BILLS DIGEST NO. 38, 2019–20              10 October 2019

National Health Amendment (Safety Net Thresholds) Bill 2019

Alex Grove
Social Policy Section 

Date introduced: 11 September 2019

House:  House of Representatives

Portfolio: Health

Commencement:  1 January 2020

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 Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at October 2019.

Purpose of the Bill

The purpose of the National Health Amendment (Safety Net Thresholds) Bill 2019 (the Bill) is to amend the National Health Act 1953 (the Act) to reduce the dollar value of the Pharmaceutical Benefits Scheme (PBS) Safety Net thresholds.

Background

About the PBS

The PBS provides subsidised access to necessary medicines for Australians. Most of the medicines listed on the PBS are prescribed by doctors, dispensed by pharmacists and used by patients at home.[1]

Expenditure on the PBS is uncapped, and may increase as new medicines are added and demand grows.[2] Australian Government expenditure on the pharmaceutical benefits and services sub-function (which is largely comprised of PBS expenditure) was $13.3 billion in 2018–19.[3]

Patient co-payments and Safety Nets

Patients pay a co-payment of $6.50 (for concession card holders) or up to $40.30 (for general patients) towards the cost of each PBS medicine, with the Australian Government paying any remaining cost. Since 1 January 2016, pharmacists have been permitted to offer consumers a discount of up to $1.00 on each PBS co-payment, as long as the pharmacist absorbs the cost of the discount.[4]

The PBS Safety Net scheme protects individuals or families who need a large number of PBS medicines in one year from excessive out-of-pocket costs. Individuals and families who spend an amount equal to their Safety Net threshold on co-payments in a calendar year receive further prescriptions for that year for free (concession card holders) or for the concessional co-payment of $6.50 (general patients). The 2019 PBS Safety Net thresholds are $390.00 for concession card holders and $1,550.70 for general patients.[5]

The co-payment and Safety Net threshold amounts are indexed on 1 January each year in line with the Consumer Price Index (CPI).[6]

In 2017–18, 39.8 million PBS scripts were dispensed to individuals and families who had already reached their PBS Safety Net threshold for the year (consisting of 37.1 million concessional Safety Net scripts and 2.6 million general Safety Net scripts).[7]

2019 federal election

During the 2019 federal election campaign, the Coalition Government promised to reduce the amount of the Safety Net thresholds ‘by 12 scripts for pensioners and concession card holders and the equivalent of 2 scripts for non-concession card holders’ from 1 January 2020, at a cost of $308 million.[8] This would ‘cut the cost of life changing prescription medicines for over 1.4 million Australians with chronic conditions who require multiple medicines’.[9]

The Australian Labor Party (ALP) promised to ‘adopt this $308 million proposal’ to reduce the Safety Net thresholds.[10]

Committee consideration

Senate Standing Committee for the Selection of Bills

The Senate Standing Committee for Selection of Bills determined that the Bill should not be referred to a committee for inquiry.[11]

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills had no comment on the Bill.[12]

Policy position of non-government parties/independents

As noted above, the ALP indicated during the 2019 federal election campaign that they would support the proposal to reduce the Safety Net thresholds.

During debate on another Bill in September 2019, ALP MPs Mike Freelander and Emma McBride both reiterated Labor’s support for the proposal, but also noted that reducing the general patient Safety Net by around one hundred dollars would not make a large difference in terms of medicine affordability.[13]

At the time of writing, no comments by other non-government parties or independents specifically relating to the Bill had been identified.

Position of major interest groups

At the time of writing, no comments by key pharmaceutical industry, pharmacy, medical or consumer stakeholders specifically relating to the Bill had been identified.

Financial implications

The reduction in PBS Safety Net thresholds is expected to cost the Australian Government $335.1 million over four years to 2022–23.[14]

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 because it does not raise any human rights issues, and because it will have a beneficial impact on human rights through reduced out-of-pocket costs and improved access to PBS medicines.[15]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had no comment on the Bill.[16]

Key issues and provisions

A general patient is entitled to apply for a Safety Net concession card when they and/or their family have spent at least the amount of the general patient Safety Net on PBS co-payments in a calendar year.[17] A concession card holder is entitled to apply for a Safety Net entitlement card when they and/or their family have spent at least the amount of the concessional Safety Net on PBS co-payments in a calendar year.[18]

A Safety Net concession card holder will only be charged the concessional co-payment (currently $6.50) for PBS prescriptions for the rest of the calendar year. A Safety Net entitlement card holder will receive PBS prescriptions free of charge for the rest of the calendar year.[19]

The concessional beneficiary safety net is currently defined in section 99F of the Act as the amount of the concessional beneficiary charge (commonly known as the concessional co-payment) multiplied by 60.

