Background

A Health Care Card (HCC) is one of three types of concession cards issued by Centrelink for the Australian Government. The other two cards are the Pensioner Concession Card and the Commonwealth Seniors Health Card. Until recently, the main Australian Government benefit available to HCC holders has been access to prescription medicines available under the Pharmaceutical Benefits Scheme (PBS) at a cheaper rate. HCC holders, and holders of other Centrelink concession cards, can obtain medicines under the PBS at the subsidised rate of $4.60¹ and subsequently free of charge when they reach the PBS Safety Net.²

Pharmacists submit claims to the Health Insurance Commission (HIC) for reimbursement for the costs of supply of subsidised medicines under the PBS to concession card holders. HIC does not compile data that readily shows the cost to the Australian Government of the PBS subsidy that is provided to HCC holders. However, HIC advised the ANAO that some $5 billion in total was paid in PBS benefits in 2003–04 and that around $4 billion, or some 80 per cent, of this related to PBS subsidies provided to Australian Government concession card holders and their dependants.

In 2004, the Australian Government introduced a number of changes under Medicare that had the effect of providing additional benefits to a range of groups including HCC holders. Under the extended Medicare Safety Net, Medicare will continue to pay the 85 per cent rebate of the schedule fee. However, once an individual or registered family reaches a set threshold³ in a calendar year, Medicare will also cover 80 per cent of all the individual's or family's out-of-pocket costs for out-of-hospital Medicare Benefit Schedule services for the rest of that calendar year.⁴ The Australian Government also introduced in 2004 incentives for general practitioners to bulk-bill Medicare for services provided to Australian Government concession card holders (or their dependants) and all children under 16 years of age. This incentive is currently either $5.10 or $7.65 per visit depending on location.

Audit approach

Fieldwork for this audit was primarily undertaken during the period February 2004 to April 2004. During this period, Centrelink was undertaking considerable changes to its administration processes for concession cards and HIC and Centrelink were working together on implementing the PBS Concessional Entitlement Validation project.⁵ The ANAO updated its knowledge of agencies' progress in implementing these changes in August 2004.

ANAO delayed finalisation of this audit for two months at the request of HIC. HIC made this request in November 2004, following the October 2004 machinery of government changes, to allow the agency time to clarify the impact of these changes, and the establishment of the new Human Services Portfolio and Department, on the administration of HCCs. However, in the event, no significant further information was provided to the ANAO.

Centrelink administers HCCs, and HIC administers both the PBS and Medicare, under which concessions are provided to HCC holders. At the time of audit fieldwork, the Department of Family and Community Services (FaCS) had policy responsibility for all HCCs issued by Centrelink while the Department of Health and Ageing (Health) had policy responsibility for the PBS and Medicare.⁶ Accordingly, the objectives of the audit were to assess:

• the effectiveness of whole of government approaches to administering HCCs by FaCS, Centrelink, Health and HIC;
• the adequacy of performance information relating to HCCs, including monitoring the use of the card and its budgetary impact, as well as the cost of administering HCCs; and
• the effectiveness of controls relating to the issue, maintenance and cancellation of the HCC, and to limit its incorrect or fraudulent use.

No significant changes have been made to policy regarding HCCs or the arrangements for the administration of HCCs following the October 2004 machinery of government changes.

As the principal cost to the Australian Government associated with the use of HCCs is related to the additional subsidies provided to card holders under the PBS, the major focus of this audit was on the controls around the provision, maintenance and cancellation of HCCs and the use of HCCs in obtaining access to subsidised medicines under the PBS. In response to the section 19 proposed report, FaCS noted that, while the focus of the audit was HCCs, the Pensioner Concession Card and the Commonwealth Seniors Health Card have a similar purpose that is to provide access to cheaper medicines and certain Medicare services. FaCS advised that it welcomed the report's recommendations and will consider their application with respect to these other cards.

