BILLS DIGEST NO. 19, 2021–22    30 September 2021

Health Insurance Amendment (Enhancing the Bonded Medical Program and Other Measures) Bill 2021

Melanie Conn
Social Policy Section

Date introduced: 26 August 2021

House: House of Representatives

Portfolio: Health

Commencement: Sections 1 to 3 commence on Royal Assent. Schedule 1 commences on the earlier of Proclamation or six months after Royal Assent. Schedule 2 commences 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 Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at September 2021.

1 Purpose of the Bill

Summary of key terms

Bonded Medical Program – a statutory scheme established under Part VD of the Health Insurance Act 1973 that requires bonded participants to complete a return of service obligation (three years within an 18 year period) in a prescribed location in return for a Commonwealth Supported Place in a medical course at an Australian university. The program commenced on 1 January 2020 and is only open to Australian citizens and permanent residents.

Bonded Medical Places (BMP) Scheme – now closed to new entrants, the BMP Scheme provided students with a Commonwealth Supported Place in a medical course at an Australian university in return for a commitment to work in an area of workforce shortage for one to six years (depending on when the person joined the scheme).

Medical Rural Bonded Scholarship (MRBS) Scheme – closed to new entrants after the 2015 academic year, the MRBS Scheme provided up to 100 Commonwealth-supported places with an attached scholarship each year to commencing Australian medical students. Recipients signed a contract requiring them to work as a doctor in a rural or remote area for six years once they attained fellowship.

Bonded participant – refers to a person participating in the Bonded Medical Program, including those who have voluntarily opted into the Program after previously participating in one of the legacy schemes.

Legacy scheme participant – refers to a person who is a participant in either the BMP Scheme or the MRBS Scheme.

The purpose of the Health Insurance Amendment (Enhancing the Bonded Medical Program and Other Measures) Bill 2021 (the Bill) is to amend the Health Insurance Act 1973 (the Act) to enhance administration of the Bonded Medical Program established under Part VD of the Act (Schedule 1 of the Bill) and of Medical Rural Bonded Scholarship (MRBS) contracts under section 19ABA of the Act (Schedule 2 of the Bill).

In particular, the amendments:

• clarify the circumstances under which a person ceases to be a bonded participant under the Bonded Medical Program, including rectifying the unintended consequence where a deceased person could breach the Program’s conditions and incur a debt to the Commonwealth

• create a mechanism for a person to apply to the Secretary of the Department of Health for an exceptional circumstances determination, under which consequences from breaching the Program’s conditions may be waived

• allow participants in legacy schemes to apply for an extended compliance determination that would provide additional time to complete their return of service obligation if opting into the Bonded Medical Program

• reduce the administrative penalty that applies if a person does not provide requested documentation from $10,000 to $1,000

• introduce additional flexibility for handling breaches of MRBS contracts that can involve Medicare benefits not being payable as a consequence.

The amendments provide greater capacity for case-by-case consideration of circumstances and appropriate consequences than the current provisions allow.

As the Explanatory Memorandum states:

Since the [Bonded Medical] Program commenced on 1 January 2020, it has become evident that some of its elements have not achieved the intended aims, particularly in relation to the flexibility needed to administer the Program and to meet the needs of a modern rural workforce.¹

The changes are broadly favourable to participants in the Bonded Medical Program and related legacy schemes.

2 Background

Bonded Medical Program

The Bonded Medical Program commenced on 1 January 2020 following the passage of the Health Insurance Amendment (Bonded Medical Programs Reform) Act 2019. The Program provides students with a Commonwealth Supported Place in a medical course at an Australian university in return for a commitment to work in eligible regional, rural and remote areas for three years within an 18 year period after completing their course. This commitment is referred to as a Return of Service Obligation (RoSO). It appears that universities are required to allocate 28.5 per cent of all commencing Commonwealth places for higher education courses in medicine to Bonded Medical Program students.²

Prior to the commencement of the Bonded Medical Program there were two legacy contract-based schemes – the Medical Rural Bonded Scholarship (MRBS) Scheme and the Bonded Medical Places (BMP) Scheme. Both schemes are now closed to new entrants. Legacy scheme participants can choose to opt-in to the Bonded Medical Program. The Department of Health has published fact sheets outlining the different RoSO, reporting requirements and withdrawal arrangements under the new Program for existing participants in the legacy BMP Scheme and MRBS Scheme.³

The decision to reform bonded medical programs was part of the Government’s Stronger Rural Health Strategy, announced in the 2018–19 Budget.⁴

There does not appear to be any recent data available identifying the number of people participating in the Bonded Medical Program.

