HIC ANNUAL REPORT 2002-03

Chairman’s Report

15 October 2003

The Hon Tony Abbott MP

Minister for Health and Ageing

Parliament House

CANBERRA ACT 2600

Dear Minister

The Board of the Health Insurance Commission (HIC) is pleased to submit HIC's Annual Report for the period 1 July 2002 to 30 June 2003 for presentation to each House of Parliament. The report is submitted in accordance with Section 9 of the Commonwealth Authorities and Companies Act 1997.

I am pleased to report that HIC has enjoyed a successful year of growth and development in a number of significant and ground-breaking areas. The Business Improvement Program has achieved substantial success with product development resulting in the delivery of key initiatives. It is a consolidated program of activity being undertaken over four years to 2004 – 05 and will transform a range of HIC products and services using new and improved service delivery channels that are emerging from advances in eBusiness technologies.

The activities of HIC’s business improvement initiatives are aligned with HIC’s strategic purpose of ‘Improving Australia’s health through payments and information’, and support the Government’s Online agenda. HIC has received strong support from the Government for its agenda to modernise its claims and payment systems and to better connect the health sector.

Achievements over the year in this area are detailed in the report, but include the successful deployment of a number of new applications. A new high availability eBusiness IT Infrastructure for Medicare and PBS claims submission was used for the MediConnect Field Test – a new development in health care which, by drawing together comprehensive information about the medicines people use, will help to enable doctors, pharmacists and hospitals to prevent health problems caused by adverse drug reactions and interaction. The year also saw the implementation of a new eBusiness IT architecture enabling Medicare bulk bill and patient claims to be transmitted through the internet from doctors’ practices, using Public Key Infrastructure (PKI) technology.

The Board of Commissioners is pleased with HIC’s direction in regard to its eBusiness activities.

The impact of the Canberra Bushfires in January needs special mention. This was a time of considerable disruption and impact on the operations of HIC’s National Office, with several staff being either directly or indirectly affected by the fires. What is notable of mention about this event however, is the magnificent response of HIC’s State Offices in rallying support for the victims of the fires in Canberra. This was a tremendous example of the corporate perspective and concern which staff of HIC embody throughout the land. I, together with the Board of Commissioners, heartily congratulate the staff of HIC nationally for their loyalty, their generosity and their commitment during those harrowing times.

In a similar vein, I would also like to congratulate the Medicare Claims Section for their continued good work on Balimed during the year. Balimed was established to help the victims of the Bali bombings by covering all their out-of-pocket expenses for the treatment of injuries resulting from the bombings. The section has worked hard over the year to ensure that the Bali victims’ interests, and those of the Government and HIC, have been dealt with efficiently and effectively.

The Board of Commissioners itself has seen a number of changes this year. Consequent upon amendments to the Health Insurance Commission Act 1973 that came into effect on 1 November 2002, the number of Commissioners was reduced from eleven overall to nine, and with one vacancy at the time this resulted in the need for one Commissioner to leave the Commission. Mr Ian Fletcher graciously agreed to stand aside and his appointment terminated on 10 November 2002. Over the short term of Ian’s appointment he proved himself a worthy and valuable member of the Board. On 3 March 2003, Mr Ron Harris resigned his position on the Board, owing to a change in his business interests which he perceived presented a potential conflict of interest to his role as a Commissioner. Ron also was a valuable member of the Board and his absence will be missed. I take this opportunity to thank both Ian and Ron for their sterling contribution during their respective terms of office.

In February 2003, the Board learnt of the appointment of the Managing Director of HIC, Dr Jeff Harmer, to the position of Secretary to the Australian Government Department of Education, Science and Training. Accordingly, on 10 March 2003, Dr Harmer resigned his position as Managing Director. Jeff was a man of exceptional talent and enthusiasm, with a real commitment to HIC, and during his almost five-year term as Managing Director, he was the instigator of several business initiatives that placed HIC at the forefront of modern business practice. His departure was sadly felt by all who knew him or who had associated with him, and the reaction of the staff of HIC in offices around the country to his leaving was testimony to the high level of esteem in which Jeff was held. I join with my fellow Commissioners, and the staff of HIC, in offering our heartfelt thanks to Jeff for his outstanding contribution to, and leadership of, HIC over the past five years.

