Bills Digest 56 1996-97 National Health (Budget Measures) Amendment Bill 1996

Numerical Index | Alphabetical Index

This Digest is prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest was available from 28 November 1996


Passage History

National Health (Budget Measures) Amendment Bill 1996

Date Introduced: 9 October 1996
House: House of Representatives
Portfolio: Health and Family Services
Commencement: 1 January 1997


To increase patient contributions under the Pharmaceutical Benefits Scheme, restrict access to subsidised drugs to Australian residents and a restricted range of members of overseas missions, and to make minor changes to the indexation of various patient contributions.


The Pharmaceutical Benefits Scheme (PBS) provides subsidises for listed pharmaceuticals. The amount of the subsidy varies depending on the cost of the pharmaceutical and the status of the person receiving the pharmaceutical. The general rate of charge for benefits is $15 (this amount is subject to indexation and is currently $17.40), although if a person is eligible for concessional benefits their contribution will be $2.50 (this amount is also subject to indexation and is currently $2.70). The lower charge applies where the person to whom the benefit is supplied holds a concession card (see below) or is a concessional beneficiary. The main categories of 'concessional beneficiary' are pensioners, unemployed, holders of seniors health cards under the Social Security Act 1991 or the Veterans' Entitlements Act 1986 (the card is available to low income earners), recipients of the youth training allowance and those in receipt of a service pension.

The PBS contains safety nets for both general patients and those in receipt of concessional benefits. For general patients, the concession card is available where their expenditure in a year on pharmaceuticals exceeds the threshold, which is currently $600 and, as noted above, where the threshold is exceeded the patient will be required to pay $2.70 per prescription (the reduced general contribution). For those already in receipt of concessional benefits, they will be eligible for an entitlement card when their yearly expenditure on pharmaceuticals exceeds 52 times the concessional payment (ie. currently $140.40). The entitlement card will enable holders to receive further pharmaceuticals during the year for free.

Expenditure under PBS is largely committed to concessionary beneficiaries. For example, expenditure under PBS in 1995-96 amounted to $473 million under the general category and $1772 million for concessional beneficiaries. Estimates for 1996-97 are that these amounts will be $477.6 million and $1943.2 million; for 1997-98: $508.8 million and $2097.1 million; and for 1998-99: $576.6 million and $2317.5 million.

The PBS uses a number of techniques to reduce the cost of the scheme. The Minimum Pricing Policy provides that where more than one source of a drug is available, the price payable for the drug will be the lowest available to the Commonwealth. Suppliers of other brands of drugs will be able to set a higher price, but the difference between the lowest price and that for the other brand drug is payable by the customer. As at 30 June 1996, there were 162 items with a brand premium, with the average premium being $1.44. Premiums range from $0.20 to $9.25. Since 1 December 1994, pharmacists have been able to dispense generic brands of brands rather than the one prescribed by a medical practitioner where the drugs are equivalent. Since September 1994, the rate of generic drugs dispensed has increased from 10.3% to 22.11% in April 1996. Another method used to decrease the cost of PBS is the requirement for patients to make a contribution where the Commonwealth and the drug supplier cannot reach agreement about the price of a drug. There are currently only four products subject to a patient contribution.(1) In addition to the above policies, the Commonwealth also relies on its market power to secure advantageous prices from suppliers.

The Industry Commission (IC) has recently reported on the pharmaceutical industry and the PBS. Major recommendations of the IC and the governments responses related to:

  • that the PBS listing procedures be reviewed as a matter of urgency. The government rejected this recommendation on the basis that the administrative aspects of PBS had recently been reviewed and that an efficiency audit of PBS is scheduled for 1996-97; and
  • that the government undertake a review of PBS policy in order to strike a better balance between the interests of taxpayers, consumers and industry. The government's response was that such a review was not necessary at this time due to the deliberations of the Council of Australian Governments and the National Commission of Audit.(2)

It was announced in the 1996-97 Budget that consumer charges under PBS would be increased by 20%(3) with the general contribution rate rising to $20, the concessional rate increasing to $3.20 and the concessional safety net increasing to $166.40. The general safety net threshold will not be increased above $600 by this Bill, but this amount will be subject to indexation from 1 January 1997. The explanatory memorandum to the Bill estimates that the total savings from the measures contained in the Bill will be $74.2 million in 1996-97; $155 million in 1997-98; $176.1 million in 1998-99; and $203.4 million in 1999-2000. (The explanatory memorandum gives a breakdown of the savings in relation to the measures contained in the Bill.)

Main Provisions

Schedule 1 of the Bill will amend a number of provisions of the National Health Act 1953 (the Principal Act) that contain references to the general, reduced general and concessional contribution rates. The amendments will increase the general contribution to $20 and the reduced general and concessional contributions to $3.20.

Schedule 2 of the Bill deals with the indexation of contributions under the Principal Act. The main changes contained in the Schedule are:

  • the general patient charge will be indexed on 1 January rather than 1 August each year. Other charges are currently subject to indexation on 1 January; and
  • the general, concessional and general patient reduced charges will not be subject to indexation on 1 January 1997.

Schedule 3 will amend various sections of the Principal Act which define those eligible to receive drugs under PBS. The definitions will be amended to require such people to be eligible people within the meaning of the Health Insurance Act 1973 (ie. Australian residents or an eligible overseas representative - ie. the head and staff of overseas missions and their families who, under an agreement between Australia and the other country, is to be treated as an Australian resident).


  1. Pharmaceutical Benefits Pricing Authority, 1995-96 Annual Report, pp. 6 - 9.
  2. Minister for Industry, Science and Tourism, Press Release, 10 September 1996.
  3. 1996-97 Budget Paper No. 1, p. 3-101.

Contact Officer and Copyright Details

Chris Field Ph. 06 277 2439
13 November 1996
Bills Digest Service
Parliamentary Research Service

This Digest does not have any official legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

PRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1323-9032
© Commonwealth of Australia 1996

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Published by the Department of the Parliamentary Library, 1996.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 14 November 1996

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