Bills Digest No. 170 2001-02
National Health Amendment (Pharmaceutical Benefits -
Budget Measures) Bill 2002
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
Passage History
National Health Amendment
(Pharmaceutical Benefits - Budget Measures) Bill 2002 (Bills Digest
170, 2001-02)
Date Introduced: 6 June 2002
House: House of Representatives
Portfolio: Health and Ageing
Commencement: Items 1-24 of Schedule 1
commence on 1 August 2002, items 25-28 of Schedule 1 commence on 1
January 2003, and the remainder commences on Royal Assent.
Purpose
The purpose of the National Health Amendment
(Pharmaceutical Benefits Budget Measures) Bill 2002 ( the Bill ) is
to introduce a 2002-03 Health and Aging Portfolio Budget measure
(Outcome 2) that specifies an increase in the patient co-payments
for the purchase of drugs subsidised under the Pharmaceutical
Benefits Scheme (PBS). The Budget measure proposes that the
co-payment amounts rise by 28 per cent from $22.40 to $28.60 for
general patients and from $3.60 to $4.60 for concessionary patients
(to be effective from 1 August 2002). It is also proposed that the
concessional patient safety net threshold will increase from
$187.20 to $239.20, and the general patient safety net threshold
will increase from $686.40 to $874.90 (both changes to be effective
from 1 January 2003).
The PBS is currently the fastest growing area of
health expenditure in Australia. In the 2001-2002 financial year
PBS expenditure is estimated to cost $4.837 billion, 13.6 per cent
more than it did in the previous year. In the last decade it has
experienced an estimated average annual expenditure growth rate of
around 14 per cent. According to the fiscal projections of the
Intergenerational Report 2002-03, government expenditure
on the PBS will increase five-fold by 2041-42 (as a percentage of
GDP).
The stated mission of the PBS is to make
affordable to all Australians the medications they need, but at a
responsible cost to the community. The currently growing cost to
the community of the PBS is placing pressure on the scheme s future
capacity to make available to Australians newly developed expensive
medicines. The sustainability of the PBS is consequently an
important issue.
Between 1991-92 and 2001-02, the government
contribution to the overall annual PBS expenditure has increased at
an average annual rate of 13.5 per cent. Patient co-payments have
had a slightly lower rate of increase in that period 12.4 per cent.
In 1991-92, the patient contribution to annual PBS costs was around
20 per cent, and has been steadily declining to around 15 per cent
in 2000-01. At the level of patient co-payments proposed in this
Budget measure, the estimated total annual contribution to PBS
costs from patients will be restored to approximately 20 per
cent.(1)
There has been opposition to the proposed
co-payment rise from the ALP, and the Australian Democrats. The
Australian Democrats have argued that the co-payment increases will
shift costs to the States through increased hospital and emergency
room visits.(2) Senator Stott-Despoja has urged the
government to consider alternative measures, such as increased
application of price-volume agreements (where prices paid to
manufacturers vary depending on the sale of drugs), as well as
further reforms to prescribing practices which contribute to high
PBS cost increases.(3) The ALP has similarly argued that
increasing co-payments places an unfair burden on those least able
to afford it, and has endorsed a range of cost-effectiveness
measures for the PBS.(4) The Greens are also opposed to
the rise in co-payments.(5)
Items 1-15, 17 and 18 of
Schedule 1 make amendments, and consequential
amendments, to the National Health Act 1953, which give
effect to the stated increase in co-payments. These changes are
detailed in the Explanatory Memorandum to the Bill.
Item 16 of Schedule
1 specifically preserves the concessional beneficiary
safety net threshold - and amount equal to 52 times the
concessional patient co-payment - at its current level ($187.20)
for the remainder of the 2002 calendar year. From 1 January 2003,
this threshold will rise to $230.20.
Items 19-24 of Schedule
1 amend or refer to section 99G of the National Health
Act 1953, and make provision for the future indexation of the
increased patient co-payments and safety net thresholds. These
changes are detailed in the Explanatory Memorandum to the
Bill, which also notes:
[The increases in co-payments and safety net
thresholds] will take the place of indexation changes that would
otherwise occur with effect from 1 January 2003. Indexation of
patient co-payments and safety net thresholds will resume with
effect from 1 January 2004.
Items 25-27 of Schedule
1 increase the general patient safety net threshold from
$686.40 to $874.90. There is no specific savings provision akin to
that provided in item 16 of Schedule 1 (in relation to the
concessional beneficiary safety net), but the stated commencement
date of these items (see clause 2 of the Bill)
means this change will not come into effect until 1 January
2003.
