health Insurance Amendment (Extended Medicare Safety Net) Bill 2014, Bills digest, 71, 2013-14, Parliamentary Library, Canberra,

2014, accessed 23 October 2015. 18. CHERE, Extended Medicare Safety Net: review of capping arrangements report 2011, op. cit., p. 21. 19. S Ley (Minister for Health), Fairer, simpler Medicare safety net to help more patients, media release, 22 October 2015, accessed

23 October 2015. 20. It is not clear if the contribution of the OMSN to safety net expenditure is included in the total figure cited by the Minister, but it would be relatively modest based on the findings of the 2011 review (see CHERE, 2011, op. cit., p. 22). The $20.3 billion figure is an estimate from

Australian Government, Budget strategy and outlook: budget paper no. 1: 2016, Table 8.1, p. 5-23, accessed 23 October 2015. 21. S Ley, ‘Second reading speech: Health Insurance Amendment (Safety Net) Bill 2015’, House of Representatives, Debates, (proof), p. 5, 21 October 2015, accessed 23 October 2015. 22. S Ley, Fairer, simpler Medicare safety net to help more patients, op. cit. 23. National Health and Hospitals Reform Commission (NHHRC), A healthier future for all Australians: final report (Bennett Report), DOHA,

Canberra, June 2009, p. 7, accessed 21 October 2015. 24. NHHRC, op. cit., p. 236. Note the NHHRC was referring to both the Medicare and the Pharmaceutical Benefits Scheme safety nets. 25. H Alexander, J Medew and D Harrison, ‘What’s really going on with health costs’, The Age, 24 January 2015, p. 26, accessed 22 October 2015.

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around 29.9 per cent. For anaesthetists the bulk-billing rate is 9.2 per cent.26 This means that patients can face high out of pocket costs for these services. There is evidence that patient out of pocket costs for some specialist services continue to rise at a relatively high rate. For example, the average out of pocket payment for obstetrics was $247.80 in June 2015, up from $229.30 on the previous year. In June 2010, the average out of pocket payment for obstetrics was $176.90.27 Overall, this represents a 40 per cent increase in out of pocket costs over 5 years.

Still, there remains uncertainty as to the impacts of recent efforts designed to curb safety net expenditure, such as capping, and increasing the general EMSN threshold to $2000. It is not clear, for example, if the distribution of safety net benefits continues to flow to the most advantaged in our community, although the Department of Health has recently given evidence that the MBS safety net is ‘typically engaged by people of middle income and higher’.28 Nor is it clear the extent to which medical providers may be moving towards less safe practices, as claimed by the Minister. Unlike previous policy developments, the proposals in this Bill are not drawing on evidence from independent reviews of safety net arrangements.

Meanwhile, a major review of the Medicare Benefits Schedule (MBS) announced by Minister Ley in April this year is underway.29 A Taskforce has been established to ‘consider how services can be aligned with contemporary clinical evidence and improve health outcomes for patients’.30 An interim report is due at the end of 2015.31 Given the potential for the Taskforce to make potentially major recommendations around the operation of Medicare, it might be prudent for the provisions in this Bill to be considered in the context of this interim report.

The enactment of this Bill is forecast to generate savings of $266.7 million over five years.32 Savings are due to be re-directed to the Medical Research Future Fund (MRFF) which was established earlier this year.33

The measure was originally announced as part of the 2014-15 Budget.34

Committee consideration Community Affairs Legislation Committee The Bill has been referred to the Community Affairs Legislation Committee for inquiry and report by 23 November 2015.35 Details about the inquiry are available on the Committee’s website.36 A public hearing was held on 16 November and the transcript is available on the Committee’s website. On 23 November 2015 the Committee tabled its report.37 The majority of the Committee, while supporting the passage of the Bill, also recommended that the Department amend the Explanatory Memorandum to ‘explain the data and modelling underpinning the Bill’ and that the Bill be amended ‘to include a review of the operation and outcomes of the new Medicare Safety Net no later than 1 January 2021’. 38

Senate Standing Committee for the Scrutiny of Bills The Senate Standing Committee for the Scrutiny of Bills had no comment to make on the Bill.39

26. DoH, ‘Quarterly Medicare Statistics’, op. cit., June quarter 2015, Table 1.1a, accessed 22 October 2015. 27. Ibid., Table 1.5. 28. A Stuart (Deputy Secretary, Health Benefits Group, Department of Health), Evidence to Senate Community Affairs Legislation Committee, Official committee Hansard, 21 October 2015, p. 35, accessed 18 November 2015.

29. S Ley, ‘Transcript of press conference: Sydney: 22 April 2015: Review of Medicare’, transcript, 22 April 2015, accessed 23 October 2015. 30. S Ley, ‘Abbott Government to deliver a healthier Medicare’, media release, 22 April 2015, accessed 23 October 2015. 31. S Ley, ‘Establishment of expert groups to shape a healthier Medicare’, media release, 4 June 2015, accessed 23 October 2015. 32. Explanatory Memorandum, op. cit., p. 7. 33. Australian Government, Budget measures: budget paper no. 2: 2014-15, p. 145, accessed 21 October 2015. 34. Ibid.

35. Selection of Bills Committee, Report, 14, 2015, The Senate, 12 November 2015. 36. Senate Community Affairs Legislation Committee, ‘Inquiry into the Health Insurance Amendment (Safety Net) Bill 2015 homepage’, Parliament of Australia website, accessed 17 November 2015. 37. Senate Community Affairs Legislation Committee, Inquiry into the provisions of the Health Insurance Amendment (Safety Net) Bill 2015, The

Senate, Canberra, 2015, accessed 24 November 2015. 38. Ibid., p. 25. 39. Senate Standing Committee for the Scrutiny of Bills, Alert digest, 12, 2015, The Senate, 11 November 2015, p. 13, accessed

18 November 2015.

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Policy position of non-government parties/independents Australian Labor Party In an initial response to the 2014-15 Budget, the Opposition spokesperson on health, Catherine King described the proposed changes as making the Medicare safety net ‘less fair’.40 Later she argued that the cost of many high fee services, such as PET scans for cancer patients, would become unaffordable for many under the new arrangements.41 More recently, she described how the changes would ‘slug cancer patients, families seeking IVF and those with chronic health conditions with even higher out of pocket costs’.42

