Bills Digest No. 6   1997-98 Health Insurance Amendment Bill (No. 1) 1997


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WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History

Health Insurance Amendment Bill (No. 1) 1997

Date Introduced: 26 March 1997
House: House of Representatives
Portfolio: Health and Family Services
Commencement: 28 days after Royal Assent

Purpose

The major amendments:

  • remove the restriction on the Minister with respect to the number of Deputy Directors of Professional Service Review he/she may appoint;
  • provide a Professional Services Review Committee (a Committee) with power to require persons, including those under review, to provide the Committee with such documents as they specify prior to a hearing;
  • make it an offence to obstruct or hinder a Committee or Committee member in the performance of the Committee's functions, or to disrupt a Committee hearing;
  • require a person under review to repay any medicare benefit paid for inappropriate services rendered by specified categories of persons, namely, themselves, one of their employees, or an employee of a corporation of which they are an officer; and
  • increase the maximum disqualification period which may be imposed for a practitioner who engaged in an inappropriate practice.

Background

The Health Insurance Amendment Bill (No. 1) 1997 deals with the issues of fraud and overservicing (or inappropriate practice) under Medicare and the Pharmaceutical Benefits Scheme. The Bill seeks to amend provisions of the Health Insurance Act 1973 which relate to the operation of the Professional Services Review Scheme. This scheme was established in 1995 to combat inappropriate practice in two key health programs: Medicare and the Pharmaceutical Benefits Scheme (PBS), both of which are administered by the Health Insurance Commission (HIC). The amendments proposed by this Bill are intended to overcome several aspects of the operation of the Professional Services Review Scheme which are regarded as cumbersome and which have been under challenge from individual practitioners. The Australian Medical Association (AMA) is supportive of the amendments.(1)

The Professional Services Review Scheme is an independent form of peer review which determines "whether the conduct of a practitioner in rendering or initiating services under Medicare or the Pharmaceutical Benefits Scheme constitutes inappropriate practice".(2) In his second reading speech on the Bill, the Minister stated that the Professional Services Review Scheme "is this Government's primary means of investigating allegations of inappropriate practice and taking action when those allegations are proven".

The extent of medical fraud and inappropriate practice has long been contentious and gauging an accurate picture of the incidence and costs of each has proved elusive. A variety of estimates have emerged from inquires into medical fraud and overservicing which have been conducted during the 1980s and 1990s by bodies such as the Joint Committee of Public Accounts (JCPA) and the Australian National Audit Office (ANAO).

A report was recently released of a performance audit conducted by the ANAO on the efforts of the Health Insurance Commission in detecting and combating medical fraud and overservicing (Medifraud and Inappropriate Practice: Health Insurance Commission, Audit Report No. 31, 1996-97). In its report, the ANAO found that an accurate calculation of the incidence and costs of medical fraud and inappropriate practice was not possible given the available data, but estimated that medical fraud could be costing the Commonwealth between 0.7 and 1.6 per cent of Medicare and Pharmaceutical Benefits Scheme payments, or between $52 million and $135 million per year. It estimated that inappropriate practice could be costing a further $60 million (one per cent of payments) per year.

The ANAO estimates that in total, some $110 million to $190 million per year, or between 1.3 to 2.3 per cent ofpayments under the Medicare and Pharmaceutical Benefits schemes, could represent the level of medical fraud and inappropriate practice. The ANAO argues that these estimates should be regarded as interim until the Health Insurance Commission (HIC) is able to provide firmer estimates. The HIC has indicated that it will re-examine the possibility of publishing an estimate of the extent of medical fraud and inappropriate practice in 1997.(3) Given the interim nature of these estimates of medical fraud and inappropriate practice, it is emphasised that the figures should be treated with caution and regarded as indicative at best.

In 1995-96, 464 medical practitioners and eight optometrists were counselled due to concerns about their practices and 19 medical practitioners were referred to the Director, Medical Services Review. The available information indicates that in 1995-96, the Health Insurance Commission referred 13 providers to the DPP for prosecution and 4 successful prosecutions were achieved. In 1995-96, some $1.1 million in Medicare and Pharmaceutical Benefits payments which had been paid incorrectly was recovered from providers and the public(4).

