Budget Review 2020–21 Index
On 27 June 2019, the Productivity Commission (PC) sent the
Government its report on the inquiry into the system of compensation and
rehabilitation for veterans: A Better Way to Support Veterans. The
report found that the system ‘is not fit-for-purpose—it requires
fundamental reform. It is out-of-date and is not working in the best interest
of veterans and their families, or the Australian community’ (p. 2).
In February 2020, the Minister
for Veterans’ Affairs, Darren Chester, stated that the Government was ‘in
the process of finalising its response to the Productivity Commission and its
recommendations, and that will be part of Budget considerations this year’.
Further, the Minister stated that the report ‘will be fully responded to in the
matter of [the] next few months’.
On 8 October 2020, the Minister released an interim
response to the PC report, which he said addressed 25 of the 69
recommendations. The 2020–21 Budget included measures made in response to six of
the recommendations (outlined below). The
Minister stated that the Government was ‘committed to consulting with the
ex-service community to consider and address the remaining recommendations as
part of our final response to be provided as part of the 2021–22 Budget’.
Productivity Commission’s findings
The PC found that the current system ‘fails to focus on the
lifetime wellbeing of veterans’. The PC used the term ‘veteran’ to cover both
current and former members of the Australian Defence Force (ADF). It
found that the system was:
- complex—both legislatively and administratively with the three
main statutes providing different entitlements and overlapping in terms of
- difficult to navigate—there are a large number of different
benefits with complex eligibility criteria and rate structures
- inequitable—the level of support differs for those with similar
needs depending on what legislative scheme they are covered by and
- poorly administered—placing unwarranted stress on claimants (p.
The PC’s final report proposed wide-ranging reforms to the
governance and funding of the system including:
- establishing a single Ministry of Defence Personnel and Veterans
- creating a new statutory authority—the Veterans’ Services
Commission—to administer and oversee the performance of the veteran support
- harmonising the different statutory compensation and
- levying an annual premium on the Department of Defence to fund
the expected cost of future compensation claims from veterans and
- creating a Joint Transition Authority within Defence which would
be responsible for preparing and assisting veterans with their transition to
civilian life (pp. 2–3).
The Government’s interim response to the PC report agreed
that it must shift from a system that focused on illness and impairment to a
system that supports the lifetime wellbeing of veterans and their families. The
interim response noted that:
The Government’s approach to reform of the veteran support
system, in particular in relation to legislation, will be evolutionary and we
will pursue sensible elements of the Commission’s legislative harmonisation
plan over time (p. 2).
The interim response noted that the Government had
implemented nine of the PC’s recommendations including the development of a Veteran
Mental Health and Wellbeing Strategy and National Action Plan 2020–23.
PC’s recommendation in this regard (Recommendation 17.4) was for a single
strategy for Defence and the Department of Veterans’ Affairs (DVA) which would
cover each of the life stages of military personnel from recruitment through to
ex-service (p. 75). DVA and Defence currently have separate mental health
strategies though DVA’s
new strategy notes that these will be evaluated in 2023 to ‘assess the
potential for improved outcomes from a future joint strategy’ (p. 14).
Other recommendations listed by the interim response as having
been implemented include:
- the commissioning of a review of medical and allied health fees
and an increase in the fee schedule for certain services (detailed in the next
- formalising Defence’s responsibility for the lifetime wellbeing
of ADF members by including a statement in the department’s corporate plan
- reporting publicly on ADF rehabilitation outcomes
- reporting publicly on progress in implementing the
recommendations of recent reviews
- providing staff with training in dealing with vulnerable people
such those experiencing the impacts of trauma
- improving awareness of DVA mental health services
- undertaking more high quality trials and reviews of different
services and policy approaches and
- publishing a veteran research plan.
The interim response stated
that another 11 recommendations were agreed to or were ‘underway’. However,
this included Recommendation 11.2—levying a premium on Defence to fund the
expected cost of future compensation—which the
interim response rejected in favour of developing an alternative approach
... development of a platform to bring together Defence and DVA
de-identified data in one place to build a better understanding of the cost of
service injuries and to inform prevention strategies without impacting on
capability (p. 5).