When the Bill was introduced for debate, Ms King indicated that Labor would carefully consider the legislation, but that it still had concerns about the impact of the changes on patients with ‘serious and costly medical issues’.43

Subsequently, Ms King announced that Labor will not be supporting the legislation in its current form.44

Australian Greens No specific commentary from the Australian Greens on the measures proposed in this Bill had been identified at the time of writing this digest. However, the Greens have previously expressed concerns about growing out of pocket costs to patients. In August 2013, Greens Senator Richard Di Natale moved to hold a committee of inquiry into high out of pocket patient costs.45 More recently, Senator Di Natale reported on the outcomes of the subsequent Senate inquiry. He noted that the inquiry had found discrepancies and problems in the operation of the two main safety nets, the Medicare safety net and the Pharmaceutical Benefits Scheme safety net, and called for reform:

We learnt that one of the big problems is that they do not provide people with the upfront assistance they need. People who do not have the disposable income to be able to afford large out-of-pocket costs do not get the benefit from the safety nets that they need. In fact, some people will achieve the threshold for one safety net but not benefit from the other safety net. One of the clear recommendations was that we need a single safety net for out-of-pocket healthcare expenses that covers medical services, medicines and other healthcare expenditure. A recommendation to government was that they implement such a significant reform.

46

Other non-government parties and independents Independent Senator Nick Xenophon has indicated that he will not vote for the Bill, citing concerns about higher costs for patients accessing in vitro fertilisation (IVF) treatment.47

Commentary from other non-government parties and independents was not identified at the time of writing this Digest.

Position of major interest groups Commentary on this measure at the time of the Budget was not extensive; the main focus for many stakeholders was instead on the proposed patient co-payment (which was subsequently dropped).

The proposed safety net changes were discussed briefly at Budget Estimates in June 2014. As explained by Dr Bartlett, from the Department of Health, savings would be achieved because the 150 per cent cap on benefits will limit the amount of benefits paid to some patients:

40. C King (Shadow Minister for Health), ‘Tony Abbott's GP Tax: attack on Medicare begins’, media release, 14 May 2015, accessed 21 October 2015. 41. C King, ‘Upfront GP tax will break the bank for cancer patients’, media release, 9 October 2014, accessed 21 October 2015. 42. C King, ‘Abbott hiding new health cuts from Canning voters’, media release, 14 September 2015, accessed 21 October 2015. 43. C King, ‘Labor to carefully scrutinise Medicare Safety Net changes’, media release, 21 October 2015, accessed 2 November 2015. 44. C King, ‘Medicare safety net needs real reform, not more Liberal health cuts’, media release, 10 November 2015, accessed

17 November 2015. 45. R Di Natale, ‘Greens to move inquiry into out-of-pocket healthcare costs’, media release, 7 August 2013, accessed 21 October 2015. 46. R Di Natale, ‘Committees: Community Affairs References Committee: Reports’, Senate, Debates, 26 August 2014, p. 5607, accessed

21 October 2015. 47. S Dunlevy, ‘Health bills set to jump’, The Mercury, 14 September 2015, p. 5, accessed 2 November 2015; N Xenophon, ‘Mamma Mia!: Government's proposed Medicare Safety Net changes will cost IVF couples almost $2000 a year more’, media release, 14 September 2015,

accessed 2 November 2015.

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The save comes because there are certain areas where there are very high fees charged, and the 150 per cent of the scheduled fee cap means that those will no longer be covered in the same way. But what happens through this is that a significant number of extra people get access to the safety net, and so more people will be getting covered by the safety net—but a number will get covered for a significantly smaller amount.

48

Patient out of pocket costs The latest data from the Australian Institute of Health and Welfare (AIHW) indicates that Australian patients continue to incur high out of pocket costs for their health care. In 2013-14, individuals spent an estimated $27.7 billion out of their own pockets on health goods and services.49 Out of pocket expenditure by individuals has grown at a faster rate than overall government expenditure on health. Over the decade, it grew by an average of 6.2 per cent a year in real terms compared with 5.3 per cent for all non-government sources.

Patient out of pocket costs have also been affected by a number of recent savings measures. In the 2013-14 Budget, the Labor government announced the phase-out of the Net Medical Expenses Tax Offset.50 It also announced an increase in the general threshold for the EMSN, from $1221.90 to $2000 from January 2015.51 In the 2014-15 Budget the Coalition announced that annual indexation of Medicare fees would be paused for two years, which was then extended to 2018.52 The pause in indexation has an effect on the incomes of medical practitioners who bulk bill, as they accept the Medicare benefit as full payment for the service. If practice costs increase, fewer practitioners may opt to bulk bill, meaning patients may face higher out of pocket costs.

A number of commentators have argued that some patients will face higher out of pocket costs as a result of this measure. Health expert Anne-marie Boxall, writing for The Conversation noted that while some patients will qualify for the safety net after spending less money, ‘they will have to pay more of the high out of pocket costs than they do now.’ For those services ‘well in excess of the Medicare schedule fee’ the new safety net ‘will not provide protection for costs’. She has described this as a ‘new, simpler Medicare safety net … but with holes.’53

Another health commentator Jennifer Doggett described the proposed lowering of the safety net thresholds as ‘woefully inadequate to support the increased numbers of people who will have difficulty meeting their health care expenses’.54

Concerns have been raised over how the safety net changes could adversely affect certain categories of patients, such as cancer patients. Under the new safety net, cancer patients undergoing expensive radiotherapy treatment may face higher out of pocket costs due to the imposition of the 150 per cent cap on benefits, according to one cancer expert:

Private patients undergoing a typical six to seven-week course of radiation treatment have $12,000 in out-of-pocket expenses but $10,000 of this is covered by the Medicare safety net, Dr Guiney said. When the 150 per cent fee cap is introduced in January the Medicare safety net will cover only $8000 of these bills leaving the patient $4000 out of pocket.

