Inside the race to overhaul Medicare's payments system

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Inside the race to overhaul Medicare's payments system

Back to the drawing board for Canberran IT dinosaur.

Fifteen minutes in the national spotlight hasn’t brought the creaky Medicare payments system any closer to a long-overdue replacement, but Canberra insists it is working on bringing the platform into the modern day.

The 30-year-old IT back-end responsible for processing public healthcare rebates rose to an unusual level of notoriety in the last week of the election campaign, amidst squabbling over whether its proposed hand-off to the private sector amounted to an attack on the national health safety net.

Now it is set to become the federal government’s next biggest IT challenge, after a public backlash forced Prime Minister Malcolm Turnbull to promise no element of the system would be privatised.

The political solution dashed plans to shift the payments function to a private sector organisation - like a bank or private health insurer - and take the multi-million-dollar job off the government’s hands.

With Turnbull’s new cabinet officially sworn in last week, iTnews understands that a plan of attack to address the Medicare IT problem is likely to be pushed onto the agenda with some urgency, as public servants grown increasingly nervous about the potential for the critical IT infrastructure to buckle.

It means tech bureaucrats in the Department of Human Services and the Department of Health will have a second mountain to move, on top of the billion-dollar welfare payments modernisation they're currently undertaking.

As the PM himself admitted on national TV, “the payment system has got to be updated”.

The question that remains is: how quickly will the government stump up the cash to get it done?

How big is the job?

The complexity of the Medicare payments system - or systems - is spoken of in carpet-sized proportions.

In February, Health secretary Martin Bowles described it as “if you look at the system diagrams of this, you would probably lay it out on the floor in the middle here; it is that sort of level of complexity”.

What is referred to as the Medicare payments system is actually as many as 200 separate applications and 90 different databases working together to process Medicare Benefits Schedule and Pharmaceutical Benefits Scheme rebates for doctors and patients.

It completes 600 million transactions every year, making it the baby cousin of the notorious Centrelink payments system ISIS, which crunches through something like 50 million every day.

The replacement of the Centrelink payments back-end is estimated to cost between $1 billion and $1.5 billion; the Medicare job would likely to slot in just below this threshold.

DHS CIO Gary Sterrenberg in February said he judged the scale of the Medicare system to be more like the IT that runs retail banking at Westpac than the Goliath-like welfare payments infrastructure.

“Everything is small compared to the social welfare system,” he cautioned.

Another small mercy for DHS and Health mandarins is that the kinds of calculations the Medicare system conducts are a lot simpler than the spider’s web of rules and conditions governing Centrelink.

A successful Medicare rebate is dependent essentially on a yes/no question of eligibility, and then the platform simply needs to get the money into a bank account.

Read on to find out why the system only has four years left...

A ticking time bomb?

The state of the 30-year-old Medicare system is already making a lot of Canberra officials very nervous.

One source said it is “creaking at the seams”, and insiders agree there is a tangible sense of urgency in the public service when it comes to doing something about it.

While outages are rare, and its shortcomings aren’t necessarily felt at the patient end of the system, doctors are struggling with inefficient bureaucracy that the health system can’t get rid of because of its brittle legacy IT.

Human Services secretary Kathryn Campbell admitted the inflexibility of the old technology has very real policy implications.

“We are already sometimes limiting policy options because of the nature of the IT system,” she told the Senate’s community affairs committee earlier this year.

With lines and lines of interdependent code built up over decades, changes are difficult and resource intensive, constraining the ability of the Medicare benefits system itself to be flexible and responsive to Australian health needs.

President of the Australian Medical Association, Dr Michael Gannon, said doctors have to deal with illogical and inefficient processes - like managing dozens of different provider numbers if they work across a range of different clinics and hospitals, or waiting on hold to the health department to get a prescribing exception approved - because of the IT limitations.

“When we ask for red tape reform, we are being told that the computer system can’t cope,” he said.

“The system is out of date and it will require substantial investment to bring it up to pace.”

Sterrenberg has said the payments system likely has only four years left.

“My advice would be that something needs to be done within that four-year period,” he said in February.

“[When] the new releases of the operating systems on the machines come out, the old software cannot fully run with them and there are incompatibility issues...it does become harder every year to do what needs to be done."

However, the public outcry at the privatisation option has almost sent the government back to square one.

What options are left?

There's little question within government that the Medicare payments system needs to evove from the age of homes without PCs to what the Prime Minister is calling “a smartphone era”.

But a spokesperson for Health Minister Sussan Ley said there was "no set timeline for a decision by the Commonwealth".

However, the government is "keen to provide much needed additional capability to update and modernise health and aged care payment services".

“The departments of Health and Human Services are investigating emerging digital technologies which can improve payment system delivery to millions of recipients every week," the spokesperson said.

Insiders argue the government needs to be eyeing off the same sort of automated fraud detection capabilities that alert your bank if a card is used overseas, and real-time payment integration that can take advantage of the Reserve Bank’s new transfers back-end.

But public sensitivity over privatisation and outsourcing, and Turnbull’s repeated insistence that the modernisation will be done within government, means Canberra will have to be extra careful about its options as it prepares to take the next step.

Ovum’s lead public sector analyst Kevin Noonan says this means any form of business process outsourcing is well and truly off the table, as is anything that affects asset ownership.

“In a sense the worst answer would be for the pendulum to swing all the way back in the other direction and for the government to start coding a whole new Medicare system from scratch," he said.

“They have to start thinking about the options in the middle.”

Noonan argues the most likely avenue from here will be to approach the market for one of two systems integrators, and a commercial off-the-shelf solution, in the same manner as DHS has gone about its Centrelink payments replacement under the WPIT program.

The government could even look at a white-labelled version of the kind of payments systems already used in the private healthcare sector, like the HICAPS patient billing solution, he said.

“Anything that doesn’t affect asset ownership of the final delivered systems is probably on the table."

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