Key findings

Administration of Health Care Cards (Chapter 2)

Four agencies had a major involvement in the administration of HCCs and related Australian Government benefits at the time of fieldwork for this audit. These agencies were Centrelink, FaCS, HIC and Health. Their key responsibilities are set out below:

• FaCS is responsible for policy relating to eligibility for HCCs. It funds the administration of HCCs by Centrelink.⁷ Three categories of HCCs are involved, low-income⁸ and foster child⁹ HCCs as well as HCCs automatically issued to recipients of income security payments.
• Centrelink issues HCCs to customers who meet eligibility requirements and provides data on HCC holders to HIC to allow it to determine eligibility to additional PBS (and Medicare) subsidies.
• Health is responsible for policy relating to the PBS and Medicare (including the additional subsidy under the PBS available to HCC holders and access to additional Medicare benefits). Health also funds the benefits provided by HIC under the PBS and Medicare.
• HIC administers HCC holders' access to additional subsidy under the PBS and additional Medicare benefits. HIC receives directly appropriations to fund this work.

The ANAO considers that the operational functions of the four agencies were clear and well understood concerning issuing HCCs, and their use to obtain subsidised access to the PBS and certain additional Medicare benefits.

Bilateral arrangements that specify roles and responsibilities in relation to HCCs exist between FaCS and Centrelink, and between Health and HIC. These bilateral arrangements allow for a clear separation of administrative responsibilities. However, there are some weaknesses in them. For example, Health and HIC only consider HCCs as part of the general group of Australian Government concession cards and cannot separately identify the costs of HCCs or the differing risks associated with this category of concession card to inform policy development and programme management.

Recently, steps have been undertaken to improve management arrangements for the provision of concession entitlement data to HIC by Centrelink. In particular, the agencies have an Exchange of Letters in place outlining responsibilities and expectations of each agency for the exchange of concessional information. It is important that the agencies also address the quality of data to be provided to HIC by Centrelink.

In addition, there is an agreement between Health and Centrelink that makes appropriate arrangements for managing the PBS Concessional Entitlement Validation Project, including oversight by an Interagency Reference Group. However, this agreement does not cover the longer-term issues relating to the oversight of the issue and use of HCCs, and the cost of subsidies that card holders and their dependants receive.

The ANAO considers that, to better inform future policy development and programme management, there would be benefit in Centrelink, HIC, FaCS, Health, the Department of Human Services (DHS) and other relevant agencies enhancing their coordination of the delivery of the HCC and other Centrelink concession card programmes. This could include an interagency committee or forum that oversights the complete management process associated with HCCs, from their issue by Centrelink to their impact on the Federal Budget through the level of subsidies paid by HIC under the PBS and through aspects of Medicare.

Performance information and costing Health Care Cards (Chapter 3)

The ANAO found that little performance information is compiled relating to HCCs, either by FaCS/Centrelink or Health/HIC. For example, Centrelink collects some limited performance information in relation to one group of HCCs (low-income HCCs), which it provides to FaCS under the relevant bilateral agreement and reports in the agency's annual report. However, Centrelink does not collect and/or report any performance information in relation to either foster child HCCs, automatic issue HCCs or administrative activities such as providing HCC holders with letters confirming entitlement.

In particular, the cost of additional subsidies provided to HCC holders under the PBS and Medicare, as distinct from the costs relating to the total population of Australian concession card holders, is not known or reported. The HIC neither collects nor reports any information that relates specifically to these subsidies provided to HCC holders or their dependants because both HIC and Health treat all three categories of Australian Government concession cards as comprising a single component of both the PBS and of Medicare.

However, the eligibility requirements and the risk profile for HCC holders vary considerably from other Australian Government concession cards. Proper identification of the costs associated with HCCs would allow for analysis of trends over time, and would promote more in-depth analysis of factors affecting costs incurred by HIC and Centrelink.

Collection and analysis of such cost information specifically relating to the impact of the issue and use of HCCs on Australian Government outlays would also support decision-making in relation to future policy development to meet the Government's policy objectives. In addition it could inform the formulation of risk management approaches and general administration. Reporting of relevant information in agencies' annual reports would also improve accountability, through improved transparency to the Parliament of the HCC programme.

FaCS has advised the ANAO that information on the actual cost of subsidies/benefits provided to each type of concession card holder, including HCC holders and their dependants, would allow greater accuracy in costing new policy proposals in the various portfolios, as it is possible that there is a different pattern of usage for each of the cards in relation to the various subsidies/benefits.

Consistent with the approach of costing HCCs separately from the other concession cards, the ANAO considers that there would be benefit in relevant agencies also collecting and reporting other appropriate performance information on HCCs as a single programme.