55

There is also a concern that some patients who are only charged the schedule fee might lose benefits under the OMSN changes:

48. Senate Community Affairs Legislation Committee, Official committee Hansard, 2 June 2014, p. 113, accessed 3 November 2015. 49. Australian Institute of Health and Welfare (AIHW), Health expenditure Australia 2013-14, AIHW, Canberra, 2015, pp. viii, 39, 49, accessed 3 November 2015. 50. From the 2013-14 income year, the NMETO will be phased out. The offset will continue to be available for taxpayers with out-of-pocket

medical expenses relating to disability aids, attendant care or aged care expenses until 1 July 2019. See Australian Taxation Office (ATO), ‘Net medical expenses tax offset phase out’, ATO website, accessed 21 October 2015. 51. Australian Government, Budget measures: budget paper no. 2: 2013-14, p. 168, accessed 3 November 2015. 52. J Hockey (Treasurer) and M Cormann (Minister for Finance), Mid-year economic and fiscal outlook 2014-15, p. 166, accessed 29 October 2015. 53. A Boxall, ‘A new simpler Medicare safety net… but with holes’, The Conversation, (online edition), 15 May 2014, accessed 21 October 2015. 54. J Doggett, ‘Budget 2014: The good, the bad and the ugly (but mostly the ugly….)’, Crikey, (online edition), 14 May 2014, accessed

21 October 2015. 55. S Dunlevy, ‘Cancer cash a steal’, Herald Sun, 27 March 2015, p. 11, accessed 3 November 2015.

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Patients charged the Medicare schedule fee currently have their out-of-pocket expenses capped at $440 a year, but this cap will be removed under the Budget changes. These patients will now have to spend $1000 on out-of pocket expenses before qualifying for the safety net and getting back 80 per cent of any costs over this amount. 56

The Australian Diagnostic Imaging Association (ADIA) raised concerns about the proposed removal of GPG arrangements. The ADIA argue that because many imaging services are higher cost, the GPG acts as an important safety net because it limits patients’ liability for gap payments. Removal of the GPG, they warn, will result in some patients facing higher gap payments.57

Others argued this measure would add to demand for public hospital services and increase waiting times.58

A number of commentators also pointed out that current safety net arrangements do not assist in helping with the out of pocket costs associated with health services such as dental care and medical aids and appliances.59 This gap in coverage will continue under the proposed changes.

Concerns over patient costs remain of high potency. On the introduction of the Bill, the AMA President Brian Owler said that the AMA opposes the changes and that ‘the sickest and most disadvantaged Australians will be hit hardest’.60

Royal Australian College of General Practitioners (RACGP) President Dr Frank R Jones expressed concern that the 150 per cent cap on safety net benefits, when coupled with the existing freeze on schedule fees, would increase costs for vulnerable groups.61

Psychiatrists have also expressed concerns about this Bill. Vice President of the National Association of Practising Psychiatrists (NAPP), Dr Gil Anaf, argues that patients who require intensive psychiatric treatment (that is who need to see a psychiatrist more than once a week) will be disadvantaged. He says that patients who exhaust the number of sessions currently allowed under one Medicare item number, and then move to an alternative Medicare service, will be faced with higher out of pocket costs.62

The Department of Health has responded to questions about increased out of pocket costs by stating that they expect some clinicians to change their billing behaviour in response to the new arrangements, making it ‘a little harder to predict specific outcomes for specific patients’.63 However, using the example of radiation oncology patients, they expect that:

There will be a number that become eligible for the first time. There will be a number that are paying a little higher out-of-pockets. We do not expect that there will be people who are currently eligible who will no longer be. 64

In recent evidence to the Senate Community Affairs Legislation Committee inquiry into the Bill, the Department further advised that it expects 53,000 additional people will qualify for the safety net due to the lower income thresholds.65

56. Ibid.

57. Australian Diagnostic Imaging Association (ADIA), ‘The Medicare Safety Net changes will hurt vulnerable patients’, ADIA website, accessed 21 October 2015. 58. S Dunlevy, ‘Budget cut hits cancer sufferers’, The Advertiser, 27 March 2015, p. 12, accessed 3 November 2015. 59. M Skinner (Senior Policy Adviser, National Seniors Australia), Evidence to Senate Community Affairs Legislation Committee, Inquiry into the

Health Insurance Amendment (Extended Medicare Safety Net) Bill 2014, 16 May 2014, p. 12, accessed 3 November 2015. 60. Australian Medical Association (AMA), Medicare safety net changes will hit the sickest and most disadvantaged, media release, 22 October 2015, accessed 3 November 2015. 61. Royal Australian College of General Practitioners (RACGP), Proposed Medicare threshold drop will leave patients worse off, media release,

28 October 2015, accessed 2 November 2015. 62. National Association of Practising Psychiatrists, Safety Net has big holes for patients with mental illness, media release, 22 October 2015, accessed 22 October 2015. Dr Anaf estimates that the new arrangements could mean that in cases where patients exhaust the number of

sessions currently available under a specific Medicare item number and need to utilise an alternative item number, ‘the patient’s out of pocket costs will increase by as much as $200 per week.’ 63. A Stuart, Official committee Hansard, op. cit., p. 33. 64. Ibid., p. 34. 65. A Stuart, Evidence to Senate Community Affairs Legislation Committee, Inquiry into the Health Insurance Amendment Safety Net Bill 2015, 16 November 2015, accessed 17 November 2015. This is a net figure.

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Complexity Despite the government’s intention to simplify safety net arrangements, some commentators still point to its complexity.

In a Senate hearing after the budget announcement in May 2014, Adam Stankevicius from the Consumer’s Health Forum commented about how the proposed changes, along with other recent changes, add to the complexity:

So it does go back down again, but again there are exclusions and carve-outs for the proposed new safety net. This one is proposed to come in on 1 January 2015. The one announced in the 2014-15 budget would come in on 1 January 2016 and bring it back down to $1,000. The carve-outs and the exclusions get more technical and more difficult to work through. The capping also gets more difficult to work through. It is not a simple matter of being just as easy as it is now to reach the threshold. With a new lower threshold, it will still be more difficult. Consumer confusion is one of the questions when you start carving stuff out, excluding it, putting caps on it and only having certain percentages that apply. You cannot necessarily plan your healthcare expenditure to get to the threshold, particularly if you are making decisions across financial years and you want to be able to ensure that you do get some kind of compensation. As I said, if you have got a chronic illness and you are trying to manage that across the years, it makes it more difficult.

66

In an opinion piece in the Medical Journal of Australia, three health experts argued that while the proposed safety net changes would ‘provide some relief to heavy users’, the measure ‘remains confusing and further complicated by caps on particular medical fees’.67

Family arrangements Stakeholder commentary has tended to concentrate on the issue of costs for patients.

