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CONTENTS
Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer and Copyright Details
Health Legislation Amendment
(Health Care Agreements) Bill 1998
Date Introduced: 12 March 1998
House: House of Representatives
Portfolio: Health and Family Services
Commencement: Royal Assent, except for the
proposed sections dealing with the establishment of a Health Care
Information Commissioner. These sections are to commence on a day
to be proclaimed which must be within 12 months of this Act
receiving Royal Assent.
- To introduce amendments dealing
with a new Health Care Agreement between the Commonwealth and the
States and Territories that will apply from 1 July 1998;
- To provide that financial assistance will be conditional on
adherence to the Health Care Agreement Principles, and the
development of a Public Patients' Charter; and
- To establish the position of Health Care Information
Commissioner.
Medicare was introduced on 1 February 1984 and
is Australia's national health care funding system. Medicare
provides universal access for all Australian residents to free or
subsidised medical care and free hospital treatment in public
hospitals, irrespective of age, income or health status. Benefits
are also available on a limited basis to persons covered by
ministerial order (eg. applicants for refugee status) and to
citizens of countries which have reciprocal health care
arrangements with Australia.(1) Medicare is funded from general
taxation revenue, plus a levy on taxable income payable only by
those earning above a certain income level.
Australian residents can choose to be Medicare
patients in a public hospital, or private patients in public or
private hospitals. If they choose to be a Medicare patient,
treatment is provided free of charge by doctors nominated by the
hospital. State and Territory governments are responsible, under
agreements with the Commonwealth Government, for ensuring that
services, adequate to meet these entitlements, are available in
public hospitals. This component of Medicare is funded jointly by
the Commonwealth Government and State and Territory
governments.
Funding
The Commonwealth provides financial assistance
to the States and Territories for public hospitals and other health
services. Financial assistance is not payable unless a State or
Territory has entered into an Agreement. Agreements between the
Commonwealth and the State and Territory governments are for a five
year period. The current Agreements were negotiated in 1993 and are
in force under section 24 of the Health Insurance Act 1973
(the Principal Act). These Agreements end on 30 June 1998. The
amount of financial assistance which the Commonwealth contributed
under the current agreements was $26 billion.
Negotiations on a new Agreement began in earnest
in December 1997 with a meeting of Commonwealth, State and
Territory Health Ministers. At this meeting the Commonwealth
offered to increase its contribution for health services by an
extra $3 billion, to $29 billion, over five years. This offer was
rejected by State and Territory governments who said that the sum
was inadequate to make up for the increased burden on the public
hospital system caused by a fall in the number of patients with
private health insurance, which they say is costing them an extra
$622.5 million a year.(2) They asked for an additional $1.1 billion
a year over the life of the agreement (a $5.5 billion increase on
the Commonwealth's offer to $34.5 billion).(3)
On 15 January 1998 the Australian Capital
Territory Government accepted in principle the new health funding
arrangements, on the understanding that if the States and the
Northern Territory were able to negotiate increased funding, then
the ACT would also benefit.
At this time it was confirmed that the
Commonwealth expected to be able to find an additional $80 million
or $100 million (later increased to $120 million) - some of it left
over from the gun buy-back levy - which would be used to reduce
hospital waiting lists in 1998-99. This additional funding was
offered as an incentive to the States and Territories to sign the
new Agreement.(4) The Minister for Health and Family Services, Hon
Dr Michael Wooldridge MP, said that the extra $120 million would
reduce national waiting lists (which he quoted as being between
100,000 and 120,000 patients) by more than 40,000 people.(5) Under
the plan, $4 million would be released each week from 16 March 1998
to States and Territories which signed up to the Health Care
Agreement.