Potentially complicating the availability of current data, errors by the Department of Health in 2020 resulted in most participants of the MRBS and BMP Schemes that sought to opt-in being incorrectly bonded under the new Program. In March 2021, the Department emailed more than 2,000 affected individuals advising them of the issues and offering them a choice to opt-in to the new Program or to remain in their legacy scheme. The Department has since been working with affected individuals to understand and manage their personal circumstances, on a no-disadvantage basis.⁵

3 Committee consideration

At the time of writing, the Bill had not been referred to any committees.

Senate Standing Committee for the Selection of Bills

On 2 September 2021, the Senate Selection of Bills Committee deferred consideration of the Bill to its next meeting.⁶

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills had no comment on the Bill.⁷

4 Policy position of non-government parties/independents

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

5 Position of major interest groups

The Australian Medical Students’ Association welcomed the Bill’s increased flexibility for Bonded Medical Program participants, but described it as ‘a bandaid on a broken program’.⁸

The Association is calling for broader reform, arguing:

Over the past 20 years the Bonded Medical Program (BMP) has failed to address workforce maldistribution. There is no evidence that doctors stay rural after their Return of Services Obligation (RoSO), or even complete their RoSO. We’re calling on doctors and medical students to call their MPs and Senators requesting an urgent review of the BMP. A senate inquiry should be a powerful avenue for this review, so that we can start building a more effective rural training pathway that services Australia’s rural communities.⁹

At the time of writing, no further commentary on the Bill from relevant stakeholders was identified.

6 Financial implications

The Explanatory Memorandum states there are no financial implications arising from the Bill.¹⁰

By creating greater flexibility with regard to administration of breaches, the Bill may reduce the extent to which bonded participants may be liable for a debt to the Commonwealth.

7 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 noting that the limitations placed on voluntary participants of the Bonded Medical Program are considered reasonable, necessary and proportionate to the objectives of the Program and benefits to the participant and the Australian public.¹¹

8 Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had no comment on the Bill.¹²

9 Key issues and provisions

Exceptional circumstances determination

The Act imposes consequences if a participant breaches certain conditions of the Bonded Medical Program as set out in subsection 124ZG(1). Section 124ZH requires the repayment of education costs (plus interest) and section 124ZJ provides that Medicare benefits are not payable for services rendered by, or on behalf of, the medical practitioner for six years from the day of the breach (the Medicare benefits ban). While this does not prevent a medical practitioner from treating patients, it effectively means that any patient the practitioner treats will not receive a rebate from the government for the service which is a strong discouragement to use the practitioner’s services.

Section 124ZQ of the Act similarly imposes consequences for a bonded participant who withdraws from the Bonded Medical Program after the census date of their second year of studying medicine at an Australian university. Requirements to repay education expenses apply to all participants, while former MRBS participants who have opted-in to the Bonded Medical Program are also subject to a six-year Medicare benefits ban.

Sections 124ZH, 124ZJ and 124ZQ do not include any discretion for the penalties not to apply.

Item 3 inserts proposed section 124ZEA which provides that exceptional circumstances may apply with respect to the requirements for a participant in the program to complete their medical course or complete their RoSO within the eighteen-year period, or that lead to their withdrawal from the program.

It allows a current or former bonded participant (or their legal representative if the person is deceased or lacks capacity to make an application) to apply to the Secretary of the Department of Health (the Secretary) for a determination that exceptional circumstances apply.¹³ There is provision for the Bonded Medical Program rules to specify what information and accompanying documents are required for written applications seeking an exceptional circumstances determination.¹⁴

The Secretary has the ability to determine that exceptional circumstances apply in relation to an applicant, having regard to any matters specified in the Bonded Medical Program rules.¹⁵ In determining that exceptional circumstances apply, the Secretary must provide a written notice to the applicant that links the exceptional circumstances to the relevant provision of the Act. Specifically, the notice must indicate the Secretary’s satisfaction that:

• the exceptional circumstances will prevent the affected person from complying with the condition mentioned in paragraph 124ZG(1)(a) or (c)¹⁶ or

• the affected person breached a condition mentioned in paragraph 124ZG(1)(a) or (c) as a result of the exceptional circumstances or

• the affected person withdrew from the Bonded Medical Program under section 124ZP as a result of the exceptional circumstances.¹⁷

