Payments outsourcing stuck in Medicare waiting room

Knows what cuts it: Health Minister Sussan Ley.


A final decision on whether more than $30 billion a year in Medicare benefit claims and payments processing will be outsourced to private industry looks no closer to resolution.

The Department of Health has confirmed it is still mulling over its options despite issuing a heavily publicised call out to commercial providers to submit Expressions of Interest (EOI) in August 2014.

“The EOI process is still with the Department of Health and possible next steps are under consideration,” a Health spokesperson told Government News late last week.

Despite a flurry of initial submissions last year, parts of industry now appear to have heavily tempered any expectation of movement on contracts or pilot projects until at least 2016 because of a new review of the Medical Benefits Scheme and the Pharmaceutical Benefits scheme instigated by recently appointed Health Minister Sussan Ley.

After investing almost a year in terms of engagement and bringing the government up to speed, industry is now avidly watching for potential signs that Medicare payments outsourcing push flagged by the Commission of Audit may be headed into political palliative care.

Ms Ley last week revealed a three pronged overhaul of Medicare which closely involves health professionals and is being spearheaded by the creation of a Medicare Benefits Schedule (MBS) Review Taskforce led by Professor Bruce Robinson, Dean of the Sydney Medical School at University of Sydney.

“Currently, the MBS has more than 5,500 services listed, not all of which reflect contemporary best clinical practice. The MBS Review Taskforce will consider how services can be aligned with contemporary clinical evidence and improve health outcomes for patients, Ms Ley said.

The giant stocktake, which will be led by clinicians, has the clear potential to generate savings which informed speculation has put at up to $3 billion. At the same time the Ms Ley has announced another review of subsidised drugs that make it onto the PBS that could generate savings claimed to potentially be has high as $7 billion.

One well publicised target is the writing of scripts for already cheap over the counter medications like paracetamol where the cost of processing of the script for a retail product can be higher than the price of the medication itself.

The raft of reviews have serious ramifications for any potential suppliers of outsourced Medicare and PBS claims and payment processing because future policy decisions would almost certainly influence the business rules that potential outsourcers would need to build their services on.

It could also dramatically change the business case assumptions for outsourcers, with the Department of Health now clearly keeping an open mind on where that might leave commercial options for both the government and industry.

The most Health will say is that Medicare payments will still be made, although it has remained conspicuously ambiguous over what form these may take.

“The EOI process was to assess the potential and feasibility for commercial payment service providers to support health service payments, and while the outcomes of the Medicare review could change the policies that lead to health service payments, it is anticipated that payments will continue to be processed in some form,” a Health Department spokeswoman said.

The latest reviews which heavily involve clinicians are a far cry from the government’s previous failed efforts to ram through a Medicare co-payment that resulted in a policy backflip, sharp criticism from doctors and ultimately the appointment of the more personable Ms Ley to Health Minister to replace Peter Dutton who has been sent to Immigration and Border Protection.

Selling the Medicare review as a major step forward in restoring productive relations with clinicians and the Australian Medical Association on ABC Radio last week, Ms Ley described Medicare co-payment backflip as “ancient history.”

Another major factor industry is watching is the Department of Human Services’ announcement that it the business case for an overhaul of Centrelink’s ageing mainframe-based payments applications, dubbed ISIS, has been approved.

The approval raises the clear question of whether the government will try and pursue both an in-house build of one key welfare payments engine while trying to get commercial providers for another.

Although Health is formally the custodian of the Medicare and PBS payments system in terms of accountability it has in fact used DHS to make the equivalent of a giant electronic cheque-run for years.

Under the Howard government the cost of manually processing Medicare refund claims over the counter had been estimated to be as high as $10 a transaction, a figure that jarred against costs to well under a dollar for electronic transactions.

Human Services has said planning for the Centrelink overhaul “will begin on 1 July 2015 with the first stage to be completed by the end of 2016.”

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