Last night, the Treasurer delivered the Australian Federal Budget for 2016-17. Below is a high level overview of the proposed changes announced in the healthcare area. Some of the measures require legislation to be passed through Parliament, which is not certain.

Proposed Changes

The Treasurer has referred to there being no winners and no losers under this budget, and some commentators have criticised it for being 'dull'.  It appears that in preparing this this budget, the Government is looking to avoid controversy.  Primary healthcare

  • The Government will commit A$21.3 million from 2015–16 to 2018–19 to fund the first stage of the rollout of the Health Care Home model, developed by the Primary Health Care Advisory Group (PHCAG).  
  • The Government will redesign the Rural and Regional Teaching Infrastructure Grants (RRTIG)Program to create a more streamlined Rural General Practice Grants Program (RGPGP) to better support rural general practices to teach and train health workers. Grants of up to A$300,000 will be provided to successful applicants and applicants will continue to be required to match the Commonwealth funding contribution.  
  • The Government will fund the development of a new online perinatal depression support tool and smart phone application to help women with early intervention and to reduce crisis situations.  
  • The Practice Incentives Program will be streamlined and simplified to help general practice continue to achieve high quality health care and improved patient outcomes. The measure is expected to save A$21.2 million from 2015–16 to 2019–20.

Public hospitals

  • The Budget increases Commonwealth funding for public hospitals by A$3.9 billion to 2019–20. Of this increase, A$2.9 billion arises from the new three-year Heads of Agreement recently signed between the Commonwealth and the states and territories. The Commonwealth will fund 45 per cent of the efficient growth of public hospital services. Activity based funding paid at the nationally efficient price will be used to achieve value for money and boost productivity. This measure also reinstates the Administrator of the National Health Funding Pool and the National Health Funding Body which calculates the Commonwealth’s public hospital funding contribution to states and territories.

Medicare Benefits Schedule (MBS)

  • At a cost of A$33.8 million, the Government will list two new items on the MBS to cover testing for diabetic retinopathy with a non-mydriatic retinal camera. The new items will particularly help Aboriginal and Torres Strait Islander people who are at risk of the chronic sight-threatening disease.  
  • The Budget introduces an item for magnetic resonance imaging (MRI) of the breast for patients presenting with occult breast cancer where conventional imaging and examination fails to show the source of the tumour, and an item for an MRI-guided biopsy of the breast for patients with suspected breast cancer where the lesion is only identifiable by MRI.  
  • As recommended by the Medicare Benefits Schedule (MBS) Review Taskforce – part of the Government’s Healthier Medicare package - the Budget removes twenty four items deemed obsolete for diagnostic imaging, ear, nose and throat (ENT), gastroenterology, obstetrics and thoracic medicine from the MBS. Two diagnostic imaging items will be restricted to patients less than 16 years of age.  
  • For the first time, the Department of Health will be able to charge for supplying external clients with customised MBS, Pharmaceutical Benefits Scheme and other health data. The Government will also look at the potential to extend similar cost recovery arrangements to other Department of Health work. Clients will now be invoiced for the true cost of work done by the department.

Private health insurance

  • The Government will seek to save A$370.9 million from 2018–19 to 2019–20 through pausing indexation of the Medicare Levy Surcharge and Private Health Insurance Rebate Thresholds from 1 July 2018 until 30 June 2021.  
  • The Government will establish an expert group – the Private Health Sector Committee (PHSC) – to provide technical and specialist advice on designing and implementing the Government’s private health insurance reforms.

Dental

  • The Government will invest A$1.7 billion from 2015–16 to 2019–20 in the introduction of the new Child and Adult Public Dental Scheme to improve access to public dental services from 1 July 2016.

Aged care

  • The Government will look to save A$1.2 billion from 2015–16 to 2019–20 through changes to the scoring matrix of the Aged Care Funding Instrument that determines the level of funding paid to aged-care providers.  
  • The Budget includes A$102.3 million in funding to improve the targeting of the viability supplement for regional aged care facilities.  
  • The Government will spend a further A$136 million over four years on the My Aged Care contact centre.  
  • The Government will provide additional funding for the Australian Aged Care Quality Agency to continue unannounced site visits to aged care homes in 2016–17.

Regulation and safety

  • The Government will seek to bring life-saving medicines and medical devices onto the Australian market faster through streamlining of processes and regulations. Costs and administrative burden for industry will also be reduced. Assessment times for some products will be reduced by up to three months through utilising work carried out by comparable overseas regulators. Some low risk products will be considered for removal from the regulatory scheme altogether.  
  • Funding for the Australian Breast Device Registry (ABDR) and the Cardiac Devices Registry (CDR) will be extended for a year, from July 2016 to June 2017, to support patients with implanted high-risk cardiac and breast devices.

Pharmacy and Pharmaceutical Benefits Scheme (PBS)

  • The Budget includes A$45.2 million for new and amended medicines on the PBS and A$12.3 million for new listings on the Life Saving Drugs Programme (LSDP).  
  • From 1 March 2016, all adult Australians with chronic hepatitis C will be able to access a range of new medicines on the PBS.  
  • The Budget also includes four new product listings and two amended listings to assist eligible people with stomas to better manage their condition with changes to the Stoma Appliance Scheme.
  • The Government will add a new listing on the National Health (Immunisation Program - Designated Vaccines) Determination 2014 for influenza – FluQuadri – and amend an existing listing for human papilloma virus (HPV) – Cervarix.

Public health

  • The Government will provide A$29.9 million to combine nine separate cancer registers into a single National Cancer Screening Register, starting 1 May 2017. The register will support the renewal of the National Cervical Screening Program and the expansion of the National Bowel Cancer Screening Program.  
  • The Government will introduce charging arrangements to recover the costs involved in the ongoing regulation of medicinal cannabis.  
  • The Government will provide A$10.5 million to set up a new Fetal Alcohol Spectrum Disorders (FASD) clinical network, including paediatricians who work with children affected by FASD.

Diverted Profits Tax

  • The Government announced a new Diverted Profits Tax (DPT) law relevant to corporate groups with annual global revenue of A$1 billion or more.. According to the Consultation Papers, the Australian DPT is " designed to ensure entities operating in Australia cannot avoid Australian tax by transferring profits, assets or risks offshore through related party transactions that lack economic substance, and to discourage multinationals from delaying the resolution of transfer pricing disputes". The DPT, at a rate of 40%, may be payable where an Australian taxpayer has a cross-border transaction with a related offshore party and, as a result, the increased income tax liability offshore attributable to the transaction is less than 80% of the corresponding reduction in Australia. If passed, the DPT will apply to income years commencing from 1 July 2017. For further information on the DPT and other tax changes, please see our 2016-2017 Federal Budget Tax Alert.