Health and Other Services (Compensation) Amendment Bill 2006
THE INQUIRY
1.1
The Health and Other Services (Compensation)
Amendment Bill 2006 was introduced into the House of Representatives on 2 March 2006. On 30 March 2006, the Senate, on the
recommendation of the Selection of Bills Committee (Report No. 3 of 2006),
referred the provisions of the Bill to the Committee for report.
1.2
In recommending the reference of this Bill
to the Committee, the Selection of Bills Committee stated that the reason for
referral was to examine the potential to improve the operation of the Advanced
Payment Option. The proposed Bill removes the sunset
clause and extends the availability of the Advanced Payment Option.
1.3
The Committee considered the Bill
at a public hearing on 28 April 2006.
Details of the public hearing are referred to in Appendix 2. The Committee
received four submissions relating to the
Bill and these are listed at Appendix 1. The submissions
and Hansard transcript of evidence may be accessed through the Committee's website
at https://www.aph.gov.au/senate_ca
THE BILL
1.4
The purpose of this Bill is to amend the Health and Other Services (Compensation) Act
1995 (the Act) clarifying the application of certain provisions within the
Act, and to remove a sunset clause on the Advanced Payment Option currently
available for finalising settlements under the Act.
BACKGROUND
1.5
The Act provides for a Compensation Recovery Program,
under which Commonwealth Medicare, nursing home or residential care benefits
are recovered from people who receive compensation payments for injury or
illness for which they have claimed these benefits. This Program is designed to
prevent 'double dipping' by successful compensation claimants.
1.6
Successful claimants of compensation may have claimed
Medicare and other benefits at the time their injury was sustained or their
illness commenced. Once the compensation judgement or settlement is determined,
the Act requires insurers and other compensation payers to advise Medicare
Australia of any claims where the compensation amounts provided to more than
$5000 (inclusive of all costs). Medicare Australia then determines the amount of benefits paid
out in the course of treating the injury or illness and collects the repayment
of this amount.
1.7
The Advanced Payment Option (APO) allows compensation
payers and insurers to pay 10 per cent of the judgement or settlement to
Medicare Australia to cover the Commonwealth debt, allowing
claimants immediate access to the remaining 90 per cent of their money. Currently,
over 80 per cent of the 50 000 settlements processed each year are
finalised using the Advanced Payment Option. This facility will cease on 1
July 2006 if the sunset clause is not repealed.[1]
ISSUES
1.8
All submissions the Committee received outlined the
benefits of the Advanced Payment Option and supported the amendment repealing
the sunset clause.
1.9
The Insurance Council of Australia (ICA) commented that
it is unfair for injured persons to wait, sometimes for a period of months, for
their damages and compensation funds while a detailed assessment of the health
services repayment amount is made. The ICA
supports the Bill's amendment repealing the
sunset clause and stated:
The Advanced Payment Option has been a practical and cost effective
mechanism of ensuring Medicare is properly reimbursed for the cost of
compensated health and related services, while at the same time ensuring that
the claimant’s access to their damages is not delayed. The Advanced Payment
Option is easy to administer by insurers and is well understood by lawyers and
other representatives of injured people...The operation of the Advanced Payment
Option is convenient, efficient and cost effective for claimants, insurers and
the Health Insurance Commission.[2]
1.10
The Law Council of Australia raised concerns of the
relatively high recovery cost under the scheme. In 2001, it was reported that
Medicare Australia expended nearly 50 per cent of amounts recovered
administering the scheme.[3]
1.11
Medicare Australia
outlined the cost and administrative efficiencies the APO
brings to the Compensation Recovery Program as well as improved processes for
insurers, the injured persons and Medicare Australia.
