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Prepared by
Stehpen Milgate and Glen Ramos on behalf of the Australian Doctors' Fund
May 2000
9.May 2000
Mr Elton Humphrey
Secretary
Senate Community Affairs Legislation Committee
Parliament House Canberra ACT 2600
Dear Mr Humphrey
The Australian Doctors' Fund makes the following points in relation to the Health Legislation Amendment (Gap Cover Schemes) Bill 2000.
Under existing legislation accountability for Medicare patient rebates assigned to medical practitioners through simplified billing agents or through health funds via Medical Purchaser Provider Agreements, Practitioner Agreements, and Hospital Purchaser Provider Agreements is governed by two different sets of rules.
The Department of Health and Aged Care (DHAC) states as follows:
Simplified Billing Agents
"A simplified billing agent is required to operate a trust account and provide details of such an account to PHIAC. The Guidelines provide that a trust account must be:
"The billing agent must provide PHIAC with the name and number of the trust account and the name, address and BSB number of the bank that holds the account.
"Billing agent trust funds must be audited annually by a qualified professional auditor, with a report sent to PHIAC. The auditor must provide certification of the audit in addition to the audit itself. Under the Guidelines the billing agent's annual report must include a certification by the qualified person that the trust account has been operated in accordance with relevant laws of the State or States of operation."
Health Funds
"Health funds that receive Medicare benefits under assignment arrangements and that are not approved simplified billing agents are not required to maintain a trust accounts for monies received from HIC. As noted above, no health fund is currently an approved billing agent. The highly regulated nature of the health insurance industry provides protection for monies handled by health funds.
"Funds are subject to detailed regulation under the NHA. Health funds are required to report to PHIAC on a quarterly basis, and are subject to audit arrangements." 1 (Underline added)
The DHAC then states that the above situation will not change under the Health Legislation Amendment (Gap Cover Schemes) Bill 2000
"The current position in relation to the custodianship of Medicare rebates, as set out above, will be unchanged under the proposed legislation." 2
Put simply under the Health Legislation Amendment (Gap Cover Schemes) Bill 2000 the same dual accountability system for the same process (simplified billing) remains.
We can see no reason why the prudential requirement for the custodianship of Medicare rebates which are demanded of simplified billing agents should not be applied to health funds, who are not compelled to register as simplified bulling agents.
"Although a health fund can operate as a billing agent, to date no health fund has applied for approval as a simplified billing agent." 3
The Australian Doctors' Fund recommends that amendments be made to the Health Legislation Amendment (Gap Cover Schemes) Bill 2000 which compels any organisation being assigned a Medicare rebate to operate a trust fund and the same accountability arrangements which now apply to registered simplified billing agents.
Medical Purchaser Provider Agreement (MPPA), Practitioner Agreement (PA), and Hospital Purchaser Provider Agreement (HPPA) - aka Lawrence Contracts
The DHAC states that:
"The Health Legislation Amendment (Gap Cover Schemes) Bill 2000 (the Bill) builds on, but does not significantly depart from, the existing assignment arrangements contained in the Act.
"The default position in relation to an approved gap cover scheme is that the Medicare benefit is paid to the health fund. This mirrors the current position with assignment of Medicare benefit where there is an MPPA or PA/HPPA." 4
And
"Further, assignment of Medicare benefits will only take place to health funds where an agreement (either a MPPA or PA/HPPA) exists. Doctor participation in these agreements is an implicit acceptance of the terms of the agreements including terms relating to the circumstances under which the fund will pay bills and the timeframe for payment of practitioners. There is no compulsion for doctors to enter into agreements, so if payment arrangements that suit medical practitioners cannot be agreed upon, doctors may refuse to participate in agreements." 5
The DHAC then states that the above situation will not change under the Health Legislation Amendment (Gap Cover Schemes) Bill 2000
"The current position in relation to the custodianship of Medicare rebates, as set out above, will be unchanged under the proposed legislation." 6
The DHAC is saying that the existing legislation (Lawrence contracts) and the proposed legislation (Health Legislation Amendment (Gap Cover Schemes) Bill 2000) both require a Lawrence contract (MPPA or PA/HPPA) in order for the assignment of Medicare benefits to a health fund.
However we note that the Health Legislation Amendment (Gap Cover Schemes) Bill 2000 in section 73BDD(4) states
"Any arrangement that is entered into for the purposes of such a scheme does not constitute a hospital purchaser-provider agreement, a medical purchaser-provider agreement or a practitioner agreement."
This would appear to us to be totally contradictory as well as confusing and despite out best efforts we have not been able to obtain a satisfactory explanation of what it all means.
Furthermore a doctor may be unaware (in whole or in part) that he or she has entered into an agreement, as the DHAC explains
"An MPPA allows the private health fund to make an agreement with the medical provider to pay the provider benefits above the Medicare Benefits Schedule Fee. Such agreements may be expressed orally or in writing, and may be valid for a fixed time period or allow either party to end the agreement at will."
But it gets worse!
Many doctors using AXA's EzyClaim on behalf of patients (predominantly in South Australia and lately in Victoria) do not consider themselves to be a party to any Lawrence contract arrangements despite conducting a simplified billing arrangement for their patients (Medicare benefit being assigned to the health fund).
