(,1 2 1/,1( - danuta mendelson

Citation:Danuta Mendelson, Devaluation of a ConstitutionalGuarantee: The History of Section 5 1 (xxiiiA) of theCommonwealth Constitution, 23 Melb. U. L. Rev. 308 (1999)Provided by: Deakin University Library

Content downloaded/printed from HeinOnline

Wed May 22 08:26:57 2019

-- Your use of this HeinOnline PDF indicates your acceptance of HeinOnline's Terms and Conditions of the license agreement available at https://heinonline.org/HOL/License

-- The search text of this PDF is generated from uncorrected OCR text.

-- To obtain permission to use this article beyond the scope of your HeinOnline license, please use:

Copyright Information

Use QR Code reader to send PDF to your smartphone or tablet device

https://heinonline.org/HOL/Page?handle=hein.journals/mulr23&collection=journals&id=326&startid=&endid=362

https://www.copyright.com/ccc/basicSearch.do?operation=go&searchType=0&lastSearch=simple&all=on&titleOrStdNo=0025-8938

DEVALUATION OF A CONSTITUTIONAL GUARANTEE:THE HISTORY OF SECTION 51(xxiiiA) OF THE

COMMONWEALTH CONSTITUTION

DANUTA MENDELSON*

[This article describes constitutional and socio-historical background to the referendum that led tothe insertion of s 51(xxiiiA) into the Commonwealth Constitution. It traces judicial interpretationsof the clause 'but not so as to authorise any form of civil conscription' through the major cases,including British Medical Association v Commonwealth, General Practitioners Society v Common-wealth, and Alexandra Private Geriatric Hospital Pty Ltd v Commonwealth. The issue of the powersof the Commonwealth to regulate private medical practice without infringing the constitutionalguarantee against civil conscription is analysed in the context of the development of NationalHealth Care Schemes for financing medical benefits (Health Insurance Commission v Peverill).Constitutional aspects of the 1995 legislation enabling the introduction into Australia of pur-chaser-provider agreements ('managed care') are also examined. Finally, the article questions theconstitutionality of the Australian Competition and Consumer Commission's powers to regulate theessential elements of the patient-doctor relationship.]

CONTENTS

I In tro d u ctio n ........................................................................................................... 30 8II C onstitutional B ackground ................................................................................... 3 10III The Origins of the Clause 'But Not so as to Authorise Any Form of Civil

C o n scriptio n '. ....................................................................................................... 3 12IV British Medical Association v Commonwealth ..................................................... 314V The Creation of the Medibank and Medicare National Health Care Schemes ...... 318VI General Practitioners Society v Commonwealth .................................................. 324VII Practical and Economic Com pulsion .................................................................... 330VIII The Purchaser-Provider Agreem ents .................................................................... 331IX Australian Competition and Consumer Commission ............................................ 340

I INTRODUCTION

Since 1906, 42 Constitution Alteration Bills have been submitted to a referen-

dum, but the Australian people supported only eight of these. Paragraph (xxiiiA)of s 51 was inserted into the Commonwealth Constitution following the success-

ful referendum of 1946. It gave the Federal Parliament power, subject to theConstitution, to make laws with respect to:

MA (Mon), PhD (Mon), LLM (Mon); Senior Lecturer, School of Law, Deakin University. Thisarticle is partly based on a paper titled 'The History and Significance of the s 51 (xxiiiA) of theCommonwealth Constitution' (Paper presented at the symposium on Medicine and the Consti-tution, Canberra, 9 June 1996). 1 wish to express my gratitude to the anonymous reviewer for avery helpful analysis and critique of the manuscript.

Devaluation of a Constitutional Guarantee

The provision of maternity allowances, widows' pensions, child endowment,unemployment, pharmaceutical, sickness and hospital benefits, medical anddental services (but not so as to authorize any form of civil conscription), bene-fits to students and family allowances.

Examination of the debates on the Constitution Alteration Bills, case law andlegislation relating to s51(xxiiiA) reveals that a shift in social values andpriorities has taken place over the past half century within the Australian commu-nity. This shift has affected the constitutional status of the provision. The aim ofthis article is to provide a jurisprudential history of s 5 1(xxiiiA) in the context ofthe shift in values I and social priorities. To this end, this article will discuss theconstitutional and legal background to the holding of the referendum and themajor cases in which the High Court of Australia has determined the meaning ofthis amendment. For instance, in the case of British Medical Associa-tion v Commonwealth,2 the High Court provided a strict interpretation of theprohibition against civil conscription. However, in General PractitionersSociety v Commonwealth,3 the Court retreated from the strict reading of theprohibition in favour of a reading that gave the Federal Parliament much widerpowers of regulation over the medical profession.

