Bills Digest No. 56 2001-02
Health and Other Services (Compensation) Legislation Amendment Bill
2001
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
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Health and Other Services
(Compensation) Legislation Amendment Bill 2001
Date Introduced: 30 August 2001
House: House of Representatives
Portfolio: Health and Aged Care
Commencement: The main provisions of the Bill
(Schedules 1 and 2) commence on a day to be fixed by Proclamation
or failing that six months from Royal Assent. The commencement of
Schedule 3, which deals with the legal review of administrative
decisions, is affected by the commencement date of the
Administrative Review Tribunal Bill 2001 and related Bills. If
these latter Bills do not come into force, neither will Schedule
3.
To amend the
Health and Other Services (Compensation) Act 1995 and the
Health and Other Services (Compensation) Care Charges Act
1995 in order to reduce the administrative burden imposed
under the current recovery regime. The Bill proposes to reduce the
administrative burden on all parties, including the Health
Insurance Commission, insurers and claimants, while ensuring that
the Commonwealth can continue to identify and recover debt owed to
it by successful claimants.
The issue of how best to deal with the
likelihood of 'double dipping' by successful claimants for
compensation(1) has been of concern to the Commonwealth
for many years. Double-dipping occurs when a person receives a
compensation payment to cover medical and other care costs relating
to their injury and does not reimburse the Commonwealth for any
services received that have been subsidised under Medicare and/or
benefits provided under other Commonwealth programs such as
residential care.(2) In these situations, the claimant
has been compensated twice for medical costs associated with the
injury. It has been argued that:
double dipping can never be acceptable, because
it means that the community pays twice for a service-once through
insurance and again through Commonwealth funding.(3)
Long-standing provisions in the Health
Insurance Act 1973 and the National Health Act 1953
were seen to be ineffective in the recovery of monies owed to the
Commonwealth in these situations,(4) resulting in the
passage, with bipartisan support, of the Health and Other
Services (Compensation) Act 1995 (the Act), which took effect
from 1 January 1996. Passed also were the accompanying Health
and Other Services (Compensation) Care Charges Act 1995 and
the Health and Other Services (Compensation) (Consequential
Amendments) Act 1995. However, the regulatory regime
introduced by this legislation proved cumbersome. A much larger
than predicted caseload and implementation problems resulted in
long delays for many claimants in receiving their compensation
payments, even in situations where little or no debt was actually
due to the Commonwealth.
In an effort to improve the effectiveness of the
recovery scheme, consultations were conducted between government,
insurers and lawyers, resulting in amendments to the Act which were
contained in the Health and Other Services (Compensation)
Amendment Act 1996. As was the case with the original Act,
this piece of legislation passed with bipartisan support. The
principal effect of the amendments was to enable the immediate
payment to claimants of 90 per cent of their settlement, with any
remainder paid after the Health Insurance Commission recovered any
'double-dipped' benefits.
Despite the bipartisan support of the
Parliament, both the original Act and the 1996 amendments attracted
considerable opposition from insurers and lawyers. As a result, the
Government and Opposition gave a commitment that the scheme would
be reviewed after 12 months of operation.(5) The former
Insurance and Superannuation Commissioner, George Pooley, was
appointed in March 1999 to conduct a review of the Act and the
operation of the Compensation Recovery Program, which is
administered by the Health Insurance Commission. The report of the
Review was tabled following the introduction of the Health and
Other Services (Compensation) Legislation Amendment Bill 2001 (the
Bill).
The Review found that the Act 'had many
shortcomings and should not be continued in its present form' and
identified a preferred option for improving the effectiveness and
efficiency of the recovery scheme.(6) This preferred
option is embodied in the amendments contained in the Bill and is
discussed as Option 2 in the Explanatory Memorandum to the
Bill.(7)
A key shortcoming of the Act was found to be its
administrative complexity which resulted in almost 50 per cent of
benefits recovered by the Commonwealth being subsumed by
administrative costs associated with the recovery process. For
example, in 1998-99, the Health Insurance Commission recovered
$31.9 million under the Compensation Recovery Program, but at an
administrative cost of $14.7 million.
The Government announced in the 2001-02 Budget
that it intended to amend the Act to streamline the operation of
the Compensation Recovery Program. This is expected to result in
annual savings of approximately $6.5 million accruing to the
Commonwealth and may assist also to reduce pressure on insurance
premiums through streamlining of administrative costs and
procedures for insurers and workers' compensation
authorities.(8)
A major reform proposed by the Bill is to exempt
from the operations of the Act and the Compensation Recovery
Program all compensation claims of less than $5000. It is expected
that this change will result in a significant reduction in the
number of settlements and judgements that must be notified to the
Health Insurance Commission, with attendant savings in
administrative costs.
