Less than two weeks ago the Federal Government called for Expressions of Interest (EOI) from the private sector to provide claims and payment services for Medicare (MBS) and the Pharmaceutical Benefits Scheme (PBS), a $29 billion operation currently managed by the Department of Human Services. The EOI closes this Friday, 22 August.

Such a privatisation not only poses major implications for public sector jobs but looks like a major step towards dismantling Medicare as a public system. It has yet to be subject to public discussion.

Health Minister Peter Dutton issued a statement, justifying the move (raised originally by the Commission of Audit) on the grounds of cutting red tape and the need for a substantial upgrade of DHS IT systems.

He noted the EOI does not include the face-to-face services provided by Medicare but said the process will inform the Government “whether the commercial sector can deliver greater efficiency, flexibility and agility to the MBS and PBS processes”.

Media reports have identified Australia Post as a likely contender.

In the post below, Croakey contributors say it’s not just a question of whether the commercial sector can deliver the service more efficiently that’s up for debate. There are also  major concerns about transparency and accountability, privacy, the future of Medicare, and the lack of community consultation around this EOI process.

A measure of the latter is the effort involved in accessing the Expression of Interest briefing pack, which is not available online. The Health Department advised that advertisements were published on 8-9 August in the Australian Financial Review, The Australian, Sydney Morning Herald, Canberra Times, The Age, Herald Sun, Hobart Mercury, West Australian, Northern Territory News, Courier Mail, and Adelaide Advertiser. All good if you buy those print editions as the ads aren’t easy to find online. Croakey finally got a copy of the 17 page document via [email protected]

The briefing notes that while the specific focus of “this market test” is on the assessment and calculation of correct entitlements and their payment, it is possible that some service providers will have “innovative suggestions” that stretch into the much broader and complex system involved. It says the outcomes of the EOI and any subsequent meetings and workshops with respndents will “inform future stages in this process”.

Read Croakey contributors’ responses and concerns below.


Craig Thomler
Government 2.0 and Open Government advocate

What are some of the implications of this move that deserve investigation and debate?
Firstly I think the government should have conducted an inclusive community engagement process around the concept of outsourcing these front-line services before seeking commercial tenders.

Without educating and engaging the community on the topic, what the implications may be for their care and access, the consequences for waiting times and service levels and understanding the community’s concerns, a commercial tender process is likely to focus on the economic drives at the expense of the social ones.

Transparency and accountability need to be carefully considered within this outsourcing move as well. While many flaws remain in how transparent and accountable government is in the provision of these services, any outsourcing arrangements need to be designed in such a way as to preserve and improve transparency and accountability rather than hide the workings of service provision behind commercial-in-confidence arrangements.

Citizens have a right to understand not only whether a government’s service delivery is meeting its KPIs, but also how it is meeting them – at what cost, resourcing and whether the processes are effective and inclusive.

Outsourcing runs the risk of placing service delivery within a ‘black box’ with far lower transparency and accountability, leading to the potential for unfair and inappropriate biases and exclusion to creep in where services are ‘uncommercial’.

Government has the role of serving everyone, which comes at an efficiency and economic cost, but significant social benefit. A commercial provider would not be acculturalised or, necessarily, contractually bound, to meet the same goal.

For starters I would like to see the outsource consideration process be fully transparent – with all commercial proposals exposed in their entirety to the public and able to be discussed and debated publicly.

Certainly corporations may feel this violates their commercial confidence – but when a government contracts with an external provider for service delivery it is not contracting on its behalf, but on the behalf of citizens, and citizens need to be able to review and understand what companies are offering for oversight and decision-making purposes.
What are the implications for patient care?

It is too early to be clear on the implications for patient care, however the prevailing assumption in the community is likely to be that care will be more efficient but also more impersonal, exclusionary and economics driven.

This is part of the reason to engage with the community first and build a common understanding of what the community does and should value and shape outsourcing to support the expected service delivery standards, or modify community beliefs using facts and evidence.
What might this mean for the wider health system and its future?

It is another step on the road towards much greater privatisation of the wider health system, and as such a poor decision by the government.

Until the government can make a clear case to the community that privatised health care can deliver the same or better outcomes for the majority of the population at a lower cost position, there’s going to be significant resistance to any moves to privatise significant parts of health.