In the majority of cases (96%), the retention of the ten per cent APO
amount covers the injured person's full repayment amount. Only four per cent of
cases that choose the APO are required to pay Medicare Australia
more than the ten per cent to cover their repayment amount.[4]
1.12
Medicare Australia
confirmed that the operation of the APO has helped to
reduce administrative costs. The recovery cost has decreased from approximately
50 per cent in 1998-1999 to a current recovery cost of approximately 30 per
cent.[5]
1.13
The Law Council of Australia also stated that the APO
amount of 'ten per cent has proved to be far more than is necessary to cover
the actual amounts recoverable by the Commonwealth. Consideration should be
given to lowering the advance payment to five per cent in respect of all
claims.'[6]
1.14
In investigating the potential for improvement to the APO,
Medicare Australia
considered the Pooley Review's recommendation of a sliding scale of APO
percentage amounts. This sliding scale would set the APO
percentage depending on the dollar amount of the damages and compensation
payout. For example, compensation of $5001 to $10,000 would pay five percent
and compensation of $10,001 to $50,000 would pay three percent. Medicare
Australia commented:
...Any change with possibly more complex administrative
arrangements may introduce unintended consequences such as added complexity in
calculations, system developments to support claims assessment, lead time to
implement and cost. The full extent of such change is difficult to quantify at
this stage.[7]
1.15
The Department of Health and Ageing also expressed
concern regarding the implementation of a sliding scale. The Department stated
that a reduction in the APO percentage:
...could result in a greater number of claimants being required to
provide additional funds. This would be likely to prolong the process of
recovery, thereby posing greater impost on those who have already suffered from
injury or hardship. Any benefits in decreasing the ten per cent advanced
payment option would need to be carefully balanced against these
considerations.[8]
..one of the things with the sliding scale is that you are
looking at withholding a certain proportion of the settlement based on how much
the actual settlement claim is worth. There is no direct correlation between
the amounts of related costs to the settlement. If that were the case, then potentially
you could look at that, but the amount of claim does not directly relate to the
amount of costs which may be regarded as recoverable through Medicare Australia.[9]
1.16
The Law Council of Australia raised concerns over the
inclusion of legal costs in the calculation of the APO
amount and stated:
...where they [legal costs] are separately identified, ought to be
excluded from the sum used to calculate the advance payment option. This could
be clarified within the definitions or by Medicare Australia
simply issuing a clarifying notice to insurers.[10]
1.17
With regards to the Law Council's concerns, the
Department commented:
That is
something that could be quite easily clarified with the Law Council, and it
comes down to whether the legal costs are actually specified in the settlement
and whether they form part of that settlement. In the case that legal costs are
specified as separate to the settlement, then my understanding is that they are
not included in the total package of the settlement, under which, say, the advance
payment option may be calculated. But I think that is something we could work
on with them to clarify.[11]
1.18
The Bill proposes a
formal pathway to allow claimants to have their notice of claim reviewed by
Medicare Australia.
An informal system of review currently exists and claimants can proceed
directly to the Administrative Appeals Tribunal. The Law Council of Australia
supports the proposed two-tiered review approach but was concerned about the
lack of time limits applying to Medicare Australia.[12]
1.19
The Department of Health and Ageing
provided clarification on the proposed review amendment:
...the crux of the issue is that there
was not a formal mechanism within the legislation for there to be an internal
review before. That is not to say that that would not have been done as a matter
of practice within Medicare Australia. I suppose we are now providing as part
of this a legal gateway for people to seek an internal review.[13]
Conclusion
1.20
The amendments proposed in this Bill
are mostly minor and technical in nature and do not constitute any significant
change to the operation of the Compensation Recovery Program. The main
amendment proposed relates to the Advanced Payment Option and the repealing of
the sunset clause. The benefits of the Advanced Payment Option have been made clear
and this amendment appears to be supported by all stakeholders. The
Parliamentary Library Bills Digest concluded similarly that the Bill
is likely to be uncontroversial.[14]
Recommendation
1.21
The Committee reports to the Senate that it has
considered the Health and Other Services (Compensation) Amendment Bill 2006 and
recommends that the Bill be passed without
amendment.
Senator
Gary Humphries
Chairman
May 2006
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