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CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Health Legislation Amendment (Gap Cover Schemes) Bill
2000
Date Introduced: 17 February 2000
House: House of
Representatives
Portfolio: Health and Aged Care
Commencement: The Act commences on Proclamation
or six months and one day after Royal Assent, whichever is
earlier.
The purpose of the Health Legislation Amendment (Gap
Cover Schemes) Bill 2000 is to enable the introduction of private
health insurance policies which limit the out-of-pocket costs faced
by contributors and do not require formal contractual agreements
between health insurance funds and medical practitioners.
The issue of the 'gap'
between fees charged by medical practitioners for in-hospital
procedures and the combined Medicare rebate and refund from private
health insurance funds has long been of concern to contributors and
non-contributors alike. The Explanatory Memorandum to the Health
Legislation Amendment (Gap Cover Schemes) Bill 2000 estimates the
cost of the 'gap' at around $200 million in 1997-98 for
contributors to private health insurance.(1)
Previous Government action
Private health insurance policies offering
limited or no out-of-pocket costs for contributors have been
possible since 1995 following the passage of the Health
Legislation (Private Health Insurance Reform) Amendment Act
1994 (colloquially known as the 'Lawrence
legislation/amendments', after the then Minister for Health). This
legislation, in part, enabled health insurance funds to make
payments for medical services above the Medicare Benefits Schedule
fee where an agreement was in place between the fund and the doctor
(Medical Purchaser-Provider Agreements). The legislation also
permitted agreements between hospitals and health insurance funds
(Hospital Purchaser-Provider Agreements) and between hospitals and
doctors (Practitioner Agreements). Amendments to this regime were
passed in 1998 (Health Legislation Amendment Act (No 2)
1997) which aimed to address some of the concerns held by the
medical profession about the agreements.
While most health insurance funds have been
successful in negotiating with most hospitals to achieve limited or
no out-of-pocket hospital costs for their contributors with
appropriate cover, only limited success has been achieved in
relation to medical charges. Most medical practitioners and the
Australian Medical Association (AMA) have been, and remain,
implacably opposed to the existing system of agreements as a means
of limiting out-of-pocket costs for contributors to private health
insurance. Their opposition has tended to centre on a perception
that the existing system permits health insurance funds to
interfere in the doctor-patient relationship. The more flexible
environment which the Health Legislation Amendment (Gap Cover
Schemes) Bill 2000 proposes to create will offer the profession the
opportunity to demonstrate that it is serious about addressing the
issue of the medical 'gap'.
View of the
medical profession and other stakeholders
The AMA strongly supports this legislation. In a
media release following Federal Cabinet's approval of the
legislation, AMA Federal President, Dr David Brand, said that:
...the move would result in gap insurance
products that would meet with much greater acceptance from
doctors...this legislation, once approved by Parliament, will help
get Australia off the road to managed care. It is a major
breakthrough for patients, for the health funds, for the medical
profession and for the quality of care we can
provide.(2)
The Explanatory Memorandum to the Bill states
that "the views of all relevant stakeholders have been canvassed.
Health funds and their representative bodies, peak medical groups
and consumer groups all support the preferred Option 4" (gap cover
schemes).(3)
Item 1 of Schedule 1 amends the
Health Insurance Act 1973 in order to allow the automatic
assignment of Medicare benefits. Proposed subsection
20A(2A) provides that where:
-
- a Medicare benefit would be payable to a person in respect of a
professional service rendered to a patient receiving hospital
treatment; and
-
- the person entered into an applicable benefits arrangement with
a health fund which covers (wholly or partly) the person's
liability in relation to professional services; and
-
- the professional service is covered by a gap cover scheme
approved by the Minister for Health,
then the person will be deemed to have assigned
their Medicare benefits to the fund or if the gap cover scheme
otherwise provides, to an approved billing agent, the hospital or a
prescribed person.
According to the Explanatory Memorandum this
amendment 'frees the patient from the need to claim the benefit
directly, and allows a consolidated payment incorporating the
Medicare and private insurance benefits to be made to the
practitioner.'(4)
Items 3, 4, 5 insert
definitions of the terms 'gap cover scheme', 'known gap policy' and
'no gap policy' into the National Health Act 1953
(NHA).
A 'gap cover scheme' is a scheme prepared by a
fund where the fund can offer no gap or known gap policies. A
'known gap policy' is a contract of insurance entered into by a
fund that covers the insured for all but a specified amount or
percentage of the cost of treatment and professional attention. A
'no gap policy' is a contract of insurance that covers the insured
for the full cost of hospital treatment and associated professional
attention.