Despite a number of meetings in 1998, Health
Ministers of the States and Northern Territory were unable to reach
agreement with the Commonwealth. The States insisted that they
needed an additional $1.1 billion a year to meet growing demand, an
ageing population and continuing declines in private health
insurance.(6) They complained that the Commonwealth Government has
not increased funding to public hospitals, despite the fact that
the current Medicare Agreements provided a trigger to review
funding each time private health insurance coverage fell by 2%.(7)
Two reviews of Medicare Agreement funding were carried out under
these arrangements, but the States received no additional
grants.(8)
The Commonwealth increased its offer to $30.170
billion over five years, in part by agreeing to pay the full cost
of services for veterans provided in public hospitals (estimated at
$750 million for five years). In addition the Commonwealth's
proposal included automatic adjustments for any further decline in
the coverage of private health insurance in any State or
Territory.(9) These would take the form of an extra payment of $83
million a year for ever percentage point fall in private health
coverage from June 1999.(10)
In rejecting the States' demands for additional
money, the Commonwealth has argued that the States have not
maintained their own levels of funding for public hospitals. It has
been stated that when the current Medicare Agreements came into
effect in 1993-94, the Commonwealth increased its contribution to
hospital funding by around 10%. 'State Treasuries skimmed this
money off the top and used it to replace reduced State funding.
None of the Commonwealth's additional money found its way into
health, and State funding took three years to return to 1992-93
levels'.(11)
Further discussions on the Health Care
Agreements(12) took place at the Premiers' Conference held on 20
March 1998. When the Commonwealth indicated that it would not
increase its offer, the State and Territory leaders left the
Conference. The Prime Minister, Hon John Howard MP, later stated on
national television that his Government would provide health care
funding to the States and Territories after 1 July 1998, consistent
with the Commonwealth's offer. The Government will distribute the
money through special purpose payments.(13)
This Bill is introduced ahead of the
Commonwealth having reached agreement with the States and the
Northern Territory on the amount of financial assistance to be paid
by the Commonwealth for health services and related matters.
Cost shifting
This Bill also establishes a position of Health
Care Information Commissioner to gather information on the extent
of cost shifting from State health budgets to the Commonwealth. The
Minister for Health and Family Services, Hon Dr Michael Wooldridge
MP, has identified cost shifting as a long standing problem in
Australia's health system.(14)
An example of cost shifting would be charging
Medicare for hospital patients when the cost should have been paid
out of the State hospital grants. According to press reports,
'hospitals cost-shift by various means, including setting up
private clinics in hospital grounds and referring patients for
expensive services such as pathology and radiology'.(15) Other
press reports suggest that the prolonged accommodation of elderly
people from rural areas in State-funded hospitals instead of in
Commonwealth-run nursing homes,(16) or the increased out-of-pocket
expenses borne by patients, are other forms of cost shifting which
benefit the Commonwealth.(17) Although there have been many
allegations of cost shifting in the health care system, it has
proven difficult to identify the extent of the practise.
In the 1996-97 Budget, the Government announced
its intention to introduce a more accurate mechanism to measure the
extent of cost shifting. From 1 November 1996, doctors who billed
Medicare for services which would generally be identified as
outpatient services, pre-admission or post-discharge services were
required to identify those services on their account forms.(18) The
Australian Medical Association (AMA) complained that doctors were
being required to 'blow the whistle on the State governments', and
that they were 'being dragged into the cost-shifting war between
the Commonwealth and the States'.(19) In April 1997 it was reported
that only one in five doctors were complying with the Government's
requirement when submitting Medicare account forms.(20) The AMA has
agreed to cooperate with the Government in developing strategies to
reduce cost shifting, in return for a commitment to remove the
requirement for doctors to mark their accounts.(21)
The Health Care Agreements appear to offer an
opportunity for the Commonwealth, States and Territories to take a
more objective approach to dealing with cost shifting through
improved information sharing.
Amendments to the Health
Insurance Act 1973
The effect of Item 4 is to move
the definition of a 'private hospital' from the Health
Insurance Act 1973 to the National Health Act 1953.
According to the Explanatory Memorandum, this will put together the
in the National Health Act similar provisions relating to the
definition of private hospital and private day hospital.
Item 5 inserts a definition of
a 'public hospital' in the Principal Act. A public hospital is
defined as a hospital, other than a private hospital or day
hospital facility, where hospital services to public patients are
wholly or partly funded by a State, or a hospital declared to be a
public hospital by the Minister. At present the Principal Act uses
the terms 'recognized' or 'recognised' hospital to mean a public
hospital, and this amendment, and the consequential amendments in
items 6-11, are intended to clarify the meaning of
the Act.