However, the RACGP has welcomed the broadened definition of a family for safety net purposes as ‘a positive step towards recognising complex family arrangements’.68

Financial implications The Explanatory Memorandum (EM) notes that savings of $266.7 million over five years are forecast. This is exactly as the forecast in the 2014-15 Budget. Although not included in the EM the yearly breakdown of forecast savings was provided in the budget papers:

Table 1: Simplifying Medicare safety net arrangements

Source: Budget 2014-1569

This chart shows that the bulk of the forecast savings are expected to accrue in later years, once the new arrangements are fully implemented. Some expenses are also forecast, most likely reflecting costs associated

66. A Stankevicius (Chief Executive Officer, Consumers Health Forum of Australia), Evidence to Senate Community Affairs Legislation Committee, Health Insurance Amendment (Extended Medicare Safety Net) Bill 2014, op. cit., p. 4. 67. V Perkovic, F Turnbull and A Wilson, ‘Is it time for Medi-change?’, Medical Journal of Australia, 200(10), pp. 566-567, 2 June 2014, accessed 13 August 2015. 68. RACGP, Proposed Medicare threshold drop will leave patients worse off, op. cit. 69. Australian Government, Budget measures: budget paper no. 2: 2014-15, 2014, p. 145, accessed 21 October 2015.

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with implementing the new arrangements. Savings beyond the forward estimates are likely to accrue given the on-going nature of the Medicare program.

It is not clear how other recent measures may interact with this measure. In the 2014-15 Budget, annual indexation of most Medicare schedule fees was paused for two years (general practice was initially exempt from the pause).70 At the Mid Year Economic and Fiscal Outlook (MYEFO), the pause in indexation was extended to July 2018 and GP fees were included in the pause.71

This prolonged pause in indexation raised concerns that it would place a financial strain on general practice and force doctors to pass on costs to patients, increasing their out of pocket costs.72 If the indexation pause results in significant increases to out of pocket costs incurred by patients, it might be expected to have an impact on the forecast savings. However, the forecast savings for the proposed new safety net have not altered since the measure was first announced in the 2014-15 Budget, despite subsequent lengthening of the indexation pause. This could indicate that the government simply rejects assertions that patients will face higher out of pocket costs as a result of the extended indexation pause. The Department of Health has recently given evidence that bulk-billing rates have continued to rise under the indexation pause, but that there has been a small increase of about one dollar (3.6 per cent) in the patient contribution per GP service for patients who are not bulk-billed.73 Another possibility is that the effects of a prolonged indexation pause on out of pocket costs may not have been considered.

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible as it does not raise any human rights issues.74

The Statement of Compatibility prepared by the Department correctly identifies that the Bill engages with the right to health and the right to social security. While Article 12(1) of the International Covenant of Economics, Social and Cultural Rights (ICESCR) defines the right to health as ‘the right of everyone to the enjoyment of the highest attainable standard of physical and mental health’,75 this does not translate to a right to be healthy.76 Rather it is a right to not only have access to adequate health care but also to ‘safe and potable water and adequate sanitation, an adequate supply of safe food, nutrition and housing, healthy occupational and environmental conditions, and access to health-related education and information, including on sexual and reproductive health’.77 While taking into account a State’s available resources, Article 12(1) places an obligation on States to ‘adopt appropriate legislative, administrative, budgetary, judicial, promotional and other measures towards the full realization of the right to health’.78

Article 9 of the ICESCR provides that everyone has the right to access social security.79 This ‘encompasses the right to access and maintain benefits, whether in cash or in kind, without discrimination in order to secure protection, inter alia, from … unaffordable access to health care’.80 Under Article 9, ‘all persons should be covered by the social security system, especially individuals belonging to the most disadvantaged and

70. Ibid., p. 139. 71. J Hockey and M Cormann, Mid-year economic and fiscal outlook 2014-15, op. cit., p. 166. 72. The AMA raised these concerns in evidence to the Senate Select Committee on Health. See Senate Select Committee on Health, Second interim report, The Senate, Canberra, 24 June 2015, p. 48, accessed 23 October 2015.

73. A Stuart, op. cit., Official committee Hansard, p. 45. 74. The Statement of Compatibility with Human Rights can be found at page 10 of the Explanatory Memorandum to the Bill. 75. International Covenant on Economic, Social and Cultural Rights, done in New York on 16 December 1966, [1976] ATS 5 (entered into force for Australia on 10 March 1976), accessed 18 November 2015.

76. United Nations Economic and Social Council, General Comment 14: The right to the highest attainable standard of health (article 12 of the International Covenant on Economic, Social and Cultural Rights), UN Committee on Economic, Social and Cultural Rights, E/C.12/2000/4, 11 August 2000, p. 3, accessed 6 November 2015.

77. Ibid.

78. Ibid., p. 9. 79. International Covenant of Economics, Social and Cultural Rights, op. cit. 80. United Nations Economic and Social Council, General Comment 19: The right to social security (article 9 of the International Covenant on Economic, Social and Cultural Rights), UN Committee on Economic, Social and Cultural Rights, E/C.12/GC/19, 4 February 2008, p. 2, accessed

6 November 2015.

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marginalized groups’, and ‘qualifying conditions for benefits must be reasonable, proportionate and transparent’.81

The Government argues that while the Bill may increase the out-of-pocket costs for some patients, overall more patients will now benefit, particularly those who are financially disadvantaged:

While the average benefit under the new Medicare safety net will reduce, the number of people who will receive a safety net benefit will increase compared to the number of people who will receive a benefit under the EMSN in 2015. It is anticipated that benefits under the new Medicare safety net will be more equitably distributed between socio-economically advantaged and disadvantaged areas. Currently, the EMSN disproportionately directs benefits to people living in more advantaged areas and encourages fee inflation. This fee inflation disadvantages people who do not qualify for safety net benefits.

