Veterans’ affairs

Budget Review 2020–21 Index

Michael Klapdor

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 It is out-of-date and is not working in the best interest of veterans and their families, or the Australian community’ (p. 2).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 and recommendations

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 eligibility
  • 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. 2).

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 system
  • harmonising the different statutory compensation and rehabilitation schemes
  • 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).

Interim response

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. However, the 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 section)
  • 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 through the:

... 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. 47).

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)

Some 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 (p. 71).

Budget measures

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 2019 review of the Totally and Permanently Incapacitated (TPI) rate of Disability Pension.

Mental health support for veterans and their families

The 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 report).

Joint Transition Authority

The 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 indexed.

The changes will cost $25.9 million over four years and will require legislation.

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.

The 2003 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.


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