I’ve not seen clear evidence from jurisdictions such as the US that privatised health care offers better outcomes for population health – and most reports indicate far worse outcomes and a resulting significant cost burden on other areas of the public purse (law and order, education, welfare).  We need to consider health within the broader framework of society and look at the transfer costs of privatising services, such as the PBS and MBS.

Any other general observations?

This decision aligns with the Coalition Government’s stated goals and is consistent with their ideology. Unlike prior Liberal governments, this government seems to place ideology far in front of evidence and practicality and is suffering from an inability to effectively engage the community, explain its values and goals and bring them along on the journey.

I believe the Coalition will find itself even more unpopular for making the decision simply to test the commercial waters in this case without having extensively engaged citizens first (beyond core Liberal supporters). This process may even establish that the DHS is the lowest-cost provider of processing, resulting in the status quo being retained (although it is hard to see this Cabinet accept that government may be more efficient than the private sector, regardless of the evidence).

This makes this step unnecessarily detrimental to the Coalition’s other policy concerns and is likely to further damage the government’s ability to exert authority, gain clear air and promote other policies which might be accepted as beneficial by the community at large.

In effect: the government is again stabbing itself in the foot as it has done over 18C (of the Racial Discrimination Act), Medicare copayments, university fees, maternity leave and in several other areas.

The political capital remaining to this government is very limited and should be husbanded for causes that have broad community support.

Where the government seeks to act beyond this, such as in the outsourcing of front-line health services and their management, they need to thoroughly engage citizens and explain their perspective, dealing with all of the concerns and bringing the community with them on the journey – otherwise they will fail to achieve their agenda and risk losing government sooner rather than later.

However given the ‘groupthink’ that we see pervading Cabinet Ministers, the people they surround themselves with, and the interests that can afford access to them, I doubt they will recognise the cause of their concerns early enough to act on them and save this government.


Vern Hughes, The National Campaign for Consumer-Centred Health Care

The Rudd Government’s Health Reform Commission identified the right option for future reform of the health system back in 2009. ‘Medicare Select’ was the only comprehensive strategy for integrated health care we have had in the last decade, and it was rejected by both private and public sector industry lobbies at the time.

It remains the only consumer-oriented strategy for integrating health care financing with consumer-centred care:  it called for a membership-based system of competing associations of consumers which build on Medicare and supplement it with private insurance. In this system, administration of Medicare payments would be conducted through these intermediary associations – and not through the present ill-conceived Abbott Government plan for private sector intermediaries.

Medicare Select was a mutualised Medicare – building on Medicare by adding in a key role for organisations of consumers (who have no role in Medicare except to be isolated and powerless individuals). In a mutualised Medicare Select version of Medicare, we would have several competing membership organisations to choose from who would offer health plans (a trade union health mutual, a Catholic health mutual, a New Age complementary health mutual, BUPA, a regional and rural one, an Indigenous health mutual, etc). This would introduce both consumer market power into the system, and competition between mutuals.

But instead of this, we get ill-conceived privatisation schemes from the Coalition, and ill-conceived public sector-based systems from Labor. When will this dumbed-down, intellectually facile, substitute for grown-up public policy end?


Associate Professor Gawaine Powell Davies
CEO, Centre for Primary Health Care and Equity, University of NSW

The major danger is that we have worse access to Medicare data for planning and for research purposes. A private service will presumably either restrict access in the interests of ‘efficiency’, or charge a market rate, which will put it beyond the reach of most users.

This is an email to Health Minister Peter Dutton from Professor Raina Macintyre, Head of the School of Public Health and Community Medicine at UNSW and Professor of Infectious Disease Epidemiology.

Subject: Re: Privatising Medicare

Dear Minister Dutton,

May I add my concern about the two-week closing date for tender for the Medicare, PBS claims and payment.

For something as important to Australians as Medicare and the PBS, it would be in the best interests of the country to have an open tender process with a longer closing date to ensure all appropriate potential providers can submit a tender. In the interests of transparency, fairness and choice, I ask that you extend the closing date for tenders.

Such a short tender period could be perceived as the government having already selected a preferred provider, and simply going through the motions of a fair tender.

