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Health Legislation (Private Health Insurance Reform) Amendment Bill 1994 [and] Private Health Insurance Complaints Levy Bill 1994 [and] National Health Amendment (No. 2) Bill 1994
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BILLS DIGEST
Nos. 14-16 1995
Health Legislation (Private Health Insurance Reform) AmendmentBill 1994
Private Health Insurance Complaints Levy Bill 1994
National Health Amendment(No.2) Bill 1994
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Parliament of the Commonwealth of Australia
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Health Legislation (Private Health Insurance Reform) Amendment Bill 1994
Date Introduced: 7 December 1994 House: House of Representatives Portfolio: Human Services and Health Commencement: The amendments contained in Schedules 1 - 4 commence on 1 April 1995, 1 July 1995, 1 July 1996 and 1 July 1997, respectively.
Purpose
This Bill will amend the National Health Act 1953, the Health Insurance Act 1973 and the Health Insurance Commission Act 1973.
The major amendments proposed by this Bill will:
⢠introduce casemix to private health insurance arrangements, allowing registered health benefits organisations to make payments to hospitals and day hospital facilities I on the basis of casemix episodic payments;
⢠allow registered health benefits organisations to enter agreements with hospitals, providing for the amount to be paid to the hospital for an insured patient's episode of hospital treatment. These Uhospital purchaser-provider agreements" may eliminate a privately insured patient's "out of pocket
expenses" owed to a hospital or day hospital facility, by providing for full payment by a health benefits organisation of the cost of an episode of hospital treatment;
⢠allow registered health benefits organisations to enter agreements with medical practitioners, providing for the amount to be paid to the medical practitioner for the provision of a professional service (in respect of which a Medicare benefit is payable) to an insured patient in a hospital. These "medical purchaser-provider agreements" mayeliminate a privately insured patient's "out of pocket expenses" owed to a medical practitioner, by providing for full payment by a health benefits organisation of the cost of an in-hospital professional service. This removes the legal prohibition on "gap" insurance for
any charges above the Medicare benefit, including charges above the schedule fee, for professional services provided to patients in hospitals;
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⢠establish an independent Private Health Insurance Complaints Commissioner to handle complaints about private health insurance matters;
⢠expand the functions of the Private Health Insurance Administration Council to include the collection and dissemination of information about private health insurance;
⢠require certain employers who provide health insurance to their employees to be registered;
⢠remove the current requirement that a health benefits organisation (other than a restricted membership organisation) must register one health fund in every State in which it operatesj
⢠require health benefits organisations to notify the Secretary of the Department of any proposed changes to their constitution, articles of association or rules.
Background
1. The Need for Reform
The Cost ofHealth Care - Who Meets It?
In 1992-3 (latest available figure) Australia's total expenditure on health exceeded $34 billion. This comprised approximately 8.5 per cent ofAustralia's gross domestic product. 2
The Commonwealth Government meets around 44 per cent of Australia's total health budget. This contribution will amount to over $17 billion in 1994-95. State and Territory Governments provide a further 23 per cent and the private sector (private health insurance and out-of-pocket payments by individuals) provides the remaining 32 per cent.3
Private health insurance is a significant source of funding for Australia's health system. The private health insurance funds' share of total health expenditure was almost 13 per cent in 1992-93.4 Since the introduction of Medicare in 1984, private health insurance funds have not been permitted to offer coverage for medical practitioner services outside hospitals. They are perm.itted to pay benefits for
ancillary services (dental, physiotherapy, chiropractic, ambulance services etc), but these account for only 22 per cent of private health insurance payments.s Private health insurance funds pay benefits principally for hospital services and for medical practitioner services received by private patients in both private and public hospitals.
Private hospital insurance in Australia can be offered in two forms: basic and supplementary. The nature and level of benefits in the basic hospital table is determined by the Minister for Health. The basic hospital table provides full coverage for standard hospital services (ie shared accommodation) for private
inpatients of public hospitals, and partial coverage for hospital services for private hospital patients. The basic hospital table also covers the gap between the Medicare benefit (currently 75 per cent of the schedule fee) and the schedule fee for medical practitioner services received by private patients in hospitals. The supplementary hospital table provides additional coverage for the higher charges for private
hospital services and for non-shared accommodation in public hospitals.
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Major Changes in Private Health Insurance Coverage - Fewer Australians, Older Australians, Higher Coverage
The proportion of the Australian population covered by private health insurance has fallen significantly since the introduction of Medicare. The participation rate fell from around 59 per cent in February 1984 (prior to the introduction of Medicare), to 50.0 per cent in June 1984 and 38.4 per cent in December 1993.6
Although participation rates have declined for all age groups, Australians aged under 65 years of age are opting out of private health insurance at a much higher rate than those aged 65 years and over. This is causing a change in the age structure of the insured population: older Australians are comprising an increasing proportion
of people covered by private health insurance.7 During 1992-3 the number of people aged 65 and over with private health insurance increased by 12 000 to 844 000 while the number aged 64 years or less fen by 208 000 to 6 124 0008
There has also been a major change since the introduction of Medicare in the level of coverage taken out by those with private health insurance. The proportion of those with private health insurance covered by supplementary hospital tables has increased ftom 59.2 per cent in 1984 to 91.6 per cent in 19939
Are These Changes Cause For Concern?
