BILLS DIGEST NO. 114, 2014–15              9 June 2015

Private Health Insurance (National Joint Replacement Register Levy) Amendment Bill 2015

Amanda Biggs
Social Policy Section 

Date introduced: 27 May 2015

House:  House of Representatives

Portfolio: Health

Commencement:  The day after Royal Assent.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the ComLaw website.

Purpose of the Bill

The purpose of the Private Health Insurance (National Joint Replacement Register Levy) Amendment Bill 2015 (the Bill) is to amend the Private Health Insurance (National Joint Replacement Register Levy) Act 2009 (the Act) by changing the method used to set the rate of the National Joint Replacement Register levy.[1] This levy is paid by sponsors (usually manufacturers or distributors) of joint replacement prostheses, to support the operation of the National Joint Replacement Register (NJRR) which collects data on the implantation and performance of joint replacement devices.

Background

The NJRR was established in 1999 by the Australian Orthopaedic Association (AOA) to record information on the implantation and performance of joint replacement prostheses.[2] Until the establishment of the NJRR outcomes of joint replacement surgery (arthroplasty) and the performance of joint replacement prostheses in Australia were not known. The success of arthroplasty registries in other countries, in particular the Swedish Arthroplasty Registries, led the AOA to propose such a register for Australia.[3]

The NJRR records data on a wide range of joint replacement procedures, including hip, knee, elbow, shoulder, wrist and disc replacements. Details recorded include complications from surgery, revision rates and other performance outcomes of joint replacement prostheses.[4] Information collected by the NJRR is used to identify the causes of any problems associated with particular prostheses or surgical technique, allowing patients and surgeons to remain informed.[5]

The most common joint replacement operations are hip and knee replacements, with around 90,000 Australians undergoing these procedures each year.[6] While the overall success rate of these procedures remains high, some devices have poorer outcomes which the NJRR has helped identify. For example, early problems with the performance of the ASR hip replacement system were identified through data collected by the NJRR first published in 2006 and in later reports. Subsequently, the device which had been implanted in some 5,500 Australians was recalled by the manufacturer in 2009 several months before its recall in other jurisdictions.[7]

Nationally, over 300 hospitals, both public and private, submit data to the NJRR.[8]

Since 2009 the NJRR has operated on a cost recovery basis funded by the imposition of a levy on manufacturers and distributors (also known as sponsors) of joint replacement prostheses that are listed in the Private Health Insurance (Prostheses) Rules.[9]

Currently, the Act specifies that the NJRR levy is imposed on each sponsor of joint replacement prostheses calculated on specified levy days according to a formula specified in the Private Health Insurance (National Joint Replacement Register Levy) Rules.[10] Broadly, the formula uses a proportional calculation taking into account the number of joint replacement prostheses that are listed by a particular sponsor as a proportion of the total number of joint replacement prostheses which are offered by all sponsors on the relevant census day for the financial year.[11] The Act also requires that the total levy amount imposed on a sponsor during any financial year for the same joint replacement prosthesis cannot exceed $5,000 (paragraph 7(2)(d) of the Act).

This Bill proposes amendments to the Act to change the method by which the levy is calculated. Instead of the levy being a proportional calculation as occurs currently, the Bill would allow for the application of a utilisation method. The Bill proposes to allow the Private Health Insurance (National Joint Replacement Register Levy) Rules to specify that the rate of the levy take into account the number of times the provision of a joint replacement prosthesis is recorded on the NJRR during a particular period. These amendments would align the imposition of the levy with the actual level of activity recorded on the NJRR and better reflect the increasing administrative cost of operating the NJRR.

The cost of operating the NJRR rose from $1.7 million to $2.1 million in 2013–14.[12] This is expected to rise further in future years reflecting an ongoing trend of increased joint replacement activity. Since 2003, the number of hip replacement procedures undertaken in Australia has increased by 39.2 per cent and the number of knee replacement procedures by 63.2 per cent.[13]

The Explanatory Memorandum notes that consultation with industry indicated its strong preference for a utilisation method for calculating the NJRR levy.[14] The measure was announced as part of the 2015–16 Budget.[15]

A number of minor amendments are also proposed in the Bill which implement modern legislative drafting practice.[16]

Committee consideration

Senate Standing Committee for the Scrutiny of Bills

To date, the Senate Standing Committee for the Scrutiny of Bills had not considered this Bill.

Parliamentary Joint Committee on Human Rights

To date, the Parliamentary Joint Committee on Human Rights had not considered this Bill.

Policy position of non-government parties/independents

The policy positions of non-government parties and independents are not yet known.

Position of major interest groups

The Government indicated that the proposed amendments were developed following consultation with the prostheses device industry, which had indicated a preference for a utilisation method to be applied when setting the levy.[17] Industry’s views on the specific amendments proposed in this Bill have yet to emerge, but the Medical Technology Association of Australia (MTAA) representing the medical devices sector, welcomed the changes to the levy when they were announced in the Budget. In a media release at the time, the MTAA stated that ‘the changes to the levy for the National Joint Replacement Registry that support the small to medium businesses through a fairer basis to the levy and a more equitable funding model, are also welcome’.[18] Other stakeholder groups, such as consumer advocates have yet to state a position on the Bill.