Proposed section 25 includes a
definition of a 'designated health service' as used in this Bill.
The definition includes the notion of a service which historically
was provided by a hospital, though it may not be provided in this
way now.
Comment: The provision of
health care is changing, and hospitals are becoming less important
overall. For example, reports indicate that the average length of
stay by patients in acute care facilities fell 30% between 1985-86
and 1993-94, and is continuing to fall. Same day services, as a
proportion of all acute services, has now grown to approximately
40%. Changes in technology will continue to move the provision of
health care services into the community setting.(22) This
definition seems to have been chosen to allow States flexibility to
choose different ways in which to provide health services most
efficiently.
Item 12 repeals Part III of the
Principal Act and replaces it with a new Part III. Proposed
section 26 provides that the Commonwealth may enter into
an agreement with a State, (which is defined in section 23E of the
Principal Act to include the Northern Territory and the ACT), in
order to provide financial assistance for designated health
services and related matters for five years from 1 July 1998. The
scope of the proposed Health Care Agreements is said to be wider
than the previous Medicare Agreements, in that funding will also be
provided for very substantial projects and programs that seek to
achieve change over the period of the Agreements (Proposed
Division 3, National Health Development Special
Assistance, [see below]).
Financial assistance will not be provided unless
a State has entered into an Agreement with the Commonwealth
(proposed section 28).
Proposed sections 29 and 30
list the major conditions to which grants will be subject. These
are:
- Adherence to Health Care Agreement Principles (proposed
section 29)
The principles are:
- Eligible people must be given a choice to receive public
hospital treatment as a public patient free of charge;
- Access to public hospitals is to be on the basis of clinical
need and within a clinically appropriate time. (This principle is
intended to prevent private patients gaining earlier access to
public hospitals.); and
- States are to ensure provision of public hospital services to
all eligible persons, regardless of where they live.
These three principles reflect the Medicare
Principles in Part III of the Health Insurance Act
1973.
- Development of a Public Patients' Charter (proposed
section 30)
States must agree to the development of a
Charter which gives people information about the provision of
designated health services, the process by which they can lodge
complaints about health services and how those complaints will be
heard. This requirement is similar to that included in the 1993
Medicare Agreements.
What is new in this Bill is the proposed
subsection 30(2) which requires each State to specify the
minimum standards for the content of the Charter, the structure and
operation of the complaints body, and public access to the Charter,
together with a date by which the State will have a Charter in
place that meets its minimum standards.
Agreements may be varied with the consent of
both parties, but variations are to comply with the conditions set
out above (proposed section 31). Agreements are to
be tabled in both Houses of Parliament (proposed section
32).
National Health Development Special
Assistance
Proposed Division 3 provides
Commonwealth funding to the States or to other parties for projects
and programs that are designed to improve the efficiency and
effectiveness of the delivery of, or reduce the demand for,
designated health services, or to improve patient outcomes in
relation to delivery of health services. The conditions for
financial assistance to States include adherence to the Health Care
Agreement Principles and the development of a Public Patients'
Charter, and additional terms and conditions specified by the
Minister (proposed section 35). The Minister may
specify criteria for approving projects and programs, and the
Minister's guidelines may be disallowed by Parliament under section
46A of the Acts Interpretation Act 1901 (proposed
section 36). National Health Development Assistance is to
be funded from Consolidated Revenue (proposed section
37).
Health Care Information
Commissioner
Item 13 inserts a
proposed Part IIIA dealing with the new office of
Health Care Information Commissioner. The Commissioner's functions
will include:
- collecting and analysing patient level data supplied by the
Commonwealth and the States, and
- providing reports to the Commonwealth and the States on health
service provision.
The Health Care Information Commissioner must
ensure that any reports produced do not allow identification of
individual patients (proposed section 38C).
The effect of proposed section
38E is to enable the Commissioner to gather information on
medicare benefits and pharmaceutical benefits.
