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HEALTH LEGISLATION AMENDMENT (MEDICARE AND PRIVATE HEALTH INSURANCE) BILL 2003

2002-2003



THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA



HOUSE OF REPRESENTATIVES



HEALTH LEGISLATION AMENDMENT (MEDICARE AND PRIVATE HEALTH INSURANCE) BILL 2003



EXPLANATORY MEMORANDUM



(Circulated by authority of the Minister for Health and Ageing,
Senator the Hon. Kay Patterson)


HEALTH LEGISLATION AMENDMENT (MEDICARE AND PRIVATE HEALTH INSURANCE) BILL 2003

OUTLINE

The measures in the Health Legislation Amendment (Medicare and Private Health Insurance) Bill 2003 make medical services more affordable. The Bill does this in three ways by:

1. Permitting private health insurers to cover 100% of out-of-pocket costs for out-of-hospital Medicare services above $1000 per family in a calendar year;

2. Applying a safety-net to the cumulative costs for out-of-hospital medical services for concessional patients covering 80% of the out-of-pocket costs above $500 per family incurred for Medicare services in a calendar year; and

3. Addressing the upfront costs of a general practitioner visit by permitting patients who are charged above the Medicare rebate to assign their Medicare benefit to the general practitioner and then pay only the gap amount charged by the general practitioner. The practitioner then claims the Medicare rebate directly through the Health Insurance Commission. This facility will only be offered to general practices which are prepared to protect affordability for patients on low incomes by participating in the General Practice Access Scheme.

FINANCIAL IMPACT STATEMENT

The measures in the Bill have a total cost over 2002-2003 and the following four years of $167.8 million. The costing for each measure, which includes payments to patients and administrative costs, is set out in the following table.

NOTES ON CLAUSES

Clause 1
Clause 1 provides for the short title of the Act to be cited as the Health Legislation Amendment (Medicare and Private Health Insurance) Act 2003.

Clause 2
This clause details the commencement dates of the various amendments contained within the Bill:

• Clauses 1 to 3 (inclusive) of the Bill, and any provisions not expressly provided for below, commence on Royal Assent.

• Schedule 1, Items 1 to 8 commence on Royal Assent.

• Schedule 1, Items 9 to 12 commence upon the later of the following (a) on Royal Assent, and (b) immediately after the commencement of Item 10 of Schedule 1 to the Health Legislation Amendment (Private Health Insurance Reform) Bill 2003. This ensure that these amendments only take effect on the commencement of Item 10 of Health Legislation Amendment (Private Health Insurance Reform) Bill 2003, and also not before Royal Assent.

• Schedule 1, Item 13 commences on Royal Assent.

• Schedule 1, Items 14 to 22, subject to subclause 2(3), commence on Royal Assent.

• Schedule 1, Item 23 commences on Royal Assent.

• Schedule 1, Items 24 and 25, subject to subsection 2(3), commence on Royal Assent.

• Schedule 1, Items 26 to 28 commence on Royal Assent.

• Schedule 1, Items 29 and 30, subject to subsection 2(3), commence on Royal Assent.

• Schedule 1, Items 31 to 39 commence on Royal Assent.

• Schedules 2 and 3 commence on Royal Assent.

Subclause 2(3) of the Bill provides, if the Health Legislation Amendment (Private Health Insurance Reform) Bill 2003 commences before the Bill, the amendments contained in items 14 to 22, 24, 25, 29 and 30 of Schedule 1 to the Bill are taken not to have been made. This makes provision for changes to the National Health Act 1953 that may be effected by that Bill.

Clause 3
Clause 3 specifies that the Acts referred to in the Schedules are amended by the amendments set out in each of the Schedules.


Schedule 1 - Amendments relating to out-of-hospital insurance plans

Schedule 1 of the Health Legislation Amendment (Medicare and Private Health Insurance) Bill 2003 (the Bill) amends the Health Insurance Act 1973, National Health Act 1953 and the Private Health Insurance Incentives Act 1998 to enable health benefits funds conducted by registered health benefits organizations to offer a new private health insurance product - out-of-hospital insurance plans.

Background

The Government has decided to allow private health funds to offer a new product as part of the ‘A Fairer Medicare - Better Access, More Affordable’ package.

This legislation will allow registered health benefits organizations to offer out-of-hospital insurance plans from 1 January 2004.

Out-of-hospital insurance plans will cover 100% of a member’s out-of-hospital medical services, once:

• a threshold of $1000 out-of-pocket costs (gap charge threshold) has been accrued within a calendar year (whether or not the plan covers one or more people); and
• a once off six month waiting period has been served.

The six month waiting period has been included to protect health benefit funds from “hit and run” contributors who may enter the plan incurring high costs in the short term leaving other members to subsidise their costs in the longer term. The waiting period provides a level of prudential protection for the registered health benefits organizations offering the product.