The threshold of $5000 was selected because it
has been estimated by consultants to the Review that the Health
Insurance Commission makes a loss recovering payments on cases with
judgments/settlements below $5000. The consultants estimate that
the effect of exempting judgements/settlements of less than $5000
would be to reduce the number of cases reported to the Health
Insurance Commission by 21 per cent (amounting to around
30 000 cases in 1998-99). Although this measure would reduce
gross revenue to the Commission by some $5.7 million (about 10 per
cent of gross revenue) it would also reduce the costs to the
Commission by 21 per cent ($6.4 million), resulting in an increase
in net revenue to the Health Insurance Commission of $0.7
million.(9)
The Bill also proposes to eliminate potential
judgements or settlements from the current notification
requirements imposed by the Act. This measure is likely also to
result in administrative savings for all parties because many
claims notified to the Health Insurance Commission under the
current regime do not actually proceed to
judgement/settlement.(10)
An indication of the necessity for reform of
current arrangements can be gauged from the assessment of the
Review that the Compensation Recovery program is:
complex, convoluted and enormously expensive to
administer for all the parties involved. The process is largely a
function of HOSCA [the Act] itself. It was well said that a complex
Act leads to complex administration with unnecessarily high costs
to most or all of the stakeholders.(11)
Item 2 of Schedule 1 inserts an
additional paragraph in subsection 4(2). This subsection describes
the types of payments that are not regarded as compensation for the
purposes of the Act. The proposed new paragraph
will permit a Regulation to be prescribed that will widen the types
of payments not regarded as compensation for the purposes of the
Act. For example, it will enable the exclusion from the Act of any
sections of State and Territory legislation that, while not
included at present, may at some point in the future be caught by
provisions of the Act.
Notification of a claim for
compensation
Item 6 of Schedule 1 repeals
sections 11 and 12, both of which relate to the notification of a
claim for compensation. As discussed above, notification to the
Health Insurance Commission of a claim prior to
judgement/settlement will not be required under the new streamlined
recovery process. Rather, notification will be required only after
a judgement or settlement has been reached. Proposed new
section 11 relates to the operation of Division 1,
clarifying that the Division will operate if a person makes a claim
against another person for compensation in respect of an
injury.
Items 3 and 5 of Schedule 1
repeal paragraphs 8(9)(a) and 10(9)(a) respectively, both of which
are consequential amendments taking account of the repeal of
sections 11 and 12. Item 26 of Schedule 1 omits
the words '11, 12 or' from section 29(3) because of the proposed
repeal of sections 11 and 12. Items 37 to 39 of Schedule
1 propose consequential amendments to take account of the
proposed repeal of sections 11 and 12. Items 1 and 2 of
Schedule 2 repeal paragraphs 6(9)(a) and 8(9)(a)
respectively. Both paragraphs refer to and are dependant upon
sections 11 and 12.
Item 7 of Schedule 1 repeals
section 13 which also relates to notification of a claim for
compensation and refers to sections 11 and 12, both proposed for
repeal. Proposed new section 13 maintains the
current requirement for notification of a reimbursement arrangement
if it is entered into 6 months or more after a claim for
compensation is made. Also maintained is the period of 28 days in
which a person who is liable to reimburse a claimant must notify
the Health Insurance Commission of the arrangement.
Item 8 of Schedule 1 repeals
sections 15 and 16 which relate to the notification of claims which
fail or are discontinued or where a claim is unlikely to become
active again. The provisions of these sections become redundant
under the new streamlined recovery process that does not require
notification of claims prior to judgement/settlement. Items
20 to 25 of Schedule 1 remove references to section 15 and
also to sections 11 and 12 because of the proposed repeal of these
sections.
Statements by claimants for
compensation
Items 9 to 15 and items
17 to 19 of Schedule 1 relate to statements by claimants
for compensation. These statements specify any services received by
the claimant where a Medicare benefit has been paid and/or whether
residential care services have been provided in the course of
treatment of, or as a result of, the injury the claimant claims to
have suffered. The statements are called 'Statements of past
benefits'. Proposed sections 23B, 23C and
23D are inserted by item 17 of Schedule
1. These new sections relate to cases where a statement of
past benefits lodged by a claimant is regarded as not substantially
correct by the Managing Director of the Health Insurance
Commission. Items 32 to 36 of Schedule 1 relocate
several sections to proposed new sections 23B to
23D and also amend further sections to take account of the
relocated sections. Item 43 of Schedule 1 provides
for the operation of transitional provisions in relation to the
relocation of these sections.
Advanced payment option
The advanced payment option was inserted in the
Act by the Health and Other Services (Compensation) Amendment
Act 1996. This option permits the immediate payment to
claimants of 90 per cent of their settlement, with any remainder
paid after the Health Insurance Commission recovers any
'double-dipped' benefits. Item 28 of Schedule 1
inserts proposed section 33AA to provide for a
sunset provision that will remove the advanced payment option. The
sunset provision is proposed to commence on 1 July 2004 or a later
date, but no later than 1 July 2006, as determined in writing by
the Minister.