In BMA, as well as in General Practitioners, the High Court distinguishedbetween regulation and control of the provision of medical and dental services bythe Commonwealth on the one hand, and regulation and control of privatemedical practice on the other. In order to ascertain whether this distinctionapplies to the more recently developed models of medical practice, the secondpart of the article will examine the Medicare system, focusing on the assignmentof benefits under the bulk-billing provisions of the Health Insurance Act 1973(Cth). The bulk-billing model was examined by the High Court in the case ofHealth Insurance Commission v Peverill, 4 which held that as between theCommonwealth and the person who claims the Medicare benefit, the payout bythe Health Insurance Commission constitutes 'a gratuitous payment' that does notgive rise to a proprietary right to a payment for services rendered, and conse-quently is outside the definition of 'property' for the purposes of the s 51(xxxi)constitutional guarantee that property is only to be acquired by the Common-wealth on 'just terms'. 5 The third part of the article will analyse the constitutionalvalidity of the 1995 amendments to the Health Insurance Act 1973 (Cth), which

The term 'values' (to be differentiated from 'value' either as a singular noun or as a verb) wasintroduced by Nietzsche to denote moral beliefs and attitudes of a society that would replace thenotions of good or evil, virtue or vice, following the ultimate revolution of the 'death of God'. Atthe beginning of the 20"h century, Max Weber borrowed this term and used it to describe notonly Judeo-Christian moral virtues of right and wrong, but more subjective beliefs, customs andconventions that a specific group or society happens to value at a particular time for any reason.See generally Gertrude Himmelfarb, The De-Moralization of Society (1995) 10-12.

2 (1949) 79 CLR 201 ('BMA'). Australian State medical associations formed the FederalCommittee of the British Medical Association in 1911; the Australian Medical Association wasestablished in 1962.

3 (1980) 145 CLR 532 ('General Practitioners').4 (1994) 179 CLR 226 ('Peverill').5 Ibid 244 (Brennan J).

1999]

Melbourne University Law Review

have paved the way for the introduction of 'managed care' into Australia.6 Thefinal part will be devoted to issues arising from the enactment of the AustralianCompetition and Consumer Commission legislation in relation to the constitu-tional limitations and guarantees contained in s 51(xxiiiA).

It is pertinent at this point to note that in general, constitutional challenges tothe validity of Commonwealth legislation involve the consideration of whether ornot there is a head of power in the Commonwealth Constitution that wouldauthorise the Commonwealth to enact the legislation in issue.7 In determining thismatter, two further questions have to be asked. Firstly, is the legislation a lawwith respect to the central area of the head of power and, if not, is the lawnevertheless valid as a law that is incidental to the subject matter assigned to theCommonwealth by the Constitution (as distinct from matters incidental to theexecution of any power)?8 The second question - of particular importance incases relating to s51(xxiiiA) - is whether the legislation has infringed alimitation (express or implied) on the legislative power of the Commonwealth. 9

Both questions are interrelated, because the High Court tends to be more cautiousin applying constitutional limitations to a law that comes within the central areaof a Commonwealth power. Consequently, although the article will mainly focuson the second issue of constitutional limitations, the question of legislative powerof the Commonwealth will also be discussed.

II CONSTITUTIONAL BACKGROUND

On 17 September 1900, Queen Victoria proclaimed that on 1 January 1901 theCommonwealth of Australia would come into existence. On that day, the six

6 The term 'managed care' refers to provision of health care to certain patients within a specificbudget by mainly for-profit health insurance companies (in the United States they are oftencalled health maintenance organisations). Characteristic features of managed care systems in-clude the integration of health care provisions, thus allowing third party payers and health insur-ance organisations to control the flow of payments to hospitals and physicians, and to set poli-cies on what services may be covered, rates of reimbursement and the standard of care. Themanaged care system became prevalent in the United States in the early 1990s: Marc A Rodwin,'Strains in the Fiduciary Metaphor: Divided Physician Loyalties and Obligations in a ChangingHealth Care System' (1995) 21 American Journal of Law and Medicine 241, 253. See alsoEdward B Hirshfeld, 'Provider Sponsored Organizations and Provider Service Networks -Rationale and Regulation' (1996) 22 American Journal of Law and Medicine 263; Stephen RLatham, 'Regulation of Managed Care Incentive Payments to Physicians' (1996) 22 AmericanJournal of Law and Medicine 399; Julia A Martin and Lisa K Bjerknes, 'The Legal and EthicalImplications of Gag Clauses in Physician Contracts' (1996) 22 American Journal of Law andMedicine 433.

7 A-G (Vic) ex rel Dale v Commonwealth (1945) 71 CLR 237 ('Pharmaceutical Benefits Case').8 BMA (1949) 79 CLR 201, 274 (Dixon J). Dixon J's notion of incidental matters is distinct from

incidental powers under s 51 (xxxix) of the Constitution, which enable the Federal Parliament tomake laws with respect to matters incidental to the execution of any power vested by the Con-stitution in the Parliament of the Commonwealth or in any department or officer of the Com-monwealth: Le Mesurier v Connor (1929) 42 CLR 481, 497-8.

9 John McMillan, Commonwealth Constitutional Power over Health (1992) 30-5; JohnMcMillan, 'The Constitutional Power of the Commonwealth in Public Health' in AustralianInstitute of Health Law and Ethics (ed), Public Health in Australia: New Perspectives (1998)105, 110-11.

