More than $30 billion in Medicare and pharmaceutical benefit payments a year is likely to be outsourced, cutting the Department of Human Services in half and reshaping the delivery of government services.
The decision – a key recommendation of the Commission of Audit – could allow Australia Post or one of the big four banks to step in to calculate and process health payments and absorb Medicare retail outlets.
It aligns with the government’s plans as part of the budget process to reduce the size the public service and make government services more efficient.
In an advertisement in today’s The Australian Financial Review, the Department of Health calls for companies to express interest in providing claims and payment services for the Medicare Benefits Schedule (MBS) and Pharmaceutical Benefits Scheme (PBS), the second-biggest responsibility of the Department of Human Services after welfare payments.
It follows the allocation of $500,000 in this year’s budget, largely unnoticed, for market testing.
“We’re determined to put into place a 21st-century payment system that will be more efficient for patients and doctors,” Health Minister Peter Dutton said. “It will reduce red tape for doctors and streamline their administrative processes and, we believe, deliver a saving to the taxpayer.”
The contract is likely to be highly complicated. The new provider would have to be capable of processing a collective $29 billion of claims from 600 million transactions a year conducted for the Department of Health, and nearly $2.5 billion in claims from 33 million transactions for the Department of Veteran’s Affairs.
The size of the job and requirement for a physical shopfront presence means few existing Australian companies would be capable of carrying out the task. But it could provide an extremely lucrative and stable revenue stream for successful candidates.
Early discussions have indicated a very strong level of commercial interest in fulfilling the contract.
It could boost the valuation of Australia Post if the government decided to privatise the government business enterprise later.
The struggling mail carrier has already made a pitch through the Commission of Audit process to take over the entirety of the Department of Human Services’ payment delivery responsibilities, including welfare payments.
As recently as July, communications minister Malcolm Turnbull said Australia Post, which cut 900 jobs in June as its letters business struggles to stay afloat, had to undergo major change to survive.
The decision to explore outourcing Medicare and pharmaceutical payments, which will result in public service job losses, will put pressure on the government to confirm whether it will embark on the same process for the Department of Human Services’ remaining welfare and other payment responsibilities and disband the department altogether.
The Department was created by Prime Minister John Howard in 2004 and absorbed Medicare and Centrelink responsibilities in 2011. It currently employs 33,868 permanent staff and in the 2013 financial year handled 39 per cent of all government outlays. It reported an operating deficit of $7.3 million before unfunded depreciation and revaluation.
In its recommendation, the audit commission run by businessman Tony Shepherd warned that outsourcing national payments would be a “substantial and potentially high-risk undertaking” requiring careful consideration. It did not support outsourcing the assessment of entitlements.
The development of a new payments system could facilitate the collection of the $7 payment for doctor visits, pathology and imaging the government wants to implement.
One of the government’s requirements is the company respond to “changes to the underpinning policies aimed at improving Australia’s health system”.
Source: Australian Financial Review