Mr Jeff Whalan commenced his duties as the new Managing Director of HIC on 8 September 2003. Jeff joined HIC from the Department of the Prime Minister and Cabinet, where he was a Deputy Secretary. Jeff has been appointed for a term of five years. The Board of Commissioners considers that Jeff will provide excellent leadership to HIC in the coming years.

I take this opportunity to thank Mr James Kelaher, who enthusiastically stepped into the role of Acting Managing Director virtually overnight upon Dr Harmer’s departure, for the professional and diligent manner in which he has led the organisation in this period.

The Board of Commissioners and the Executive are justly proud of HIC’s achievements over this reporting year. We are confident and enthusiastic about its future.

We take much pleasure in commending our Annual Report to you.

Yours sincerely

Peter Bunting

Chairman

HIC IS TRUSTED BY OUR CUSTOMERS AND THE COMMUNITY… THAT’LL PUT A SMILE ON EVERYONE’S FACE.

MANAGING DIRECTOR’S REPORT

This financial year was a year of change, challenges and successes for HIC. Our Business Improvement Program continued to gather momentum and build a framework for our future business processes, and we also started to explore new functions and prepare for the introduction of new programs such as Medical Indemnity.

Our Business Improvement Program has been designed to take advantage of emerging technology to improve the service we offer our customers, especially the channels our customers use to do business with us. This year saw a number of our business improvement initiatives successfully implemented. For example, the information technology architecture has been developed which allows online applications such as HIC Online, PBS online services, eAuthorities and MediConnect to provide more efficient, value added interaction between HIC and its customers. Work on other systems has also enabled the easy extraction and analysis of Medicare data to assist health decision-makers.

Earlier this year the Australian Government announced a new framework for Medical Indemnity insurance for the medical profession. HIC will administer two of the schemes associated with this new Medical Indemnity framework – the Incurred but Not Reported Indemnity Scheme and the High Cost Claim Indemnity Scheme.

It is rewarding to see the inroads we are making with new business opportunities as a result of our Business Improvement Program and our subsequent eBusiness capability. We are looking forward to using our eBusiness platform to deliver new and innovative programs on behalf of Government.

HIC Online is one of the key business improvement initiatives. The system allows doctors and patients to claim their Medicare entitlements online. At 30 June 2003 there were 69 sites transmitting claims to HIC with a total of 326,902 bulk billed claims and 20,954 patient claims processed since the system was introduced in March 2002.

HIC has also played an important role in implementing changes to the Pharmaceutical Benefits Scheme (PBS). The 2002 Federal Budget measures aimed at sustaining the PBS have resulted in a number of projects which HIC is leading. These include the Prescription Shopping project, Overseas Drug Diversion project, PBS Risk, PBS Restrictions, and Enhancing PBS Authorities.

The Australian Organ Donor Register, also administered by HIC, had a very successful year – 4.7 million Australians are now listed as potential organ and tissue donors. This year the Australian Childhood Immunisation Register recorded more than 400,000 meningococcal C vaccinations following the introduction of the National Meningococcal C Vaccination Program in January 2003.

In 2002–03, HIC placed a priority on reaching Aboriginal and Torres Strait Islander communities to increase understanding of the health system and improve access to health services. This work will continue in 2003–04.

It is pleasing to note that the Australian community continues to hold HIC’s services in administering programs such as Medicare and the PBS in high regard with a satisfaction rating of 93 per cent.