The substantial and continuing fall in the proportion of Australians with private health insurance has lead to concerns that increasing demands will be placed upon the public health system, which eventually will require significant additional government expenditure on health. This has not yet occurred, arguably because
many Australians who have chosen not to obtain private health insurance are young and healthy and do not currently need or use many health services. As this uninsured and expanding population ages and its health declines, however, it is anticipated that the demands it places upon the public health system will
increase. 10
The fall in private insurance participation levels, in combination with the ageing of the privately insured population, is widely seen as an indication that a vicious circle has developed: young, healthy people drop health insurance; premiums rise as the proportion of the aged increases; more young, healthy people drop their health
insurance; premiums rise still further; and so onY It has been suggested that if this is allowed to continue, a point will be reached where premiums become so high that the gradual decline over recent years in participation in private health insurance will become nan avalanche", with "critical implications for both the private and public systems".12
Raised premiums for all purchasers of private health insurance are an inevitable consequence of an ageing insured population, due to the requirement that all private health insurance must be "community rated" (i.e. all contributors must pay the same premium for the same cover, regardless of their risk). Raised premiums also act as
a disincentive - probably the main disincentive - to participation in private health insurancel3, particularly in a recession. Opinion differs, however, as to whether if no reforms were attempted the current situation necessarily would develop into a crisis of non-participation in private health insurance, or whether instead the
participation rate would level out. 14
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Another factor identified by many commentators as affecting the rate of participation in private health insurance is whether potential purchasers of insurance believe they are being offered "value for money". People may be prepared to pay higher premiums if they believe the private insurance cover they are purchasing offers them substantially more benefits than reliance upon Medicare as a public patient. The trend towards supplementary rather than basic health
insurance cover reflects this. Many people with basic table cover now receive little advantage over those solely reliant on Medicare, their advantage being limited to choice of doctor in a public hospital. Hence basic table cover has been abandoned in favour of supplementary table cover by the considerable number of people who want more substantial private coverage.
Even the maximum coverage offered under the supplementary tables, however, does not always protect privately insured hospital patients from having to pay "out-of pocket" expenses. These expenses may comprise hospital charges (for accommodation, theatre fees, etc) and/or medical practitioner charges. In the case
of hospital charges, there is no legal barrier preventing health insurance funds from offering full coverage and eliminating out of pocket expenses. This could, however, lead to higher premiums. In the case of medical practitioner charges, there is a legal barrier. The law currently permits private insurance to cover the gap between the
Medicare benefit - which is 75 per cent of the schedule fee - and the schedule fee for services provided in a hospitalby a medical practitioner, but prohibits any coverage of amounts in excess of the schedule fee. (Compare the situation when a medical practitioner provides services outside a hospital; the Medicare benefit payable is 85
per cent of the schedule fee, and insurance coverage is not permitted for the gap between that Medicare benefit and the schedule fee). A private patient therefore incurs out-of-pocket expenses whenever a medical practitioner treating the patient in hospital charges more than the schedule fee. This occurs frequently.
This inability to purchase full coverage for private health care acts as a further disincentive to participation in private health insurance. 15 It influences the conclusion by many Australians that the insurance product they are offered is not sufficiently attractive tojustify their expenditure on private health insurance. In the words of the Secretary of the Victorian Department of Community Services and Health at a recent seminar held by the Economic Planning Advisory Committee:
No wonder the customers are voting with their feet. Private health insurance is grossly overpriced for the limited de facto benefits it confers. 16
2. Reform Proposals
Casemix
Discussion of any recently proposed reform affecting the funding of Australia's health care system cannot occur without an understanding of "casemix". Casemix was developed in the United States over 20 years ago and is used there in the publicly funded health care programmes for the elderly (Medicare) and the poor
(Medicaid),
The casemix of a hospital is the mix of different categories of patients and cases it treats. Under casemix, illnesses and medical conditions are classified using a large number of Diagnosis Related Groups (DRGs). Diagnosis Related Groups have been
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developed for Australia and are called AN-DRGs; there are 530 AN-DRGs in the latest classification. Weights are calculated for each AN-DRG to reflect the average complexity of each AN-DRG. Under a casemix system, funding is provided to the hospital on the basis of output, that is, the mix of cases which it treats. The hospital's output is calculated by measuring cases treated according to their AN
DRG weighting. Hospitals which treat more complex cases or which have a higher throughput of patients will earn more revenue. 17
Although casemix funding systems generally include correction factors for significantly atypical cases (exceptional case payments), some commentators argue that no DRGs, including AN-DRGs, have yet been developed that can adequately indicate severity of illness. Commentators also argue that DRGs do not properly represent certain clinical situations (including those involving multiple conditions, post-acute care, psychiatric care or rehabilitation).18 Other concerns that have been raised about the use of DRGs include insensitivity to the special funding requirements of smaller hospitals, rural hospitals and hospitals engaged in teaching
and research. 19 Moreover, under a casemix-based payment system a hospital arguably has a greater financial incentive to move patients quickly through the system, which may result in the undertreatment of some patients.
From July 1993, Victoria introduced casemix-based funding for its public hospitals. South Australia and Western Australia followed from 1 July 1994, and Queensland from 1 January 1995.
