Chapter 2
Key issues
2.1
Submitters to the inquiry expressed support for the Health Insurance
Amendment (Extended Medicare Safety Net) Bill 2014 (Bill) as a cost saving
measure.[1]
The Australian Women's Health Network noted increases in the general Extended
Medicare Safety Net (EMSN) threshold over the past nine years, with the current
proposal to further raise 'the level at which higher income families are
eligible to receive additional benefits for out‑of‑hospital
services'.[2]
2.2
Some submitters did not support the proposal to increase the threshold[3]
and the following key issues were examined during the inquiry:
- impact of the proposed measure on health and well-being;
- effect on equity of access to healthcare; and
- introduction of a short-term measure in the context of long-term
reforms.
Impact of the proposed measure on health and well-being
2.3
Submitters argued that increasing the general EMSN threshold from $1,000
to $2,000 will affect healthcare affordability for consumers, with adverse implications
for individuals' health and well-being.
2.4
The Consumers Health Forum of Australia (CHF) submitted that, contrary
to the primary objective of the EMSN,[4]
the proposed measure will require consumers to incur higher out-of-pocket
healthcare costs before they are eligible for additional financial relief:
Under the proposed arrangements, middle income families and
individuals will need to incur $778.10 [sic] of additional out-of-pocket costs
before they reach the new EMSN threshold.[5]
2.5
National Seniors Australia (National Seniors) observed that it may be
difficult for consumers to find this extra money each year if they are on a
'tight' budget. Further, precisely how the measure will affect consumers is not
known, as each case is different:
[I]f you looked at it as a $35 out-of-pocket payment just for
a [general practitioner] service and then you looked at what they might get
back...they are going to lose quite a bit of money and have to put out a lot more
money before they reach that safety net. It is the people on the margins who
are going to be quite severely affected by this—people on restricted incomes,
even if they are not people on an age pension. It is also going to hit people
who have a chronic health condition or who need to go quite frequently to
various healthcare providers—$700 is a lot of money when you have a tight
budget that you have worked out for the year.[6]
2.6
Both National Seniors and the CHF expressed concern at the impact of
higher out-of-pocket healthcare costs, resulting from the proposed measure.
2.7
The CHF submitted that Australian consumers already make a high direct
contribution to healthcare costs (17% of total expenditure), with consumers
spending on average more than $1,000 a year in out-of‑pocket costs.[7]
The committee heard that these costs are forcing consumers to make difficult
decisions, including, for example, whether or not to: seek medical attention;
fill prescriptions; and prioritise their own healthcare needs.[8]
2.8
National Seniors commented similarly in respect of older Australians, noting
that out-of-pocket costs can rapidly escalate for various reasons.
In addition to changes in healthcare needs, these reasons include: the gap
between the Medicare rebate and fees charged by service providers; the lack of
safety net coverage; the cap on specific items in the Medicare Benefits
Schedule (MSB); the lack of private health insurance cover; and gap payments
and/or annual limits on services covered by private health insurance.[9]
2.9
According to submitters, out-of-pocket healthcare costs particularly
affect persons with chronic health conditions and high-level healthcare needs.[10]
The CHF, for example, described the EMSN as a key support mechanism for
these consumers:
There are a significant number of consumers experiencing
chronic illness. Some of that is debilitating; some of it is manageable. They
will obviously be the highest end users who are likely to reach the threshold
quicker.[11]
2.10
Diabetes Australia provided one illustration of these concerns, submitting
that diabetes, as 'a lifelong condition with complex care needs', requires
constant management. Diabetes Australia stated that the EMSN assists people
with diabetes to best manage their condition but increasing the general
threshold will jeopardise this standard of care:
For many, the safety net and its increased reimbursements is
an important contribution to the significant expenses associated with managing
their condition.
...
