Govt opens pitches for Medicare payments system replacement

The Commonwealth government has formally invited pitches from suppliers as it races to replace its ageing Medicare payments processing software.

The controversial IT modernisation made headlines during last year’s election, when the Labor opposition accused the government of testing the market for ways to outsource the payments processing to a third party as a precursor to a full privatisation of Medicare.

The government was forced to back down on its business process outsourcing (BPO) proposal, and commit to keeping the Medicare IT back-end owned and operated by the public sector.

The decision has left it scouring the market for an off-the-shelf IT solution and a supporting infrastructure stack that can take over the job of distributing more than 600 million payments worth $50 billion every year to Medicare, PBS, veterans’ benefits, and aged care recipients.

The Department of Health, which runs the payment system for Medicare, has asked interested vendors to send in their technology pitches before 4 April 2017, as part of a two-stage procurement process to sign a multi-million dollar deal for the new 'digital payments platform'.

It wants industry’s feedback on what solutions are available, including cloud-based products, and whether it is feasible to have achieved “demonstrated progress” by early 2019.

According to Gary Sterrenberg, CIO of the Department of Human Services, which manages the Medicare operation, the system has roughly three years of life left.

The complex and high-profile job will almost certainly prove to be a challenge for the selected vendor.

More than 60 rebate programs in the areas of medical, pharmaceutical, aged care, and veterans’ services will need to be transitioned to the new IT back-end.

The 30-year-old technology currently doing the job is undermined by a “tightly coupled and inflexible architecture”, according to tender documents.

The Department of Human Services supports 400 custom adapters in order to allow health providers to connect their own software into the existing payments system, and the Health department has warned that any changes will force these health providers to update the products they’re using.

"Submissions should provide information on the approach the Commonwealth should take on implementing the new digital payments platform, including in relation to technical approach, delivery approach, commercial and risk issues," the Health department said.