Item 1 of Schedule 1 amends the definition of the concessional beneficiary safety net to be 48 times the concessional beneficiary charge. This means that that concessional beneficiary safety net is estimated to be $316.80 from 1 January 2020.[20]

The general patient safety net is currently defined in section 99F of the Act as ‘the amount that was the general patient safety net immediately before 31 December 2009’, and which has since been subject to annual indexation under section 99G of the Act.

Item 2 of Schedule 1 changes the definition of the general patient safety net to the ‘amount of $1,486.80’.

This amount would normally be indexed on 1 January each year under section 99G of the Act. However, item 3 of Schedule 1 inserts proposed subsection 99G(1A) which provides that the general patient safety net is not to be indexed on 1 January 2020 (the day the Bill commences).

Concluding comments

The Bill reduces the PBS Safety Net thresholds from $1,550.70 to $1,486.80 for general patients, and from $390.00 to around $316.80 for concession card holders. This would reduce out-of-pocket costs for individuals and families who need a large number of PBS medicines in one calendar year.

The reduction in Safety Net thresholds was a Coalition election promise which the ALP also promised to adopt. The Bill has not attracted significant stakeholder comment and appears unlikely to be controversial.

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[1].              Department of Health (DoH), ‘About the PBS’, The Pharmaceutical Benefits Scheme (PBS) website, last updated 1 July 2019.

[2].              Ibid.

[3].              J Frydenberg (Treasurer) and M Cormann (Minister for Finance), Final budget outcome 2018–19, p. 79.

[4].              DoH, ‘About the PBS’, op. cit.

[5].              Ibid.

[6].              Ibid.

[7].              DoH, Expenditure and prescriptions twelve months to 30 June 2018, PBS Information Management Section, Pricing and PBS Policy Branch, DoH, Canberra, 2018, p. 2.

[8].              S Morrison (Prime Minister) and G Hunt (Minister for Health), A strong economy provides millions of Australians cheaper and free medicine, joint media release, 2 May 2019; This implies that the concessional Safety Net threshold would be reduced by twelve times the value of the concessional co-payment, or around $78.00, and the general Safety Net threshold would be reduced by two times the value of the general co-payment, or around $80.60.

[9].              Ibid.

[10].              C King (Shadow Minister for Health and Medicare), Labor to adopt PBS changes, media release, 2 May 2019.

[11].              Senate Standing Committee for Selection of Bills, Report, 5, 2019, The Senate, Canberra, 12 September 2019.

[12].              Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 6, 2019, The Senate, 18 September 2019, p. 23.

[13].              M Freelander, ‘Second reading speech: National Health Amendment (Pharmaceutical Benefits) Bill 2019’, House of Representatives, Debates, 11 September 2019, p. 78; E McBride, ‘Second reading speech: National Health Amendment (Pharmaceutical Benefits) Bill 2019’, House of Representatives, Debates, 11 September 2019, p. 83.

[14].              Explanatory Memorandum, National Health Amendment (Safety Net Thresholds) Bill 2019, p. 1.

[15].              The Statement of Compatibility with Human Rights can be found at page 2 of the Explanatory Memorandum to the Bill.

[16].              Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, 5, 2019, 17 September 2019, p. 16.

[17].              National Health Act 1953, subsection 84C(1AA).

[18].              Ibid., subsection 84C(1C).

[19].              Ibid., section 87. See also DoH, ‘Section 1 - Explanatory Notes: 5. The Safety Net Scheme’, PBS website, last updated 9 January 2019.

[20].              The exact amount of the proposed concessional beneficiary safety net is not known. This is because indexation will not be applied to the concessional beneficiary charge until 1 January 2020. Explanatory Memorandum, op. cit., p. 4.