BILLS DIGEST NO. 83, 2022–23
7 June 2023

Health Insurance Amendment (Professional Services Review Scheme) Bill 2023

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Key points

The Health Insurance Amendment (Professional Services Review Scheme) Bill 2023 implements changes arising from the recommendations of the Independent Review of Medicare Integrity and Compliance (the Philip Review).
The Bill removes the requirement for the Australian Medical Association (AMA) to agree to the appointment of the Director of the Professional Services Review (PSR) on the basis the current arrangement is inconsistent with public expectations regarding the independence of the PSR. It also amends consultation requirements for appointing other statutory office holders of the PSR to enable consultation with relevant peak bodies directly, rather than via the AMA.
The Bill establishes the new statutory office of Associate Director of the PSR to assist with managing conflicts of interest, unexpected absences and workload pressures. The Associate Director will be able to exercise the same functions and powers as the Director in reviewing inappropriate practice but will not have a role in administering the PSR agency.
To streamline the audit process, the Bill removes the requirement for the Chief Executive Medicare to consult with relevant professional bodies prior to issuing a notice to produce documents.
The Philip Review outlined an ambitious reform agenda to build trust in Medicare and materially reduce non-compliance and fraud that is likely to inform further legislative and policy change over coming years.

Introductory info

Date introduced: 24 May 2023

House: House of Representatives

Portfolio: Health and Aged Care

Commencement: The day after Royal Assent.

This Bills Digest replaces a preliminary Digest published on 26 May 2023.

Purpose of the Bill

The purpose of the Health Insurance Amendment (Professional Services Review Scheme) Bill 2023 (the Bill) is to amend the Health Insurance Act 1973 (the HIA) to:

remove the requirement for the Australian Medical Association (AMA) to agree to the appointment of the Director of the Professional Services Review (PSR) (item 4 of Schedule 1)
amend consultation requirements for appointing other statutory office holders of the PSR to enable consultation with relevant peak bodies directly rather than via the AMA (items 6–9 and 12–15 of Schedule 1)
establish the new statutory office of Associate Director of the PSR (items 1, 2, 3, 5, 10, 11, 16, 20 and 21 of Schedule 1)
remove the requirement for the Chief Executive Medicare to consult with relevant professional bodies prior to issuing a notice to produce documents during an audit as to whether Medicare benefits should have been paid (items 17–19 of Schedule 1).

The Bill also makes minor technical amendments to clarify language around circumstances for termination of various statutory appointments (items 22–24 of Schedule 1).

The Bill is intended to implement priority changes arising from the recommendations of the Independent Review of Medicare Integrity and Compliance (Philip Review).[1]

Background

Medicare

Medicare is Australia’s universal health insurance scheme which subsidises the cost of selected medical services for Australians (and some international visitors).

The HIA sets out a legislative framework for the provision and claiming of services and benefits with respect to the Medicare Benefits Schedule (MBS). The MBS is the listing of Medicare services that are subsidised and includes around 6,000 items. In 2021–22 there were 511.5 million services subsidised through Medicare, with $29.1 billion paid in benefits.[2]

Medicare compliance

The HIA provides for post payment compliance activities to be undertaken by the Government, to identify incorrect claiming and recover debts. There are a range of entities with responsibilities relevant to compliance:

The Department of Health and Aged Care (Health) is responsible for the legislation and policy for the MBS and health provider compliance.[3]
The Professional Services Review (PSR) scheme, established under Part VAA of the HIA, is designed to review and investigate the provision of certain services (including Medicare services) by a practitioner or a corporate entity to determine whether they have engaged in inappropriate practice.[4] The PSR Scheme was established in 1994 and has evolved since as a result of litigation and reviews.[5] The PSR Scheme is administered by the PSR agency, a small statutory agency in the Health and Aged Care portfolio (Average Staffing Level of 33).[6] It is led by the PSR Director who has a range of powers and responsibilities under the HIA.
Services Australia administers the MBS on behalf of Health and makes payments.