Items 4, 5, 6, 9, 13, 14 and 15 of the Bill amend sections 124ZH (Breach of condition of Bonded Medical Program–repayment of education costs), 124ZJ (Breach of condition of Bonded Medical Program–Medicare benefits not payable) and 124ZQ (Consequences of withdrawal) to provide that, if an exceptional circumstances determination is made under subsection 124ZEA(3) and the written notice of the determination states that the Secretary is satisfied that the breach of specified conditions or the withdrawal was as a result of the exceptional circumstances, then the section (including its penalties) does not apply. Item 2 amends section 124ZE to allow a person to cease to be a Bonded participant following the making of an exceptional circumstances determination. Together, these items provide a mechanism to allow a person to exit the Program without being penalised.

Extended compliance determination for legacy scheme participants

Item 17 of the Bill inserts proposed section 124ZUA (Extended compliance determination for certain BMP and MRBS participants). This provides a mechanism for participants in the legacy schemes, who wish to opt-in to the Bonded Medical Program, to seek a determination from the Secretary that their return of service obligation be extended by up to six years, if they do become a bonded participant under the Program.

The rationale for this is outlined in the Explanatory Memorandum:

Section 124ZUA recognises that, if some legacy scheme participants were to become bonded participants, they may not have sufficient time to complete the RoSO within the timeframe allowed under paragraph 124ZF(2)(a) of the HI Act, that is ‘within 18 years of the day on which a bonded participant completes their course of study in medicine at an Australian university’.¹⁸

In the absence of such a mechanism, some legacy scheme participants may be unable to opt-in to the Bonded Medical Program even if they wished to.

Proposed section 124ZUA provides for:

• the requirements for those wishing to apply for a determination to be set out in the Bonded Medical Program rules¹⁹

• application requirements²⁰

– Of note, proposed paragraph 124ZUA(2)(b) requires the application to be made before the person advises the Department that they voluntarily wish to opt into the Program (per subsection 124ZU(2)). Item 16 amends section 124ZU to insert proposed subsection 124ZU(4) requiring a person not to advise the Department they wish to opt in until they have received a decision on their application for an extended compliance period and exhausted any rights of review and appeal. Together, these provisions ensure that the person is aware of the amount of time they will have to complete the RoSO if they become a bonded participant under the Program.

• the matters the Secretary is required to be satisfied of in making a determination, including requirements specified in the Bonded Medical Program rules²¹

• the requirement to provide written notice of the determination including details of the extended compliance period²² and

• the requirement for written notice of a refusal to make the determination, including reasons for the decision and information on how to apply for review of the decision.²³

Proposed section 124ZUB provides for the Secretary to request further information needed to make a decision on the application and for the application to be considered to have been withdrawn if the requested information is not provided within the specified period.

Items 18 and 19 insert new paragraphs 124ZV(2)(d) and 124ZW(2)(d) relating to BMP scheme participants and MRBS participants respectively who have opted-in to the Bonded Medical Program, to give effect to the extended RoSO period as specified in any extended compliance determination.

Reduced administrative penalty

Section 124ZK provides for a bonded participant to be liable for an administrative penalty of $10,000 if they breach the requirements in paragraphs 124ZG(1)(d) and (e) to give information or documents to the Department in accordance with the Bonded Medical Program rules or in response to a request from the Secretary. This administrative penalty is considered to be a debt due to the Commonwealth and may be recovered by the Commonwealth in a court of competent jurisdiction.²⁴

Item 10 of the Bill amends subsection 124ZK(2) to reduce this administrative penalty to $1,000.

The Explanatory Memorandum states that this amendment is to ensure that the penalty when participants fail to give information or documents within prescribed timeframes is ‘appropriate and proportionate in the circumstances’.²⁵

Amendments relating to MBRS contracts

Schedule 2 of the Bill contains amendments relating to MRBS contracts. Specifically, it introduces additional flexibility for handling breaches of MRBS contracts that may involve Medicare benefits not being payable as a consequence.

The Explanatory Memorandum justifies these changes on the basis that ‘in many circumstances, the nature of the breach does not warrant the Medicare ban’ and that ‘[c]ircumstances exist where an MRBS participant can unknowingly breach their contract.’²⁶ The Schedule provides for different arrangements depending on whether the breach occurs before or after the commencement of the Schedule. Potentially, the additional flexibility could be used in the case of MRBS participants who wished to opt-in to the Bonded Medical Program but were incorrectly bonded by the Department of Health, resulting in unintended breaches.