The loyalty of current members is important and as such the legislation provides that the six month waiting period:

• may not be applied to anyone who enters into an out-of-hospital insurance plan who was covered by hospital treatment insurance (applicable benefits arrangement) at 1 July 2003 and held it continuously until the time of entry into an out-of-hospital insurance plan; and
• may (as is currently the case in relation to waiting periods on other health insurance products) be waived by the registered health benefits organizations.

Only medical services for which a Medicare rebate is payable are insurable via out-of-hospital insurance plans. This will include general practitioner, specialist, ultrasound, diagnostic, pathology and radiation oncology services.

Out-of-pocket costs (the gap charge) will be the difference between the fee charged by the medical provider and the Medicare benefit payable in respect of that out-of-hospital medical service.

This legislation will enable the Health Insurance Commission to keep track of the out-of-pocket medical expenses of a person covered by a plan. Once a person enters a plan, their health fund will advise the Health Insurance Commission and the Health Insurance Commission will keep track of their out-of-pocket expenses for the purposes of tracking amounts for the gap charge threshold.

This legislation enables the registered health benefits organizations and the Health Insurance Commission to exchange a range of relevant information necessary to the successful operation of out-of-hospital insurance plans. This information must necessarily includes a person’s Medicare number and out-of-hospital medical costs details.

The privacy of persons who enter out-of-hospital insurance plans will be protected. This legislation expressly confines the use of the information exchanged between the registered health benefits organizations and the Health Insurance Commission to the purpose of administering out-of-hospital insurance plans.

All private health funds will be able to offer the new product, although they will not be required to do so.

Premiums for this product will be set by private health insurance funds that choose to offer this product. Premiums will be set and changed in the manner set out in the National Health Act 1953.

This legislation ensures that premiums for out-of-hospital insurance plans will be offset by the operation of the 30% Rebate.

Community rating will also apply to this new product, as it does to hospital and ancillary insurance products. This means that all contributors to an out-of-hospital insurance plan will pay the same amount as other like members on the same plan at the same health fund, regardless of their age or state of health.

Out-of-hospital insurance plans are subject to the operation of all the general regulatory provisions (such as the National Health Act 1953, Health Insurance Act 1973 and conditions of registration) pertaining to the conduct by a registered health benefits organization of its health insurance business. These provisions permit scrutiny by the Private Health Insurance Administration Council and the Private Health Insurance Ombudsman.

Out-of-hospital insurance plans will operate in tandem with the existing Medicare safety-net arrangements and the new safety-net for people with a Commonwealth concession card.

The out-of-hospital insurance plan has no effect on the Medicare Levy Surcharge or Lifetime Health Cover. That is, a person who chooses to be covered by an out-of-hospital insurance plan will not gain exemption from the Medicare Levy Surcharge (if otherwise applicable) or increased premiums under Lifetime Health Cover (if otherwise applicable).

Health Insurance Act 1973

Item 1: After subsection 126(5A) of the HIA

Section 126 of the Health Insurance Act 1973 prohibits contracts of insurance for liabilities in respect of the rendering of a professional service in Australia for which a Medicare benefit is payable. Section 126 exempts health insurance funds offering applicable benefits arrangements from this prohibition. The proposed amendment will exempt health funds offering out-of-hospital insurance plans from this prohibition.

The purpose of this amendment is to enable registered health benefits organizations to offer contracts of insurance (out-of-hospital insurance plans) for out-of-pocket costs associated with out-of-hospital medical expenses covered by Medicare. Out-of-hospital insurance plans may only cover services where a service attracts an 85% Medicare rebate and not a 75% Medicare rebate (the level of rebate for in-hospital services).

National Health Act 1953

Item 2: Subsection 4(1)

This item amends section 4 of the National Health Act 1953 by inserting a definition of gap charge. A gap charge, in relation to an out-of-hospital service, is defined as the difference between the total charge for the service and the Medicare benefit payable in respect of that service.

If the Medicare benefit is not payable in respect of the service, the charge for that service is not covered by an out-of-hospital insurance plan.

Item 3: Subsection 4(1)

This item amends section 4 of the National Health Act 1953 by inserting a definition of gap charge threshold for the purposes of an out-of-hospital insurance plan. The gap charge threshold is a total of $1000 in gap charges per calendar year.

• This is irrespective of whether or not a plan covers one or more persons or whether or not the services are provided during a waiting period.
• If an insurance plan is only in force for part of a calender year, the $1000 threshold must be reached in that part of the calender year when the insurance plan is in force.

The gap charge threshold of $1000 must be reached before benefits are payable under an out-of-hospital insurance plan. Gap charges may be accrued towards the threshold during a waiting period even if benefits may not be paid. For each calendar year a new $1000 threshold must be met.

Item 4: Subsection 4(1)
This item amends section 4 of the National Health Act 1953 by inserting a definition of out-of-hospital insurance plan. An out-of-hospital insurance plan is a policy of health insurance offered only by registered health benefits organizations to meet all (100%) of reimbursable gap charges in respect of Medicare payable out-of-hospital services provided to a person covered by the policy.

