BILLS DIGEST NO. 108, 2016–17              14 June 2017

Medicare Guarantee Bill 2017 [and] Medicare Guarantee (Consequential Amendments) Bill 2017

Paula Pyburne
Law and Bills Digest Section

Date introduced:  1 June 2017

House:  House of Representatives

Portfolio:  Treasury

Commencement: The Medicare Guarantee Act commences the day after Royal Assent. Sections 1–3 of the Medicare Guarantee (Consequential Amendments) Act commence on Royal Assent. The commencement of Schedule 1 of the Consequential Amendments Act is contingent upon the enactment of the Medicare Guarantee Act 2017.

Links: The links to the Medicare Guarantee Bill 2017, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page.

The links to the Medicare Guarantee (Consequential Amendments) Bill 2017, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page.

Both Bills can be accessed through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at June 2017.

Purpose of the Bills

This Bills Digest relates to two Bills: the Medicare Guarantee Bill 2017 (the Guarantee Bill) and the Medicare Guarantee (Consequential Amendments) Bill 2017 (the Consequential Amendments Bill). The purpose of the Guarantee Bill is to establish the Medicare Guarantee Fund which comprises:

•       the Medicare Guarantee Fund (Treasury) Special Account (the Treasury Special Account) and

•       the Medicare Guarantee Fund (Health) Special Account (the Health Special Account).

The purpose of the Consequential Amendments Bill is to amend the Health Insurance Act 1973 and the National Health Act 1953 to reflect the proposed operation of the Guarantee Bill.

Background

About Medicare

Medicare is Australia’s national health insurance scheme. It covers:

•       free or subsidised treatment by health professionals such as doctors, specialists, optometrists, and in specific circumstances, dentists, and other allied health practitioners

•       free treatment and accommodation for public Medicare patients in a public hospital

•       75 per cent of the Medicare Schedule fee for services and procedures if you are a private patient in a public or private hospital. This does not include hospital accommodation and items such as theatre fees and medicines.[1]

Medicare commenced on 1 February 1984, following the passage of the Health Legislation Amendment Act 1983 and related legislation in September 1983.[2]

Medicare operates by paying a specified benefit (in the form of a rebate) for a health or medical service for which a claim is submitted. Only services provided by private practitioners (the majority of Australian doctors work in private practice) are covered by Medicare. Services provided in a public hospital only attract a Medicare benefit if the patient elects to be treated as a private patient.

Services covered by Medicare benefits are listed in specified tables, published as the Medicare Benefits Schedule (MBS).[3] Each service listed in the MBS has an item number, a descriptor which outlines the type and scope of the service and relevant clinical requirements, the Medicare schedule fee, the applicable Medicare benefit, and any additional safety net benefits.

About the Pharmaceutical Benefits Scheme

The Australian Government subsidises the cost of many medicines for Australians through the Pharmaceutical Benefits Scheme (PBS). The PBS began as a limited scheme in 1948, with free medicines for pensioners and a list of 139 ‘life-saving and disease preventing’ medicines free of charge for others in the community.[4] It became a comprehensive scheme offering access to a wide range of medicines in 1960.[5]

The PBS is now regarded as a key component of the National Medicines Policy which ‘aims to improve positive health outcomes for all Australians through their access to and wise use of medicines’.[6] The PBS is established under the National Health Act 1953.[7]

2016 federal election

At the height of the 2016 federal election campaign, the Australian Labor Party (Labor) alleged that ‘Mr Turnbull wants to privatise Medicare payments. Behind closed doors, the government has been working for 18 months to sell off the Medicare payments system to a private provider’ and that ‘is the first step towards the privatising of the whole Medicare system’.[8]

Following the Coalition's narrow win in the federal election on 2 July 2016, it was reported that Labor’s so called ‘Mediscare’ campaign[9] ‘had worked’.[10]

2017 Budget

It is not surprising then, that in its 2017–18 Budget the Coalition sought to defuse any on-going fears about the future of Medicare. According to the Treasurer, Scott Morrison:

Tonight, we put to rest any doubts about Medicare and the Pharmaceutical Benefits Scheme … we will legislate to guarantee Medicare and the PBS with a Medicare Guarantee Bill. This new law will set up a Medicare guarantee fund to pay all expenses on the Medicare Benefit Schedule and the Pharmaceutical Benefits Scheme. Proceeds from the Medicare levy will be paid into the fund.[11]

And further when introducing the Medicare Guarantee Bill 2017:

The government is guaranteeing Medicare so that all Australians can be assured Medicare is not only here to stay, but will be strengthened into the future.[12]

The Guarantee Bill establishes the Medicare Guarantee Fund comprising of two special accounts.

