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Carter, Peter; Morgan, Richard --- "Accounting for subsidised medicine and income support in offshore litigation" [2021] PrecedentAULA 22; (2021) 163 Precedent 38


ACCOUNTING FOR SUBSIDISED MEDICINE AND INCOME SUPPORT IN OFFSHORE LITIGATION

By Peter Carter and Richard Morgan

The underlying legal basis for requiring refunds to Medicare, public hospitals and Centrelink from injury payouts is rarely examined in Australian case law, seeing as the practice is such a routine part of domestic accident compensation.

Claims for people who have received medical treatment or income support in Australia are sometimes conducted in a foreign jurisdiction, for example, where an Australian resident is injured in a motor vehicle accident overseas or where a non-resident is permitted to litigate in their home jurisdiction for an injury that occurred in Australia.

Those litigating abroad in such circumstances need to consider whether the usual refund requirements are altered by the fact that the forum and at-fault party are foreign, or by the application of foreign law to determine the claim.

They may also need to convince a foreign court that their client’s full financial loss is recoverable from the at-fault party notwithstanding Australia’s significant social welfare support.

The observations below will give some guidance to lawyers engaged in such foreign claims.

MEDICARE

Australia’s version of subsidised health care (now called Medicare, previously Medibank) began in 1973. Medicare does not provide ‘free’ health cover because it does not prescribe treatment fees. The benefit it pays for any particular treatment may be anywhere from about 50 per cent of the cost rendered by the service-provider (leaving the patient to pay the ‘gap’) up to 100 per cent.

Any Australian citizen or permanent resident can apply for a Medicare card that entitles them to these benefits. Residents of New Zealand, the UK, the Netherlands, Ireland and seven other European nations with whom Australia has reciprocal health agreements are also entitled to such benefits while visiting Australia.

The legislation that obliges a compensation recipient to refund Medicare-funded accident-related health treatment is the Health and Other Services (Compensation) Act 1995 (Cth) (HOSCA) and the Health and Other Services (Compensation) Care Charges Act 1995 (Cth) (HOSCCCA).

Section 8 of HOSCA sets out the general principle that Medicare benefits paid for accident-related treatment are refundable to Medicare out of the proceeds of a judgment or settlement greater than AUD 5,000 which fixes an amount of ‘compensation’ for an injury (other than payment in the nature of crime victims’ compensation). The requisite refund is reduced to the extent of any liability apportioned to the claimant if it is specified in the judgment or settlement terms.[1]

The scheme envisages Medicare giving to the person against whom the claim is made or their insurer – each of whom is a ‘notifiable person’ – notice that it may seek recovery of all Medicare, nursing home, residential care or home care benefits or subsidies out of the proceeds of a claimant’s injury compensation claim.[2]

In practice, Medicare usually only becomes aware of a potential compensation claim when the claimant’s solicitors contact Medicare for particulars of all the claimant’s medical treatment.

Medicare’s failure to give the requisite s14 notice to the notifiable person does not preclude the obligation to make the refund.

The procedure, so far as Australian claims are concerned, is that the court will include any amounts paid by Medicare as an incurred expense (special damages) as part of the judgment, and the defendant insurer will then deduct that amount from the judgment sum and pay it to Medicare. Similarly, in the case of settlements, the payment to Medicare is made by the defendant out of the agreed damages.

In claims conducted outside of Australia, the obligation to make the refund depends on whether or not the payment to the claimant in the foreign jurisdiction can be categorised as ‘compensation’.

The term is defined in s4 of HOSCA:

‘(1) Subject to subsection (2), for the purposes of this Act, compensation is:

(a) a payment of damages; or

(b) a payment under a scheme of insurance or compensation under a law, including a payment under a contract entered into under such a scheme, but not including a payment under such a scheme to which the recipient has contributed; or

(c) a payment (with or without admission of liability) in settlement of a claim for damages or a claim under an insurance scheme of a kind to which paragraph (b) applies; or

(d) any other compensation or damages payment, other than a payment under a scheme to which the recipient has contributed;

that is made in respect of an injury to a person (whether or not the payment is made to that person).

(2) For the purposes of this Act, compensation does not include:

(a) a payment by an individual who is not insured or otherwise indemnified for liability in respect of the injury in question, and who is not required by law to be so insured or indemnified; or

(b) a payment in the nature of criminal injuries compensation; or

(c) an amount paid that is not required to be paid by or under an Australian law, other than such an amount the payment of which (whether on its own or in conjunction with other such payments) has the effect of extinguishing by agreement a claim for compensation; or

(d) an amount paid in respect of a fatal injury to a person, unless all or part of that amount relates to medical expenses or expenses incurred in respect of nursing home care for that person.’

