The Government has begun the process to offload the task of processing Medicare and Department of Veteran’s Affairs payments to the private sector, to avoid bearing the hefty cost of updating these IT systems itself.
It opened the call for expressions of interest - in what could be one of the biggest IT deals the Commonwealth has seen - an advertisement placed in the Australian Financial Review this morning.
Health current pays the Department of Human Services to process these payments on its behalf, using its behemoth IT shop and infrastructure.
But this arrangement looks to end in favour of a “dynamic and innovative commercial solution” that can take on the task of moving $19 billion in medical benefits claims, $10 billion in pharmaceutical claims and nearly $2.5 million worth of DVA claims every year.
“The current IT systems that manage the claims and payments processes are dated and in need of substantial upgrade,” Health Minister Peter Dutton said in a statement.
“The market test will determine the level of private sector interest and capability in providing those IT services for both the Department of Health and the Department of Veteran’s Affairs.”
Health was allocated $500,000 in the 2014 Budget to test the market for “a commercially integrated health payment system”.
The Commonwealth public sector union has already expressed fears that the divestment will result in the loss of thousands of jobs.
“Medicare staff are stunned and appalled at news the Government is planning to sell off their jobs and outsource Medicare payments to big business,” CPSU National Secretary Nadine Flood said in a statement.
But Dutton insisted that the services to be outsourced were predominantly IT-based functions rather than the face-to-face services provided by Medicare.
“Commercial organisations already provide services to Government involving large amounts of data and transactions,” a statement from his office explained.
The advertisement in the newspaper somewhat contradictorily stated that the scope of work on offer won’t be confirmed until its market sounding is over.
It is calling for responses before 22 August 2014.
A spokesman for the Department of Human Services confirmed that the processing of the Medicare and DVA payments is not done by Centrelink’s Income Security Integrated System (ISIS), which has been also flagged for replacement by Joe Hockey at a potential cost of $1.5 billion to the Commonwealth.
The National Commission of Audit suggested that DHS look into market options for upgrading ISIS, which is based on 30 year-old technology, rather than continuing the maintenance of the expensive an increasingly inflexible system itself.
The DHS has not indicated how the potential offloading of ISIS or the loss the Medicare and DVA payments processing will affect its own IT resourcing levels.