This ‘alternative approach’ appears to bear little
resemblance to the intent of the PC’s recommendation. It is more in-line with
Recommendation 5.1 which suggests Defence and DVA assess data-sharing which
would ‘provide insights into the cost of particular injuries and illnesses’ (p.
The recommendation for a levy on Defence was always likely
to be contentious given the diverse and changing nature of the conflicts and
emergencies to which government deploys military forces and the challenges
these deployments present to the health and wellbeing of personnel. The PC’s
recommendation was intended as a way to deliver better outcomes for veterans.
It was based on the argument that the design of the current system means that
Defence has a strong incentive to provide rehabilitation services to ADF
members who have a high probability of redeployment or return to duty, but a
weaker incentive to rehabilitate members likely to transition out (p. 24). According
to the PC, the long-term costs of problems that arise during service are
not borne by Defence but handed to DVA:
... Defence can effectively settle its long-term work health
and safety obligations by discharging its members. This is not an option for
any other Australian employer because they pay a financial premium (or self-insure
to the same effect) that reflects the long-term costs of their employees’
work-related injuries. In effect, what the current system does is it under
prices the high long-term costs of supporting veterans compared to the lower
short-run costs. (pp. 23–24)
funding from additional resourcing for DVA in the 2020–21 Budget will be
allocated to ‘scoping work’ related to the alternative approach to
Recommendation 11.2 (p. 167). A further five recommendations were addressed in
the 2020–21 Budget (see next section).
Two more recommendations were rejected:
- 16.4—changing eligibility conditions for the veterans’ Gold Card
so that only veterans’ with severe service-related impairments would be
eligible (the PC recommended existing Gold Card holders be protected) and
- 16.5—no further extensions to Gold Card eligibility.
The Gold Card provides access to health treatments and care
for any medical condition—regardless of whether that condition is related to a
person’s service—at DVA’s expense. The eligibility conditions currently provide
for a range of cohorts other than severely impaired veterans to access the card,
including some dependents of veterans, veterans aged over 70 years with
qualifying service and veterans on the Service
Pension who meet a means test. In recent years, some civilians have been
granted eligibility for the Gold Card, including participants
in the British nuclear tests in Australia and Australian
medical teams in Vietnam during the period 1964–72 under the Southeast
Asian Treaty Organization (SEATO) aid program.
The PC had found that the Gold Card is not targeted to
service-related health needs, focused on wellness or financially sustainable
The 2020–21 Budget included five new measures in response to
the PC’s report, including one measure in response to both the PC report and a
of the Totally and Permanently Incapacitated (TPI) rate of Disability Pension.
Mental health support for veterans
and their families
Budget included $101.7 million over four years for veteran mental health
measures (p. 168). The main component of this measure was $94.3 million for a
one-off increase in the fee schedule paid by DVA to mental health, social work
and community nursing providers.
Recommendation 16.3 of the PC’s report was for an
independent review of fee-setting arrangements which would look at the merits
of adopting workers’ compensation-style fee arrangements (including
co-payments). The PC had found that DVA was paying significantly lower fees
than market rates and workers’ compensation schemes for some allied health
services including psychology. These fees were also subject to an indexation
freeze between 2013 and 2018 (p. 717). The PC noted that providers cannot charge
DVA clients a co-payment (except for pharmaceuticals and some dental services)
and that if fees are set too low then providers will respond by
cross-subsidising from other patients (or their own income) or not treating DVA
clients (p. 718). In recent years there have been media
reports of mental health providers not accepting veterans as patients due
to the low fee schedules.