The Richardson Discussion Paper
In December 1993 the former Minister for Health, Graham Richardson, released a Discussion Paper which canvassed a number of proposals for reform of private health insurance.2o The Discussion Paper stated that the decline in the rate of participation in private health insurance must be stopped, to avert the threat which
that decline will eventually pose to the maintenance of high standards of health care for all Australians. It emphasised both the primary role of the Medicare program in funding the provision of health care in Australia, and the need for a healthy rate of private contribution as a parallel method of health funding.
The Discussion Paper attributed the falling participation rates to two factors: rising premiums and out-of-pocket expenses. The aim of the proposals outlined in the Discussion Paper therefore was to enable and encourage the health insurance industry to attract contributors by offering them a more attractive insurance product. The Discussion Paper claimed that this would "place a floor under the private health insurance system" by stemming the flow of people out of private
insurance.
The proposals canvassed in the Discussion Paper fell into two broad categories. The first category advocated reform of the private health insurance industry, with the aim of lowering premiums.21 It was suggested that this reform could be achieved by:
⢠amalgamating/rationalising private health insurance funds. This could be achieved by requiring all funds to be registered nationally (rather than operating individual funds in each State or Territory) and by increasing the size of the minimum reserves for each fund. The resulting market of fewer, larger funds would result in administrative efficiencies and
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increased bargaining power, which would relieve pressure on premiums;
⢠increasing the powers of the Private Health Insurance Advisory Council (PHIAC);
⢠establishing a process by which individual fund members could complain and seek redress, whether by recourse to PHIAC or to some kind of ombudsman.
The second category ofproposals advocated reform ofthe payment arrangements for private hospital treatment, with the aim of creating "a more efficient private patient treatment system ... to achieve the competitive pressure which would restrain the rising costs of health care and the fees charged by doctors".22 This cost restraint resulting from negotiation between private health insurance funds, doctors and
private hospitals concerning the cost of medical and hospital services - would eliminate out-of-pocket expenses for fund members. It was suggested that this result could be achieved by:
⢠introducing a case payment system to the private health sector, based on AN~ DRGs;
⢠introducing an all-inclusive billing scheme, under which:
hospitals would be required to render one bill to a patient or insurance fund, that includes all hospital and medical costs for an episode ofhospital treatment (based on a pre-determined price for an episode using AN-DRGs);
insurance funds would be required to cover the whole of the cost of an episode of hospital treatment;
insurance funds would be prohibited from paying benefits for hospital treatment except where a single bill is rendered on the basis of a pre-determined AN-DRG. This would require replacing the existing basic and supplementary tables with a llcore" table of procedures based on AN-DRGs from accommodation and services
(including medical fees);
insurance funds would need to negotiate costs with private hospitals, who in turn would contract services from medical practitioners at agreed fees; and
legislation could be enacted to ensure restraint on the cost ofmedical services negotiated between medical practitioners, private hospitals and insurance funds, to protect fund members.
The measures proposed in this Discussion Paper were regarded as contentious and were referred by Cabinet to a Caucus-ACTU Working Group, together.with another proposal by the former Health Minister to impose a higher Medicare levy upon people on higher incomes without private health insurance.
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The Caucus-ACTUWorking Group Report
The Caucus-ACTU Working Group issued its report in June 1994. The report challenged a number of suppositions upon which the Richardson reform proposals were based, including the central assumption that there is a need to place a floor under the participation rate in private health insurance: lithe Working Group does not believe any intervention is either warranted or necessary to stabilise the level of private insurance.23 As well as doubting the claim that declining private insurance participation rates will inevitably cause a crisis in both the private and public health systems, the Working Group suggested that any reform to improve the health system should enable Medicare to meet more ofthe present and future health needs of Australians, rather than strengthening the private insurance industry.
The Working Groupls report rejected the Richardson proposal to amalgamate or rationalise health funds, on the basis that it would cause Ita great deal of upheaval for dubious returnslt ⢠24 The report expressed support, however, for the Richardson proposal to establish a complaints process for insurance fund members, provided it
was independent of the Private Health Insurance Administration Council.25
The Richardson proposals to reform payment arrangements for hospital treatment, by introducingasystem ofcontractual arrangements between health funds, hospitals and doctors leading to an all-inclusive bill, was also rejected by the Working Group. It supported both the aim of reducing out-of-pocket costs for privately insured
patients and the aim of placing restraint on the fees charged by doctors in hospitals, but believed the scheme proposed was unworkable. The Working Group's criticisms of these proposals included:
⢠concern that insurance funds, hospitals and medical practitioners would be unwilling and unable to negotiate fee arrangements effectively and without disputes;
⢠concern that any proposal to eliminate the basic table would either force those Australians who do have this cover into more expensive premiums or out of private insurance; and
⢠concern that basing payments for individual episodes of hospital
treatment on AN-DRGs may be inappropriate. The Working Party acknowledged the value of casemix as a useful tool for analysing what takes place in hospitals and for making comparisons between hospitals, but cautioned against its premature use for other purposes, such as the
introduction of casemix as the sole basis for calculating private hospital payments.
Although the Working Group rejected the proposal for an all-inclusive bill of the type outlined in the Richardson Discussion Paper, it acknowledged the merit of simplifying the administrative process for hospital patients by presenting them with a single billing statement which includes all the component costs of an episode of hospital treatment, including individual doctorsl bills.
The Working Group report also rejected the proposal to impose a higher Medicare levy upon people on higher incomes who did not have private health insurance.
