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Bills Digest No. 170 2001-02
National Health Amendment (Pharmaceutical Benefits - Budget Measures)
Bill 2002
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
National
Health Amendment (Pharmaceutical Benefits - Budget Measures) Bill 2002
(Bills Digest 170, 2001-02)
Date Introduced:
6 June 2002
House:
House of Representatives
Portfolio:
Health and Ageing
Commencement:
Items 1-24 of Schedule 1 commence on 1 August
2002, items 25-28 of Schedule 1 commence on 1 January 2003, and the remainder
commences on Royal Assent.
Purpose
The purpose of the National Health Amendment (Pharmaceutical
Benefits – Budget Measures) Bill 2002 (‘the Bill’) is to introduce a 2002-03
Health and Aging Portfolio Budget measure (Outcome 2) that specifies an
increase in the patient co-payments for the purchase of drugs subsidised
under the Pharmaceutical Benefits Scheme (PBS). The Budget measure proposes
that the co-payment amounts rise by 28 per cent from $22.40 to $28.60
for general patients and from $3.60 to $4.60 for concessionary patients
(to be effective from 1 August 2002). It is also proposed that the concessional
patient safety net threshold will increase from $187.20 to $239.20, and
the general patient safety net threshold will increase from $686.40 to
$874.90 (both changes to be effective from 1 January 2003).
The PBS is currently the fastest growing area of health
expenditure in Australia. In the 2001-2002 financial year PBS expenditure
is estimated to cost $4.837 billion, 13.6 per cent more than it did in
the previous year. In the last decade it has experienced an estimated
average annual expenditure growth rate of around 14 per cent. According
to the fiscal projections of the Intergenerational Report 2002-03,
government expenditure on the PBS will increase five-fold by 2041-42 (as
a percentage of GDP).
The stated mission of the PBS is to make affordable to
all Australians the medications they need, but at a responsible cost to
the community. The currently growing cost to the community of the PBS
is placing pressure on the scheme’s future capacity to make available
to Australians newly developed expensive medicines. The sustainability
of the PBS is consequently an important issue.
Between 1991-92 and 2001-02, the government contribution
to the overall annual PBS expenditure has increased at an average annual
rate of 13.5 per cent. Patient co-payments have had a slightly lower rate
of increase in that period – 12.4 per cent. In 1991-92, the patient contribution
to annual PBS costs was around 20 per cent, and has been steadily declining
to around 15 per cent in 2000-01. At the level of patient co-payments
proposed in this Budget measure, the estimated total annual contribution
to PBS costs from patients will be restored to approximately 20 per cent.(1)
There has been opposition to the proposed co-payment
rise from the ALP, and the Australian Democrats. The Australian Democrats
have argued that the co-payment increases will shift costs to the States
through increased hospital and emergency room visits.(2) Senator
Stott-Despoja has urged the government to consider alternative measures,
such as increased application of price-volume agreements (where prices
paid to manufacturers vary depending on the sale of drugs), as well as
further reforms to prescribing practices which contribute to high PBS
cost increases.(3) The ALP has similarly argued that increasing
co-payments places an unfair burden on those least able to afford it,
and has endorsed a range of cost-effectiveness measures for the PBS.(4)
The Greens are also opposed to the rise in co-payments.(5)
Items 1-15, 17 and 18
of Schedule 1 make amendments, and consequential amendments,
to the National Health Act 1953, which give effect to the stated
increase in co-payments. These changes are detailed in the Explanatory
Memorandum to the Bill.
Item 16 of Schedule 1 specifically preserves
the concessional beneficiary safety net threshold - and amount equal to
52 times the concessional patient co-payment - at its current level ($187.20)
for the remainder of the 2002 calendar year. From 1 January 2003, this
threshold will rise to $230.20.
Items 19-24 of Schedule 1 amend or refer
to section 99G of the National Health Act 1953, and make provision
for the future indexation of the increased patient co-payments and safety
net thresholds. These changes are detailed in the Explanatory Memorandum
to the Bill, which also notes:
[The increases in co-payments and safety net thresholds]
will take the place of indexation changes that would otherwise occur
with effect from 1 January 2003. Indexation of patient co-payments
and safety net thresholds will resume with effect from 1 January 2004.
Items 25-27 of Schedule 1 increase the
general patient safety net threshold from $686.40 to $874.90. There is
no specific savings provision akin to that provided in item 16 of Schedule
1 (in relation to the concessional beneficiary safety net), but the stated
commencement date of these items (see clause 2 of the Bill) means
this change will not come into effect until 1 January 2003.