Item 6 inserts a new
Division 4A into Part VI of the NHA which deals with gap
cover schemes. The new division essentially empowers the Minister
to make appropriate regulations to facilitate the operation of gap
cover schemes.
Proposed subsection 73BDD(2)
deals with the requirements of a gap cover scheme. Funds may apply
to the Minister for approval of such a scheme. A scheme will not
have any effect unless the Minister has given approval.
Proposed subsection 73BDD(5)
states that the regulations must provide for:
-
- the form and content of, and the manner of dealing with,
applications for approval of such schemes
-
- criteria to be taken into account by the Minister in deciding
whether to approve a scheme(5)
-
- the power of the Minister to impose and vary conditions on the
operation of schemes.
The regulations must also specify that the
Minister must be satisfied that the operation of the gap cover
scheme will not have an inflationary impact (proposed
subsection 73BDD(6)).
Any regulations made by the Minister may be
disallowed by either House of Parliament under section 48 of the
Acts Interpretation Act 1901.
Proposed subsection 73BDD(3)
makes clear that schemes must comply with competition law (ie the
Trade Practices Act 1974 and the Competition Codes of the
States and Territories). The section means that schemes will have
to be designed in such as way as to ensure that they do not result
in agreements which restrict dealing or affect competition, fix
prices or involve the misuse of market power. In a statement
endorsing the proposals contained in this Bill, the AMA
acknowledged that strong adherence to the AMA's list of fees in a
gap cover scheme could raise trade practices
concerns.(6) It is not clear whether the Minister will
seek the advice of the Australian Competition and Consumer
Commission on the issue of the compliance of a particular scheme
with competition law before granting his or her approval.
Arrangements under a gap cover scheme do not
capture agreements of a formal contractual nature under the NHA
(proposed subsection 73BDD(4)). As noted above
medical purchaser-provider agreements and practitioner agreements
currently facilitate medical gap cover at the moment. However as
the Minister noted in his second reading speech, parts of the
medical profession are of the view that these agreements have
formal contractual requirements which are 'completely
unacceptable.'(7)
Regulation making power is also bestowed by
proposed section 73BDE. These provisions cover the
operation of gap cover schemes after Ministerial approval has been
given.
The regulations must state that health funds are
required to provide the Minister with an annual report on the
operation of the gap cover scheme and to send a copy of the report
to the Private Health Insurance Administration Council - the
industry regulator (proposed subsection
73BDE(2)).
In addition, these regulations may also provide
for:
-
- periodic review of the schemes
-
- the power of the Minister to revoke such schemes
-
- the capacity of funds to seek to vary the schemes or
conditions, and
-
- the review, under the Administrative Appeals Tribunal Act
1975, of the decisions of the Minister approving or revoking
gap cover schemes or imposing conditions on such schemes
(proposed subsection 73BDE(4)).
Item 7 expands the functions
and powers of the Private Health Insurance Administration Council
under section 82 to include receiving reports about gap cover
schemes and advising the Minister on the operation of those
schemes.
Currently, health insurance funds may refund
more than 25 per cent of the Medicare benefits schedule fee where a
medical practitioner's charge for the service is greater than the
schedule fee and a medical purchaser-provider agreement (MPPA) is
in place between the fund and the practitioner.
Item 8 will allow a fund to pay out a greater
amount if the service is rendered under a gap cover scheme. As with
the present MPPAs, the item will permit a health fund to pay the
difference between the Medicare rebate and the total cost of the
service.
The greater availability of gap cover schemes
will be of benefit to consumers, both contributors and
non-contributors. The Explanatory Memorandum discusses in some
detail the impact on contributors of the measures in the Bill.
The Explanatory Memorandum points to a range of
benefits for contributors, but it can also be argued that while the
measures contained in this Bill are designed to assist contributors
and prospective contributors, the Bill suffers from a similar
problem to the 1995 legislation. That is, the schemes it permits
will be designed by and for providers (medical practitioners) and
payers (health funds) and approved by the Minister for Health and
Aged Care, in order to remedy a problem faced by consumers
(contributors). Consumers will have increased choice but the choice
is likely to be one of continuing to pay out-of-pocket medical
costs through the policies currently available or to pay (the
likely) higher premiums for the increased cover offered by the new
gap cover schemes. The Explanatory Memorandum to the Bill states
that all stakeholders have been consulted on the Bill, including
consumer groups.