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The Lawrence Reforms
In August 1994 the current Minister for Health, Dr Cannen Lawrence, released new proposals for reform of private health insurance.26 Like the Richardson proposals, the stated aim of the Lawrence reforms is to bring about a situation where consumers are offered a more attractive insurance product, which in turn should
stop Australians from being driven away from private health insurance by rising premiums and out-or-pocket expenses. 27 The mechanisms chosen by the current Minister to achieve this aim, however, differ in a number of respects from those advanced in the Richardson proposals.
The Lawrence proposals initially were not outlined in any detail. The major features of the reforms as first announced in August were:
a. removing "regulations that restrict efficiency and competitionl1 , allowing insurance funds to negotiate with hospitals and doctors to arrive at "a better deal on behalf of their members,,;28
b. allowing funds to cover members for the full cost of medical services if they can reach agreement with doctors, eliminating out-of-pocket expenses in respect of those services;
c. introducing a system of single billing for hospital treatment and care;
d. establishing a formal financial consent process which will require medical practitioners to outline to their patients what the patient can expect to pay for particular treatment;
e. developing a I1Private Patients Hospital Charter", as well as establishing an independent complaints mechanism to resolve difficulties with insurance matters;
f. requiring the Private Health Insurance Administration Council to publish regular updated information on health funds l products and premiums;
g. updating solvency requirements; and
h. requiring all health funds to be registered.
The August 1994 proposals form the basis of the Health Legislation (Private Health Insurance Reform) Amendment Bill 1994 ("the Bill"), which was tabled on 7 December 1994. The Bill, however, does not fully address all the initial reform proposals. In summary, the present Bill:
a. implements the proposals to allow negotiation between insurers and hospitals, and between insurers and medical practitioners. This is done by allowing these parties to negotiate "hospital purchaser provider agreements" and "medical purchaser provider agreements" (see Main
Provisions, below), which in turn will allow the development ofl1preferred provider" arrangements. Whether or not this will actually implement the proposal to encourage efficiency and competition remains to be seen.
The Bill's introduction of casemix as the basis for hospital payments
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under hospital purchaser-provider agreements is another mechanism designed to increase efficiency and competition. (Note casemix is not introduced as the basis for payments to medical practitioners);
b. implements the proposal to allow funds to cover members for the full cost of medical services if they can reach agreement with doctors, eliminating out-of-pocket expenses in respect of those services. The Bill removes the current legal barriers to full insurance coverage of in-hospital medical services, but only for treatment occurring under a medical purchaser provider agreement;
c. only partially implements the proposal to require a single bill to be rendered to a hospital patient. The Bill does require hospitals who have entered hospital purchaser provider agreements with a patient1s insurance fund to send a single account to the insurance fund, but this account excludes in-hospital services provided by a medical practitioner. Each medical practitioner who has entered a medical purchaser provider agreement with the patient's insurance fund is also required to send an account to the fund specifying the amount (if any) the patient owes the practitioner for in-hospital services. Possibly the intention here is for the
fund then to send the patient a single amalgamated statement, which will only be a bill if the agreements between the insurer, doctors and hospital have not eliminated out-of-pocket expenses. The Bill, however, does not require this. Nor does the Bill contain any single billing requirement in
respect of treatment that takes place outside of a hospital purchaser provider agreement or a medical purchaser provider agreement;
d. does not implement the Lawrence proposal to introduce a formal financial consent process requiring medical practitioners to inform their patients how much they can expect to pay for particular treatment. If the agreements between the patient's insurer, doctors and hospital have
eliminated all out-of-pocket expenses, there will of course be no financial consent to obtain. If the agreements have not eliminated (but have merely fixed) those expenses, the Bill does not require the medical practitioner to ensure the patient is aware of the extent of those pre arranged expenses. Nor does the Bill require informed financial consent when treatment takes place outside of a hospital purchaser provider
agreement or a medical purchaser provider agreement;
e. does not implement the proposal to develop a Private Patientsl Hospital Charter, but does provide for an independent Private Health Insurance Complaints Commissioner;
f. implements the proposal to require the Private Health Insurance Administration Council ("PHIAC") to publish regular updated information on health funds' products and premiums. The new functions given to PHIAC in the Bill implicitly require this to happen;
g. does not implement the proposal to update solvency requirements;
h. does not fully implement the proposal to require all health funds to be registered. It does, however, extend the registration requirement to certain health insurance arrangements conducted by employers for their employees;
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i. implements measures not detailed in the initial proposals, concerning the llnationalisation" of funds and notification requirements.
Main Provisions
Hospital Purchaser Provider Agreements
1 April 1995 - The Introduction of Casemix
Casemix will be introduced into the private health care system by allowing registered health benefits organisations ("RHBOs") to enter hospital purchaser provider agreements ("HPPAs") with hospitals from 1 April 1995. These agreements are to be in respect of payment to the hospital of its charges for treatment of
patients insured by the RHBO.
Item 29 of Schedule 1 provides that tbe terms of an HPPA must specify:
⢠that except to the extent provided in the agreement, the hospital will accept payment from the fund in satisfaction of an amount owed by a contributor for hospital charges. This allows the fund and hospital to arrive at an agreement that eliminates all out-of-pocket expenses owed by an insured patient to the hospital;
⢠that payments by the fund to the hospital for each "episode" of hospital treatment are to be:
casemix episodic payments (see below); or
payments in accordance with the appropriate basic or supplementary table; or
a combination of casemix episodic payments and payments m accordance with the appropriate basic or supplementary table;
⢠the level of accommodation that the hospital is to provide to contributors;
⢠that the hospital will render a single account covering all hospital and related services (other than medical services) in respect of each episode of treatment; and
⢠that the hospital will provide the fund with information as set out in the Hospital Casemix Protocol. The Hospital Casemix Protocol will be prescribed by regulation.