82

Parliamentary Joint Committee on Human Rights The Parliamentary Joint Committee on Human Rights questioned whether the changes to the safety net are a justifiable limitation on the right to social security and the right to health.83 While the Committee recognised that the Government’s rationale for reforming the safety-net arrangements was considered to be a legitimate objective, it noted that the changes might still not be justified where they disproportionality affected vulnerable groups.84 The Committee noted that the proposed amendments will mean that a person will be required to incur more out-of-pocket expenses before reaching the safety net threshold (regardless of whether they are financially disadvantaged) and that the removal of the Greatest Permissible Gap may also have a substantial impact on vulnerable groups.85 The Committee found that the statement of compatibility did not adequately justify the need for the amendments:

The statement of compatibility states that the Bill will mean that the benefits of the safety net will be more equally distributed between socio-economically advantaged and disadvantaged areas. However it does not explain whether the Bill will result in many financially disadvantaged people being worse off as a result of the changes. If this is the case, it is also unclear what safeguards there are to ensure that financially disadvantaged people are not effectively barred from accessing appropriate out-of-hospital healthcare due to a reduction in the benefits payable to them.

86

Key issues and provisions This section deals with notable or significant provisions. For all other provisions the reader is advised to consult the EM which adequately explains these proposed changes.

Schedule 1—Amendments to the Health Insurance Act 1973

New definitions Item 1 proposes new subsection 3(1) which inserts new definitions for key terms, including the meanings of those used to describe who is eligible for safety net benefits and new safety-net terminology.

Item 2 repeals sections 8 and 8A which specify the current definitions relevant to the safety net, and inserts a new simplified outline at 8AA.

Repeal of EMSN, OMSN and GPG and establishment of new Medicare safety net Items 6 and 7 repeal the existing provisions around the safety net arrangements and propose the new Medicare Safety Net.

Item 6 repeals subsections 10(3) and 10(5) which specify the GPG.

81. Ibid., p. 8. 82. Explanatory Memorandum, op. cit., p. 10. 83. Parliamentary Joint Committee on Human Rights, Thirtieth report of the 44th Parliament, pp. 14-18, 10 November2015, accessed 17 November 2015.

84. Ibid., p. 17. 85. Ibid., pp. 17-18. 86. Ibid.

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Item 7 repeals sections 10AA to 10C which specify the operation of the OMSN and the EMSN. Item 7 replaces these sections with proposed Division 3 which specifies the new safety net arrangements.

The new provisions include a simplified outline (proposed subsection 10A) which broadly explains the new safety net in simple language.

Proposed section 10B sets out the ‘general rule’ for the Medicare safety net: the Medicare benefit paid to a person for a safety-net service (defined below) will be increased by the safety net amount (defined in proposed section 10R) once they have reached their safety net threshold for the year. That is, people will receive a higher Medicare benefit to cover some of their out of pocket costs once they have reached their threshold. This rule is similar to the current EMSN arrangements.87

Proposed subsections 10BA(1) and (2) define a safety net service, and specify that an episode of hospital treatment or hospital substitute treatment cannot be a safety net service. This is the same as the current arrangement which excludes hospital services from the Medicare safety net. Proposed subsection 10BA(3) allows for the regulations to prescribe instances where more than one professional service is taken to be a single safety net service.88 Proposed 10BA(4) specifies that if such regulations are made, these regulations can also specify the schedule fee for these services, the method for calculating the fee, the medical expenses to count for these services and the method by which they are to be calculated. In such instances, proposed subsection 10BA(5) specifies that the original individual services are not considered a safety net service. This will replace current provisions in the HIA which allow for the treatment of multiple services to be specified under the HIA and classify these as ‘deemed services’.89

Proposed subdivision D sets out the framework for the new safety-net thresholds and specifies the amounts at which they will apply to different categories of people.

Proposed section 10D defines safety net expenses as the sum of all qualifying or ‘relevant’ expenses for professional services including the current service, incurred in a calendar year. To qualify for a safety net benefit, these expenses must equal or exceed the safety net threshold in a given calendar year.

Proposed section 10DB specifies how to determine an out of pocket expense by using a simple formula: the total amount (expense) of the medical service minus the Medicare benefit (or rebate).

Proposed section 10DC specifies a table which defines the rate of the safety net threshold for different classes of persons (as indexed under proposed section 10S). Rather than having two sets of out of pocket expenditure thresholds—one for the OMSN and one for the EMSN—this proposes a single set of thresholds. For a concessional person the safety net threshold is set at $400; for an FTB(A) person or a person confirmed as a member of an FTB(A) family, and for a confirmed single, the threshold is $700; for an unconfirmed single and a person confirmed as a family other than FTB(A), the threshold is $1000.90 As noted, these threshold levels are lower than the current EMSN thresholds. The EMSN thresholds are currently $638.40 for concession cardholders and people who receive FTB(A), and $2,000 for all other singles and families.91

Around 773,000 people are receiving safety net benefits in 2015. Under the proposed new arrangements, the Department of Health expects the total number of those receiving benefits ‘to go up by over 50,000, with a greater distribution towards the concessional.’92

Proposed subdivisions E, F, G, H and J deal with the eligibility of families in different circumstances and family registration.

87. Health Insurance Act 1973, subsections 10ACA(2) and 10ADA(3). 88. That is, where more than one professional service is needed in order to treat the patient it can be counted as a single service. For example, when multiple skin excisions may need to be performed in the one operation, rather than these multiple services counting towards the safety net, regulations can specify these are to be treated as a single service.

89. Subsections 10ACA(7AA) and 10ADA(8AA). 90. An unconfirmed single is defined in note 2 of the proposed subsection 10DC(1), which explains that the process for confirmation is specified in proposed subdivision K, while an unconfirmed single is defined in proposed subdivision L. 91. DoH, ‘Extended Medicare Safety Net’, op. cit. 92. A Stuart, Official committee Hansard, op. cit., p. 36.

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Registering a family Currently section 10AA of the HIA sets out the requirements for registering a family for the purposes of qualifying for the safety net. Subsection 10AA(1) clarifies that a person’s spouse or any of their dependent children are considered to be family members for the purposes of the safety net. A spouse is defined broadly as either someone who is legally married or someone in a de facto relationship. The definition excludes spouses who are living apart on a permanent basis.

