Review of methadone treatment in Australia

12.4 Option 4: grants to States

Page last updated: October 1995

Under this option, methadone treatment provided by the private sector would be excluded from the Medicare Benefits Schedule. Rather, the Commonwealth would allocate an annual grant to the States, who could then determine the mix of public and private services they wish to use within their jurisdiction. States would have the flexibility to either provide services directly themselves via public clinics, or to contract for services with the private sector, using either the fee for service or client management models of the types described in Option 2 and Option 3 above.

The level of the grants in the first instance could be the equivalent level of funding currently expended by the Commonwealth through Medicare benefits and NDS grants to the States. Thereafter, the grants may be increased either at an agreed annual rate or by negotiation to reflect targeted or actual increases in the number of clients treated. If the agreed basis for growth is the number of clients participating, then the client management model described in Option 3 could be applied.

It is suggested that the Commonwealth would continue to provide methadone syrup at no charge to dispensers This approach would seek to continue the current situation whereby the cost of methadone has been kept considerably lower than overseas because of the Commonwealth's central purchasing power.

12.4.1 Advantages of this option
12.4.2 Disadvantages of this option

12.4.1 Advantages of this option

  • This approach would provide the States with greater flexibility over the mix of public and private methadone services they employ within their jurisdiction. Given greater control over the aggregate level of funding available for methadone treatment, they would be able to choose that mix of services which best meets local circumstances and provider availability. They would also be in a better position to pursue competitive tendering for services as a means for achieving additional economies, and to evaluate alternative service delivery models and vehicles.

  • The merging of regulatory and funding roles brought about by this approach would assist in overcoming one of the major obstacles to clinical and financial accountability present in the current funding arrangements. States would be in a stronger position to assess the quality and costs of services provided in both the public and private sectors and to take substantive action where these are not to the required standard. This is particularly relevant in the private sector, where the maintenance of appropriate standards of practice could be a condition of continued approval of methadone providers, and/or financial penalties imposed where non-conformity occurs.

  • This approach would limit the Commonwealth's funding exposure for methadone services. Since the level of grants to the States would be negotiated and is expected to be closely tied to the number of clients participating in methadone programs, the Commonwealth's exposure to any costs of over-servicing would be removed. While it may be argued that this risk is simply being transferred to the States, they would be in a stronger position to monitor such activities and to take remedial action under any contracting arrangements than the Commonwealth is currently able to do under the Medicare arrangements.

  • This option provides a greater opportunity for the development and application of a standard funding mechanism between private and public sectors. If the States choose to adopt a competitive tendering approach for methadone services, they could apply a common funding mechanism across both sectors. Such an approach would potentially lead to improved economies of scale and promote models of best practice.

  • This approach is likely to lead to an improved balance between the public and private sectors in methadone services. The current division of funding responsibility between the States and the Commonwealth provides an incentive for the States to shift services to the private sector (and hence costs to the Commonwealth). The removal of this incentive under this option would promote a more rational decision making process as to the appropriate method of service delivery at both a local and a State-wide level.
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12.4.2 Disadvantages of this option

  • This approach would require the establishment of separate accounting, reporting and funding infrastructures and mechanisms in each State. This may represent a considerable overhead cost to the overall system, and duplicate the payment infrastructure which already exists at a national level through Medicare. At the same time, medical practitioners would be required to differentiate their billing practices between the States and the Commonwealth, adding to their costs of administration. As such, the total costs of administering methadone services are expected to be higher than under the current funding system.

  • The transfer of the payment system for private services from the Commonwealth to the States may be seen as simply transferring the current funding problems from one jurisdiction to another, without addressing the underlying difficulties associated with the payment mechanism itself. While this may be true to some extent, the States would nevertheless be in a better position to address any inequities and to establish a more consistent funding system within their jurisdictions.

  • This approach may not cater well for movements of clients for short terms across State boundaries. Specific arrangements would need to be made for the funding of services provided by practitioners in different jurisdictions, either by their home State or the State in which the client is registered. While these difficulties exist in an administrative sense under the current system, they would be extended under this approach to the funding mechanism, a problem which does not occur when that funding system operates at a national level.

  • The reaction by medical practitioners and clients themselves to this approach is uncertain at this time. There may be a perception that the removal of methadone treatment services from Medicare, to be funded through a different mechanism by the States, further identifies this group of clients and differentiates them from the wider community. If this view persists, then reaction to this approach by both groups may be negative.
The underlying principle behind this option is the combining of the two existing groups of purchasers of methadone services (namely the States for public services and the Commonwealth for private services) into a single purchaser for all services in each State, namely the State governments. The same principle could be implemented by transferring the purchasing role to the Commonwealth. This implies that the Commonwealth would be responsible for the purchasing of all methadone services, possibly through a competitive tendering process in which both public and private service providers could participate.

In order for this alternative approach to be effected, the approval and regulatory functions currently vested with the States may also need to transfer to the Commonwealth. This would require a significant change to the legislative and administrative roles of the different entities which requires further investigation into its feasibility.

The advantages of this variation are essentially the same as those described above, except that the Commonwealth would substitute for the States in the discussion. However, there may be fewer disadvantages associated with this variation. In particular, the concerns expressed about duplication of infrastructures, the potential for double-billing, and the capacity of the system to cater for interstate movements of clients would be significantly reduced under this approach.

The major additional disadvantage of this approach is the question as to whether the Commonwealth is in a position to plan and implement methadone service programs at a local level. The States currently have the required infrastructure to assess and evaluate local conditions and requirements, and to plan accordingly. It is problematic whether the Commonwealth would have the capacity to undertake this function with the same effectiveness.
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