We continue to work with doctors and pharmacists to improve our service to them. Our Stakeholder Advisory Committee has provided an opportunity for timely and meaningful consultation on many aspects of our business and we are working closely with the Red Tape Taskforce to identify and re-engineer business practices which could be streamlined further. Over the past year we have also worked to implement a range of new and dynamic initiatives to ensure our front line staff particularly have the best possible information to pass on to our customers and the tools to do their work more efficiently.

The developments over 2002–03 have resulted in significant change for HIC. The changes are aimed at providing a better service to the Australian public and to other key customers including doctors and pharmacists. These changes are only possible as the result of a very high level of dedication and professionalism of staff across HIC. Maintaining HIC’s reputation for being a people focused organisation is valued highly by the Executive team and will continue to be supported at every opportunity.

I also want to thank Mr James Kelaher and the Executive for their excellent contribution over the period before my appointment. On behalf of my HIC colleagues I am proud to commend our 2002-03 Annual Report to you.

Jeff Whalan

Managing Director

HISTORICAL HIGHLIGHTS

1974 / Wealth Insurance Commission Act 1973 is passed in August at an historic joint sitting of both Houses of Parliament /
1975 / Medibank offices are opened across Australia on 1 July to administer Medibank /
1976 / Medibank Private is established on 1 October to compete with other private health insurance funds /
1978 / Operation of Medibank Private becomes HIC's sole function /
1982 / Medibank Private becomes Australia's largest national private health insurer /
1984 / Medicare is introduced in February /
1985 / Fraud and over servicing function {new Professional Review) is transferred to HIC /
1989 / Administration of the Pharmaceutical Benefits Scheme is transferred to HIC Medclaims {electronic direct billing) is introduced /
1993 / HIC begins processing and paying claims on behalf of Australian Hearing Services HIC is chosen to administer the Commonwealth Childcare Rebate Scheme /
1994 / Commonwealth Childcare Cash Rebate Scheme begins in July /
1995 / HIC is chosen to administer the Australian Childhood Immunisation Register from 1 January Wealth and Other Services (Compensation) Act 1995 becomes effective from 1 February for HIC administration /
1996 / HIC begins processing of Veterans' treatment accounts on behalf of the Department of Veterans' Affairs /
1997 / Commonwealth Government announces separation of Medibank Private from HIC Private Health Insurance Incentives Scheme begins in July General Practice Immunisation Incentives Program begins in August /
1998 / Medibank Private is separated from HIC
Government announces the introduction of two-way agency arrangements between Medicare and private health insurance funds
Medicare offices cease to assess Medibank Private claims from 30 June Practice Incentives Program replaces the Better Practice Program from 1 July /
1999 / Federal Government 30% Health Insurance Rebate supersedes the Private Health Insurance Incentives Scheme from 1 January /
2000 / HIC begins providing services under the Family Assistance Office HIC begins administering the Australian Organ Donor Register /
2001 / Health eSignature Authority Pty Ltd is established to facilitate PKI infrastructure /
2002 / HIC Online is launched, allowing direct bill claims to Medicare to be made over the internet PBS Online is launched and HIC receives more than 90.000 scripts in its first six months /
2003 / The first MediConoecf consumer has their medication and prescription details registered with HIC /
2003 / The Australian Organ Donor Register has more than 4.5 million people registered /

REPORT OF OPERATIONS

The information required in the report of operations is included throughout this annual report. The table below shows where this information can be found.

Clause of FMO / Requirement /
8(a) / Enabling legislation, objectives and functions /
8(b) / Name of all responsible Ministers /
9 / Outline of organisational structure /
10 / Review of operations and future prospects /
11 / Judicial decisions and reviews by outside bodies /
12 / Effects of Ministerial directions /
14 / Directors (Commissioners) /
15(1) / Governance practices /
15(2) / Committees /
16 / Indemnities and insurance premiums for officers /
18 / Commonwealth disability strategy /

Certification

In accordance with the Finance Ministers Orders, the Board of Commissioners has