The Australian National Audit Office reported that in the 2018–2019 financial year, Health recovered $49.3 million in claims which should not have been paid and reported $123.4 million in estimated savings through changes in claiming behaviour of providers.[7]

Previous changes to Medicare compliance arrangements

In recent years, the Parliament has passed four Bills aimed at improving health provider compliance arrangements:

the Health Legislation Amendment (Improved Medicare Compliance and Other Measures) Act 2018 which introduced new debt-recovery powers for Medicare debts owed to the Commonwealth, including providing for a shared debt recovery scheme [8]
the Health Legislation Amendment (Data-matching and Other Matters) Act 2019 which introduced a data-matching scheme for permitted Medicare compliance and related purposes [9]
the Health Insurance Amendment (Compliance Administration) Act 2020 which clarified the circumstances in which the Commonwealth can recover a Medicare benefit or payment where it has been provided on the basis of false or misleading information [10]
the Health Legislation Amendment (Medicare Compliance and Other Measures) Act 2022 which strengthened the ability of the Commonwealth to recover debts, including through new sanctions and increased maximum penalties for body corporates and non-practitioners.[11]

Philip Review

In November 2022, the Minister for Health and Aged Care commissioned Dr Pradeep Philip to undertake an independent review of Medicare integrity and compliance.[12] This followed media reporting of flaws in Medicare’s systems leading to fraud and waste of reportedly $8 billion a year.[13]

A public version of Dr Philip’s report (the Philip Review) was released on 4 April 2023.[14] This provided a conservative estimate of the value of non-compliance and fraud in the range of $1.5 billion to $3 billion a year, with a significant part of this stemming from non-compliance errors rather than premeditated fraud. Dr Philip emphasised that the structural issues and controls in the system ought to be the main focus, observing that:

Legislation, governance, systems, processes and tools are currently not fit for purpose and, without significant attention, will result in significant levels of fraud.[15]

The Philip Review points to the organic evolution of Medicare over decades in response to changing needs, technology, business models and health care delivery as leading to the significant issues facing the system today. The report made a series of recommendations intended to strengthen governance, enhance operational processes, modernise technology and strengthen legislation.[16]

Government response

While the Government is yet to provide a detailed response to the Philip Review, the 2023–24 Budget provided $29.8 million over 4 years from 2023–24 to strengthen the integrity of the Medicare system in response to key recommendations of the Philip Review.[17] This included establishing a taskforce in the Department of Health and Aged Care to identify and disrupt fraud and serious non-compliance, and produce immediate policy and legislative amendments.

Committee consideration

At the time of writing, the Bill had not been referred to, or reported on by, any committees.

Policy position of non-government parties/independents

At the time of writing, non-government parties and independents have not commented publicly on the Bill.

Financial implications

According to the Explanatory Memorandum there is no financial impact from the Bill (p. 2).

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[18]

Key issues and provisions

Removing the requirement for the AMA to agree to appointment of PSR Director

As discussed in the background to this digest, Part VAA of the HIA establishes the PSR Scheme which is overseen by the Director of the PSR.

Subsection 83(1) allows the Minister to appoint a medical practitioner to be the Director of the PSR. Subsection 83(2) prevents the Minister from appointing a person to be the Director of the PSR unless the AMA has agreed to the appointment. This has been a feature of the PSR Scheme since its establishment.[19] The AMA is the peak professional body for doctors in Australia.

The Philip Review recommended removing the veto power of the AMA in the selection process of the Director of the PSR given the breadth of health professions whose registrants could now be subject to a review by the PSR (Recommendation 6).[20]

…the positioning of the AMA as a professional body who can veto the appointment of a PSR Director no longer reflects the fact that there are a range of professionals who will be referred to PSR. Either all professions should be engaged and involved in Director appointment decisions, or no professional bodies should be involved.[21]

Dr Philip described this veto power as an anachronism that has never been exercised [22] and considered its removal could ‘bring about a measurable enhancement to the perception of the PSR by the sector and any perceived conflicts of interest’.[23]

Item 4 of the Bill deletes subsection 83(2), thereby removing the requirement for the Minister to obtain the agreement of the AMA prior to appointing the Director of the PSR.