In carrying out his or her functions, or
exercising his or her powers, the Commissioner must have regard to
resolutions of the Health Ministers' Conference (proposed
section 38F), and comply with written directions of the
Minister for Health and Family Services (proposed section
38J). The Minister is also empowered to make guidelines
concerning the use and secrecy of any personal information
collected by the Commissioner. These guidelines may be disallowed
by Parliament under section 46A of the Acts Interpretation Act
1901 (Proposed section 38H).
Proposed Division 3 sets out
matters relating to the terms and conditions of the Health Care
Information Commissioner's appointment. The Commissioner is to be
appointed by the Minister after consultation with State Health
Ministers, for a period ending no later than 31 December 2003, on a
full or part-time basis (proposed section 38K).
Salary and allowances for the Commissioner are to be determined by
the Remuneration Tribunal (proposed section 38M),
and the States may be required to contribute to funding the
position (proposed section 38T). This is a matter
which is still to be resolved in negotiations over the Health Care
Agreements.
Amendments to the National
Health Act 1953
The effect of Item 1 is to
insert a definition of a 'private hospital' that is consistent with
the definition which is to be repealed from the Health
Insurance Act 1973 (Item 4 of Schedule 1 refers.)
- Health Insurance Commission, Annual Report 1996-97,
Health Insurance Commission, Tuggeranong, 1997, 27.
- '$3 billion boost to nation's health budget', The Age,
18 December 1997, A8; 'States reject "inadequate" health offer',
The Australian Financial Review, 20 December 1997, 3; 'Canberra
"blinkered on health fund fall"', Sydney Morning Herald, 21 March
1998, 10.
- 'Howard and Borbidge in money talks', The
Australian Financial Review, 10 March 1998, 3.
- 'Medicare deal breaks ranks with states', Canberra
Times, 16 January 1998, 1.
- 'States reject latest $120m health offer', The Age, 20
February 1998, A9; 'All States, Territories gain from Commonwealth
offer', Media release, Minister for Health and Family
Services, MW 39/98, 10 March 1998.
- 'States reject latest $120m health offer', The Age, 20
February 1998, A9.
- 'Howard and Borbidge in money talks', The Australian
Financial Review, 10 March 1998, 3.
- Review of Medicare Agreement funding pursuant to the
decline in health insurance coverage, a report prepared by a
Working Group of Commonwealth, State and Territory Officers for
consideration by Health Ministers, [unpublished, 1995]; 2%
Review (1996): Review of Medicare Agreement funding pursuant to the
decline in health insurance coverage September 1994 to September
1995, a report prepared by officials of the Commonwealth
Department of Health and Family Services in consultation with State
and Territory officials, [unpublished], February 1997.
- 'Wooldridge furious after Medicare rebuff',
Australian, 11 March 1998, 2.
- 'Bitter deadlock on health funds', Sydney Morning
Herald, 21 March 1998, 1.
- 'All States, Territories gain from Commonwealth offer',
Media release, Minister for Health and Family Services, MW
39/98, 10 March 1998.
- In a Media Release from the Minister for Health and
Family Services dated 1 August 1997, it was announced that the
Medicare Agreements were to be retitled 'Australian Health Care
Agreements'.
- 'Bitter deadlock on health funds', Sydney Morning
Herald, 21 March 1998, 1.
- Second Reading Speech, House of Representatives,
Parliamentary Debates, 12 March 1998, 778.
- 'State in shock at $34m bill for health', Sydney Morning
Herald, 20 November 1997, 1.
- 'NSW disputes $100m aged care bill', Sydney Morning
Herald, 13 December 1997,
- 'Cost-shifting: no win mahyem(sic)', Roger Kilham,
Australian Medicine, 16 September 1996, 10.
- Department of Health and Family Services, Budget papers
1996-97, 4.
- 'Doctors in Catch 22 on cost-shifting: Government must rethink
dobbers plan', AMA, Media release, 24 November 1996.
- 'Cost-shifting paperwork ignored', Australian Doctor,
11 April 1997.
- 'New strategies for cost-shifting', Australian
Medicine, 4 August 1997.
- Cost-shifting: no win mahyem(sic)', Roger Kilham,
Australian Medicine, 16 September 196, 10.
Rosemary Bell
23 March 1998
Bills Digest Service
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ISSN 1328-8091
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