Financial implications

The Explanatory Memorandum explains that as the NJRR is a cost recovered activity there are no financial implications for the Commonwealth as a result of the amendments proposed in this Bill.[19] According to figures released in the Budget, the total levy amount collected will increase by $0.6 million over the forward estimates.[20] Overall, the Government expects that levy amounts for the majority of sponsors will be lower as a result of this Bill.[21]

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.[22]

Key provisions

Schedule 1—Amendments to the Private Health Insurance (National Joint Replacement Register Levy) Act 2009

Item 6 proposes amendments to subsection 6(1) that deal with the imposition of the national joint replacement register levy on a specified levy day. The current text specifies that the levy is imposed on ‘each sponsor for joint replacement prostheses’. Item 6 proposes to replace that text with ‘the recording on the register of the provision of a joint replacement prosthesis’. This would impose a levy on any activity recorded on the NJRR on the specified levy day.

Item 11 proposes to repeal subsection 7(2), which specifies the methodology for the imposition of the joint replacement register levy, and substitute it with a subsection specifying a new methodology. The replacement subsection 7(2) allows for the rate of the levy to be set under the Private Health Insurance (National Joint Replacement Register Levy) Rules and a determination made under proposed section 8A. Three approaches to setting the levy are to be allowed, the first two of which are broadly in line with current provisions. Paragraph 7(2)(a) allows for different rates of levy or methods for the setting of the levy to be specified for different classes of joint replacement prostheses; paragraph 7(2)(b) allows for a levy rate of zero for a class of prostheses to be set; and paragraph 7(2)(c) allows for a rate of levy or methodology for calculating the levy, to take into account the number of times recordings were made on the NJRR for the provision of a joint replacement prosthesis over a particular period, which is a deviation from the current provisions.

Finally, proposed subsection 7(3) specifies that the maximum levy for a joint replacement prosthesis must not exceed $5,000 in a financial year, in line with current provisions in the Act.

Item 12 proposes to insert new section 7A specifying who is to pay the NJRR levy, as the reference to the sponsor being liable is removed by proposed subsection 6(1). Proposed section 7A specifies that the NJRR levy is payable by the sponsor of the joint replacement prosthesis.

Item 13 proposes to insert new section 8A to allow the Minister for Health to make determinations by legislative instrument. Proposed section 8A specifies that the Minister may make a determination by legislative instrument to specify a supplementary NJRR levy day and a NJRR rate or method for calculating a rate. This aligns with proposed subsection 7(2) which allows a determination to specify the levy or rate of levy and clarifies the Minister’s role.

The remaining items propose mostly minor drafting amendments or consequential amendments as a result of the major amendments.

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[1].              Private Health Insurance (National Joint Replacement Register Levy) Act 2009, accessed 29 May 2015.

[2].              The NJRR was established with funding from the Commonwealth Government. Australian Orthopaedic Association National Joint Replacement Registry (AOA NJRR), ‘Background’ AOA NJRR website, accessed 28 May 2015.

[3].              Ibid.

[4].              Ibid. A revision is when any subsequent surgical intervention is required. The revision rate is the number of revisions that are undertaken over a specified period.

[5].              Ibid.

[6].              AOA NJRR, ‘Patient information’, AOA NJRR website, accessed 28 May 2015.

[7].              SE Graves, ‘What is happening with hip replacement?’, Medical Journal of Australia, 194(12), 2011, p. 620, accessed 28 May 2015.

[8].              AOA NJRR, ‘Hospital participation’, AOA NJRR website, accessed 28 May 2015.

[9].              The purpose of the Private Health Insurance (Prostheses) Rules is to list the kinds of prostheses for which a benefit is payable.

[10].              Private Health Insurance (National Joint Replacement Register Levy) Rules 2011, accessed 1 June 2015. Section 6 of the Act specifies a maximum of four levy days and two supplementary levy days per financial year.

[11].              The actual denominator and numerator amounts specified in the Rules vary to account for the operating cost of the NJRR in a given year. In 2013–14, costs for the NJRR rose to $2,612,000 per year, so the formula amounts were amended to allow cost recovery of this higher amount. See Explanatory Statement, Private Health Insurance (National Joint Replacement Register Levy) Amendment Rules 2014 (No. 1), accessed 1 June 2015.

[12].              Ibid.

[13].              Ibid.

[14].              Explanatory Memorandum, Private Health Insurance (National Joint Replacement Register Levy) Amendment Bill 2015, p. 2, accessed 28 May 2015.

[15].              Australian Government, Budget measures: budget paper no. 2: 2015–16, p. 107, accessed 28 May 2015.

[16].              Explanatory Memorandum, op. cit., p. 2.

[17].              Ibid.

[18].              Medical Technology Association of Australia (MTAA), MTAA concerned that Budget 2015 lacks primary investment in healthcare, media release, 14 May 2015, accessed 2 June 2015.

[19].              Explanatory Memorandum, op. cit., p. 2.

[20].              Budget measures: budget paper no. 2: 2015–16, op. cit., p. 107.

[21].              Explanatory Memorandum, op. cit., p. 5.

[22].              The Statement of Compatibility with Human Rights can be found at page 3 of the Explanatory Memorandum to the Bill.