To support such an approach to performance monitoring and reporting, Centrelink should collect and present performance information related to all types of HCCs (not just low-income HCCs). In addition, HIC should collect and report information on the subsidies provided to HCC holders and their dependants under both the PBS and Medicare, as separate from the total level of subsidies provided to holders of all Australian Government concession cards.

Given the current lack of performance information that specifically relates to HCCs, there are risks that there will be an absence of firm data to guide the strategic direction and overall management of HCCs. The need for coordinated management of HCCs is particularly important in light of recent policy changes that have increased the Australian Government outlays associated with them.¹⁰

Controls related to the issue and use of Health Care Cards (Chapter 4)

The risks associated with the issue and use of HCCs have been broadly recognised by Centrelink and HIC for many years. The key aspect of weakness in controls over subsidy payments for the PBS is starting to be addressed, although at this time the weaknesses have not yet been overcome.

The ANAO found that Centrelink has a number of controls in place relating to HCC matters that are similar to the controls that Centrelink applies to all its benefit payments. However, the ANAO considers that the controls relating to cancellation of HCCs could be improved. Some 25 percent of all HCCs are cancelled by Centrelink before they expire. A large proportion of these cancellations occur because a person ceases to be eligible for the primary Centrelink benefit that provided their entitlement to an automatically issued HCC. The letter Centrelink sends to a customer informing them that their HCC is cancelled does not inform the customer that it would be illegal to continue to use the card after the date their eligibility ceases, or that electronic validation processes exist that may detect use after that date.

FaCS' Random Sample Reviews¹¹ are a crucial element of its quality assurance processes, designed to establish whether the customer is being paid correctly. However, these reviews do not assess the correctness of Centrelink's issue, reissue or cancellation of HCCs, or, therefore, the correctness of Centrelink's decisions about customers' eligibility for HCCs. The ANAO considers that there would be benefit in FaCS reassessing the extent of checking undertaken in relation to HCCs as part of these reviews, or via an alternative quality assurance mechanism. Such an assessment should consider all costs incurred by the Australian Government in providing benefits to HCC holders, including those incurred by HIC.

HIC has indicated that, prior to about 2000, it had only been able to successfully relate 80 per cent of concession entitlement records provided to it by Centrelink to HIC Medicare Number records. Due to this and other data transfer problems, HIC advised that it had not previously considered the data provided by Centrelink to be sufficiently reliable to enforce the non-payment of PBS subsidies to pharmacists who provided medicines at the HCC concessional rate to people not entitled to this concession. This represents a significant weakness in controls that has endured to the present time. On the basis of information provided by HIC, the cost to the Australian Government because of these control weaknesses in relation to HCCs and other Australian Government concession cards may have been up to $78 million per annum.

In recent years Centrelink has been improving the accuracy of the data it provides to HIC, with the number of Centrelink records that HIC has been able to successfully relate to Medicare Numbers rising to over 96 per cent. Further, the introduction in 2004 of the new Concession Entitlement Manager system¹² has enabled Centrelink to identify a large number of people who had previously been receiving HCCs even though they were not entitled to them and to take action to address this.

The PBS Online initiative is the major project being implemented by HIC to improve its controls related to the payment of PBS subsidies to holders of Australian Government concession cards, including HCCs. PBS Online allows pharmacists to carry out eligibility checking electronically before they dispense/supply. PBS Online has been trialled and HIC is currently addressing some performance issues with a view to rolling out PBS Online to pharmacies from 1 July 2005. The ANAO notes that it is intended that pharmacists' participation in PBS Online will be optional. Accordingly, it is important that effective alternative control mechanisms are also put in place in regard to pharmacies that do not choose to participate in PBS Online.

The ANAO considers that it is important that strengthened control arrangements, scheduled to be introduced as part of the Concessional Entitlement Validation Budget measure and the PBS Online initiative, be introduced as a matter of priority.

Recent Medicare initiatives affecting Health Care Cards (Chapter 5)

Controls over additional bulk-billing payments to medical practitioners, including in respect of patients who are HCC holders, have included the provision of educational material to the practitioners explaining the requirements for bulk-billing claims, and also post-payment monitoring by HIC to check whether the patient was eligible at the time of service. The ANAO considers that these controls are generally stronger than those applying to the PBS, mainly because PBS post-payment monitoring is not as effective.