Raising the safety net threshold and having people pay more
may worsen access to the recommended cycle of care and the recommended [six]
monthly monitoring.[12]
2.11
Diabetes Australia and the CHF noted that there are consumers with
chronic health conditions and high-level healthcare needs to whom the
concessional EMSN threshold does not apply. Diabetes Australia expressed
concern about these consumers' capacity to access affordable healthcare, to
manage their illness and prevent the development of further complications.[13]
A representative from CHF stated: 'there are high users of the system who are
not necessarily concessional users of the system'.[14]
2.12
In evidence, the CHF described concerns with the Medicare safety net,
which, the representative argued, does not operate to the advantage of consumers
with life‑long, or later life, long-term illnesses:
Obviously,...in a 12-month period, if you have those high-cost,
acute, short time frame illnesses, you can [reach] the threshold quickly and
those costs are reduced for the rest of that [calendar] year. If you have a
chronic condition spread over 10 years or 20 years, you may never reach the
threshold. Particularly if it goes up to $2,000, you may sit underneath that
threshold and not actually be able, because of the nature of your illness, to
get there, but you still experience those significant costs.[15]
Confirmation of family composition
for EMSN purposes
2.13
One submitter – the Australian Women's Health Network (AWHN) –
explicitly supported the proposal to allow the Chief Executive of Medicare to
determine the manner in which families are contacted to confirm family
composition for EMSN purposes. The AWHN endorsed the simplified process, which
it argued would increase administrative efficiency for consumers and
government.[16]
2.14
At the public hearing, witnesses commented briefly on the need for the
Department of Human Services (Human Services) to communicate with consumers in
an appropriate and timely manner. The Australian Council of Social Service
(ACOSS) considered:
[H]ouseholds need to be informed about what is going on.
Particularly for low-income households, given that quite often the system is
very hard to navigate and they are navigating a whole lot of the system,...ACOSS
would support easy access to information, and people being notified about their
entitlements when they are coming up so that they are able to access those
entitlements[.][17]
2.15
In evidence, the representative from National Seniors indicated that
older Australians prefer to receive hard copy information (via the post),[18]
whereas the CHF representative highlighted that, for some Australians,
electronic methods of communication may be the preferred medium:
[W]ith the introduction of myGov and the translation of all
the Medicare data over to that system, that there will be regular signals,
probably text messages as well as emails, in terms of notification.[19]
Department response
2.16
The Department advised that the measure proposed in the Bill allows for
flexibility in the way in which Human Services communicates with consumers. A departmental
representative indicated that the proposal accommodates consumers' wishes,
emphasising:
There is no intent to reduce the information people get about
where they are up to in terms of safety net entitlement or to ensure that they
are aware that they are approaching the threshold. It is about, if you like,
liberalising the way in which that communication occurs, to reflect technology
changes and a range of other things.[20]
2.17
The officer confirmed that Human Services determines each consumer's
preferred method of confirmation, which may or may not be in
writing:[21]
It is anticipated that with the current technology and
systems that a letter will usually be sent to the nominated person's address as
registered with [Human Services] for Medicare purposes. However, in future,
this contact may be by email or SMS message if the person advises that this is
their preferred form of interaction with [Human Services] for Medicare
purposes.[22]
2.18
In addition, there are various sources of information, which consumers
can readily access to obtain further detail about the EMSN. The primary source
of information concerning coverage is a website called MBS Online.
2.19
An officer from the Department acknowledged that the MBS is not 'the
easiest read' but the online service is available 24 hours a day, seven days a
week.[23]
In answer to a question on notice, the Department advised that 'there is no
evidence that the use of MBSonline has been reduced because of technical
issues'.[24]
Effect on equity of access to healthcare
2.20
Submitters considered that, by requiring consumers to incur higher out‑of‑pocket
costs before qualifying for the EMSN benefit, the Bill impedes equitable access
to healthcare.