Our legal advice on this matter leads us to conclude that section 73BDA of the current National Health Act contemplates some degree of formality and supports the argument that less formal agreements not complying with this section are insufficient to allow reassignment of benefits under the Act.
This raises the very difficult prospect that schemes such as EzyClaim may be operating outside existing legislation and accepting the assignment of Medicare benefits without a formal MPPA as the Act envisaged. We believe this is a matter that the committee should clarify with some urgency and we would be interested in whether the Auditor-General is satisfied that existing arrangements, which would obviously have the DHAC's approval, are in fact covered by the existing legislation.
The explanatory memorandum to the Health Legislation Amendment (Gap Cover Schemes) Bill 2000 claims that groups of medical practitioners, and craft groups will be able to jointly negotiate benefits, fees, or schedules. The explanatory memorandum states that
"A fund might agree to provide 100% medical cover for members who are treated by doctors who have agreed to participate in an approved gap cover, but would limit benefit payments to the MBS made in relation to charges by other practitioners (that is, contributors, in some instances, would still have an unknown gap payment to meet). This agreed benefit may be related to the MBS or the AMA schedule fees or funds may prefer to establish their own schedules. These arrangements might be negotiated on an industry wide basis, or with reference to a particular hospital, or group of hospitals, or to particular craft groups." 7
However, the Australian Competition and Consumer Commission (ACCC) notified the Australian Doctors' Fund that this is not the case and in fact that the application of the Trade Practices Act is not excluded from Gap Cover Schemes.
The ACCC goes as far as stating that
"Put briefly, the statement is an error and competing hospitals and competing doctors will not be able to jointly negotiate with health funds." 8
This being the case, the Health Legislation Amendment (Gap Cover Schemes) Bill 2000 does not address the current imbalances of power in contractual arrangements between health funds (who can combine to acquire medical services) and medical practitioners (who are expected to 'negotiate' as individuals) leaving negotiations for Gap Cover Schemes in the same situation as that of Lawrence contracts – the health funds dictate the terms and the is no meaningful negations, let alone prospects of reasonable redress when wrongs occur.
There is now rampant uncertainty and confusion as to what is permissible in terms of communication with health funds and hospitals by medical organisations that are attempting to represent their members' interests, as is their democratic right.
On the one hand doctors are urged to sit down and talk with health funds in order to come up with compatible arrangements regarding private health insurance, whilst at the same time, doctors associations are being threatened by the ACCC should Professor Fels interpret any of their communications as constituting fee negotiations. Individual doctors representing their colleagues are libel to a fine of $500,000 and the organisation they represent, $10,000,000 should their communications fall foul of the ACCC.
How can any medical association enter into meaningful communication with a health fund without touching on medical fees?
Whilst Professor Fels has warned doctors not to publish fee schedules that have a substantial degree of compliance, he is before the Senate committee urging the publication of individual doctor fees.
It is worth noting that should an individual doctors fee mirror that of a number of his or her craft group colleagues' (now known as competitors) then all doctors in the one craft group may be subject to investigation by the ACCC for fee fixing.
The degree of fear and uncertainly over the simple process of group negotiating reasonable fee schedules with third party funders, including health funds, is preventing the negotiation of user friendly arrangements for health fund contributors.
The Health Legislation Amendment (Gap Cover Schemes) Bill 2000 does not improve this situation. What would improve the situation is for the Bill to be amended to allow medical craft groups to publish fee schedules and to group negotiation with any third party payer on behalf of members.
The Australian Doctors' Fund does not support medical organisations demanding its members' adherence to any schedule and supports the rights of individual doctors to determine their own fees in consultation with their patients.
The billing history of the vast majority of doctors who constitute the Australian medical profession shows that with few exceptions doctors have accommodated their patients' financial circumstances and we believe, by international comparisons Australian doctors have given excellent value to their patients.
The number of Australians paying an excess on their private health insurance, we are informed, is approaching 50% of health funds members.
Therefore, almost one in two members will be paying up to $1,000 out of their own pocket to cover the heath fund gap which has been growing at a significant rate.
Since there is no intention to eliminate the health fund excess (front-end deductibles) it is erroneous and misleading to claim that for a significant number of privately insured patients that gaps will disappear.
We believe that the Health Legislation Amendment (Gap Cover Schemes) Bill 2000 misses the opportunity to correct some of the flaws that are dogging private health insurance legislation.
Sensible amendments along the lines that we have suggested above, together with the repeal of the Lawrence Legislation, are now urgently required to prevent a further deterioration in the value of private health insurance for those Australians who choose to use it.
Prepared by
Stephen Milgate and Glen Ramos
on behalf of the Australian Doctors' Fund
1 Commonwealth Department of Health and Aged Care. Reponses to: Senate Community Affairs Legislation Committee Enquiry: Health Legislation Amendment (Gap Cover Schemes) Bill 2000; Supplementary questions. Canberra, Australia. 2000. pg 6.
2 Ibid. pg 6.
3 Ibid. pg 6.
4 Ibid. pg 4.
5 Ibid. pg 6.
6 Ibid. pg 6.
7Health Legislation Amendment (Gap Cover Schemes) Bill 2000: Explanatory Memorandum. pg 6.
8 O'Brien, AJ. Letter to Australian Doctors' Fund from ACCC re Health Legislation Amendment (Gap Cover Schemes) Bill 2000: Explanatory Memorandum. 22 February 2000.
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