Turnbull backs down on Medicare payments system outsourcing

Prime Minister Malcolm Turnbull has ruled out handing off any element of the Medicare system to the private sector, including the payments processing work pitched to the market back in August 2014.

Prime Minister Malcolm Turnbull

The Labor party and unions alike have pounced on the Medicare payments market testing as evidence that the government harbours plans to outsource the whole health benefits scheme.

Over the weekend the Prime Minister told reporters “every element of Medicare services that is being delivered by government today will be delivered by government in the future. Full stop”.

He said necessary improvements to the back-office IT that calculates Medicare rebates and pays them into patient’s bank accounts “will all be done by government and within government”.

The announcement follows almost two years of talks with industry providers interested in taking over the payments function.

The government sought expressions of interest in 2014 to replace the decades-old mainframe infrastructure it currently relies on to process $19 billion with of medical benefits claims a year with a “dynamic and innovative commercial solution”.

Officials from the Department of Human Services have suggested that organisations that are already set up to make high volumes of payments to customers - like health insurers and banks - would be a good fit for the job.

Australia Post CEO Ahmed Fahour confirmed his organisation made a bid for the payments work, and Fairfax newspapers reported last year that Eftpos, Telstra subsidiary Stellar, Serco, Fuji Xerox, SAP and Accenture were also in the race.

But now that Turnbull has called off the market testing, the government will face the mammoth tech replacement on its own.

“We will continue to improve the way in which Medicare interacts, interfaces with its customers, with citizens and patients,” the Prime Minister said.

“Every delivery system of government has to be upgraded and improved so that it is, as I’ve said before, so that people are able to access services on digital platforms."

The project sits on a similar scale to Centrelink's rebuild of its 30 year-old payments engine, which is forecast to cost between $1 billion to $1.5 billion.

DHS has previously estimated the number of staff currently engaged on coding and maintenance of the existing Medicare payments system is between 1500 and 1700. It has 33,000 full time equivalent employees across the department.