A dependent child is defined as a child under 16 who is either in, or substantially in, the custody, care and control of the person, or a person between the age of 16-25 who is receiving full time education at a school, college or university and who is wholly or substantially dependent on the person. Subsections 10AA(2)-(5) provide that a family member can apply at any time to the Chief Executive Medicare (CEM) to have their family registered, or to add the new family member, or to delete a family member and the CEM must either register or vary the registration accordingly. A child, or a dependent child, constitute the only exception to the rule that a person may not be registered as a member of more than one family.93

The Bill proposes to replace section 10AA of the HIA with proposed Subdivision E—Registering a Family. Proposed section 10EA widens the scope of who is considered to be a spouse or a dependent child for the purposes of determining the family safety net. Proposed subsections 10EA (3) and (4) redefines the definition of spouse to include married couples and de-facto partners who are not living together because of a temporary absence from each other or because one or both of them suffers from illness or infirmity. The Explanatory Memorandum points out this will ensure that couples who are living in a nursing home or care facility will still be able to be recognised as a family for the purpose of the safety net. This amendment would serve to bring consistency in Commonwealth laws, because currently subsection 2F(4) of the Acts Interpretation Act 1901 contains the same arrangement—a de-facto couple will still be considered to be together on a genuine domestic basis when they are not living together because of a temporary absence from each other or because one or both of them suffers from illness or infirmity.94

Proposed subsection 10EA(7) amends the definition of ‘dependent child’ to include children who cannot study full-time due to illness or infirmity.

Therefore, the Bill provides that a dependent child of a person will now be defined as:

• a child under 16 who is either in or substantially in the custody, care and control of the person or

• a person between the age of 16-25 who is receiving full time education at a school, college or university (or who would be if not for illness or infirmity), and who is wholly or substantially dependent on the person.

Proposed subsection 10EA(8) allows for the regulations to prescribe additional definitions of a dependent child.

Proposed subsections 10E and 10EB inserts similar provisions to those contained in section 10AA in relation to registering a family or varying the registration to add a new family member or delete a family member. However, proposed subsection 10EB(4), in conjunction with proposed sections 10ED, provides that the CEM is not obligated to register a family, or vary a family’s registration, where he is not satisfied that either the new member has become a member of the family, or the former member is no longer a member of the family, and is not allowed to either register a family or vary a family’s registration where it would result in the family being comprised of more than two spouses. Proposed section 10EC introduces new provisions to clarify the registration process for where the new member of the family is a newborn. In particular, proposed subsection 10EC(3) places an additional burden on the CEM to ensure that where a newborn child is a member of a family either applying for registration or to vary their registration, the CEM must take such steps as are reasonable in all the circumstances to ascertain the membership of the family. The Explanatory Memorandum provides no guidance as to the rationale for this amendment.

Confirming the membership of a family Under current section 10AE of the HIA, if the CEM is satisfied that a registered family is close to reaching a Medicare Safety Net threshold, he/she must request that the registered family provide confirmation to the Department of the names of people who were considered to comprise the registered family for that year. This

93. Health Insurance Act 1973, subsection 10AA(6). 94. Acts Interpretation Act 1901, accessed 6 November 2015.

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obligation applies even where the registered family has not applied during the year to change its composition. According to the Department, the confirmation process allows for the Department to check the registered family’s eligibility for higher Medicare benefits.95 If the registered family fails to provide confirmation, each family member will not receive the increased benefits for that year.

New Subdivision F updates the process for providing confirmation. Proposed section 10F allows for any member of a registered family to provide confirmation by notifying the CEM, regardless of whether the CEM has requested that they do so. However, under proposed subsections 10FA(1) and (2) the CEM must still request that a registered family provide confirmation where he/she reasonably believes that a member of the family may in the near future be eligible for a safety net benefit amount (see below regarding proposed subdivision R). Proposed subsections 10FA(4)-(6) provide for time limits in which a member of the registered family can confirm the composition of the family.

Consequences of changing the registration of a family after the safety-net threshold is reached Currently section 10AB of the HIA provides for the scenario where a registered family member or members has reached their safety net threshold and the composition of the registered family changes. Subsection 10AB(1) provides that where a family’s registration is varied due to the addition of a new member, claims in respect of his or her medical expenses, incurred during the calendar year in which the registration is varied but before the variation, can be taken into account for the purpose of the safety net and the extended safety net. However, increased benefits are not payable under that section in relation to medical expenses that are incurred in respect of that person or any other family member and in respect of which a benefit has already been paid. Subsection 10AB(2) provides that where a family’s registration is varied due to a person ceasing to be a member and one of the family members (including the person ceasing to be a member) has not, at the time of the variation, become entitled to increased benefits in respect of medical expenses incurred in the calendar year in which the variation is made, claims involving the person’s medical expenses will no longer be relevant with respect to that family’s safety net. These claims will now apply to the person’s own safety net (as an individual) or another family’s safety net (where the person has registered with another family). Subsection 10AB(3) provides for when family members have become entitled to increased benefits in respect of medical expenses incurred in the calendar year and a person ceases to be a family member (and the family membership is varied). In these circumstances, claims involving the person’s medical expenses will continue to be relevant with respect to the original family’s safety net and the person will not be entitled to be treated as a member of another registered family during the year.

New subdivisions G and J set out the provisions relating to changes in the composition of families, including new rules with respect to former spouses and former dependent children. Proposed section 10G provides that where a person has reached the safety-net threshold any changes to the composition of the registered family the person is part of will not impact the person’s right to continue to receive safety-net benefits for relevant services for the remainder of the calendar year. This also applies where a person has reached the safety-net threshold and ceases to be a member of a registered family. Proposed section 10GA introduces new provisions which prevent a person who has reached their safety net threshold and leaves their current family from forming a new family for the purposes of the safety net. Specifically, where one person has reached their safety net threshold (which allows other members of the family to reach their safety net, including their spouse, and where costs may have been incurred by everyone in the family) and then ceases to be a part of that family, the person will be restricted from forming a registered family with anyone except their previous spouse and dependent children. The Explanatory Memorandum states that these restrictions ‘preserve the financial integrity of the safety net’ by not allowing a person to help someone else reach the safety net where the costs may have been incurred by their former spouse.96 Proposed section 10GB introduces similar provisions with respect to a dependent child who has reached their safety net threshold and then ceased to be a member of a registered family. In this case a former dependent child will only be allowed to become a dependent child of another family or form their own family with their dependent children. They will also be prohibited from registering a spouse.

New subdivision J inserts similar provisions to those contained in subsection 10AB(1) and provides that where a family membership has been varied to include a new family member, increased benefits are not payable in respect of which benefits have already been paid.

95. Department of Human Services (DHS), ‘Medicare Safety Net’, DHS website, updated 26 June 2014, accessed 6 November 2015. 96. Explanatory Memorandum, op. cit., pp. 19-20.