Further possible concerns for the consumer arise
from the flexibility of the proposed arrangements. For example,
what sort of consumer protection regime is envisaged? Will a health
insurance fund guarantee the no gap or known gap if a medical
practitioner decides to walk away from the arrangements for a
particular patient/procedure? What sanctions will deter
practitioners from acting in a manner likely to disadvantage
contributors? The Private Health Industry Ombudsman would be likely
to have a role here. It is possible also that the criteria for the
establishment and approval of the gap cover schemes, which are to
be specified by regulation, may deal with some or all of these
consumer issues.
The proposed gap cover schemes will most likely
appeal (in the first instance at least) to existing members who
hold top cover. Contributors with lower levels of coverage could be
faced with a significant premium increase if they wished to upgrade
to the new top cover, although the 30 per cent rebate may be a
factor in influencing the perception of contributors about the
relative cost of premiums. In addition, the 'gap' is not
necessarily of concern to all contributors because it only becomes
a reality when a contributor undergoes a hospital episode and
receives medical treatment.
Over time, the perception of consumers (both
insured and uninsured) of private health insurance's value for
money may change, but this is unlikely to be a rapid process.
According to the latest private health insurance survey by the
Australian Bureau of Statistics, uninsured people are concerned
about the 'gap' but list their greatest concern as the cost of
private health insurance.(8) As this survey was
conducted prior to the introduction of the 30 per cent rebate (but
during the previous means tested incentives scheme) it is possible
that there has been a change already in the community's perception
of private health insurance's value for money.
The introduction of new, more flexible,
arrangements for the provision of gap cover schemes should be a
'win-win' situation for all participants in the private health
insurance industry. It may mean, for example, that more people are
attracted to private health insurance or it may mean the difference
between a contributor deciding to remain covered or dropping out.
However, the success or otherwise of the proposed measures will
hinge on the negotiating ability of the health insurance funds and
the good faith of the medical profession. The outcome of
negotiations to limit the out-of-pocket medical costs faced by
contributors, particularly for those procedures where very large
out-of-pocket costs have become the norm, will determine the uptake
of the new policies, as will the extent of any premium
increases.
The Explanatory Memorandum to the Health
Legislation Amendment (Gap Cover Schemes) Bill 2000 states that the
Bill "will have no significant impact upon the finances of the
Commonwealth".(9) However, if the measures contained in
the Bill lead to a greater number of people contributing to private
health insurance and/or existing members upgrading their cover,
there will inevitably be flow-on costs to the Commonwealth through
the 30 per cent rebate arrangements.
-
- Health Legislation Amendment (Gap Cover Schemes) Bill 2000,
Explanatory Memorandum, p. 8.
- Australian Medical Association, 'Health Insurance
Breakthrough', Media Release, 15 December 1998.
- Health Legislation Amendment (Gap Cover Schemes) Bill 2000,
Explanatory Memorandum, p. 10.
- Explanatory Memorandum p. 13.
- The Explanatory Memorandum suggests that the criteria
will require the Minister to consider factors such as whether:
the scheme is a genuine scheme that would reduce
or eliminate gaps;
the scheme contains proposals under which
patients are offered informed financial consent, that is, a
contributor to a fund is informed of any amounts that they can
reasonably be expected to pay in respect of the professional
service, including the amount of any Medicare benefit, health
insurance benefit and the amount (if any) that the contributor may
be liable to pay for the professional service;
the scheme provides for simplified billing
arrangements;
the fund can demonstrate the scheme will not
have an inflationary impact;
arrangements are made by the fund to ensure that
contributors will not be disadvantaged by revocation of the
scheme;
the scheme requires all parties to maintain the
professional freedom of medical practitioners involved in the
scheme, within the scope of accepted clinical practice, to identify
appropriate treatments in the rendering of professional services to
which the scheme applies.
- Australian Medical Association, 'Bridging the Gap without
Contracts', Health Economics, April 1999.
- The Hon. Dr Michael Wooldridge, Second Reading Speech,
House of Representative, Debates, 17 February 2000, p.
13670.
- Australian Bureau of Statistics, Health Insurance
Survey June 1998, Australia (Cat No. 4335.0), 30 September
1999, p. 23.
- Health Legislation Amendment (Gap Cover Schemes) Bill 2000,
Explanatory Memorandum, p. 2.
Paul Mackey and Mark Tapley
13 March 2000
Bills Digest Service
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ISSN 1328-8091
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