The Review of the Act and the Compensation
Recovery Program undertaken by George Pooley considered whether the
advanced payment arrangements should continue to operate. The
arrangements were introduced originally as a temporary measure to
deal with the backlog of cases that built up under the initial
recovery regime that commenced on 1 January 1996. The second
reading speech indicates that the streamlined processes envisaged
under the provisions of this Bill, together with earlier
streamlining mean that the advanced payment arrangements should be
removed with effect from 1 July 2004.(12)
Item 31 of Schedule 1 inserts
proposed subsection 33B(2A) which provides greater
flexibility to current arrangements by enabling the Minister to
determine different amounts, or ranges of amounts, of compensation
payable under the advanced payment option. Provisions will enable
the Minister to set different percentages for any one or more of
the altered amounts of compensation.
The report of the Review found that, in most
cases, the retention by the Health Insurance Commission of 10 per
cent of each compensation payment far exceeds the amount which is
repayable to the Commonwealth for Medicare and other benefits. The
average across all cases between 1997-1999 was found to be 2.1 per
cent. The Review found also that the greater the size of the
compensation payment, the lower the proportion of the claim
required to be repaid to the Health Insurance Commission. The
Review recommended that a sliding scale be established for the
Advanced Payment Option arrangements whereby for
judgements/settlements between $5000 to $10 000, the Advanced
Payment Option would be 5 per cent. For judgements/settlements of
$10 000 to $50 000 the amount would be 3 per cent and for
judgements/settlements in excess of $50 000, the Advanced
Payment Option would be 1 per cent.(13)
A proposed new threshold of
$5000
Items 30 and 40 of Schedule 1
propose to set a threshold of $5000, amounts below which will be
defined as 'small amounts'. This will enable all compensation
judgements/settlements below $5000 to be exempt from the Act. As
discussed above, this will remove about 30 000 claims per
annum from assessment by the Health Insurance Commission, resulting
in considerable administrative savings. The Review of the Act and
its operations found that it cost the Commission more to administer
claims below $5000 than it recovered in payments.
In making its recommendation of a preferred
option, the report of the Review concluded that all
stakeholders(14) supported a proposal to establish a
committee of stakeholders to consider the pros and cons of the
development of a national database for compensation cases and for
the development of a system for 'tagging'(15) medical
services, especially those associated with compensation
injuries.(16) Neither the second reading speech nor the
explanatory memorandum of the Bill contain any indication of the
Government's views on these proposals. The report of the review
noted that a proposal to establish a national database of workers'
compensation injuries is being developed for the consideration of
Commonwealth and State Workplace Relations
Ministers.(17) In addition, proposals for the
development of unique patient identifiers and individual electronic
health records have been under active consideration, however any
implementation would appear, at this stage, to be well into the
future.
-
- The report of the Review of the Act by George Pooley indicates
that under the Act, Medicare payments for services are recovered
for claims for compensation made under common law, public
liability, workers' compensation or third party (motor vehicle
accident) compensation. Medicare payments for services are not
recoverable where claims for compensation are made for criminal
injuries compensation. In cases involving sporting injuries or
school accidents, the operation of the Act is less clear and
recovery of Medicare payments depends on the type of claim and
insurance status of the claimant. (G Pooley, Review of the
Health and Other Services (Compensation) Act 1995 and of its
operation, Canberra, 2001, p. 23.)
- Pooley, p. 22.
- House of Representatives, Debates, 19 August 1994, p.
4453.
- Pooley, op cit, p. 22.
- Pooley, p. 23.
- Pooley, p. 86.
- see, for example, Explanatory Memorandum, p. 6.
- Budget Paper No.2, 2001-02, p. 147.
- Pooley, op cit, pp.33-34.
- Pooley, p. 24.
- Pooley, p. 24.
- House of Representatives, Debates, 30 August 2001, p.
30333.
- Pooley, op cit, p. 36.
- It is worth noting that consumers were not represented directly
on the Committee of Stakeholders established to assist the Review
process. Although the Review called for public submissions, none
were received from representatives of consumers.
- This proposal would require medical practitioners and other
providers of health care services to attach a code or electronic
tag to their bills to Medicare so that the Health Insurance
Commission can quickly recognise medical services arising from a
compensable injury. Such a system would enable the Commission to
monitor the pattern of services provided by doctors to compensable
patients. The report of the Review argues that as a result of the
Commission being aware at an early stage of the provision of
services for a compensable injury, injuries may be treated more
efficiently and claimants may be returned to work more rapidly,
with a reduced need for economic compensation (Pooley, p. 84).
- Pooley, p. 86.
- Pooley, p. 85.
Paul Mackey
17 September 2001
Bills Digest Service
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ISSN 1328-8091
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