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Where children are registered in more than one family Currently subsection 10AC(3) provides for a simple solution for where a child has been registered as a member of two families and a medical expense has been incurred on the child’s behalf. Where the CEM is satisfied that the expense was incurred by a particular adult, the expense will be incurred for the purpose of the safety net in respect to the family the adult is registered as a member of. However, where the CEM is not satisfied as to the adult who incurred the expense, half of the expense will be incurred with respect to one family and the other half in respect to the second family.

Proposed section 10H provides that the provisions contained in new Subdivision H apply where a child has either been registered as a member of two families for that calendar year or the person ceases to be a dependent child of one family and becomes a dependent child of another family. Proposed section 10HA sets out when a child will have reached the safety net threshold, while proposed section 10HB sets out when the child’s family members will be considered to have reached the threshold. A child will reach the threshold when the total expenditure for services relating to the child reaches the threshold (regardless of which family paid for the services) or where the expenditure for the child combined with the expenditure for one family exceed the safety-net threshold. A child’s family members will be considered to have reached the threshold when their own medical expenses, combined with expenses incurred on the child’s behalf by them (but not expenses incurred by the other family) exceed the safety-net threshold. A detailed example of how proposed sections 10HA and 10HB will work in practice is set out in the Bill. Proposed section 10HC clarifies the situation where a family has separated part-through a calendar year (and has become two different families for the purposes of the safety-net) and, before separating, there were expenses incurred on behalf of the child. Instead of each family incurring half the expense, which would be the case under subsection 10AC(3), the total amount incurred by the former family will apply to each new family (regardless of which parent paid for the service). A scenario explaining proposed section 10HC is included in the Bill.

Proposed subdivisions K and L specify the treatment and eligibility of confirmed and unconfirmed singles. Currently sections 10AD and 10ADA prescribe the circumstances under which an individual can reach the safety set. An individual is defined as a person who is not a member of a registered family.97

The Bill introduces the concept of confirmed singles and unconfirmed singles. New section 10K allows for a person to give the CEM a notice that they wish to be treated as a confirmed single. Similar to the provisions in relation to registered families (see above discussion of proposed subsections 10FA(1) and (2)), the CEM must request that a person provide confirmation where the CEM reasonably believes that the person may in the near future be eligible for a safety net benefit amount if the person were a confirmed single.98 Proposed subsections 10KA(4)-(6) provide for time limits in which a person can confirm that they wish to be treated as a confirmed single and still qualify for the safety net for that year. New section 10KB provides for the situation where a confirmed single becomes a member of a registered family and before joining the family had reached the safety net. Proposed subsection 10KB(2) limits the classes of people who can be considered to be a member of the confirmed single’s family for that calendar year to only them and their dependent children (therefore if the confirmed single acquires a spouse, the spouse will not be considered to be part of their family for that calendar year). According to the Explanatory Memorandum, the purposes of these amendments ‘is to prevent a family from seeking to take advantage of the safety-net arrangements by confirming one member as a confirmed single, then subsequently adding a spouse to the family who would benefit from the confirmed single’s out of pocket expenses’.99

New subdivision L sets out the circumstances where a person is considered to be an unconfirmed single. Specifically, where a person is not a confirmed single or a member of a confirmed family, or eligible for concessional benefits or family tax benefits (see below discussion), the person will be considered to be an unconfirmed single. This clarifies that anyone who does not fall into those four categories will still be eligible to reach a safety net threshold (as prescribed under new Subdivision D).

Proposed subdivision M deals with the treatment of FTB(A) members and proposed subdivision N deals with concessional persons.

97. Subsections 10AD(2) and 10ADA(2). 98. Proposed subsections 10KA(1)-(3). 99. Explanatory Memorandum, op. cit., p. 23.

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Currently the HIA only provides for a definition of a FTB(A) family. Subsection 8(1A) defines a FTB(A) family to mean a registered family which includes a member who has received an instalment payment of a family tax benefit that has a Part A rate that is greater than nil,100 or who has received a lump-sum FTB(A) payment for a past financial year, or where a determination has been made which provides that the registered family is a FTB(A) family. The Bill removes the current definition of a FTB(A) family and replaces it with a concept of a FTB(A) person and a new definition of a FTB(A) family. Proposed section 10M provides that FTB(A) person is a person who has received an instalment payment of a family tax benefit that has a Part A rate that is greater than nil, or who has received a lump-sum FTB(A) payment for a past financial year, or where the Minister has made a determination providing that the person is considered to be a FTB(A) person for the purpose of the safety-net. This new definition is effectively the same as the current definition of a FTB(A) family except it allows for FTB(A) recipients who are not part of a registered family to be eligible for the FTB(A) safety-net threshold. Proposed section 10MA provides that where a member of a registered family receives FTB(A), then every member of the family is given access to the FTB(A) threshold. This is the same as the existing situation for a FTB(A) family.

Under the HIA, a concessional person is a person who is the holder of (or who is listed on) a pensioner concession card, a seniors health card or a health care card or a person who is entitled to concessional benefits under the Veterans’ Entitlements Act 1986 or the Military Rehabilitation and Compensation Act 2004.101 A person who is a Commonwealth concession card holder at any time in the calendar year retains concessional status for the rest of the calendar year. Proposed section 10N retains the current definition of a concessional person.

Proposed subdivision P specifies the expenses that will count towards the safety net thresholds.

Proposed section 10P specifies how to calculate a person’s accumulated safety net expenses, including the maximum amount that can be counted towards the safety net. In simple terms, this provision introduces a maximum out of pocket expense amount (or cap) that can accumulate towards the safety net. Under current arrangements, there is no cap on out of pocket costs that can count towards the safety net. Consequently, a person can reach the current safety net threshold if they incur high out of pocket costs from only a few services.

Proposed subsection 10P(1) specifies that the amount of the safety net expenses for a safety net service is defined as either, the out of pocket expense for the service (as defined at proposed subsection 10DB), or, if this exceeds the prescribed maximum amount (or cap), then no more than that maximum (cap). That is, only the lower of these two amounts can count towards the safety net. Proposed subsection 10P(2) specifies a formula for determining the maximum amount (cap) that can count towards the safety net. This is the threshold percentage (defined at proposed 10P(3) as 150 per cent of the schedule fee) multiplied by the fee for the service (defined at proposed 10P(3) as the Medicare schedule fee, or an amount prescribed under regulation) minus the Medicare benefit. The EM provides a useful example.102 However, a second example provided in the EM appears to have been worked incorrectly.103

The second example with corrected working would seem to be: a patient visits their doctor and is charged $200. The schedule fee is $80 and the Medicare benefit is $68. Therefore the out of pocket expense is $132 ($200- $68).