2.21
The CHF, for example, referred to a recent research report,[25]
which found:
- the impact of high out-of-pocket costs is most profound for the people
who are most in need and vulnerable;
- consumers can face substantial unbudgeted out-of-pocket costs and
co‑payments;
- the EMSN does not adequately target consumers adversely affected
by out-of-pocket costs to ensure they do not experience barriers to accessing
care; and
- mechanisms to address inequity, such as healthcare cards,
identify people on the basis of income level or carer status but do not accurately
target those who have difficulty affording health care.[26]
2.22
The CHF expressed concern that the proposed change to the EMSN general threshold
does not sufficiently consider, and may exacerbate, these problems. Its submission
recommended that the Bill be considered in the context of the findings of the
Community Affairs References Committee inquiry into Out-of-pocket costs in
Australian healthcare.[27]
2.23
The Australian Medical Association (AMA) acknowledged that the EMSN has
helped consumers to access timely and affordable medical care, as well as
preventing downstream costs to the healthcare system.[28]
However, the AMA also raised concerns about the context of the Bill:
In recent years, the EMSN has been systematically wound back
with the introduction of caps on benefits and now this increase in the extended
general safety-net amount – the upper threshold – proposed by the Bill.
The Bill implements one of four 2014-15 Budget measures that
together will significantly affect...the affordability of medical services for
Australian families – measures that are designed to shift $1,852.9 [million] in
costs for medical services from the government onto the chronically ill, the
elderly, young families, and accident and trauma victims who all need medical
care.[29]
2.24
The AMA contended that out-of-pocket costs are a material element in
cost‑of‑living pressures:
The larger they become, the more they undermine the equity of
access to services under Medicare and, in turn, the more they undermine the
lack of equity in health outcomes.[30]
Introduction of a short-term measure in the context of long-term reforms
2.25
On 13 May 2014, the Australian Government announced that the existing
three safety nets for out-of-hospital services – the Original Medicare Safety
Net, the EMSN and the Maximum (greatest) Permissible Gap – will be collapsed
into one new Medicare Safety Net.[31]
2.26
The Department's Portfolio Budget Statements explained:
This will simplify safety net arrangements and replace the
original Medicare Safety Net and [EMSN] which are complex and difficult for
both patients and practitioners to navigate and understand.
The thresholds to access the new Medicare Safety Net will be
lower than current thresholds, which will help more people and better ensure
that Safety Net benefits are available to people who have serious medical
conditions or have prolonged health care needs. The new thresholds will be $400
per year for individual and family concession card holders, $700 for [Family
Tax Benefit (Part A)] families and non-concessional individuals and $1,000 for
non-concessional families. The new Medicare Safety Net will introduce a cap on
out-of-pocket costs that accumulate to a threshold and a cap on benefits
received – both caps limit the Commonwealth's liability and contribute to
restricting growth in Medicare.[32]
2.27
Witnesses commented on the interaction between the new Medicare Safety
Net (due to commence on 1 January 2016) and the current proposal to increase
the general EMSN threshold (effective 1 January 2015).[33]
Representatives from the CHF, National Seniors and ACOSS considered that the
multiplicity of thresholds, exclusions and capping arrangements will cause
confusion among consumers.
2.28
The CHF commented:
[The $2,000 general EMSN threshold] is proposed to come in on
1 January 2015. The one announced in the 2014-15 budget would come in
on 1 January 2016 and bring it back down to $1,000. The carve-outs and the
exclusions get more technical and more difficult to work through. The capping
also gets more difficult to work through. It is not a simple matter of being
just as easy as it is now to reach the threshold. With a new lower threshold,
it will still be more difficult. Consumer confusion is one of the questions
when you start carving stuff out, excluding it, putting caps on it and only
having certain percentages that apply. You cannot necessarily plan your
healthcare expenditure to get to the threshold, particularly if you are making
decisions across financial years and you want to be able to ensure that you do
get some kind of compensation...[I]f you have got a chronic illness and you are
trying to manage that across the years, it makes it more difficult.[34]
2.29
National Seniors 'hoped' that the announced reforms had been considered
in the formulation of the Bill,[35]
while ACOSS suspected that this was not the case. An ACOSS representative
stated that '[the Bill] absolutely does need to take into account some of the
proposed changes'.[36]
Department response
2.30
A departmental representative acknowledged the measures announced in the
2014-15 Budget, allowing that 'the [EMSN] with the $2,000 upper threshold would
be in place for one calendar year, 2015'.[37]
The Explanatory Memorandum states that the forecasted savings in the financial
year ending 30 June 2015 will be $7.8 million, and for the financial year
ending 30 June 2016, $48.5 million.[38]
2.31
An officer from the Department affirmed the Australian Government's
position, as announced in the 2014-15 Budget, to direct all savings from the
measures proposed in the Bill to the establishment of a new Medical Research
Future Fund:
From 1 January 2015, the Government will establish a Medical
Research Future Fund (the Fund) that will grow to $20 billion–the largest of
its kind in the world...Every dollar of estimated savings from health reforms in
this Budget will be invested in the Fund until it reaches $20 billion
[estimated by 2020].[39]
2.32
The departmental representative advised that the cost of implementing
the Bill will be 'very small systems costs with [Human Services]',[40]
meaning that the forecasted savings – as adjusted for 2015-16 – will largely
stand.