Concluding
Comments
The proposed increases in co-payment levels will reduce
the proportion of the annual costs of the PBS that the Commonwealth will
have to pay. It is questionable, however, whether this will have the stated
long-term impact of enhancing the sustainability of the PBS. It can be
argued that such an increase may negatively affect the operation of the
PBS.(6)
The increasing costs of the PBS have partly been attributed
to aspects of its operation which are not cost-effective. The PBS is designed
to make available medicines that will have cost-savings effects on the
use of other health-care and related resources (such as further GP visits,
extended hospitalisation, productivity, etc). A cost-effective PBS, even
when it is costing more in and of itself, will still be reducing
expenditure in other areas.
The problematic PBS growth drivers will be those that
detract from the PBS’ capacity to deliver the greatest level of health-related
cost-benefits. One key problematic growth driver is the rising prescription
of expensive newly developed medicines outside of their PBS cost-effectiveness
guidelines. A number of factors contribute to this prescribing, including
primarily a lack of clear, accurate and timely information about cost-effective
uses of these drugs, and misleading information and promotional incentives
from manufacturers. Although there are other 2002-03 Budget measures that
do address some of these factors, it is not clear that raising co-payments
in any way contributes to the enhanced cost-effectiveness of the PBS.
Moreover, any additional payment patients are asked to make will be partly
wasted if it is paying for a less than completely cost-effective system.
There is some evidence that raising patient co-payments
can act as a disincentive for patients to purchase prescribed medicines,
and thus as a disincentive for them to adequately address their medical
needs. This introduces the risk that further subsequent costs may be introduced
into the health-care system, perhaps through those patients seeking further
GP visits, or through hospitalisation due to their conditions being improperly
addressed. Recent NATSEM modelling (on 1996–97 data) observed that a flat
25 per cent rise in co-payments would place a burden on the lowest income
earners among general patients (making expenditure on pharmaceuticals
a high average of 8.6 per cent of disposable income).(7) There
is also overseas evidence that increases in co-payments can result in
patients not filling their prescriptions.(8)
Apart from these concerns about the potential impacts
of co-payment rises, there are also questions surrounding the rationale
for why the rises should be of the specified amount. Although the proposed
rise will bring the proportional patient contribution to the total annual
PBS costs into line with what it was in 1991-92, it is not clear why that
particular proportioning is especially important. Nor is it clear that
any proportionality or balance in government-patient contributions has
ever been, historically, a relevant policy consideration. The rationale
for setting the general patient safety-net threshold at approximately
30 times the general co-payment amount is similarly unclear.
- Second Reading Speech, National Health Amendment (Pharmaceutical Benefits-Budget
Measures) Bill 2002.
- M. Lees, "PBS Cuts: Another Cost Shift to the States" Press Release
Wednesday May 15, 2002.
- N. Stott-Despoja "Government Urged to Drop DSP and PBS Charges" Press
Release, 9 June 2002; N. Stott-Despoja, "Costello’s Quick Fix is
no Benefit to Ailing System", The Australian, 7 June 2002.
- S. Crean, "Reform of the Pharmaceutical Benefits Scheme", Press
Release June 16, 2002.
- B. Brown, "Greens to oppose super cuts for the rich in the Senate"
Press Release, May 17, 2002.
- See further M. Rickard, The Pharmaceutical Benefits Scheme – Options
for Cost Control, Current Issues Brief, no 12, 2001-02, Department
of the Parliamentary Library, 28 May 2002, http://www.aph.gov.au/library/pubs/CIB/2001-02/02cib12.htm.
- Walker, 'Distributional Impact of Higher Patient Contributions to
Australia's Pharmaceutical Benefits Scheme', Australian Health Review,
vol. 23, no. 4, 2000, pp.32–46.
- Two recent reports note the negative impact of increased co-payments
on usage. S. Jacobzone, Pharmaceutical Policies in OECD Countries: Reconciling
Social and Industrial Goals. Labour Market and Social Policy Occasional
Papers, no. 40, OECD Section 2.1.1, 2000; Senate Standing Committee
on Social Affairs, Science and Technology, Interim Report on the State
of the Health Care System in Canada, vol. 2, January 2002, pp. 33–34.
Maurice Rickard
18 June 2002
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
© Commonwealth of Australia 2002
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Published by the Department of the Parliamentary Library, 2002.
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