Why the Govt shouldn’t outsource Medicare payments

The Federal Government’s plans to outsource Medicare and Department of Veteran’s Affairs payments systems to the private sector will see it throw away one of its best opportunities to lay a proper foundation for e-government.

Health Minister Peter Dutton and his Human Services counterpart Marise Payne are effectively shooting Canberra’s IT strategy in the foot before it has even begun walking.

Dutton on Friday confirmed the Health department is gauging interest from the private sector on outsourcing the mammoth IT-based payments processing functions that fall under the Medicare and DVA remit.

In doing so, the Government will split the payments off from similar welfare calculations currently processed by the same IT shop in the Department of Human Services.

Back in May, the National Commission of Audit encouraged the consideration of outsourcing the DHS payments processing system - specifically the Centrelink welfare payments churned out by the 30 year-old ISIS platform.

It noted:

Outsourcing of the payments system could also be considered on the basis of prospects for the services to be delivered more efficiently and effectively and at a lesser cost than is the case now.

However, the need to redesign such a complex IT system in parallel with the simplification of welfare policy, complicates any decision about outsourcing.

- National Commission of Audit

The audit certainly did not recommend that the solution to the complexity of the payment processing system was to fragment it. But that is exactly what breaking out Medicare payments would do.

Outsourcing the Medicare and Veterans’ Affairs payments processing will not help create a single unified process, and Medicare - given it has a relationship with every citizen in the country - would be an ideal starting point for that.

If the systems are offloaded, the Government throws away an opportunity to unify these sorts of customer transactions across the Commonwealth.

It would be as short-sighted as a major bank offloading the design of its ATM, EFTPOS and BPay functions just before the bank implemented a new core banking system.

The fundamental role of the payments systems would still be served through an outsourced model, but an internally developed system could form a critical component of a future single unified process. 

It is understandable that Health and Human Services may be getting impatient for back office reforms as we wait for the Government to confirm its plans for a new IT strategy, given it has been nearly a year since it released its election policy for e-Government an the Digital Economy without any updates.

It's time for this Government to seize the initiative and lay out a coordinated vision for technology reform before more agencies get itchy feet and offload all the foundations for reform.

David is a thirty-year telco veteran who has worked in corporate sales, strategy and regulatory and corporate affairs for Telstra, Hutchison, AAPT and Unwired/vividwireless. His writing and consultancy career was briefly interrupted when he agreed to join then Minister Senator Conroy’s office, and later Minister Albanese and Shadow Minister Jason Clare.

David conducts policy research under the business name DigEcon Research and consults to various participants through Havyatt Associates. He is also contesting the NSW election in 2015 as the Labor candidate for Epping.