A payment is a casemix episodic payment if (new section 73BD(3)):
⢠the episode of hospital treatment is of a kind specified in the List of Australian National Diagnosis Related Groups prescribed by regulations or otherwise specified in the regulations; and
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⢠the amount of the payment is set out in the HPPA or may be calculated in accordance with the agreement.
It can be seen that, from 1 April 1995, the use of casemix-based contracts will be optional in two respects:
⢠hospitals and RHBOs can choose whether to enter into HPPAs or whether to continue with the present basic and supplementary arrangementsj and
⢠even if a HPPA is entered into, the parties can agree that payments will be based solely on basic and supplementary tables or a combination of the tables and casemix.
1 July 1997 - Casemix Becomes Compulsory
From 1 July 1997, however, the use of casemix as the basis for charges under HPPA's becomes compulsory. This is achieved by simply removing all relevant references in the Act to the basic and supplementary tables on that date (Schedule 4).
One effect of this measure will be to alter the level of charges levied on private patients in public hospitals. Currently, the Minister has the power under the National Health Act 1953 to set the bedday charge for private patients in public hospitals, by declaring the amount that private health insurance funds can
reimburse for each bedday under the basic table. The bedday charge traditionally has been set well below the actual cost of the bedday, so it is likely that under an AN-DRG based payment system the public hospitals and the States and Territories will receive increased revenue for treating private patients. (The extent of this
increase obviously would depend upon the HPPAs negotiated between the funds and the hospitals). In order to transfer some of this increased revenue back to the funds, Item 27 oCSchedule 1 "permits" the States and Territories to share the reinsurance liability with the Commonwealth and RHBOs. In relation to private health insurance, reinsurance means the sharing of the costs of the chronically ill among all private health insurance funds because some funds, particularly those that are older and well established, have a different risk profile to some of the newer funds.
Negotiations between the Commonwealth and the States and Territories on the extent of this cost-sharing presumably will be required.
Preferred Hospitals
The introduction of HPPAs enables the development of preferred provider arrangements between RHBOs rmd hospitals. This will arise if an RHBO is able to negotiate with particular hospitals ("preferred hospitals") for 100 per cent coverage for its fund members for hospital charges at that hospital, but does not reach a
similar arrangement with other hospitals. If a fund member attends one of those other hospitals, therefore, the member will be liable for out-of-pocket expenses.
The Bill contains no provisions requiring RHBOs to offer insurance cover for hospital charges incurred at non-preferred hospitals, apart from the limited protection offered to fund contributors by Item 94 of Schedule 2, inserting paragraphs (hO to (hi) into Schedule 1 of the Act on 1 July 1995. These
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amendments require RHBOs to provide benefits to fund contributors in respect of treatment provided by a hospital which is not a preferred hospital:
⢠in situations of emergency. The level of benefit payable must be at least as high as for an episode of treatment of that kind in a preferred hospital; and
⢠otherwise than in situations of emergency, until the earlier of 1 July 1998 or a day specified in the regulations for the purposes of the paragraph.
Medical Purchaser-Provider Agreements
From 1 April 1995, RHBOs will be able to enter into agreements with medical practitioners to provide for the amounts which are:
⢠owed to the practitioner for professional services rendered to a patient while in hospital; and
⢠in respect of which a medicare benefit is payable;
to be paid directly by the fund (Item 29 of Schedule 1).
These agreements, known as "medical purchaser-provider agreements" (MPPAs) must:
⢠provide that except to the extent specified, the practitioner will accept payment by the RHBO in satisfaction ofany amount that would otherwise be owed to the practitioner by the contributor. This allows the fund and medical practitioner to arrive at an agreement that eliminates all out-of
pocket expenses owed by an insured patient to the medical practitioner. Item 72 of Schedule 1 (amending s 126(5A) of the Health Insurance Act 1973) and Item 53 of Schedule 1 remove the current legal barrier to insuring for amounts above the schedule fee, but only for medical services provided in-hospital pursuant to an MPPA. For in-hospital medical
services not provided pursuant to an MPPA, the level of insurance is still limited to the difference between the schedule fee and the Medicare rebate (Item 53 of Schedule 1);
⢠provide that the RHBO accepts an assignment of the benefit payable under Medicare for the service;
⢠specify the amount that is payable by the RHBO to the practitioner or a method of calculating the amount;
⢠require the practitioner to send all accounts for professional services to the RHBO; and
⢠require the practitioner to specify in each account, the amount that the contributor is liable to pay in respect of the service.
The agreement may apply to all professional services rendered by the medical
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practitioner or may be limited to those services specified in the agreement.
The introduction of MPPAs enables the development of preferred provider arrangements between RHBOs and medical practitioners.
Private Health Insurance Complaints Commjssioner
Item 91 of Schedule 2 establishes the Private Health Insurance Complaints Commissioner (lithe Commissioner") and sets out its functions (new 8 82ZRC).