Section 19ABA of the Act provides that Medicare benefits are not payable for services rendered by, or on behalf of, a medical practitioner who has breached a contract with the Commonwealth under which they agreed to work in a rural or remote area.

Item 1 inserts proposed subsection 19ABA(5) to restrict application of section 19ABA to MRBS contracts only when the breach occurs before the commencement of the subsection.

Item 2 inserts proposed section 19ABB allowing the Minister to waive any amount owing to the Commonwealth as a result of a Medicare benefit being paid that should not have been because of subsection 19ABA(1).

Proposed section 19ABC sets out the arrangements to apply when a person with an MRBS contract breaches a provision requiring them to work in a rural or remote area after the commencement of the section. It provides that the Minister may determine that a Medicare benefit is not payable. That is, rather than the restriction on Medicare benefits being triggered automatically, per section 19ABA, this consequence will only occur where the Minister makes a determination.

Proposed section 19ABD provides for a person affected by a ministerial determination under proposed subsection 19ABC(1) to request reconsideration of the decision and subsequent to the outcome of that reconsideration, to apply to the Administrative Appeals Tribunal for review of the reconsidered decision.

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Notes

[←1]

.    Explanatory Memorandum, Health Insurance Amendment (Enhancing the Bonded Medical Program and Other Measures) Bill 2021, p. 1.

[←2]

.    Australian Government, Funding Agreement between the Commonwealth of Australia as represented by the Minister for Education and the University of Melbourne regarding funding under the Higher Education Support Act 2003 in respect of the 2021, 2022 and 2023 grant years, Department of Education, Skills and Training website, n.d., pp. 8–9. Note: This text is taken from the agreement with the University of Melbourne. Similar clauses are found in funding agreements with other universities, although some agreements for the period 2018–2020 include provisions commencing from 1 January 2020.

[←3]

.    Department of Health (DoH), Bonded Medical Program – Bonded Participant obligations, factsheet, DoH, n.d.; DoH, Bonded Medical Program - Bonded Participant obligations. Medical Rural Bonded Scholarship (MRBS) Scheme participants, factsheet, DoH, n.d.

[←4]

.    Australian Government, Budget measures: budget paper no. 2: 2018–19, 2018, p. 106.

[←5]

.    DoH, ‘Bonded Medical Program frequently asked questions – July 2021’, DoH website, July 2021.

[←6]

.    Senate Standing Committee for the Selection of Bills, Report, 11, 2021, The Senate, Canberra, 2 September 2021.

[←7]

.    Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 14, 2021, 1 September 2021, p. 13.

[←8]

.    Australian Medical Students’ Association (AMSA), ‘The Issue’, The BMP Project website, n.d.

[←9]

.    Ibid.

[←10]

.    Explanatory Memorandum, op. cit., p. 2.

[←11]

.    The Statement of Compatibility with Human Rights can be found at pages 3–4 of the Explanatory Memorandum to the Bill.

[←12]

.    Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, 11, 2021, 16 September 2021, p. 60.

[←13]

.    Health Insurance Act 1973 (Cth) (HIA), proposed subsection 124ZEA(1).

[←14]

.    HIA, proposed subsection 124ZEA(2). The Minister may make the Bonded Medical Program rules, by legislative instrument, under subsection 124ZT(1) of the Act. See Health Insurance (Bonded Medical Program) Rule 2020.

[←15]

.    HIA, proposed subsections 124ZEA(3) and (4).

[←16]

.    Paragraph 124ZG(1)(a) requires the bonded participant to complete their course of study in medicine at an Australian university, within the period prescribed in the Bonded Medical Program rules. Paragraph 124ZG(1)(c) requires the bonded participant to complete their RoSO of three years within 18 years of completing their course of study in medicine at an Australian university.

[←17]

.    HIA, proposed paragraph 124ZEA(5)(b).

[←18]

.    Explanatory Memorandum, op. cit., p. 12.

[←19]

.    HIA, proposed subsection 124ZUA(1).

[←20]

.    HIA, proposed subsection 124ZUA(2).

[←21]

.    HIA, proposed subsection 124ZUA(3).

[←22]

.    HIA, proposed subsections 124ZUA(4) and (5).

[←23]

.    HIA, proposed subsection 124ZUA(6).

[←24]

.    HIA, subsection 124ZK(4).

[←25]

.    Explanatory Memorandum, op. cit., p. 10.

[←26]

.    Ibid., p. 16.