Yours sincerely,

Raina MacIntyre MBBS (Hons 1), FRACP, FAFPHM, M App Epid, PhD

Head of School <http://www.sphcm.med.unsw.edu.au/about-SPHCM/head-school-welcome>
Professor of Infectious Diseases Epidemiology <http://www.research.unsw.edu.au/people/professor-raina-macintyre>
Director, UNSW Future Health Leaders Program <http://www.sphcm.med.unsw.edu.au/future-students/postgraduate-research/professional-doctorate>
School of Public Health and Community Medicine <http://www.sphcm.med.unsw.edu.au/>


Elizabeth Harris

A Senior Research Fellow at the University of NSW
What will the face-to-face services in Medicare offices involve if they do not process payments?

Also what protection will there be for people in new provider accessing health services used over a number of years by a person and those on the same card/ family?

What are the implications for linked data research?

Is there any evidence that outsourced services are more effective?

Fran Baum
Professor of Public Health, Flinders University

The risk of privatisation is growing much greater with the negotiations surrounding the Trade in Services Agreement (TISA).

This agreement was devised by an elite group of countries, including Australia, and has been subject to secret negotiations from 2012. TISA seeks to convert all forms of services across the world into tradable commodities or private services.

TISA would greatly strengthen the position of corporations vis a vis the current provisions of the WTO’s GATS agreement (see https://wikileaks.org/tisa-financial/analysis.html <https://wikileaks.org/tisa-financial/analysis.html> ).

Transnational companies, including health insurance companies and corporate health service providers, are always seeking new markets, not just in Australia but also from the middle classes of the ‘emerging economies’.  So Australia will be one such market.

It is also very hard to have comprehensive primary health care under privatisation: unlikely there would be any leadership on social determinants under private services or community development with a social action edge.


Dr Peter Tait
GP and clinical senior lecturer, ANU

What are some of the implications of this move that deserve investigation and debate?

This seems another move to shift public tax-payers’ funds into private hands.

How can administering Medicare and the PBS be profitable?? If profitable, should it not remain in government hands and the profit used to improve services?

 What are the implications for patient care?

Unclear really. The threat is that in the drive for profit the services will become attenuated, and exclusions may creep in, or as happens in private insurance schemes, the insurer just plays hard ball knowing the least advantaged punters without the resources of money and time (and lawyers) just give up on seeking their legitimate entitlements.

This undermines the whole fair-go collective idea of a universal health insurance scheme. It moves Australia toward a user pays where of course it becomes a tri-tier system where those who can buy the best, most struggle to keep up and a large minority become excluded. We all suffer.

 What might this mean for the wider health system and its future?

Again unclear. What is the justification for the need for such a change? How does this stand up to scrutiny? If the change evolves as suggested above, then we get overall worse health for everyone (Wilkinson and Pickett) and dismantle a functioning system for the benefit of a few.


Statement by the Australian Healthcare and Hospitals Association (AHHA), 8 August

“The AHHA is supportive of an efficient, modern and innovative way of providing health payment services and believes that, with so much technology available today, a service model meeting these criteria can be found,” AHHA Chief Executive Ms Alison Verhoeven said today.

“However, the commercial delivery of health claims and payments raises concerns on a number of levels.”

Ms Verhoeven emphasised that where the delivery of these crucial health services to Australians is provided commercially, there must be appropriate governance arrangements in place to ensure individual privacy.

“The issue of privacy really comes into play here, as bank tellers, post office managers or other attendants generally don’t hold the security clearances required to be dealing with sensitive and very personal information,” Ms Verhoeven said.

“I don’t know how comfortable people would feel having their home loan manager providing them with a Medicare rebate and knowing very detailed information about their healthcare.”

Ms Verhoeven also raised concerns about the about the collection, storage and access to important personal health data.

“We know that it’s already quite difficult to access Medicare and pharmaceuticals data to undertake clinical and health services research: will this be further compromised?” Ms Verhoeven asked.

“There will need to be very strong quality of service guarantees in place with any private providers to ensure that all Australians are able to access these services wherever they live, and that data is managed sensitively to ensure privacy and able to be accessed for vital research and planning needs.  I’d also be interested to see more detail on what fraud control measures will be put in place with any new claims and payments arrangements.”

“With so much change occurring in access to and payment for healthcare in Australia at the moment, it is important for the Minister to make sure that these changes do not result in a disjointed system,” Ms Verhoeven said.



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