The budget measure also includes $2.4 million to extend
eligibility for the Coordinated
Veterans’ Care (CVC) Program to DVA White Card holders with chronic mental
health conditions. All current and former ADF members are
provided with a White Card to access mental services at DVA’s expense. The
CVC Program is a coordinated care program developed by the participant, their
GP and a nurse coordinator. Currently, only Gold Card holders with a chronic
health condition who are at risk of unplanned hospitalisation are eligible for
the program. The interim response to the PC’s report lists this measure as a
response to Recommendation 16.1. However, 16.1 recommended amending the CVC
program so that higher payments are provided to higher-risk patients and lower
payments for lower-risk patients. The
PC had found the program was not being targeted properly and there were
incentives for GPs to enrol patients with a low-risk of unplanned
hospitalisation (pp. 711–712).
Other components of this budget measure include ten
additional training places for psychiatrists to specialise in veterans’ mental
health care and $5.0 million to expand Open Arms – Veterans and Families
Counselling services and monitor outcomes (Recommendation 17.2 of the PC
Joint Transition Authority
Budget included $17.7 million over four years (and $4.4 million per year
ongoing) to establish a Joint Transition Authority with the Department of
Defence (p. 71). The measure will cost $10.6 million over four years with the
remaining funding met from existing resources. The Authority will assist ADF
members and their families as they transition from military to civilian life.
The Authority was recommended by the PC (Recommendation 7.1)
to recognise that Defence has primary responsibility for the wellbeing of
discharging ADF members. The
PC had found that transition could be a difficult and stressful time for
some veterans, particularly those in lower ranks and those involuntarily
discharged (p. 49). The PC recommended the Authority prepare serving members
and their families for transition, provide individual supports, provide
information and access to DVA supports, remain accessible for 12 months after
discharge and report publicly on transition outcomes (p. 50).
Disability Pension changes
The Government will make
a number of changes to veterans’ Disability
Pension compensation payments in response to recommendations of the Independent
Review into the TPI Payment by David Tune, including:
- renaming the Disability Pension the ‘Disability Compensation
Payment’ to better reflect its status as a compensation payment rather than a
means-tested income support payment such as the Service Pension
- making the Disability Pension exempt from the social security
income test and the veterans’ rent assistance income test
- simplifying the way Disability Pension rate components are
changes will cost $25.9 million over four years and will require
Making the Disability Pension exempt from the social
security income test will remove the need for the Defence
Force Income Support Allowance (DFISA). The DFISA is paid to veterans
Disability Pension recipients who are eligible for the Age Pension or certain
other social security payments (such as JobSeeker Payment). It tops up the rate
of the relevant social security payment to what it would be if the Disability
Pension was exempt from the income test.
The rent assistance income test reduces the level of rent assistance
for those receiving veterans’ Disability Pension or Permanent Impairment
Compensation payments—with those receiving the highest rates of payment (i.e.
those with the highest impairment level) not eligible for any rent assistance.
Clarke Review of Veterans’ Entitlements had proposed a model for the
veterans’ Disability Pension where there was no rent assistance income test and
it was exempt from the social security income test (p. 629). The DFISA
was introduced as an alternative to making the Disability Pension exempt
from the social security income test (p. 21). Making the Disability Pension
exempt from the social security income test and removing the DFISA was a
recommendation of the PC report (Recommendation 15.1) and an option proposed by
the Tune review (Supplementary Option 1).
The proposed changes will simplify Disability Pension
arrangements and enable recipients of this compensation to receive rent
assistance (or higher rates of rent assistance than currently payable). The
Tune Review, and the Government, rejected calls from veterans in receipt of
the TPI rate of Disability Pension to increase the payment rate.
Economic Support payments
Most veteran payment and concession card holders will also
benefit from two $250 Economic Support payments announced
in the Budget. The payments will be made to those in receipt of an eligible
payment or holding an eligible concession card on 27 November 2020 and/or 26
February 2021. The two new payments follow on from
two $750 payments made as part of the Government’s response to COVID-19 in
April and July. For further information on this budget measure, see the ‘Social
security and welfare’ article in this Budget Review.
All online articles accessed October 2020
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