It is important to note that an out-of-hospital insurance plan meets 100% of out-of-pocket costs associated with an out-of-hospital Medicare payable service.

Item 5: Subsection 4(1)
This item amends section 4 of the National Health Act 1953 by inserting a definition of out-of-hospital service. The purpose of defining an out-of-hospital service is to clearly define the sphere of operation of out-of-hospital insurance plans. The insurance plans cover out-of-hospital services for which a Medicare benefit is payable.

Professional services of a kind referred to in paragraph 10(2)(c) of the Health Insurance Act 1973 are excluded from the definition of out-of-hospital service. The services referred to in paragraph 10(2)(c) of that Act are in-hospital professional services in relation to which Medicare benefit is payable (75% of the Schedule fee), and in relation to which a person may already obtain private health insurance from a registered organization, under an applicable benefits arrangement.

In addition, provision is made, should it become necessary or appropriate, to declare, by regulation, that a professional service is not an out-of-hospital professional service for the purposes of the National Health Act 1953.

Item 6: Subsection 4(1) (definition of waiting period)
This item amends section 4 of the National Health Act 1953 by repealing the current definition of waiting period and substituting a new definition. The amendment has been made to ensure that the definition of waiting period in the National Health Act 1953 covers the waiting period that applies in relation to out-of-hospital insurance plans. In relation to an out-of-hospital insurance plan the waiting period means a period specified under section 73BDEE of the National Health Act 1953.

Item 7: Subsection 4(1)
This item amends section 4 of the National Health Act 1953 by inserting a definition of reimbursable gap charge. A reimbursable gap charge is defined as a gap charge or part of a gap charge, in relation to an out-of-hospital service where:

• the out-of-hospital service is provided to a person covered by an out-of-hospital insurance plan;
• the gap charge is not incurred during a waiting period which applies to persons covered by the out-of-hospital insurance plan; and
• the gap charge, or that part of the gap charge, does not form any part of a gap charge threshold of an out-of-hospital insurance plan covering the person to whom the service was provided.

This amendment ensures that only the out-of-hospital costs of those insured via out-of-hospital insurance plans count towards the threshold or are eligible for reimbursement. The definition ensures that benefits are not payable in relation to out-of-hospital costs incurred during the once off six month waiting period, or if the costs form part of the annually recurring $1000 gap charge threshold. Any reimbursable costs (even if it forms only part of the cost for the service) incurred after the threshold has been reached must be reimbursed by the health fund.

Item 8: Subsection 67(4) (after paragraph (a) of the definition of health insurance business)
This item amends section 67 of the National Health Act 1953 by inserting a new paragraph (aa) to the definition of health insurance business in subsection 67(4). Section 67 of the National Health Act 1953 makes it a criminal offence for persons, other than registered organizations, to carry on health insurance business. New paragraph (aa) to the definition of health insurance business in subsection 67(4) ensures that only registered organizations may carry on the business of undertaking liability, by way of insurance, with respect to loss arising out of a liability to pay fees or charges in relation to the provision in Australia of an out-of-hospital service. The amendment is consistent with the amendment to section 126 of the Health Insurance Act 1973 (Item 1 of Schedule 1 to this Bill).

Items 9 to 12 inclusive
Items 9 to 12 inclusive relate to sections to be inserted into the National Health Act 1953 by Item 10 of the Health Legislation Amendment (Private Health Insurance Reforms) Bill 2003. Items 9 to 12 inclusive will only take effect on the commencement of Item 10 of the Health Legislation Amendment (Private Health Insurance Reforms) Bill 2003, and not before Royal Assent.

Item 9 relates to new 73AAI, which imposes a community rating condition concerning admission of persons as contributors and cancellations of membership. Item 9 ensures that new 73AAI would apply to out-of-hospital insurance plans.

Items 10 to 12 inclusive relate to new 73AAJ, which imposes a community rating condition concerning quantum and payment of benefits. Items 10 to 12 inclusive ensure that new 73AAJ would apply to out-of-hospital insurance plans.

Item 13: After Division 4A of Part VI

This item inserts a new Division 4B after Division 4A of Part VI to the National Health Act 1953. The new Division provides the framework for the new out-of-hospital insurance product. The new Division contains the following new sections:

• 73BDEB Definition
• 73BDEC Registered organization may offer insurance plans
• 73BED Who may be covered by an insurance plan
• 73BDEE Waiting periods
• 73BDEF Registered organization may collect certain information for purposes of this Act and the Health Insurance Act 1973
• 73BDEG Registered organization to notify Health Insurance Commission of existence and coverage of insurance plan
• 73BDEH Health Insurance Commission notification obligations
• 73BDEI Claim against registered organization by person covered by an insurance plan
• 73BDEJ Regulations relating to portability and other matters

73BDEB Definition

This new section simplifies interpretation by providing that for the purposes of the new Division 4B an “insurance plan” means an out-of-hospital insurance plan offered under section 73BDEC.