Complaints
A complaint may be made about any matter arising out of or connected with a private health insurance arrangement and may be made by or on behalf of:
⢠a person who is, or was at the time of the incident to which the complaint relates, a contributor to the health benefits fund conducted by a RHBO.
⢠a hospital.
⢠a medical practitioner.
⢠a registered organisation.
The first step after the receipt of a complaint is to refer it to a health care fund and request an investigation. If the Commissioner is not satisfied with the outcome of the request, he or she may investigate the complaint. The Commissioner may not take action unless the complainant agrees to the action being taken (new s
82ZSB(1».
After receiving a report from the health care fund or after investigating a complaint, the Commissioner may make recommendations to the health care fund that it:
⢠take a specific course of action in relation to the complaint and/or make changes to its rules; or
⢠request a hospital or medical practitioner take a specific course of action in relation to the complaint (new 8 82ZSD).
The Commissioner must keep the complainant informed of action taken and the reasons for that action.
If, after making the investigation and recommendation, the complaint is not resolved, the complainant may request the Commissioner to try to effect a settlement by conciliating between the parties.
Investigations
There are three triggers for the investigation of the practices and procedures of a health care fund. The first has already been mentioned, namely a complaint followed by an unsatisfactory outcome to a request for an investigation by the health care fund. Secondly, the Commissioner may commence an investigation on his or
her own initiative. Thirdly, the Commissioner must commence an investigation if
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requested to do so by the Minister, and report the finding to the Minister.
In these latter two categories of investigation, the Commissioner may examine the records and rules of a health care fund.
Private Health Insurance Complaints Levy Bill 1994
The Private Health Insurance Complaints Levy Bill 1994, introduced at the same time as the Health Legislation (Private Health Insurance Reform) Bill, imposes a levy on RHBOs for the purpose of covering the administrative costs which may be incurred by the Commissioner. (Note the Private Health Insurance Complaints Levy Bill 1994 is dealt with in a separate Digest),
Notification of Changes
Section 78 of the National Health Act 1953requires health care funds to notify the Minister of any changes to their constitution, articles of association or rules within seven days of the change.
Item 43 of Schedule 1 amends section 78 and requires notification of the change be given:
⢠if the change relates to rates of contribution - at least seven days before the change is to come into effect or such lesser period as the Minister determines; or
⢠in any other case - at least 60 days before the change is to come into effect or such lesser period as the Minster determines.
Private Health Insurance Administration Council
The Private Health Insurance Administration Council has been given two new functions:
⢠Item 69 of Sehedule 2 provides that it is the function of the Council to obtain from RHBO's, information referred to in the Hospital Casemix Protocol for the purposes of modelling, evaluation and research;
⢠Item 70 of Schedule 2 requires the council to collect and disseminate information about private health insurance, for the purpose of enabling people to make informed choices about private health insurance.
"Nationa1isation" of Funds
At present RHBOs may only carry on business in the States (in which they are registered. An organisation is not eligible to be registered in a State unless it conducts a health benefits fund in respect of that State. All income derived from carrying on business in that State must be credited to the fund, and only outgoings
in respect of the business carried on in that State (including payments to contributors and costs incurred in providing professional and hospital services) may be debited to the fund (s 68 of the National Health Act 1953),
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Item 12 ofSchedule 2 abolishes the need to conduct individual health benefits funds in each State and the Northern Territory, allowing RHBOs to conduct single national funds.
The Bill also contains amendments to the Health Insurance Commission Act 1973 (Itema 104 and 105 of Schedule 2). These provisions require Medibank Private to continue to operate in each State and the Northern Territory.
Registration of Funde
Item 10 of Schedule 2 inserts the term "employee health benefits scheme" into the Act, defining the term to mean any arrangement that provides for an employer to arrange whole or part payment for costs incurred by its employees in relation to hospital treatment or ancillary health benefits. Item 11 of Schedule 2 states that
such a scheme will constitute a health insurance business, provided:
⢠the employer:
is a body corporate to which placitum 51 (xx) of the Constitution applies; is a body corporate incorporated in a Territory; or carries on business in a Territory; and
⢠the employee health benefits scheme does not constitute State insurance within the meaning of placitum 51 (xiv) of the Constitution.
The consequence of such an employer being deemed to constitute a health insurance business is that the employer cannot conduct such a scheme without being registered (s 67 of the National Health Act 1953. It should be noted that an exception in such circumstances may be granted by the Minister.
Endnotes
I. All further references in this paper to a hospital should be taken to include a reference to a day hospital facility.
2. Australian Institute of Health and Welfare, Australia'sHealth 1994: the Fourth Biennial Health Report of the Australian Institute of Health and Welfare, Canberra: AGPS, 1994: p.122.
3. See Australian Institute of Health and Welfare, Australia's Health 1994: the Fourth Biennial Health Report of the Australian Institute of Health and Welfare, Canberra: AGPS, 1994: p.122.
4. Australian Institute of Health and Welfare, Australia'sHealth 1994: the Fourth Biennial Health Report of the Australian Institute of Health and Welfare, Canberra: AGPS, 1994: p. 135.
5. Australian Institute ofHealth and Welfare, Australia'sHealth 1994: the Fourth Biennial Health Report of the Australian Institute of Health and Welfare, Canberra: AGPS, 1994: p.135.
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6. Australian Institute ofHealth and Welfare, Australia'sHealth 1994: the Fourth Biennial Report of the Australian Institute of Health and Welfare, Canberra: AGPS, 1994: p.I36.