The maximum amount that can be counted towards the safety net is:

(150%×$80)-$68=$52.

Even though the patient was $132 out of pocket, only $52 of this will count towards their safety net threshold.

Proposed subsection 10Q specifies that, for a safety net amount to be payable, a specified (or minimum) amount must first be paid for the service. This amount is at least the difference between the fee charged by the medical provider and the Medicare benefit. In most instances, the patient would pay at the time of the service;

100. The Part A rate is calculated under Schedule 1 to the A New Tax System (Family Assistance) Act 1999, accessed 9 November 2015. 101. Veterans’ Entitlements Act 1986 and the Military Rehabilitation and Compensation Act 2004, accessed 9 November 2015. See section 84 of the National Health Act 1953, accessed 9 November 2015. 102. Explanatory Memorandum, op. cit., p. 4. There is also a confusing reference to the EMSN threshold being relevant under the ‘New Medicare

Safety Net’ provisions on p. 5. 103. Ibid., pp. 25-26.

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this provision ensures that a minimum amount has been rendered for a service before a safety net benefit can be paid.

Proposed subdivision R specifies the methodology for calculating the safety net benefit amount and the maximum (cap) on safety net benefits, once the safety net threshold is reached. Under the existing safety net arrangements the amount of benefits are capped to 300 per cent of the Medicare fee for that service (up to a maximum of $500). Under the proposed provisions this cap will be reduced to 150 per cent of the Medicare fee.

Proposed subsection 10R(1) specifies that the safety net benefit is the lesser of the ‘adjusted expenses’ for that particular service or the maximum safety net amount. This approach is broadly similar to current provisions, except that it reduces the safety net percentage. There are different formulae to be applied depending on the type of safety net expense (the ‘adjusted expense’): one for when the safety net threshold is reached, and one for when a person is close to reaching the threshold.104 The first of these formulae is at proposed section 10R(2) which specifies the formula for calculating the adjusted expenses when the safety net threshold has been reached. This is equal to 80 per cent of the difference between the fee paid by the patient and the Medicare benefit (i.e. 80 per cent of the out of pocket expense). Proposed subsection 10R(3) specifies the second formula in the event a person is just below the safety net threshold, but would reach the threshold if the current service were included. This formula calculates 80 percent of the out of pocket expense that is left over for the service once the threshold has been reached.

The maximum safety net benefit amount is calculated using a formula at proposed subsection 10R(4).This is specified as the safety net cap percentage (defined as 150 per cent at proposed section 10R(6)) multiplied by the schedule fee for the service,105 minus the Medicare benefit. The EM provides one useful example. 106 However, a second example provided in the EM appears to have been worked incorrectly.107

The second example with corrected working would appear to be: a patient visits their doctor and is charged $200. They have already reached their safety net for the year. The schedule fee for the service is $80 and the Medicare benefit is $68. Therefore the out of pocket expense is $132 ($200-$68). The safety-net cap percentage is 150 per cent.

Adjusted expenses are 80% of $132 which is $105.60.

The maximum safety-net amount for the service is:

(150%×$80)-$68=$52.

As the adjusted expense is greater than the maximum safety-net amount, the person will only receive a safety net benefit of $52 (plus the Medicare benefit of $68, for a total benefit of $120). This leaves them out of pocket by $80, despite having reached the safety net threshold.

Proposed subsection 10R(6) provides definitions of terms to apply under these provisions, including the treatment of multiple professional services at proposed paragraph 10R(6)(b).

Proposed subdivision S deals with indexation matters.

Proposed section 10S specifies the indexation number to be used is the Consumer Price Index (CPI) and that indexation for a safety net service is to occur on 1 January each year, which is consistent with indexation arrangements that currently apply to the safety net.108

Concluding comments The Bill simplifies existing Medicare safety net arrangements and lowers the safety net thresholds for many people. It goes a long way in recognising that the composition of a family has changed over time and that there has been a substantial increase in lone-person households.109 This may increase the number of people who are

104. Expenses are to be adjusted according to these formula; these are termed ‘adjusted expenses’. 105. The schedule fee can include more than one professional service, if this is specified in regulations or an amount higher than the schedule fee or a method for calculating a higher amount, if this is specified in the regulations. 106. Explanatory Memorandum, op. cit., pp. 4-5. 107. Ibid., p. 27. 108. Current section 10A of the Health Insurance Act 1973. 109. L Allen, E Gray and A Reimondos, ‘Australian census: one in ten live alone, but that doesn’t mean they’re lonely’, The Conversation, (online

edition), 22 June 2012, accessed 9 November 2015.

Warning: All viewers of this digest are advised to visit the disclaimer appearing at the end of this document. The disclaimer sets out the status and purpose of the digest. Health Insurance Amendment (Safety Net) Bill 2015 19

assisted by safety net benefits. However, in cases where health professionals charge fees that are significantly higher than the schedule fee, patients will not be able count all of their out of pocket costs towards the safety net, and will receive lower safety net benefits once they do reach the threshold. Thus, the safety net will cover more people, but for less money overall, making it a savings measure.

Stakeholder responses have focused on the concerns about increased out of pocket costs for some patients. The Government is expecting the revised arrangements to exert downward pressure on high doctors’ fees, but if this does not eventuate then some patients will pay more. Removing the GPG will also increase gap costs for services that have a very high Medicare schedule fee, because the maximum dollar value of the gap will no longer be capped.

The proposed changes to safety net arrangements are likely to interact with other Government initiatives such as the extended indexation pause on Medicare schedule fees and the MBS review that is currently underway. This interaction may warrant further review or scrutiny before the safety net reforms are enacted.

The evidence base around some of the claims remains limited (although additional material provided to the Senate Community Affairs Committee by the Department will assist), but uncertainty remains over the extent of perverse billing practices for out of hospital treatments and the extent to which safety net benefits are being inequitably distributed. Questions also remain over whether the bill will address all the problems that have been identified and deliver the savings that are forecast.

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