73BDEC Registered organization may offer insurance plans

This new section sets out the circumstances in which an out-of-hospital insurance plan may be offered.

• Pursuant to subsection 73BDEC(1), out-of-hospital insurance plans may be offered by registered organizations at any time.
• Pursuant to subsections 73BDEC(2) and (3) out-of-hospital insurance plans take effect from the date specified in the plan but the date specified may not be earlier than 1 January 2004, or the date on which a person becomes a party to the contract for insurance whichever is the latest.
• Pursuant to subsection 73BDEC(4) an out-of-hospital insurance plan must be distinct from any other health insurance products offered by the health fund;
• Pursuant to subsection 73BDEC(5) an out-of-hospital insurance plan may not exclude any out-of-hospital services.
• Pursuant to subsection 73BDEC(6), subject to section 73BDED, in offering an out-of-hospital insurance plan a registered health benefits organization must not deny access to any persons who wish to enter the contract for out-of-hospital insurance, or be covered by it, except to the extent allowed for restricted membership organizations. This qualification recognises the historical development of the private health insurance industry, where health insurance was often one of many services provided by a friendly society (or like organization) to a defined group. The National Health Act 1953 enables the rules of a registered health benefits organisation to restrict eligibility for membership by reference to matters including employment and membership of a profession, professional association or union.

73BDED Who may be covered by an insurance plan

The purpose of this section is to provide for who may be covered via an out-of-hospital insurance plan. An out-of-hospital insurance plan if it covers more than one person may only cover the contributor and dependants of the contributor. This approach enables health funds to have a consistent approach to administering membership of their products between the new and extant products.

73BDEE Waiting periods

This new section provides for a maximum waiting period of 6 months, and for other associated matters.

Pursuant to this section, health funds may apply a once off six month waiting period from the date of entry into the contract for insurance. No other waiting periods are to apply such as those in paragraphs (j) to (kd) of Schedule 1 to the National Health Act 1953.

The new section recognises that registered organizations may waive the waiting period. Section 73BAA of the National Health Act 1953 states that the Act does not prevent registered organizations from waiving waiting periods. In addition, of course, the waiting period will also not apply to all dependants under such a plan.

Pursuant to subsection 73BDEE(2), people who have hospital cover at 1 July 2003, and maintain that cover, will not have to serve the waiting period when they subscribe to this plan.

No benefits are payable for gap charges incurred during the waiting period. However, gap charges incurred during the waiting period do accrue towards the threshold.

The six month waiting period has been included to protect health benefit funds from “hit and run” contributors who may enter the plan incurring high costs in the short term leaving other members to subsidise their costs in the longer term. The waiting period provides a level of prudential protection for the registered health benefits organizations offering the product.

73BDEF Registered Organization may collect certain information for purposes of this Act and the Health Insurance Act 1973

This new section enables registered organizations to collect information relevant for the purposes of administration of the out-of-hospital insurance plans. Persons seeking to be covered by an out-of-hospital insurance plan must notify their health fund of the identity of the person(s) covered by the plan and the medicare number of those covered, and the expiry date in relation to the medicare number. Furthermore, if these details change the person must notify their health fund of the change.

Any information so provided may only be used by the registered organization, and if notified to the Health Insurance Commission, by the Commission, for the sole purpose of the operation of out-of-hospital insurance plans and the National Health Act 1953 and Health Insurance Act 1973 in relation to the operation of out-of-hospital insurance plans.

This is a fundamental element for the administration of the out-of-hospital insurance plans which requires the Health Insurance Commission to track amounts towards the gap charge threshold.

The provisions of the Privacy Act 1998 continue to protect those covered by out-of-hospital insurance plans. Health funds must clearly advise those covered by out-of-hospital insurance plans of the range of information to be provided to the Health Insurance Commission. Health funds must also clearly advise those covered of the details of the information the Health Insurance Commission will provide back to it, and the purposes for which information has been collected in relation to out-of-hospital insurance plans.

73BDEG Registered organization to notify Health Insurance Commission of existence and coverage of insurance plan

This new section requires registered organizations to notify the Health Insurance Commission, as soon as practicable after a person enters into an out-of-hospital insurance plan, of the following matters:

• That the plan has been entered into;
• The date of effect of the plan;
• The identity of person(s) covered by the plan;
• The medicare number of the person(s) covered by the plan and the expiry date in relation to each medicare number; and
• Any other matters relating to the insurance plan and the person(s) covered by it necessary for the Health Insurance Commission to undertake its functions in relation to the out-of-hospital insurance plans as are determined in writing, via disallowable instrument, by the Managing Director of the Health Insurance Commission.

In addition, whenever a registered organization is notified of a change in the identity of a person(s) covered by an out-of-hospital insurance plan, the medicare number(s), the expiry date for the medicare number(s), or information notified to the Commission under the Managing Director’s determination, the registered organization is to notify the Commission of the change.

This is a fundamental element for the administration of the out-of-hospital insurance plans which requires the Health Insurance Commission to track amounts towards the gap charge threshold.