As explained in the Explanatory Memorandum, the Government considers that the effective ‘veto power’ is ‘inconsistent with public expectations regarding the independence of the PSR and may undermine public confidence in its role as a regulator’.[24]

In commentary on the Philip Review, the AMA has not directly opposed the recommendation to remove its veto over the Director role. AMA President Professor Steve Robson reflected that:

While the Dr Philip may view the AMA’s role as anachronistic, the reality is that the AMA played a significant role in establishing the PSR and the peer review process as part of our commitment to ensuring Medicare funding is used appropriately.[25]

In an interview with 7.30, AMA Vice President Dr Danielle McMullen noted:

The AMA was instrumental in the development of the PSR, which takes care of the most serious cases of fraud and abnormal billing in the system. It shows that we feel strongly that compliance is important in a system like Medicare, and we're keen to remain involved in the selections to make sure that the profession has trust in that system.[26]

Establishing the new statutory office of Associate Director of the PSR

Under the PSR Scheme, only the Director can exercise a series of functions, duties and powers, including:

whether to undertake a review into a suspected case of inappropriate practice by a practitioner [27]
if a review is undertaken, upon conclusion of a review whether to enter into a written agreement with the person, refer them to a PSR Committee, or to take no further action.[28]

As the Explanatory Memorandum notes, there are no provisions in the event that the Director has a conflict of interest or is otherwise unable to make decisions on a case, for example due to unexpected absences or workload pressures.[29]

This issue was highlighted by the Philip Review, which argued that:

Having the opportunity for an associate or second Director to be available would help to share the load of the work, ensure that conflicts can be handled more appropriately, and potentially assist with succession planning and training for future Directors.[30]

The Bill establishes the new statutory office of Associate Director of the PSR. Item 1 inserts a definition for Associate Director, and includes a note that in Part VAA of the HIA, a reference to the Director includes a reference to an Associate Director, subject to certain exceptions as set out in proposed subsection 83A(2).

Item 5 inserts proposed section 83A concerning Associate Directors. Proposed subsection 83A(1) allows the Minister to appoint a medical practitioner to be an Associate Director of the PSR. One or more Associate Directors can be appointed. Proposed subsection 83A(2) details the following provisions within Part VAA of the HIA for which a reference to the Director is not to be taken to include a reference to an Associate Director:

section 83, which concerns appointment of the Director of PSR
paragraph 106ZM(2)(b), which specifies that for the purposes of the Public Service Act 1999, the Director is the Head of the PSR
section 106ZPL, which relates to the duty of the Director to arrange for the provision of services to support the committees and the Determining Authority that exercise powers under the PSR scheme
section 106ZPLA, which clarifies the application of the finance law, including that the Director is the accountable authority under the Public Governance, Performance and Accountability Act 2013 (separately, item 16 inserts a reference in section 106ZPLA providing that Associate Directors are to be included as officials in the listed entity known as the PSR)
Subdivision A of Division 6, which concerns the provisions specific to the Director’s appointment, such as terms and conditions and termination arrangements.

This has the effect of allowing an Associate Director to exercise the same functions and powers as the Director in reviewing inappropriate practice, but not to have a role in the administration of the PSR agency.

Item 11 inserts a new Subdivision AB into Division 6 of Part VAA outlining the details of an Associate Director’s appointment which mirror those currently outlined in Subdivision A of Division 6 regarding the Director.

Other provisions

Items 6–9 and 12–15 of the Bill amend consultation requirements for appointing other statutory office holders of the PSR to enable consultation with relevant peak bodies directly, rather than via the AMA (see pages 1, 6 and 7 of the Explanatory Memorandum).

Items 17–19 remove the requirement for the Chief Executive Medicare to consult with relevant professional bodies (including the AMA) prior to issuing a notice to produce documents during an audit as to whether Medicare benefits should have been paid (see pages 2 and 7 of the Explanatory Memorandum).

Items 22-24 make minor amendments to provisions relating to termination of PSR appointments to align wording with the Office of Parliamentary Counsel’s standard form; they do not change the substantive effect (see page 8 of the Explanatory Memorandum).

Concluding comments

The Bill presents relatively modest amendments to compliance arrangements, informed by the Philip Review delivered to the Government earlier this year. Amendments removing the special role of the AMA in PSR appointments are arguably less about the practical effect and more symbolic of the Government’s intention to strengthen public confidence in the systems underpinning Medicare integrity.