Concluding
Comments
The proposed increases in co-payment levels will
reduce the proportion of the annual costs of the PBS that the
Commonwealth will have to pay. It is questionable, however, whether
this will have the stated long-term impact of enhancing the
sustainability of the PBS. It can be argued that such an increase
may negatively affect the operation of the PBS.(6)
The increasing costs of the PBS have partly been
attributed to aspects of its operation which are not
cost-effective. The PBS is designed to make available medicines
that will have cost-savings effects on the use of other health-care
and related resources (such as further GP visits, extended
hospitalisation, productivity, etc). A cost-effective PBS, even
when it is costing more in and of itself, will still be
reducing expenditure in other areas.
The problematic PBS growth drivers will be those
that detract from the PBS capacity to deliver the greatest level of
health-related cost-benefits. One key problematic growth driver is
the rising prescription of expensive newly developed medicines
outside of their PBS cost-effectiveness guidelines. A number of
factors contribute to this prescribing, including primarily a lack
of clear, accurate and timely information about cost-effective uses
of these drugs, and misleading information and promotional
incentives from manufacturers. Although there are other 2002-03
Budget measures that do address some of these factors, it is not
clear that raising co-payments in any way contributes to the
enhanced cost-effectiveness of the PBS. Moreover, any additional
payment patients are asked to make will be partly wasted if it is
paying for a less than completely cost-effective system.
There is some evidence that raising patient
co-payments can act as a disincentive for patients to purchase
prescribed medicines, and thus as a disincentive for them to
adequately address their medical needs. This introduces the risk
that further subsequent costs may be introduced into the
health-care system, perhaps through those patients seeking further
GP visits, or through hospitalisation due to their conditions being
improperly addressed. Recent NATSEM modelling (on 1996 97 data)
observed that a flat 25 per cent rise in co-payments would place a
burden on the lowest income earners among general patients (making
expenditure on pharmaceuticals a high average of 8.6 per cent of
disposable income).(7) There is also overseas evidence
that increases in co-payments can result in patients not filling
their prescriptions.(8)
Apart from these concerns about the potential
impacts of co-payment rises, there are also questions surrounding
the rationale for why the rises should be of the specified amount.
Although the proposed rise will bring the proportional patient
contribution to the total annual PBS costs into line with what it
was in 1991-92, it is not clear why that particular proportioning
is especially important. Nor is it clear that any proportionality
or balance in government-patient contributions has ever been,
historically, a relevant policy consideration. The rationale for
setting the general patient safety-net threshold at approximately
30 times the general co-payment amount is similarly unclear.
-
- Second Reading Speech, National Health Amendment
(Pharmaceutical Benefits-Budget Measures) Bill 2002.
- M. Lees, "PBS Cuts: Another Cost Shift to the States" Press
Release Wednesday May 15, 2002.
- N. Stott-Despoja "Government Urged to Drop DSP and PBS Charges"
Press Release, 9 June 2002; N. Stott-Despoja, "Costello s
Quick Fix is no Benefit to Ailing System", The Australian, 7 June
2002.
- S. Crean, "Reform of the Pharmaceutical Benefits Scheme",
Press Release June 16, 2002.
- B. Brown, "Greens to oppose super cuts for the rich in the
Senate" Press Release, May 17, 2002.
- See further M. Rickard, The Pharmaceutical Benefits Scheme
Options for Cost Control, Current Issues Brief, no 12,
2001-02, Department of the Parliamentary Library, 28 May 2002,
http://www.aph.gov.au/library/pubs/CIB/2001-02/02cib12.htm.
- Walker, 'Distributional Impact of Higher Patient Contributions
to Australia's Pharmaceutical Benefits Scheme', Australian Health
Review, vol. 23, no. 4, 2000, pp.32 46.
- Two recent reports note the negative impact of increased
co-payments on usage. S. Jacobzone, Pharmaceutical Policies in OECD
Countries: Reconciling Social and Industrial Goals. Labour Market
and Social Policy Occasional Papers, no. 40, OECD Section 2.1.1,
2000; Senate Standing Committee on Social Affairs, Science and
Technology, Interim Report on the State of the Health Care System
in Canada, vol. 2, January 2002, pp. 33 34.
Maurice Rickard
18 June 2002
Bills Digest Service
Information and Research Services
This paper has been prepared for general distribution to
Senators and Members of the Australian Parliament. While great care
is taken to ensure that the paper is accurate and balanced, the
paper is written using information publicly available at the time
of production. The views expressed are those of the author and
should not be attributed to the Information and Research Services
(IRS). Advice on legislation or legal policy issues contained in
this paper is provided for use in parliamentary debate and for
related parliamentary purposes. This paper is not professional
legal opinion. Readers are reminded that the paper is not an
official parliamentary or Australian government document.
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 2002
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,
2002.
Back to top