HIC also introduced a pre-payment check for patient eligibility on 15 November 2004. This process was suspended in early December 2004 due to concerns from general practitioners that some eligible claims were being incorrectly rejected. Doctors were particularly concerned that some claims were being incorrectly rejected despite the patient showing them what appeared to be a valid concession card. From 4 December 2004, post-payment checking of the validity of claims has continued with pre-payment warning notices appearing on benefit statements to notify doctors of possible non-valid concessions.

The ANAO notes that, similar to the situation facing pharmacists dispensing PBS medicines, the patient may have presented a HCC to the medical practitioner on which there is an expiry date that has not yet been reached but the data available to HIC may indicate that the patient does not have a concessional entitlement. HIC proposes to check these specific instances with Centrelink.

The ANAO considers that the difficulties thus far encountered in making these pre-payment checking processes work supports the view that it is important that data integrity be improved. HIC intends to continue to work with Centrelink to improve the integrity and reliability of concessional data matching. In the longer term, HIC proposes to include entitlement checking as part of a proposed electronic payment arrangement with medical practitioners.

Overall audit conclusion

Operational functions of Centrelink, FaCS, Health and HIC in respect of HCCs are clear and well understood. There are bilateral arrangements between FaCS and Centrelink, and between Health and HIC, that allow for a clear separation of administrative responsibilities. However, existing arrangements do not consider the issue and use of HCCs in a fully integrated manner.

To better inform future policy development and programme management, there would be benefit in Centrelink, HIC, FaCS, Health, DHS, and other relevant agencies, enhancing their coordination of the delivery of the HCC programme. This could include the establishment of an interagency committee or forum that oversights the complete management process associated with HCCs, and considers the full impact of HCCs on the Federal Budget, including PBS and Medicare programme costs, and administration costs.

Little performance information is currently compiled relating to HCCs. Collection and analysis of performance information specifically relating to the impact of the issue and use of HCCs on Australian Government outlays would support decision-making in relation to future policy development to meet the Government's policy objectives. In addition it could inform the formulation of risk management approaches and general administration. Reporting of relevant aspects of this information in agencies' annual reports would also improve accountability, through improved transparency to the Parliament of the HCC programme.

Given the current lack of performance information that specifically relates to HCCs, there are risks that there will be an absence of firm data to guide the strategic direction and overall management of HCCs. The need for effective management of HCCs is particularly important in light of recent policy changes that have increased the Australian Government outlays associated with them.

Over the past two years there have been concerted efforts to improve the quality of concession eligibility data provided by Centrelink to HIC. While these measures have improved the quality of data provided to HIC, there remain doubts as to whether the data is sufficiently accurate to be used as part of electronic eligibility checking and payment arrangements proposed for HIC. Manual interventions are still required for the level of eligibility matches to reach a satisfactory level. The ANAO concludes that despite recent improvements, there are still control weaknesses in relation to the provision of concessions to HCC holders under the PBS.

The ANAO considers that all agencies concerned should continue with their efforts that support improved controls. Together, the Concessional Entitlement Validation Budget Measure and the PBS Online initiative provide an opportunity to put effective controls in place. However, these initiatives are still in the process of implementation. Once implementation is completed, it will be important for agencies to establish that the anticipated effectiveness of the controls to be provided by these initiatives has been delivered. If not, then further mechanisms may be necessary to deliver effective controls.

Recommendations

The ANAO made six recommendations to improve the administration of HCCs and related subsidy payments made by HIC. Six agencies responded to relevant recommendations—Centrelink, HIC, FaCS, Health, DEWR and DEST.

Centrelink agreed with all recommendations relevant to the agency. HIC agreed with all of Recommendations No.s 1, 5 and 6, although HIC's agreement to Recommendation No.1 was with qualification. HIC also agreed with Recommendation No.2 in so far as it was relevant to the agency, noting that part (c) of this recommendation was not applicable to the HIC as were Recommendations No.s 3 and 4.