Main Provisions

Number of Deputy Directors of Professional Services Review

The effect of the amendment proposed by item 4 of Schedule 1 of the Bill is to remove the restriction imposed on the Minister under subsection 85(2) of the Health Insurance Act 1973 (the Principal Act) with respect to the number of Deputy Directors of Professional Services Review he/she may appoint. Subsection 85(2) currently restricts the number of Deputy Directors which may be appointed to a maximum of 15.

Remarks: The rationale given by the Government in the Explanatory Memorandum for removing the 15 Deputy Directors limit is that the current limit unnecessarily restricts the creation of review Committees and places a burden on a few dedicated practitioners. It could be argued that the proposed amendment is also a response to the estimated high level of fraud and overservicing and the need to deter such inappropriate practices. The Australian National Audit Office estimates that around 1.3 to 2.3 per cent of payments from Medicare and Pharmaceutical Benefits Schemes ($110 million to $190 million) per annum is lost through fraud and inappropriate practices.(5)

Content and form of HIC referrals to Director of Professional Services Review

Provision is made under section 86 of the Principal Act for a referral for investigation of inappropriate practice to the Director of the Professional Services Review by the Health Insurance Commission (HIC). Section 87 deals with what a section 86 referral must specify. Specifically, a referral must specify whether it relates to:

  1. specified services; and/or
  2. services rendered or initiated by a practitioner that are of a specified class, to a specified class of person, or provided within a specified location.

To (B), above, is added by item 5 of Schedule 1 services provided within a specified period.

Remarks: The rationale given by the Government in the Explanatory Memorandum for the proposed amendment is that the Professional Services Review Scheme is based on considering conduct and it is necessary for the scheme to be effective that a persons conduct to be able to be assessed in relation to a period of time.

Offence for failure to produce documents prior to a Committee hearing

A new section 105A is inserted in the Principal Act by item 9 of Schedule 1 which provides a Professional Services Review Committee (a Committee) with power to require persons, including those under review, to give them such documents as they specify prior to a hearing. Notice of a requirement to produce documents must be given at least seven days before the day on which the documents are required to be produced (proposed subsection 105A(2)).

The documents must be produced to a Committee member, or persons nominated by a Committee member, at the time and place specified in the notice informing the person of the requirement to produce the documents. Failure to produce documents constitutes an offence punishable by a maximum penalty of 20 penalty units ($2 000) (proposed subsection 105A(3)).

The power accorded by proposed section 105A is mitigated by proposed subsection 105A(7) which provides that the relevant document/s and any information or thing obtained is not admissible in evidence in criminal proceedings or proceedings for recovery of a pecuniary penalty against the person producing the document. Proposed section 105A(8) provides an exception to proposed subsection 105A(7), that is, where a person knowingly produces a document that contains a false or misleading statement. In such a case the information obtained can be used in criminal proceedings or proceedings for recovery of a pecuniary penalty against the person producing the document.

Documents produced prior to a hearing may be inspected by a Committee member; retained by a Committee member for a reasonable period; and a Committee member may make copies of, or take extracts from, the document (proposed subsection 105A(4)).

It is an offence, punishable by a maximum penalty of 20 penalty units ($2 000) for a person to knowingly produce a document that contains a false or misleading statement without identifying the respects in which they know it be false or misleading (proposed subsection 105A(5)).

Self incrimination will not be an excuse for the non-production of document except for a person under review (proposed subsection 105A(6)).

Remarks: A number of rationale are provided by the Government in the Explanatory Memorandum for proposed section 105A, including: to ensure a Committee can properly consider the documents before a hearing or setting a hearing date; and several of the Committees have been concerned that medical records may have been altered following the issuing of a notice.

