Plans to outsource up to $150 billion a year in government payments handled by the Department of Health Services is on hold, as billions of dollars of required technology upgrades move ahead.

Federal Minister for Social Services, Scott Morrison, confirmed that on10 April the government would proceed with a staged replacement of the decades old DHS payments system with a new platform.

The first stage of the project is due for implementation in late 2016, with final works stretching out to 2022. Late last year Federal Treasurer Joe Hockey said the cost of such an upgrade would be “billions”.

Turnbull’s Digital Transformation Office

To kick things off the government in the May budget allocated $95 million to the newly established Digital Transformation Office (DTO) within Malcolm Turnbull’s Department of Communications.

The DTO is charged with dragging government services into the digital age, to make contact between government and citizens fast and efficient, and essentially to put it on a private enterprise footing.

Certainly solid digital credentials, combined with a new DHS payments system would enhance government options following the National Commission of Audit’s proposal to explore outsourcing DHS payments systems.
But despite seeking expressions of interest last year from enterprises interested in taking over parts of the DHS payments system, there is no sign of progress in pushing that agenda.

Minister Morrison’s April 2015 press release also looks likely to place roadblocks in front of any outsourcing agenda: “The Government will partner with the private sector for the design and delivery of the (new payments system) project. However, the ownership and management of the new payments system, and the customer data it holds, will remain with the Government.”

Muddied waters

Any clarity on government thinking has been further muddied by Health Minister Sussan Ley’s decision to undertake a number of reviews of the Medibank and Pharmaceutical Benefits Scheme, with reports not due till later this year.

According to a report on 27 April in GovernmentNews: “After investing almost a year in terms of engagement and bringing the government up to speed, industry is now avidly watching for potential signs that Medicare payments outsourcing push flagged by the Commission of Audit may be headed into palliative care.”

How it started

The outsourcing agenda commenced in August 2014, when the DHS called for expressions of interest in taking over parts of the DHS payments system, in particular the $30 billion a year Medicare payments system.
At the time unions and opposition politicians claimed such a move could cost between 5000 to 20,000 public service jobs, and put at risk personal information, by handing over government collected information to private, and even multinational corporations.

Why it’s needed

The need to transform the antiquated and inefficient DHS payment system was highlighted in the National Commission of Audit report released in March last year. The report looked at both federal government expenditure and revenue.

The report, chaired by businessman Tony Sheppard, found Commonwealth spending will increase by $280 billion over the next decade, with 70% of the increase coming from the 15 largest programs, of which the DHS is the largest.

And that spending is a major reason why the report determined the nation faces an “unusual” scenario of 16 consecutive budget deficits, with net debt rising from $190 billion in 2014 to $440 billion by 2023-24.
While Australia Post made public its desire to take over all the payment systems of the DHS, other contenders include Telstra and Eftpos, and German software and solutions group SAP and US technology group Oracle.


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