FaCS and Health agreed with all recommendations, although Health's agreement to Recommendation No.1 was with qualification as was FaCS' agreement to Recommendation No. 4. DEWR agreed with Recommendations No.s 1, 2, 3 and 4. The Department had no comment on Recommendations No.s 5 and 6. DEST specifically agreed with Recommendations No.s 3 and 4 but also indicated support for the report's remaining recommendations.

Responses

Each agency's summary response to the audit findings is presented below. DEWR did not provide such an overall summary response.

Centrelink

Centrelink notes ANAO's view that there would be benefit in all parties involved in policy development and programme management of Health Care and other Centrelink concession cards enhancing their coordination of these activities. Centrelink welcomes the opportunity to work more closely with other stakeholders in this respect and considers the new Department of Human Services as being well placed to lead this process from the service delivery perspective.

HIC

HIC welcomes the assurance provided by the ANAO that the operational functions of the agencies involved with HCCs are clear and well understood and that the bilateral arrangements between HIC and the Department of Health and Ageing allows for a clear separation of administrative responsibilities.

FaCS

FaCS acknowledges the recommendations of the audit of the Administration of Health Care Cards and will consider their application with respect to the administration of all concession cards.

Health

Overall, the Department is generally supportive of the report and its recommendations. The Department has provided specific comments, including some qualifications, against each of the recommendations.

DEST

DEST agrees with the audit report's overall findings and supports its recommendations that aim to improve the administration and quality assurance of HCC arrangements through consideration of enhanced performance information and improved controls relating to the issue and use of HCCs.

Footnotes

1 People who do not qualify for Centrelink concession cards pay the General Patient rate of $28.60. The Health Insurance Commission adjusts these rates annually, in line with the Consumer Price Index (CPI).

2 When a HCC holder and their family have a record of spending $239.20 (52 prescriptions) on PBS medicines in a calendar year, they may ask for a Safety Net Entitlement Card. This entitles the card holder to further PBS medicines free for the rest of the year.

3 For HCC holders the current threshold is $306.90 (compared to $716.10 for non-concessional claimants). However, on 14 April 2005, the Prime Minister announced the Government's intention to increase the threshold for low income earners, including concession card holders, to $500 and for all other people the threshold will increase to $1 000.

4 Holders of all Commonwealth concession cards and recipients of Family Tax Benefit Part A are eligible for Medicare Safety Net benefits once the concessional threshold of $306.90 is reached.

5 Part of a 2003–04 Budget initiative of Health, PBS—Improved Entitlement Validation of Concession Cards, that aims to improve the accuracy of entitlement validation of concession cards used under the PBS.

6 On 22 October 2004, the Prime Minister announced machinery of government changes affecting, among other things, the administration of policy relating to income support payments and related programmes. Previously, Centrelink was located in the FaCS Portfolio and, while it had agreements in place with other agencies, such as the Department of Employment and Workplace Relations (DEWR) and the Department of Education, Science and Training (DEST) for the delivery of some services, the overwhelming bulk of Centrelink's activities related to its delivery of services on behalf of FaCS. Until 22 October 2004, HIC was located in the Health and Ageing Portfolio. As a result of the changes announced by the Prime Minister, both Centrelink and HIC are now part of the newly established Human Services Portfolio. In addition, DEWR now has policy responsibility for the delivery of working age income support payments and programmes, and DEST has policy responsibility for income support payments for students. However, FaCS retained policy responsibility for all concession cards, including HCCs.

7 Subsequent to the machinery of government changes, DEWR is responsible for funding HCC administration associated with the working age income support payments transferred to it from FaCS.

8 Low-income HCCs are available, on application to people who meet relevant means test requirements.

9 Foster children are also entitled to a HCC, on application, regardless of the income of the family looking after them.

10 Specifically, the enhanced Medicare Safety Net, for which a significantly lower threshold applies for HCC holders as opposed to other users of Medicare, and bulk billing incentives for doctors in respect of HCC holders and other eligible individuals.

11 Random Sample Reviews are a point in time analysis of customer circumstances designed to establish whether the customer is being correctly paid in accordance with the FaCS/Centrelink Business Assurance Framework.

12 The Concession Entitlement Manager system is an information technology system designed to improve the quality of the data Centrelink holds relating to concession cards. It therefore aims to assist Centrelink to improve concession entitlement determinations. The Concession Entitlement Manager system commenced full operation in 2004.