Commonwealth on the hunt for new Medicare payments system

The Department of Health has kicked off the process to update its 30-year-old payments system that currently supports Medicare and the Pharmaceutical Benefits Scheme.
Written by Asha Barbaschow, Contributor on

The Department of Health has published a Request for Information (RFI), seeking advice on replacing its 30-year-old IT payments system that currently supports the operation and delivery of Medicare, the Pharmaceutical Benefits Scheme, aged care, and related veterans payments.

According to the federal government, each year the department makes in excess of 600 million payments worth approximately AU$50 billion across the health and aged care services via an IT system it called obsolete.

"Just as Australian families have upgraded their computers since the 1980s, the time has come for the government's health payments systems to do the same," the government said in a statement.

"The RFI provides an opportunity for respondents, including small and medium enterprises, to shape the future design of the new system which the Australian government will continue to own, operate, and deliver."

During his election campaign last June, Australian Prime Minister Malcolm Turnbull warned against outsourcing government services, saying a government could find itself without sufficient internal talent as a result.

Facing questions on outsourcing Medicare payments, Turnbull said he had every intention of updating the healthcare service's payments system.

"The Medicare payments system is enormous, obviously, and I believe that we can -- well, it is not a question of belief, there is no doubt that we can -- bring that into the 21st century and do so within government," he said. "But my decision is that this payments system will be upgraded and it will be upgraded within government."

At the time, Turnbull pointed to the creation of the now defunct Digital Transformation Office (DTO) as proof that he did not wish to head down the outsourcing path.

"It has the culture of a startup but it is within government and its aim is to, within government, transform the delivery of government services, rather than spending enormous amounts of money on big private firms and outside systems integrators and outsourcers," Turnbull said.

"It is a commitment that I am making to all of the elements of Medicare that are currently being provided by government, being provided by government in the future, and that is absolutely consistent with my approach to these issues as demonstrated by my establishment of the DTO," he added.

The DTO was superseded by the Digital Transformation Agency (DTA) in October, which is charged with a similar remit to the DTO. But as interim CEO Nerida O'Loughlin highlighted during Senate Estimates last week, the DTA and DTO have "quite different" roles, which includes her agency evolving from a government startup and not "disrupting" government agencies as much as the former office.

On Monday, Minister for Human Services Alan Tudge provided an update on the Department of Human Services' (DHS) Welfare Payment Infrastructure Transformation (WPIT) Program that is essentially updating Australia's 30-year-old payment system, currently responsible for processing over AU$100 billion in Centrelink payments annually.

The minister said improvements to the Youth Allowance and Austudy claims process has cut processing time by almost half, with the average time to process a claim reduced from nine weeks last year to under five weeks in 2017, with claims on hand reduced from 80,000 to 35,000, as well.

The WPIT program has been labelled the biggest digital transformation the government has embarked on to date by Tudge, with the project estimated to take seven years in total to complete.

"Over the next five years, we're going to be progressively building a new system for each one of the major payments to make it simpler, faster, and cheaper to administer," Tudge said previously. "We're going from a world today where the system is stifled with unnecessary inefficiency and complexity to a world where there will be progressive transformational change."

Centrelink has been in the spotlight recently, after it emerged over the holiday season that the agency's new automated debt recovery system had letters demanding money repayment sent in error to welfare recipients in Australia.

DHS announced in December it had implemented the online compliance system in July and said it was finding approximately AU$4.5 million that had gone awry each day. With this, the federal government hopes to improve the nation's Budget by AU$2.1 billion over the next four years.

The new system automatically compares the income people declare to the Australian Taxation Office against income declared to Centrelink. When it detects a disparity, Centrelink automatically issues a debt notice and that debt comes with a 10 percent recovery fee.

One large error in the Centrelink system is that it was incorrectly calculating a recipient's income, basing a recipient's fortnightly pay on their annual salary rather than taking a cumulative 26-week snapshot of what an individual was paid.

Responses to the Department of Health's RFI close on April 4, 2017, with a procurement phase for the new system expected to commence mid-year.

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