The Department of Human Services botched a massive crackdown on Medicare rorting by doctors, leaving taxpayers with a $128 million shortfall.
A damning report by the Auditor-General has raised serious questions about the ability of the department to safeguard the integrity of the $19 billion Medicare program.
In 2008, the Rudd government allocated $77 million over four years to the Department of Human Services to increase the number of audits it completed on doctors' Medicare claiming each year from 500 to 2500. The audits, which examine whether doctors are actually delivering the services they are billing Medicare for, was supposed to recover $147 million to deliver a net saving of $70 million.
But a report on the program by the Australian National Audit Office, tabled in Federal Parliament on Wednesday, showed the department identified incorrect claims of $49 million while actually recovering less than $19 million over this period, leaving a shortfall of more than $128 million.
"The available Human Services data shows that overall there was a shortfall of $128.3 million in savings [monies recovered] against the budget initiative's savings target - some 87 per cent less than the $147.2 million in expected savings," the Auditor-General, Ian McPhee wrote.
"Even if all debts raised were recovered, there would remain a shortfall of $98 million or 66 per cent less than the expected savings."
"The ANAO’s analysis indicates the program of additional compliance audits funded under the budget measure was delivered at a net cost to the Australian government and did not represent a positive financial return on its investment."
Medicare is the fourth largest item in the federal budget, costing $18.6 billion or about 5 per cent of all Commonwealth spending last financial year. Medicare spending is expected to reach $23.7 billion by 2016-17. Health Minister Peter Dutton has flagged an overhaul of Medicare, warning the current rate of spending growth is unsustainable and arguing well-off Australians should pay more for their care. He has refused to confirm media reports this week that the government has adopted a proposal to introduce a $6 fee to see the doctor, a change that would effectively end bulk-billing.
According to the Auditor-General's report, until recently the department did not have a process to analyse the risks of doctors rorting the system and tailor its investigations accordingly.
"This approach has meant that a large number of identified risks have not been substantively analysed and as a consequence have not actively informed the development of Human Services-planned compliance activities," it said.
When it approved the expanded audit program in 2008, the Rudd government's expenditure review committee requested the then minister for human services, Joe Ludwig, and the then health minister, Nicola Roxon, agree on performance indicators to report on the measure's effectiveness.
But the report found the human services department was unable to capture and report definitive results from the expanded audits because it did not follow up on the request.
Mr McPhee said the department met the target of completing 2500 audits in only one year, in 2011-12, and without reference to the minister counted other, less onerous actions, such as sending letters, in its reporting against the target.
Mr McPhee also found the department did not have a consistent approach to calculating debts for incorrect or fraudulent claiming by doctors, and there were inaccuracies in the department's audit data. Of 359 Medicare audits completed between March and June 2013, almost 10 per cent were incorrectly recorded as non‐compliant when they were actually compliant.
"There would be value in the department strengthening its system-based controls to improve data quality and the accuracy of its Medicare compliance reporting," Mr McPhee wrote.
The Department said its compliance program had other objectives as well as achieving savings, such as education and reinforcing doctors' awareness of their obligations.
"Prevention and positive behaviour change are a very important part of the department's compliance program," the department said in its response to the report.
It added it had already introduced improvements to its processes, including in relation to prioritising risks.