The Philip Review presented wide-ranging recommendations to deal with a range of challenges to the effective operation and integrity of Medicare, including several that the Review is quite clear will be complex and contentious to implement. Should the Government adopt the way forward presented by the Review, substantive future legislative amendments are likely to be required. Indeed, the Review recommended ongoing and whole of system review of relevant legislation and regulations.[31] This would be a challenging undertaking but provide opportunity to achieve systemic reform of compliance arrangements and build trust in a Medicare system fit for today and the future.

References
[1]. Dr Pradeep Philip, Independent Review of Medicare Integrity and Compliance: Final Report (Public Release), (Canberra: Department of Health and Aged Care, March 2023).
[2]. Philip, Independent Review, 67.
[3]. Following the Government’s Healthier Medicare Initiative announcement in April 2015, the Administrative Arrangements Order on 30 September 2015, transferred responsibility for Medicare provider compliance from the then Department of Human Services to the Department of Health.
[4]. Subsection 80(2) of the Health Insurance Act 1973 (HIA). Inappropriate practice is defined at section 82. In summary, it is conduct that a practitioner’s peers could reasonably conclude is unacceptable to the general body of their profession or specialty.
[5]. See ‘History of the PSR Scheme’, Professional Services Review for further detail.
[6]. Australian Government, Agency Resourcing: Budget Paper No. 4: 2023–24, 159.
[7]. Australian National Audit Office (ANAO), Managing Health Provider Compliance, Auditor-General Report, 17, 2020–21, (Canberra: ANAO, 2020), 6.
[8]. For further information, see Kaushik Ramesh, ‘Health Legislation Amendment (Improved Medicare Compliance and Other Measures) Bill 2018’, Bills Digest, 124, 2017–18, (Canberra: Parliamentary Library, 2018).
[9]. For further information, see Jennifer Phillips, ‘Health Legislation Amendment (Data-matching and Other Matters) Bill 2019’, Bills Digest, 66, 2019–20, (Canberra: Parliamentary Library, 2019).
[10]. For further information, see Melanie Conn, ‘Health Insurance Amendment (Compliance Administration) Bill 2020’, Bills Digest, 37, 2020–21, (Canberra: Parliamentary Library, 2020).
[11]. For further information, see Leah Ferris, ‘Health Legislation Amendment (Medicare Compliance and Other Measures) Bill 2022’, Bills Digest, 10, 2022–23, (Canberra: Parliamentary Library, 2022).
[12]. Mark Butler (Minister for Health and Aged Care), ‘Independent Review into Medicare Compliance’, media release, 5 November 2022.
[13]. Adele Ferguson and Chris Gillett, ‘Expert Estimates $8 Billion a Year Lost to Medicare Fraud and Waste’, ABC News, 17 October 2022.
[14]. Mark Butler (Minister for Health and Aged Care), ‘Medicare Non-Compliance and Fraud Costing Australians’, media release, 4 April 2023.
[15]. Philip, Independent Review, 4.
[16]. Philip, Independent Review, 10–11.
[17]. Australian Government, Budget Measures: Budget Paper No. 2: 2023–24, 151.
[18]. The Statement of Compatibility with Human Rights can be found at pages 3–4 of the Explanatory Memorandum to the Bill.
[19]. Health Legislation (Professional Services Review) Amendment Act 1994, item 6.
[20]. Philip, Independent Review, 11.
[21]. Philip, Independent Review, 34.
[22]. Philip, Independent Review, 8.
[23]. Philip, Independent Review, 56.
[24]. Explanatory Memorandum, Health Insurance Amendment (Professional Services Review Scheme) Bill 2023, 1.
[25]. Australian Medical Association, ‘Medicare Compliance Review Stands By Doctor Integrity and Calls For Future-Proofing of Medicare’, media release, 4 April 2023.
[26]. Dr Danielle McMullen (AMA Vice President), ‘AMA Vice President on ABC 7.30 Report’, interview, 7.30, 5 April 2023.
[27]. Section 88A, HIA.
[28]. Sections 89C, 91, 92 and 93, HIA.
[29]. Explanatory Memorandum, 2.
[30]. Philip, Independent Review, 35.
[31]. Philip, Independent Review, 61.
Links
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All hyperlinks in this Bills Digest are correct as at June 2023.
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