Offence of contempt of Committee

Item 10 of Schedule 1 inserts a new section 106EA in the Principal Act making it an offence to obstruct or hinder a Committee or Committee member in the performance of the Committee's functions, or to disrupt a Committee hearing. The penalty for such an offence is 20 penalty units ($2 000).

Remarks: The rationale given by the Government in the Explanatory Memorandum for proposed section 106EA is that experience has shown that existing provisions are likely to be inadequate in dealing with disruptions and threats against Committee members.

Content of determinations for engaging in inappropriate practice

Existing section 106U of the Principal Act specifies the actions the Director of Professional Services Review, or their nominee, can take against a person engaging in an inappropriate practice. These include:

that the person under review repay the Commonwealth an amount equivalent to any medicare benefit paid for inappropriate services (whether or not the medicare benefit was paid to the person), and that any medicare benefit that would otherwise be payable for those services cease to be payable (subparagraph 106U(1)(c));

A new paragraph 106U(1)(c) is substituted in the Principal Act by item 17 of Schedule 1. It provides that the person under review repay to the Commonwealth the whole or a part of the medicare benefit paid (whether or not it was paid to them) for services that:

  • were rendered by the person under review, an employee of the person under review, or an employee of a corporation of which the person under review is an officer; and
  • are services in connection with which the person is stated in a report to the Determining Officer to have engaged in inappropriate practice;

and that any medicare benefit that would otherwise be payable for the services cease to be payable.

Remarks: The major difference between proposed paragraph 106U(1)(c) and the current paragraph 106U(1)(c) is in their scope. Whereas the current paragraph 106U(1)(c) requires a person under review to repay any medicare benefit paid for the inappropriate services, proposed paragraph requires a person under review to repay any medicare benefit paid for inappropriate services rendered by specified categories of persons, namely, themselves, one of their employees, or an employee of a corporation of which they are an officer.

In essence, the rationale provided by the Government in the Explanatory Memorandum to the Bill for extending the scope of paragraph 106U(1)(c) is that 'No one can condone abuse of Medicare and cases with a proven high degree of culpability involving hundreds of thousands of dollars warrant strong action at the top end of the measures provided in section 106U'(6).

Period of disqualification for engaging in an inappropriate practice

Subsection 106U(3) of the Principal Act provides in relation to a practitioner who has engaged in an inappropriate practice for their disqualification for a maximum of 12 months in respect of:

Item 20 of Schedule 1 increases the maximum disqualification period that must be imposed from 12 months to 3 years.

Subsection 106U(4) of the Principal Act provides in relation to a practitioner who has engaged in an inappropriate practice for their disqualification for a maximum of 3 months. Item 21 of Schedule 1 increases the maximum disqualification period from 3 months to 3 years.

Referrals by the Determining Officer

A new section 106XA is inserted in the Principal Act by item 24 of Schedule 1 which provides the Determining Officer (the Determining Officer makes determinations dealing with inappropriate practice found by a Committee) with the power to refer material before him/her to a body specified in the regulation, where of the opinion it may be required against a person under review for an inappropriate practice. Referred material must not disclose the identity of a particular person unless the Determining Officer believes the body needs to know the identity of that person in order to properly carry out its functions. Where identity is disclosed, the identified person must be notified of the disclosure.

Endnotes

  1. Anastasopoulos, C., "Tougher law on doctor conduct", Australian Dr, 18 April 1997.
  2. Health Insurance Commission, Annual Report 1995-96, Canberra, HIC, 1996.
  3. Australian National Audit Office, Medifraud and Inappropriate Practice: Health Insurance Commission, Audit Report No. 31 1996-97, Canberra, AGPS, 1997.
  4. Ibid., p. xiii.
  5. Ibid., p. xii.
  6. Health Insurance Amendment Bill (No. 1) 1997, Explanatory Memorandum, p. 5.

Contact Officer and Copyright Details

Paul Mackey and Ian Ireland
25 July 1997
Bills Digest Service
Information and Research Services

This Digest does not have any official 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.

IRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1328-8091
Commonwealth of Australia 1997

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, 1997.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 12 August 1997



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