About special accounts

Under section 81 of the Constitution all moneys raised or received by the Commonwealth form part of the Consolidated Revenue Fund (CRF). Furthermore, section 83 of the Constitution provides that no money may be drawn from the Treasury of the Commonwealth without a legal appropriation authority.[13] The CRF in section 81 of the Constitution is synonymous with the Treasury in section 83.[14]

Under section 80 of the Public Governance, Performance and Accountability Act 2013 if an Act establishes a special account and identifies the purposes of the special account, then the CRF is appropriated for expenditure for those purposes, up to the balance for the time being of the special account.

A special account which has been established under an enactment, such as is proposed by the Guarantee Bill, can only be varied, revoked or abolished with the amendment or repeal of the provision which establishes the Special Account in the enabling legislation.[15]

While special accounts can record amounts solely from Commonwealth appropriations, they can also record amounts from other sources as allowed by the terms of the legislation establishing the special account. These funds can include indirect taxes or other imposts (for example, an industry levy), contributions by other governments, or discretionary contributions by members of the community. Amounts standing to the credit of special accounts may only be debited strictly in accordance with the Account’s purpose.[16]

Current funding arrangements

Medicare is primarily financed through taxation, which includes the imposition of a Medicare levy on taxable income.[17] Expenditure on the PBS is uncapped, and can therefore increase as new drugs are added and demand grows.[18]

At present Medicare benefits and PBS benefits are paid in accordance with certain provisions of the Health Insurance Act and the National Health Act respectively. Under these statutes payment obligations in relation to those schemes are appropriated from the CRF in accordance with sections 81 and 83 of the Constitution as set out above.

Rationale for the Bills

Speaking at the introduction of the Guarantee Bill, the Treasurer, Scott Morrison, stated:

The fund demonstrates the Government's commitment to Medicare by ring-fencing revenue for the sole purpose of MBS and PBS spending.

Ring-fencing the revenue in the Medicare Guarantee Fund will increase the public visibility of the costs of the MBS and PBS, the quantum of revenue generated by the Medicare levy and the additional revenue necessary to meet these costs.

The Fund does not change the demand driven nature of MBS and PBS funding. To make sure that there is always sufficient credit in the fund to meet MBS and PBS costs, the credit to the fund will be adjusted at every budget update. This will ensure that it is in line with forecast future growth in MBS and PBS expenditure over the forward estimates.[19]

The Guarantee Bill does not guarantee the continuing existence of Medicare of itself. However, it will make funding of both the MBS and PBS more visible because all the Medicare benefit payments and PBS payments will be made through the Health Special Account.

Committee consideration

Selection of Bills Committee

At the time of writing this Bills Digest neither of the Bills had been referred to Committee for inquiry and report.

Senate Standing Committee for the Scrutiny of Bills

At the time of writing this Bills Digest, the Senate Standing Committee for the Scrutiny of Bills had not made any comment in relation to the Bills.

Policy position of non-government parties/independents

The Australian Greens have labelled the Medicare guarantee fund as ‘a glorified bank account’.[20]

Shadow Minister for Health and Medicare, Catherine King, has quoted a leading health expert saying the fund does absolutely nothing to guarantee the future of Medicare:

The best guarantee for the future of Medicare would have been if the Turnbull Government dropped their entire Medicare freeze immediately – which they failed to do.[21]

Position of major interest groups

The establishment of the Medicare Guarantee Fund was only one of the measures announced in the 2017–18 budget to impact the Health portfolio. Other measures include a thaw of the Medicare freeze on rebates, the retention of bulk-billing incentives and reinvestment of pharmaceutical subsidy savings. As a result, ‘patients have a better chance of being bulk-billed and still have access to new drugs’.[22] It is these measures which have garnered most of the commentary from stakeholders. However, according to the Australian Healthcare and Hospitals Association (AHHA):

The Minister has proposed the Medicare Guarantee Fund as a measure to provide certainty for health funding, but it appears to be an exercise in compartmentalising health funding which could lead to longer term jeopardy should the coffers not be full enough.[23]

Financial implications

According to the Explanatory Memorandum for the Bills they will have nil financial impact.[24]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bills are compatible.[25]

Parliamentary Joint Committee on Human Rights

At the time of writing this Bills Digest, the Parliamentary Joint Committee on Human Rights had not made any comment in relation to the Bills.

Key issues and provisions

Guarantee Bill

The Medicare Guarantee Fund

Clause 5 of the Guarantee Bill provides that the Medicare Guarantee Fund consists of two separate special accounts:

•       Medicare Guarantee Fund (Treasury) Special Account (Treasury Special Account) and

•       Medicare Guarantee Fund (Health) Special Account (Health Special Account).