2.33
The Department's representatives did not agree that amending the general
EMSN threshold twice over a short space of time – from 1 January 2015 to 1
January 2016 – would confuse healthcare consumers:
[C]hanging the threshold does not change at all what is in or
what is out...the expenditure threshold at which benefits commence is all that is
affected under this bill.[41]
2.34
Another officer added that the current system involves a level of
complexity, which is unlikely to be significantly increased by the measure
proposed in the Bill.[42]
Further, communication materials relating to the EMSN will be updated and Human
Services will contact certain consumers, to inform them of the changes.[43]
2.35
The departmental witness further advised that the proposed threshold
amount was 'a decision of government in the budget context'.[44]
Another officer explained that previous capping measures have failed to curb
the growth in expenditure for the Medicare safety net. Consequently, 'there is
a logic in saying, "Let's look at how the safety net overall is working".
The threshold is one way of dealing with that'.[45]
Conclusion
2.36
The primary purpose of the Bill is to increase the general threshold of
the EMSN, with a view to ensuring its sustainability. In view of the measures
announced in the 2014-15 Budget, this objective can only apply to the EMSN until
1 January 2016 when the new Medicare Safety Net will commence.
2.37
The committee accepts that the forecasted savings ($105.6 million over
four years) will now be reduced but notes that there will be considerable
savings achieved by the Bill – well in excess of its implementation costs –
which will be redirected back into the health budget with the establishment of
the Medical Research Future Fund.[46]
2.38
Participants in the inquiry expressed some concern that the reforms
announced in the 2014-15 Budget, in conjunction with the Bill, will cause
consumer confusion. While it may be too early to determine the precise level of
confusion, the committee agrees that it will be necessary for the relevant
departments to adequately explain the reforms to all stakeholders. Subject to
the passage of the Bill, timely explanations will be most important throughout
2014 and 2015.
2.39
The committee recognises that consumers have preferred methods of
communication and, according to the Department's evidence, the Bill proposes to
facilitate this choice in consultation with consumers. The committee agrees
that, in the absence of an expressed preference, the default position should be
for Human Services to communicate in writing with consumers. Further, in the
letter advising consumers of the changes resulting from the Bill, the committee
suggests that consumers should be clearly advised of their right to nominate,
at any time, a preferred method of communication, consistent with the stated
objective of this measure (increased flexibility of communication).
2.40
The practical impact of raising the general EMSN threshold is difficult
to quantify. The committee acknowledges that there will be some consumers
affected by the temporary increase in the threshold, with the impact varying on
a case-by-case basis. Further, the committee heard that persons with chronic
illness do not necessarily reach even the current threshold.
2.41
Bearing in mind that the new Medicare Safety Net will shortly commence
with new criteria and lower thresholds, and given the Community Affairs
References Committee's more comprehensive inquiry into Out-of-pocket costs in
Australian healthcare, the committee reserves its comment on the impact of the
Bill in relation to the accessibility and affordability of healthcare.
2.42
On the basis of the above conclusions, the committee recommends as
follows:
Recommendation 1
2.43
The committee recommends that the Department of Human Services be
required, at the first opportunity, to notify persons likely to qualify for Extended
Medicare Safety Net benefits of their right to nominate, at any time, a
preferred method of communication with the department.
Recommendation 2
2.44
The committee recommends that the Bill be passed.
Senator Sue Boyce
Chair
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