Most claims will be covered under s4(1) unless they are excluded by the operation of s4(2) and in particular s4(2)(c) – that is, if it is ‘an amount not required to be paid by or under Australian law’.

At first blush, it might be thought that s4(2)(c) carves out all foreign litigated claims from the refund regime. This interpretation faces two hurdles. The first is whether or not s4(2)(c) is intended to have such an effect if, for example, the law of Italy is applied to adjudicate the claim. However this is improbable as the legislature would have been more likely to express any intended carve-out as a positive exemption, for example, of all ‘amounts paid by order of a foreign court or in settlement of a claim brought therein’.

The second hurdle arises from the accompanying words in the sub-section – ‘other than such an amount the payment of which has the effect of extinguishing by agreement a claim for compensation’ – which negates any carve-out if the payment is made pursuant to a settlement agreement or ‘release’.

Section 4(2)(c) is therefore likely only to exempt funds not required to be paid by or under Australian law to the injured person, for example ex gratia payments from an employer, or benevolent or treatment funds raised through a platform such as GoFundMe.

If, however, the claim results in an order or judgment made under the law of a foreign jurisdiction rather than ‘an agreement’, it is arguable by reference to s4(2)(c) at least that the proceeds are exempt from Medicare refund obligations.

However, in by far the majority of foreign claim situations, Medicare is entitled to receive a refund of the amounts it has paid in connection with accident-related treatment.

HOSCCCA creates a statutory charge ‘payable by the person entitled to the reimbursement’ for the value of Medicare benefits paid in respect of accident-related treatment over the judgment or settlement proceeds.[3] Because of a quirk in s55 of the Australian Constitution, the charge can only have effect as ‘a law imposing taxation’.[4]

Whether the provision can validly impose a taxation obligation on a non-citizen or a citizen domiciled elsewhere is beyond the scope of this article. The absence of any effective statutory charge over the compensation sum does not avoid the benefit recipient’s refund obligation.

PUBLIC HOSPITALS

Australia’s hospital system comprises of privately-owned hospitals on the one hand, and ‘free’ public hospitals on the other. In private hospitals, the hospital charges patients for accommodation, nursing and facilities, and medical practitioners charge patients for in-hospital consultations, surgery and other treatment. Emergency services are provided by both private and public hospitals but the latter take the lion’s share of accident trauma cases.

A Medicare card entitles the holder to ‘free’ public hospital treatment not because there is any direct relationship between Medicare (a federal organisation) and the hospital (all public hospitals are state- and territory-run), but because of principles of publicly-funded health care[5] agreed between state and territory governments and their federal counterpart.

Such principles include the following:

• eligible persons are to be given the choice to receive, free of charge as public patients, health and emergency services of a kind or kinds that are currently, or were historically, provided by hospitals; and

• access to these services by public patients free of charge is to be on the basis of clinical need and within a clinically appropriate period. [6]

Section G3 of the National Healthcare Reform Agreement (NHRA) states: ‘Private patients, compensable patients and ineligible persons may be charged an amount for public hospital services as determined by the State’.[7] Each of Australia’s six states and two territories thus set their own rules relating to charging for ‘free’ treatment and recoupment of charges from accident compensation recipients.

The NSW system is the common model applied in the other states and territories.

The NSW Fees Procedures Manual for Public Health Organisations (NFPM) states that compensable patients ‘should be charged at the inpatient compensable rates as gazetted in the NSW Government Gazette’.[8]

Compensable patients are defined as ‘those patients who are eligible to claim compensation/damages for hospital charges under workers’ compensation, Public Liability Insurance or such other compensation that may apply’.[9] Motor vehicle accident cases ‘are compensable but accounts are not raised on insurers’.[10]

The NFPM requires hospitals to ‘identify and classify patients accurately’ and states that fees for treatment provided to overseas visitors not covered by a Reciprocal Health Care Agreement (RHCA) should be charged:

• to the individual where there is no insurer, or no confirmation of payment from an insurer; or

• to the Australian or international insurer when eligibility and confirmation of payment has been established.[11]

Visitors in respect of whom no confirmation of insurance can be obtained are classified as ‘ineligible’ patients and must pay for treatment in advance unless a life-threatening or similar condition requires that they be treated regardless.

Because the situation occurs relatively infrequently, Australian residents injured abroad and therefore litigating abroad are often admitted as a regular public hospital inpatient rather than as a compensable patient.

In practice, if the injured person’s foreign lawyer contacts the hospital and requests particulars of charges for inpatient treatment because the client is pursuing an insurance-related compensation claim, particulars of the treatment charges will be provided.

PRIVATE HEALTH INSURANCE

Private hospital treatment is funded by a range of health insurers which issue policies providing various levels of subsidies for hospital accommodation and services.