According to the Explanatory Memorandum for the Bills:

The establishment of two special accounts as part of the Medicare Guarantee Fund rather than a single special account is required to ensure that the new Medicare Guarantee arrangements do not affect existing expenditure reporting requirements for MBS and PBS payments undertaken by the Health portfolio.[26]

Treasury Special Account

Clause 6 establishes the Treasury Special Account and designates it as a special account for the purposes of the Public Governance, Performance and Accountability Act. The Treasury Special Account is to be administered by the Secretary of the Treasury Department.[27]

The purpose of the Treasury Special Account is to ensure that amounts are available for transfer to the Health Special Account to meet Medicare benefit and PBS payment obligations.[28]

Clause 7 sets out in general terms the power of the Treasurer to determine, by notifiable instrument, that a specified amount is to be credited to the Treasury Special Account at a specified time.[29] The determination must always be expressed to be for a particular budget year.[30]

Clause 8 sets out how an amount is to be credited into the Treasury Special Account for the budget year commencing on 1 July 2017. This provision recognises that the Treasury Special Account may not be established by 1 July 2017. The Treasurer is required, as soon as practicable after the establishment of the Treasury Special Account, to make a determination expressed as being for the budget year commencing on 1 July 2017. The amounts specified in the determination must be sufficient to cover the funding of Medicare benefit payments[31] and PBS payments[32] for the period which begins when a specified amount is credited to the Treasury Special Account and ends at the end of the relevant budget year. Those monies will be ‘the proceeds from the Medicare levy, less the portion set aside for the National Disability Insurance Scheme’.[33]

Clause 9 sets out how the Treasurer is to make a determination for later budget years. The determination is to be made as soon as practicable after the release of the Commonwealth budget in the relevant budget year.

Where the balance of the Treasury Special Account and the Health Special Account is likely to fall short of the amount needed to meet Medicare benefit payments and PBS payments, clause 10 of the Guarantee Bill requires the Treasurer to make a further determination (in accordance with the terms of clause 7) that:

•       is expressed to be for a budget year

•       provides that a specified amount is to be credited to the Treasury Special Account at a specified time and

•       the amount must be equivalent to the amount of the expected shortfall.

Such a shortfall may come to light, for instance, at the time that the Government prepares its mid-year budget update.

Health Special Account

Clause 12 of the Guarantee Bill establishes the Health Special Account and designates it as a special account for the purposes of the Public Governance, Performance and Accountability Act. The Health Special Account is to be administered by the Secretary of the Health Department.[34]

Clause 13 specifies that the purposes of the Health Special Account are to make Medicare benefit payments and make PBS payments after the initial credit time for the Health Special Account.[35]

Where the balance of the Treasury Special Account is greater than zero, the Treasurer must, in writing, direct that the balance amount is debited from the Treasury Special Account and credited to the Health Special Account.[36] Similarly where the liabilities of the Health Special Account are over-estimated the Health Minister may direct, by notifiable instrument, that an amount should be debited from the Health Special Account and returned to the general CRF.[37]

Clause 18 of the Guarantee Bill provides that, if the balance of the Health Special Account is insufficient to meet a MBS or PBS payment, then the CRF is appropriated for the purposes of making the payment.

Consequential Amendments Bill

Item 1 of the Consequential Amendments Bill repeals section 125 of the Health Insurance Act which provides that all amounts payable by the Commonwealth by way of Medicare benefits are appropriated from the CRF. This is no longer needed as those payments will be made from the Health Special Account.

Items 2 and 3 of the Consequential Amendments Bill amend subsection 130(1) of the Health Insurance Act and subsection 135A(1) of the National Health Act respectively to permit information covered by those provisions to be shared for the purposes of the performance of duties or the exercise of powers or functions under the provisions of the Guarantee Bill.

Concluding comments

The Guarantee Bill establishes the Medicare Guarantee Fund comprising two special accounts. It does not, of itself, guarantee the continuing existence of Medicare. According to one commentator, ‘it merely provides an additional line in the budget papers, supplementing information that was already there for MBS and PBS expenditure, albeit separately’.[38]

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[1].              Department of Human Services (DHS), ‘Medicare services: about Medicare’, DHS website, 18 May 2017.

[2].              A Biggs, Medicare: a quick guide, Research paper series, 2016–17, Parliamentary Library, Canberra, 12 July 2016, p. 1.

[3].              Department of Health (DoH), Medicare benefits schedule book: operating from 01 May 2017, DoH, Canberra, 1 May 2017.

[4].              DoH, ‘About the PBS’, DoH website, 1 January 2017.

[5].              M Goddard, ‘How the Pharmaceutical Benefits Scheme began’, Medical Journal of Australia, 201(1), 7 July 2014.

[6].              DoH, ‘National medicines policy’, DoH website, 16 November 2014.