7. Reform of Private Health Insurance: A Discussion Paper, Canberra: AGPS, 1993: pp.6-7.
8. Private Health Insurance Administration Council, Annual Report 1992-93, Canberra: AGPS, 1993: p.15.
9. Private Health Insurance Administration Council, Annual Report 1992-93, Statistical Supplemen~ Canberra: AGPS, 1993.
10. Reform of Private Health Insurance: A Discussion Paper, Canberra: AGPS, 1993: p.l.
11. See Mackey, P., Medicare, Private Health Insurance and Proposals for Change (Background Paper - Social Policy Group), Canberra: Department of the Parliamentary Library, 1994: p.9.
12. Reform of Private Health Insurance: A Discussion Paper, Canberra: AGPS, 1993: p.l.
13. Caucus/ACTU Working Group, Response to Government Discussion Paper: ReformofPrivateHealth Insurance,April 1994: p.21; Reform ofPrivate Health Insurance: A Discussion Paper, Canberra: AGPS, 1993: p.5.
...14. The Caucus/ACTU Working Group's Response to Government Discussion Paper: Reform of Private Health Insurance, April 1994, refers (at p.36) to research that estimates that, without any intervention to halt the decline in the private insurance participation rate, the rate is likely to stabilise at about 30
35 per cent ofAustralians; and to other research that estimates the "hard core" who would maintain private insurance at any cost to be about 20 per cent of Australians.
15. Reform of Private Health Insurance: A Discussion Paper, Canberra: AGPS, 1993: p.5.
16. Paterson, J., Beyond Case Payments: A New Paradigm for Australian Health and Welfare (EPAC Background Paper No.34), Canberra: AGPS, 1993: p.33.
17. Reform of Private Health Insurance: A Discussion Paper, Canberra: AGPS, 1993: p.l.
18. See Draper, M., "The Casemix Maze" (1992) Health Forum 23 (September), 16 17; and Mackey, P., Medicare, Private Health Insurance and Proposals for Change (Background Paper - Social Policy Group), Canberra: Department of the Parliamentary Library, 1994: p.20.
19. Nelson, B., "Casemix - An AMA Perspective" (1994) 161 Medical Journal of Australia (5 September - Supplement), S4.
20. Reform of Private Health Insurance: A Discussion Paper, Canberra: AGPS, 1993.
21. Caucus/ACTU Working Group, Response to Government Discussion Paper: Reform ofPrivate Health Insurance, April 1994: p.8.
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22. Reform of Private Health Insurance: A Discussion Paper, Canberra: AGPS, 1993: pp. 2 and 9-10.
23. Caucus/ACTU Working Group, Response to Government Discussion Paper: Reform ofPrivate Health Insurance, April 1994: p.vii.
24. Caucus/ACTU Working Group, Response to Government Discussion Paper: Reform ofPrivate Health Insurance, April 1994: p.25.
25. Caucus/ACTU Working Group, Response to Government Discussion Paper: Reform ofPrivate Health Insurance, April 1994: p.25.
26. News Release, Minister for Human Services and Health, 31 August 1994.
27. Media Release, Minister for Human Services and Health, 31 August 1994.
28. Media Release, Minister for Human Services and Health, 31 August 1994.
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Natasba elca (ph. 06 277 2699) and Lee Jones (Ph. 06 277 2646) Bills Digest Service 27 January 1995
Parliamentary Research Service
Inquiries concerning this Bill and the issues it raises should be directed to Paul Mackey, Social Policy Group, Parliamentary Research Service, Canberra (Ph. 06277 2412).
This Digest does not have any legal status. Other sources should be consulted to determine whether the bill has been enacted and, if so, whether the subsequent Act reflects further amendments.
© Commonwealth of Australia 1995.
Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian
Parliament in the course of their official duties.
Published by the Department of the Parliamentary Library, 1995.
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Warning; This Digest was prepared for debate and should not be taken as a
complete guide to the legislation which may reflect amendments.
Parliamentary Research Service Department of the Parliamentary Library
Private Health Insurance Complaints Levy Bill 1994
Date Introduced: 7 December 1994 House: House of Representatives Portfolio: Human Services and Health Commencement: 1 July 1995
Purpose
To impose a levy on those conducting health insura.nce business based on the number of contributors to the health benefits fund.
Background
The levy is established at the same time as the Private Health Insurance Complaints Commissioner to fund that office. It is payable by registered health benefits organisations which conduct health insurance business. Additional background information is set out in the Bills Digest for the Health Legislation (Private Health Insurance Reform) Amendment Bill 1994.
Main Provisions
Clause 5 imposes a levy on the conducting of health insurance business by registered organisations.
The rate of levy is to be prescribed by regulation and is to be based on the number of contributors to the fund. Different rates of levy can be specified for contributors who contribute in respect of benefits for one person and those who contribute for benefits for more than one person (Clause 6).
The rate cannot exceed 25 cents per quarter for contributors who contribute in respect of benefits for one person and 50 cents per quarter for contributors who contribute in respect of benefits for more than one person (Clause 6).
Lee Jones (ph. 06 277 3646) Bills Digest Service Parliamentary Research Service
13 Jaouary 1995
This Digest does not have any official legal status. Other sources should be consulted
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to determine the subsequent official status of the Bill.
© Commonwealth of Australia 1995.
Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including infonnation storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.
Published by the Department of the Parliamentary Library, 1995.
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Warning: This Digest was prepared for debate and should not be taken as a
complete guide to the legislation which may reflect amendments.
Parliamentary Research Service Department of the Parliamentary Library
National Health Amendment (No.2) Bill 1994
Date Introduced: 7 December 1994 House: Senate Portfolio: Human Services and Health Commencement: With the exception of Item 26 relating to the essential pharmacy allowance, the amendments commence on 1 April 1995. Item 26 commences on 1 July 1995.
Purpose
The Bill amends the National Health Act 1953. It purpose is to:
⢠replace the tlessential pharmacy allowance" for pharmacists in rural areas with two separate allowances - an isolated pharmacy allowance for pharmacies in isolated areas, and a remote pharmacy allowance in respect of pharmacies in more remote areas which have a low prescription volume;
⢠discontinue the availability of financial assistance to pharmacists who close or amalgamate their pharmacies on the basis that the number of approved pharmacies is now at around the correct level;
⢠provide a new professional allowance to qualifying pharmacists for the provision of specific professional activities not directly concerned with the supply of pharmaceutical benefits;
⢠replace the Pharmacy Restructuring Authority with the Australian Community Pharmacy Authority. The new authority will make recommendations in respect of:
applications for approval to supply pharmaceutical benefits;
the payment of allowances to pharmacists in isolated and remote areas; and
the payment of allowances for specific professional services.
Background
The Pharmacy Restructuring Authority was formed on 18 December 1990. It was established to implement an agreement between pharmacists and the government
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on the structure of the industry, which followed a prolonged dispute between the parties during 1989. The restructuring centred on plans to reduce the number of pharmacies through voluntary amalgamations and closures. The restructuring was assisted by joint industry and government financing for redundancies and amalgamations The Pharmacy Restructuring Authority made recommendations on all issues relating to approval of pharmacists within the industry.
Financial assistance to essential pharmacies operating in rural areas was offered to pharmacists who entered into amalgamation agreements or who closed their pharmacies.
As at 19 December 1994, a total of 4316 applications had been received by the Pharmacy Restructuring Authority since January 1991 for closure packages, amalgamation packages, essential pharmacy allowances and changes to approval arrangements. $43.77 million was spent on closures and amalgamations during this period.
The total number of pharmacies in Australia has declined by about ten per cent since the introduction of the restructuring arrangements:
Dau. Mu J= D« J= D~ J= D~ J= D~
91 91 91 .2 92 '3 .3 94 .,
Pharmacies .54. 5365 5188 5 105 .063 5032 5011 , 99. 4- 981
\OOurce: neann ,msurance \..
A total of 412 pharmacies are now receiving the essential pharmacy allowance to encourage provision of pharmaceuticals to remote or isolated communities.
Main Provisions
The Australian Community Pharmacy Authority
The Pharmacy Restructuring Authority is replaced by the Australian Community Pharmacy Authority ("the Authority") (Item 1). The Authority will consist of a chairperson, two pharmacists chosen from four nominated by the Pharmacy Guild of Australia, one pharmacist chosen from two nominated by the Pharmaceutical
Society of Australia and an officer of the Department (Item 19).
Minister to Make Rules in Respect of Allowances, etc
Item 18 inserts new subsection 99L(I) which allows the Minister:
⢠to make rules to which the Authority is subject when making
recommendations as to applications for approval to supply pharmaceutical benefits, and applications for the new isolated pharmacy allowance, remote pharmacy allowance and professional allowance;
⢠to determine the rates of and qualifications for each of the new isolated pharmacy allowance, remote pharmacy allowance and professional allowance.
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Introduction of New Allowances
Existing s 99ZA provides for the payment of an essential pharmacy allowance upon approval by the Secretary, following a recommendation by the Pharmacy Restructuring Authority. This allowance is replaced by two allowances - Item 25 introduces the isolated pharmacy allowance and Item 29 introduces the remote pharmacy allowance.
Neither the proposed legislation nor the explanatory memorandumelaborates on the circumstances in which these allowances will be payable, except to provide that the Authority may recommend to the Secretary that an allowance be paid if the applicant qualifies under the rules determined by the Minister under subsection
99L(l).
Item 34 proposes the payment ofa professional allowance in respect of the provision of a professional services or a class of professional services. As with the other two new allowances, there is no indication as to who will qualify for the allowance or on what basis payments will be made, except that the Authority will make a recommendation to the Secretary. These details will be determined by the Minister
in the rules made under subsection 99L(l).
Abolition of Existing Allowances
Item 35 provides that applications for financial assistance on the basis of the amalgamation or closure of pharmacies may only be made until 28 February 1995.
Additional Functions for Pharmaceutical Benefils Remuneration Tribunal
The Pharmaceutical Benefits Remuneration Tribunal is assigned two new functions:
⢠in respect of the professional allowance, it must determine the rate of the professional allowance if the Minister and Pharmacy Guild of Australia cannot agree on a rate (Item 10);
⢠it must advise the Minister on any matter relating to remuneration for pharmaceutical benefils that is referred to it by the Minister.
Lee Jones (ph. 06 277 2646) Bills Digest Service Parliamentary Research Service
13 January 1995
This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.
© Commonwealth of Australia 1995.
Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means,
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including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.
Published by the Department of the Parliamentary Library, 1995.
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