The power of the Managing Director is, however, qualified in the interests of privacy. The Managing Director may not issue a direction that requires the provision of a person’s tax file number or information about the physical, psychological or emotional health of a person.

Pursuant to subsection 73BDEG(5), information notified by the registered health benefits organization to the Health Insurance Commission may only be used for the purposes of the enabling the Commission to work out the gap charge threshold, and to notify the health fund that the threshold has been reached.

73BDEH Health Insurance Commission notification obligations

This new section provides that once the Health Insurance Commission is satisfied, on the basis of claims for medicare benefits made to it, that a person has reached the gap charge threshold in respect of a particular calendar year, the Commission must, as soon as practicable, notify the registered health benefits organisation of the following:

• That the gap charge threshold has been reached in respect of the persons covered by the insurance plan in respect of that calendar year ;
• Details of the services, or part thereof, counted towards the gap charge threshold; and
• If only a part of a service was counted towards the threshold the amount counted towards the threshold thereby enabling the health fund to determine the quantum of that gap charge which is eligible for reimbursement (if the service is not subject to the application of a waiting period).

73BDEI Claim against registered organization by person covered by an insurance plan

The purpose of this new section is to set out the circumstances in which those covered by an out-of-hospital insurance plan may make a claim for an amount equal to the amount of the reimbursable gap charge from their health fund. A claim for reimbursement may be made directly to the health fund as is currently the case with other health insurance cover (after the Medicare rebate amount has been paid by the Health Insurance Commission). The legislation does not, however, preclude other methods of claiming reimbursement. Other methods of claiming reimbursement may include (but are not limited to) direct electronic transfers.

A claim for the reimbursement of 100% of the gap charge can be made if:

• A person is covered by an out-of-hospital insurance plan; and
• The Health Insurance Commission has notified the registered health benefits organization offering the plan that the gap charge threshold has been reached in respect of the plan and a particular calendar year; and
• An out-of-hospital service is provided within that calendar year to person(s) covered by the plan; and
• A gap charge is paid by a person(s) covered by the plan in respect of that out-of-hospital service; and
• The person(s) covered by the plan incurs a gap charge that is reimbursable in whole or in part (ie. if part of it forms part of the threshold the remainder if not subject to a waiting period would be reimbursable); and
• The person(s) covered by the plan have the capacity, under the terms of the plan, to make a claim against the health fund; and
• The person(s) covered by the plan are not subject to the application of the once off six month waiting period.

This section also provides that if a person(s) is (are) covered by the plan, and the organization is satisfied in relation to the matters set out above, the organization must pay to the person(s) an amount equal to the reimbursable gap charge amount.

73BDEJ Regulations relating to portability and other matters

This new section enables the making of regulations establishing principles governing portability (movement to comparable products within or between funds) in relation to out-of-hospital insurance plans. The regulations also provide governing principles regarding waiting periods and the accrual of the gap charge threshold when a person ceases to be covered by a plan, and either immediately, or at a later time, becomes covered by another insurance plan.

Regulations made pursuant to this new section operate to the exclusion of the principles set out in paragraphs (l), (la), (laa), (lab), (lb), (lba), (lc), (ld), and (le) of Schedule 1 to the National Health Act 1953.

Items 14, 15, 16, 17, and 18: Changes pertaining to section 73BF
These items make consequential changes to ensure that the new out-of-hospital insurance plans are subject to relevant regulatory provisions in the National Health Act 1953. Section 73BF enables the Minister to direct a registered health benefits organization to admit a person to an applicable benefits arrangement if the Minister is satisfied that admission was refused on the grounds of the health of a person covered by that arrangement. These powers will also apply in relation to the out-of-hospital insurance plans.

Items 19 and 20: Changes pertaining to section 73BFA
These items make consequential changes to ensure that the new out-of-hospital insurance plans are subject to relevant regulatory provisions in the National Health Act 1953. Section 73BFA enables the Minister to direct a registered health benefits organization to admit a person, being a patient in an institution, to an applicable benefits arrangement if the Minister is satisfied that admission was refused on the grounds that a person covered by that arrangement was in an institution. These powers will also apply in relation to the out-of-hospital insurance plans.

Items 21 and 22: Changes pertaining to section 73BFB
These items make consequential changes to ensure that the new out-of-hospital insurance plans are subject to relevant regulatory provisions in the National Health Act 1953. Section 73BFB enables the Minister to reinstate person(s) to a health fund if the Minister is satisfied that the cancellation of the person(s) cover constitutes improper discrimination against the person. These powers will also apply in relation to the out-of-hospital insurance plans.

Item 23: Section 82ZQ (After paragraph (e) of the definition of private health insurance arrangement)
This item makes a consequential amendment to ensure that out-of-hospital insurance plans are within the sphere of influence of the Private Health Insurance Ombudsman.