Australian health insurers invariably impose a contractual obligation to repay treatment expenses that are met by the insurer out of any accident compensation recovered. This much is not controversial. However, many health insurers overstep the mark by including a further term in their policy requiring the refund to be the ‘full amount’ it might pay for accident-related treatment regardless of whether the settlement or judgment includes the treatment as a component. Controversies arise when a claim is resolved between the plaintiff and defendant on an equal apportionment of liability, for example, where the claimant only recovers 50 per cent of their medical expenses but the health insurer insists on a refund of 100 per cent of the amount that it paid.

CENTRELINK

In 1997, the federal Department of Social Security established the Centrelink brand to provide services to social security benefit recipients.

The Social Security Act 1991 (Cth) (Social Security Act) provides that some or all of the welfare benefits received by an injured person after the accident date are repayable out of injury compensation ‘whether or not there is any connection between the circumstances that give rise to’ injury compensation and the circumstances that give rise to the receipt of Centrelink benefits.[12]

Most income support payments from Centrelink are covered: pension, parenting payment, the Newstart Allowance, sickness benefit, unemployment and disability. The only benefits not subject to repayment are the Carer Allowance, Bereavement Allowance, Mobility Allowance, Family Tax Benefit and Newborn Payment. The payment is considered ‘compensation’ for refund purposes if it is made ‘wholly or partly in respect of loss of earnings or lost capacity to earn’ by reason of a personal injury[13] (other than payment in the nature of crime victims’ compensation).

In the case of a court judgment, the refund to Centrelink will be calculated by reference to the portion of the judgment allocated to past and future loss of income. In the case of a compromise settlement, the refund is referable to what is deemed to have been past and future loss of income, namely 50 per cent of the gross settlement (including legal costs if the settlement is a lump sum inclusive of legal costs).

The amount of the refund is determined by a somewhat complex formula. The refund can never exceed 50 per cent of the settlement sum.

Centrelink issues notices to potential compensation payers of their liability to pay to the Commonwealth a refund amount to be determined, out of the compensation payable to a claimant.[14] Such a notice suspends the compensation payer’s liability to pay compensation to the claimant while the notice has effect.[15] The amount due to Centrelink is a debt payable by the compensation payer and the compensation recipient.[16] Payment of compensation to a claimant without having repaid Centrelink first is an offence.[17]

Part 3.14 of the Social Security Act does not expressly refer, in the context of refunds, to compensation payments made outside of Australia. However the Social Security Guide specifies that debts are recoverable from an injury compensation claimant if they arise from sums that are awarded or settled overseas, or that are made from an overseas source.[18]

CONCLUSION

It can be seen from the above that Australia’s ‘free’ public hospitals are not free; its universal health care is not ‘universal’; and its income support is in many cases ‘loaned’ rather than given. Advocates need to be aware of these intricacies when handling claims in overseas jurisdictions that include, as an element, medical treatment received in Australia.

Peter Carter is legal practice director and head of travel law at Carter Capner Law, Brisbane. Richard Morgan is a barrister at Jeddart Chambers, Brisbane.


[1] Health and Other Services (Compensation) Act 1995 (HOSCA), s8(2); Health and Other Services (Compensation) Care Charges Act 1995 (HOSCCCA), s6(2).

[2] HOSCA, ibid, s14 – notice of intention to recover amounts; but see also HOSCA, s13 – notice of reimbursement arrangements, which obliges such a person to notify Medicare of settlements within 28 days unless a settlement occurs within six months of the claim having been made.

[3] HOSCCCA, above note 1, s6.

[4] Ibid, s6(5).

[5] Council of Australian Governments (COAG), National Healthcare Agreement (NHA) <https://www.federalfinancialrelations.gov.au/content/npa/health/_archive/healthcare_national-agreement.pdf>; COAG, National Health Reform Agreement (NHRA) <https://www.federalfinancialrelations.gov.au/content/npa/health/other/NHRA_2020-25_Addendum_consolidated.pdf>.

[6] Hospital and Health Boards Act 2011 (Qld), s4 restates the principles of the federal-state agreement.

[7] NHRA, above note 5, 81.

[8] NSW Government, NSW Fees Procedures Manual for Public Health Organisations, 2.32, <health.nsw.gov.au/policies/manuals/Documents/fees.pdf>.

[9] Ibid, 2.29.

[10] Ibid, 2.41.

[11] Ibid, 2.8.

[12] Social Security Act 1991 (Cth), s1160.

[13] Ibid, s17(2).

[14] Ibid, s1182.

[15] Ibid, s1184B.

[16] Ibid, ss1184F and 1184G.

[17] Ibid, s1184D.

[18] Department of Social Services, Social Security Guide, 6.4.1, <https://guides.dss.gov.au/guide-social-security-law>.


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