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