Item 24: Paragraph (b) of Schedule 1
This item makes a consequential amendment to ensure that out-of-hospital insurance plans are subject to relevant regulatory provisions in the National Health Act 1953. Paragraph (b) of Schedule 1 to the National Health Act 1953 forms part of community rating in relation to applicable benefits arrangements by requiring health funds to allow all contributors and all persons eligible to become contributors to contribute any applicable benefits arrangement in relation to their dependants. Community rating applies equally to out-of-hospital insurance plans as to applicable benefits arrangements.

Item 25: Paragraph (be) of Schedule 1
This item makes a consequential amendment to ensure that out-of-hospital insurance plans are subject to relevant regulatory provisions in the National Health Act 1953. Paragraph (be) of Schedule 1 to the National Health Act 1953 forms part of community rating requirements in relation to applicable benefits arrangements by requiring health funds to allow all contributors and all persons eligible to become contributors to contribute to an applicable benefits arrangement. Community rating applies equally to out-of-hospital insurance plans as to applicable benefits arrangements.

Items 26 and 27: Changes pertaining to paragraph (g) of Schedule 1
This item makes a consequential amendment to ensure that out-of-hospital insurance plans are subject to relevant regulatory provisions in the National Health Act 1953. Paragraph (g) of Schedule 1 to the National Health Act 1953 enables person(s) covered by an applicable benefits arrangement who cease to pay contributions to pay arrears within two months from the cessation and have continued cover without penalty. This is an important protection for consumers that will apply to out-of-hospital insurance plans.

Item 28: Paragraph (lf) of Schedule 1
This item makes a consequential amendment to ensure that out-of-hospital insurance plans are subject to relevant regulatory provisions in the National Health Act 1953. Paragraph (lf) of Schedule 1 to the National Health Act 1953 prohibits registered health benefits organizations from limiting the entitlements of a person(s) covered by a health insurance product by including provisions in a way that has substantially the same effect as the imposition of a waiting period. This prohibition does not operate if the waiting period is in accordance with the relevant conditions in Schedule 1 of the National Health Act 1953. The amendment will ensure that the limitation will not operate if it is in accordance with any other provisions of the Act. This amendment removes any possible argument that the $1000 gap charge threshold, which will appear in the Act and not as part of the conditions in Schedule 1, may lead registered organizations to inadvertantly act contrary to condition (lf).

Items 29 and 30: Changes pertaining to paragraph (m) of Schedule 1
These items make consequential amendments to ensure that out-of-hospital insurance plans are subject to relevant regulatory provisions in the National Health Act 1953. Subparagraphs (m)(i) (ii) and (iii) of Schedule 1 to the National Health Act 1953 forms part of community rating requirements. In particular paragraph (m) prohibits discrimination by registered health benefits organizations in relation to the payment and quantum of payment of benefits having regard to a range of matters including (but not limited to) age and health status. Community rating applies equally to out-of-hospital insurance plans as to applicable benefits arrangements.

Item 31: Paragraph (ma) of Schedule 1
This item makes a consequential amendment to ensure that out-of-hospital insurance plans are subject to relevant regulatory provisions in the National Health Act 1953. Paragraph (ma) of Schedule 1 to the National Health Act 1953 enables the rules of the registered health benefits organization to implement a loyalty bonus scheme. Loyalty bonus schemes will be available in relation to out-of-hospital insurance plans.

Items 32 and 33: Changes pertaining to paragraph (q) of Schedule 1
These items make consequential amendments to ensure that out-of-hospital insurance plans are subject to relevant regulatory provisions in the National Health Act 1953. Paragraph (q) of Schedule 1 to the National Health Act 1953 form part of community rating. Paragraph (q) provides for equivalence in quantum (with some exceptions) of contributions as between contributors of the same type (ie. in respect of one or more than one persons) to the same health insurance product at the same health fund. Community rating applies equally to out-of-hospital insurance plans.

Item 34: Paragraph (s) of Schedule 1
This item makes consequential amendments to ensure that out-of-hospital insurance plans are subject to relevant regulatory provisions in the National Health Act 1953. Paragraph (s) of Schedule 1 to the National Health Act 1953 enables registered health benefits organizations to offer discounted rates of contributions. Discounts that meet the requirements of the National Health Act 1953 will be available in relation to out-of-hospital insurance plans.

Item 35: Subparagraph (t)(ii) of Schedule 1
This item makes consequential amendments to ensure that out-of-hospital insurance plans are subject to relevant regulatory provisions in the National Health Act 1953. Subparagraph (t)(ii) of Schedule 1 to the National Health Act 1953 provides principles governing the offering of discounted rates of contribution.

Private Health Insurance Incentives Act 1998

Item 36: Paragraph 19-1(2)(e)
This item makes a consequential amendment to the Private Health Insurance Incentives Act 1998 to enable the Health Insurance Commission to collect the requisite information, as it does with other health insurance products, to enable the application of the 30% Rebate to out-of-hospital insurance plans. This amendment will ensure that the Health Insurance Commission is able to undertake its functions under the Private Health Insurance Incentives Act 1998. The 30% Rebate is available for all out-of-hospital insurance plans.