[7].              A Grove, The pharmaceutical benefits scheme: a quick guide, Research paper series, 2015–16, Parliamentary Library, Canberra, 7 April 2016, p. 1.

[8].              B Shorten (Leader of the Opposition) and C King (Shadow Minister for Health), Election 2016: Labor’s Medicare guarantee, joint media release, 24 May 2016.

[9].              H Alexander, ‘Why Mediscare worked in the west’, The Sun-Herald, 24 July 2016, p. 6; R Gittins, ‘”Mediscare” a real worry’, The Age, 6 July 2016, p. 16; B Potter, ‘Concern over success of “Mediscare”’, The Australian Financial Review, 4 July 2016, p. 9.

[10].              P Martin, ‘“Mediscare” worked because fear among voters was real’, The Age, 4 July 2016, p. 8; S Bartholomeusz, ‘The high price of Labor’s “Mediscare” campaign’, The Australian, 5 July 2016, p. 22.

[11].              S Morrison (Treasurer), ‘Second reading speech: Appropriation Bill (No. 1) 2017–18’, House of Representatives, Debates, (proof), 9 May 2017, p. 65.

[12].              S Morrison (Treasurer), ‘Second reading speech: Medicare Guarantee Bill 2017’, House of Representatives, Debates, (proof), 1 June 2017, p. 7.

[13].              Northern Suburbs General Cemetery Reserve Trust v Commonwealth (1993) 176 CLR 555, [1993] HCA 12.

[14].              Department of Finance (DoF), ‘Guide to appropriations: RMG 100: appropriations: constitutional background’, DoF website, 25 January 2017.

[15].              DoF, An introduction to Special Accounts, Finance circular, 2009/01, DoF, Canberra, 4 March 2009, para. 16.

[16].              For a history of the development of Special Accounts, see C Lawson, ‘“Special Accounts” under the Constitution: amounts appropriated for designated purposes’, UNSW Law Journal, 29(2), 2006, pp. 114–146.

[17].              Australian Taxation Office (ATO), ‘Medicare levy’, ATO website, 31 August 2016.

[18].              Grove, The pharmaceutical benefits scheme: a quick guide, op. cit., p. 1.

[19].              Morrison (Treasurer), ‘Second reading speech: Medicare Guarantee Bill 2017’, op. cit.

[20].              R Di Natale (Australian Greens), Australian Greens 2017 budget, media release, 9 May 2017.

[21].              C King (Shadow Minister for Health and Medicare), Government's Medicare "guarantee" not worth the paper it's written on, media release, 23 May 2017.

[22].              S Parnell, ‘The verdict’, The Australian, 10 May 2017, p. 14.

[23].              Australian Healthcare and Hospitals Association (AHHA), Doctors, industry groups entrusted with the keys for a healthy Australia, media release, 9 May 2017.

[24].              Explanatory Memorandum, Medicare Guarantee Bill 2017 [and] Medicare Guarantee (Consequential Amendments) Bill 2017, p. 3.

[25].              The Statement of Compatibility with Human Rights can be found at pages 17–18 of the Explanatory Memorandum to the Bills.

[26].              Explanatory Memorandum, Medicare Guarantee Bill 2017 [and] Medicare Guarantee (Consequential Amendments) Bill 2017, p. 9.

[27].              Medicare Guarantee Bill, subclause 6(3).

[28].              Medicare Guarantee Bill, clause 11.

[29].              Section 11 of the Legislation Act 2003 defines a notifiable instrument. Notifiable instruments are not subject to Parliamentary scrutiny or sunsetting and do not require an explanatory statement.

[30].              Clause 4 of the Guarantee Bill defines a budget year as the financial year to which an annual Commonwealth budget relates.

[31].              Clause 4 of the Guarantee Bill defines a Medicare benefit payment as a payment by the Commonwealth under Part II of the Health Insurance Act 1973; or payment by the Commonwealth under an arrangement in force under section 129A of the Health Insurance Act 1973.

[32].              Clause 4 of the Guarantee Bill defines a PBS payment as a payment by the Commonwealth for the purposes of Part VII of the National Health Act 1953 but does not include expenditure covered by subsection 137(2) of that Act.

[33].              Morrison (Treasurer), ‘Second reading speech: Medicare Guarantee Bill 2017’, op. cit.

[34].              Medicare Guarantee Bill, subclause 12(3).

[35].              Clause 4 of the Guarantee Bill defines the initial credit time for the Health Special Account is the first time when an amount is required to be credited to the Health Special Account by a direction under subsection 14(1).

[36].              Medicare Guarantee Bill, clause 14.

[37].              Medicare Guarantee Bill, clause 15.

[38].              S Duckett, ‘Don’t be fooled, the Medicare Guarantee Fund provides no real guarantee’, The Conversation, 12 May 2017.