Items 37, 38 and 39: Changes pertaining to section 20-5
These items make amendments to the definitions contained in section 20-5 of the Private Health Insurance Incentives Act 1998 to enable the application of the 30% Rebate to out-of-hospital insurance plans.


Schedule 2 - Concessional safety-net

Schedule 2 amends the Health Insurance Act 1973 (the Act) to establish a new concessional safety-net. The new safety-net will apply to concessional patients when their cumulative out-of-pocket costs for out-of-hospital medical services listed on the Medicare Benefits Schedule have exceeded $500 in a calendar year. Under the safety-net arrangements, benefits covering 80% of the out-of-pocket costs for subsequent services will be paid to families and individuals who have concessional beneficiary status.

Items 1 to 19 make amendments to Part II of the Act, which provides for the payment of Medicare benefits.

Item 20 provides for the amendments made to Part II by Schedule 2 to apply to expenses incurred by concessional patients on or after 1 January 2004.

Item 1: Subsection 8(1A)
Item 1 inserts a definition for concessional person in section 8 of the Act. This definition is based on the definition for concessional beneficiary for the purposes of the Pharmaceutical Benefits Scheme, as set out in Part VII of the National Health Act 1953. This will mean that those people who are eligible for concessions under the Pharmaceutical Benefits Scheme will also be eligible for the new concessional safety-net.

A person, who, at any time in a calendar year, becomes a concessional beneficiary under the Pharmaceutical Benefits Scheme, will also become eligible for benefits under the Medicare concessional safety-net for that year.

Item 2: Subsection 8(1A)
Item 2 provides for the threshold amount for the concessional safety-net. The threshold amount will be set at $500 and will be indexed annually under section 10A.

Item 3: Subsection 8(1A)
Item 3 makes a minor amendment to the definition of patient contribution in subsection 8(1A) to exclude payments made in respect of the new concessional safety-net from the patient contribution.

Item 4: Subsection 8(1A)
Item 4 inserts a note after the definition of safety-net amount in subsection 8(1A) to alert the reader to the indexation of the safety-net amount in accordance with section 10A.

Item 5: Section 9
The effect of item 5 is to provide for the calculation of Medicare benefits in respect of expenses incurred by families and individuals who are eligible for the new concessional safety-net to include the amounts paid by them that are above the Medicare Benefits Schedule fee.

Items 6, 7, 8, 9, 10 and 11: Section 10AB
Items 6 to 11 make minor consequential amendments to include references in section 10AB to the concessional safety-net established in new sections 10ACA and 10ADA (being introduced by items 13 and 15 respectively).

Item 12: After subsection 10AC(2)
It will be possible for a family to qualify for the existing safety-net in section 10AC and/or the new concessional safety-net to be established under new section 10ACA. There is no requirement to qualify for one safety-net before the other. Item 12 amends the existing safety-net for families in section 10AC to deal with the scenario where a family qualifies for the new concessional safety-net before the existing safety-net.

Item 12 inserts new subsection 10AC(2A) to provide for the calculation of the patient contribution for the existing safety-net to include the relevant gap after a payment is made under the concessional safety-net. This amount is the amount that the patient is actually out-of-pocket after receipt of the concessional safety-net benefit, up to the amount of the gap between the rebate and the schedule fee.

Item 13: After subsection 10AC

10ACA Concessional safety-net – families with concessional members
Item 13 inserts new section 10ACA to establish the new concessional safety-net for families with concessional members. New subsection 10ACA(1) provides that only relevant services, that is out-of-hospital medical services attracting a Medicare benefit, are covered. In-hospital services are not covered.

New subsection 10ACA(2) provides that where a family qualifies for the concessional safety-net, Medicare benefits will be increased by 80% of the out-of-pocket expense for the claim.

New subsection 10ACA(3) provides that the concessional safety-net applies to the claim if the total out-of-pocket expenses for the current claim and relevant prior claims for the current year is equal to or exceeds the concessional safety-net amount ($500 for calendar year 2004).

New subsection 10ACA(4) sets out the circumstances which must apply for the concessional safety-net to be accessed. These include that the:
• service was rendered to the claimant or a member of the registered family unit;
• expense was incurred in the calendar year;
• claimant has paid at least 20% of the out-of-pocket cost;
• Health Insurance Commission has accepted the claim;
• person to whom the service was rendered was a concessional patient in the relevant year; and
• concessional safety-net applies to the claim.

New subsection 10ACA(5) provides that the concessional safety-net will apply to a claim when that claim and all relevant prior claims exceed the safety-net amount.

New subsection 10ACA(6) defines a relevant prior claim.

New subsection 10ACA(7) deals with how a benefit under the concessional safety-net will be calculated when a portion of a claim enables a person to be eligible for the safety-net. Benefits under the safety-net will only be payable on the portion of the claim by which the patient’s out-of-pocket expenses exceed the safety-net threshold.

New subsection 10ACA(8) provides that concessional safety-net benefits become payable only after a family becomes registered. However, expenses incurred by the family before registration will be taken into account in calculating whether the family is eligible for safety-net benefits in that calendar year.

New subsection 10ACA(9) provides that a person who is paid a Medicare benefit by means of a pay doctor via claimant cheque is deemed to have paid that portion of the medical expense as represented by the amount of the pay doctor via claimant cheque.

New subsection 10ACA(10) provides that the question of when the medical expenses are incurred is determined under the regulations.

Item 14: After subsection 10AD(3)
This item adds an identical provision to the existing safety-net for individuals in section 10AD to the provision added to 10AC by item 12.

Item 15: After section 10AD

10ADA Concessional safety-net - individuals
This item inserts a new section 10ADA into the Act. New section ADA is the equivalent of the new section 10ACA introduced by item 13, except that it applies to individuals.

Items 16 and 17: Section 10AE
Items 16 and 17 make minor consequential amendments to include references in section 10AE to the concessional safety-net established in new section 10ACA (being introduced by item 13).

Item 18: Subsection 10A(1)
Item 18 inserts a new paragraph 10A(1)(d). This amendment provides for the concessional safety-net to be indexed on a calender year basis in the same way as the existing safety-net.

Item 19: Subsection 10A(2)
Item 19 provides for the concessional safety-net amount of $500 to be indexed annually under section 10A. Section 10A provides for annual indexation of the existing safety-net for accumulated gap payments exceeding $319.70 in a calendar year. This amendment ensures that both Medicare safety-nets are indexed in the same manner.

Item 20: Application
The effect of item 20 is that the concessional safety-net commences on 1 January 2004. The amendment provides that the arrangements surrounding the concessional safety-net apply to expenses incurred on or after 1 January 2004.

Schedule 3 - General Practice Access Scheme

The amendments in Schedule 3 amend the Health Insurance Act 1973 (the Act) and provide for the introduction of a new direct billing option that is only available to practitioners providing services from a practice that is participating in the General Practice Access Scheme.

The General Practice Access Scheme is a voluntary program which will provide financial incentives to general practices which guarantee to provide services at no cost to those patients who are covered by a Commonwealth concession card. The General Practice Access Scheme will be administered by the Health Insurance Commission in accordance with guidelines issued by the Minister for Health and Ageing following discussion with stakeholders.

The effect of the amendments in Schedule 3 is to allow general practitioners who participate in the General Practice Access Scheme to offer additional benefits, in the form of lower up-front payments, to patients without a Commonwealth concession card to whom they decide to charge a gap. All Australians remain eligible to be bulk billed for services provided under Medicare.

The Scheme is expected to commence by 1 November 2003 in order to allow patients of participating general practices to be charged a lower up-front payment from 1 February 2004.

Item 1: After subsection 20A(1)
This item introduces new subsection 20A(1A).

The effect of this item is to enable a general practitioner to receive an assignment of a Medicare benefit from a non-concessional patient, and if the general practitioner chooses to do so, charge that patient a gap payment at the same time. Where a gap payment is charged, the non-concessional patient will pay only the gap between the amount charged by the general practitioner and the Medicare rebate, reducing the total amount payable by the patient at the time of service.

General practitioners are only able to avail themselves of the billing arrangement provided in new subsection 20A(1A) if they have provided the service to the patient in a practice that is participating in the General Practice Access Scheme.

Item 2: Subsection 20B(2)
Section 20B of the Act specifies how a claim for an assignment of a Medicare benefit is to be made. The effect of item 2 is to exclude claims made under new subsection 20A(1A) from the claiming requirements under section 20B.

Item 3: After subsection 20B(2A)
This item inserts a new subsection 20B(2B) which provides that a claim for Medicare benefit, as set out in new subsection 20A(1A), must be made in accordance with the approved form, and unless the Managing Director of the Health Insurance Commission determines otherwise, must be sent to the Commission as an electronic transmission within six months of the date of the service rendered. The effect of this item is that claims must be submitted electronically unless special circumstances apply that would lead the Managing Director to agree an alternate claiming mechanism.

Items 4, 5, 6 and 7: Section 20B
Items 4 to 7 insert the new provision 20A(1A) into the existing section 20B that require the eligible patient to be given a copy of the assignment of benefit form and for the provider to retain a copy of the form.

Items 8 and 9: Section 127
Items 8 and 9 insert the new provision 20A(1A) into the existing section 127 that requires a copy of the assignment of benefit form with full details of the services assigned to be given to the patient.

Item 10: Application
Item 10 provides for the amendments in Schedule 3 to apply to expenses incurred on or after 1 February 2004.

However, subitem 10(2) provides that the Minister may, by written notice, specify a different commencement date. The effect of subitem 10(4) is that the notice must be tabled in the Parliament and is subject to disallowance.

Subitem 10(3) provides a default commencement date of 1 July 2004, in the event that the Minister does not make a written notice in accordance with subitems 10(2) and 10(4).

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