[Vol 23


Australian colonies would become the original States of the federation, 10 unitedunder the Commonwealth of Australia Constitution Act 1900 (UK).' 1 TheCommonwealth Constitution Act ratified an agreement among self-governingpolitical entities, the old colonies, to give up some of their powers to a newcentral body - the Commonwealth - while preserving sovereignty over thepowers they retained. 12 The Commonwealth could only exercise those powersconferred upon it under the Constitution.13 All powers not specified in thatdocument, known as 'residual' powers, remained with the States. Amongst thepowers specifically enumerated in the Constitution (mainly under the paragraphsknown as the placita of s 51) were the so-called 'concurrent powers', whichenabled the Commonwealth to legislate with respect to certain subject mattersover which the States also had legislative authority under their residual powers. 14

Thus, under s 51 (xxiii) of the Commonwealth Constitution, the Federal Parlia-ment was given powers to legislate for old age and invalid pensions. Theresponsibility for health care, including the control of the general practice ofmedicine, was retained by the States under their residual general powers.Likewise, the Commonwealth, under s 51 (xiv), was given power to legislate inthe area of insurance, other than State insurance, and wide incidental powerswere granted to the Commonwealth under s 51 (xxxix).

However, the constitutional foundation of measures introduced by Mr BenChifley, the then Prime Minister of Australia, was open to challenge on thegrounds that the Commonwealth Parliament did not have the power under theCommonwealth Constitution to enact the relevant legislation. The statute inquestion, the Pharmaceutical Benefits Act 1944 (Cth), provided for specifiedpharmaceutical benefits to be payable out of the trust account established underthe National Welfare Fund Act 1943 (Cth). When enacting the PharmaceuticalBenefits Act, the Commonwealth, being unable to rely upon any of its specificheads of power, relied solely upon the power of appropriation for the expenditureof public moneys under s 81 of the Constitution.

10 The Constitution Bill, which eventually became the Commonwealth of Australia ConstitutionAct 1900 (UK) 63 & 64 Vict, c 12, was successfully put to the electors at the referenda whichtook place in the five self-governing colonies of New South Wales, Victoria, Tasmania, SouthAustralia and Queensland between June and September of 1899. In Western Australia the refer-endum was successfully passed on 31 July 1900.63&64Vict, c 12.

12 Under the 19th century notion of coordinate federalism, the States were not supposed to besubordinate to the Commonwealth, nor the Commonwealth to the States, when each polity wasacting within its own respective area of legislative authority.

13 The Commonwealth was given certain exclusive powers, such as the power to raise militaryforces (s 114), power over money and legal tender (s 115) and the power to regulate FederalTerritories (s 122), which had never come within the general powers possessed by the colonies,as well as a number of other specific powers, such as those over migration, and customs andexcise which the colonies used to possess but had given up to the Commonwealth. The Com-monwealth was also given a parallel power, that is a power that operates side by side with Statelaws, to levy income tax.

14 By virtue of the operation of s 109 of the Commonwealth Constitution, when a State law isinconsistent with a law of the Commonwealth, the latter shall prevail.

1999]


For this reason, a majority of the High Court in the Pharmaceutical BenefitsCase15 held that the Pharmaceutical Benefits Act 1944 (Cth) was invalid. TheCourt determined that the power under s 81 was limited by s 51 (xxiii) to 'invalidand old-age pensions', and consequently did not extend to pharmaceuticalbenefits. In other words, the provision of pharmaceutical benefits was notauthorised by the Constitution, and thus fell beyond the powers of the Common-wealth Parliament. The Pharmaceutical Benefits Case placed in doubt thevalidity of other Commonwealth social services Acts, specifically those provid-ing for maternity allowances, child endowment, widows' pensions, unemploy-ment and sickness benefits, and hospital benefits. 16 The only way of ensuring thecontinuance of these benefits was to amend the Constitution through a referen-dum, as provided for under s 128, to authorise the Federal Parliament to providesuch benefits and similar social services.

III THE ORIGINS OF THE CLAUSE 'BUT NOT SO AS TO AUTHORISEANY FORM OF CIVIL CONSCRIPTION'

In the 1946 referendum, Ben Chifley's Labor Government placed before thepeople three separate constitutional Bills. The object of the first Bill was to insertinto the Constitution s 51 (xxiiiA), which would extend the Commonwealth powerin relation to the provision of social services. The second Bill involved grantingthe Commonwealth powers to legislate for organised marketing of primaryproducts, and the third Bill proposed to give the Commonwealth a new power tomake laws on '[t]erms and conditions of employment in industry, but not so as toauthorize any form of industrial conscription'.

In its proposal for the Constitution Alteration (Social Services) Bill 1946 (Cth),the Labor Government insisted that apart from the power to confer socialbenefits, the Federal Parliament should also be given power to provide nationalmedical and dental services.' 7 The leader of the Opposition, Mr Menzies,supported the extension of the Commonwealth Government's powers to legislatefor the provision of maternity allowances, widows' pensions, child endowment,unemployment, pharmaceutical, sickness and hospital benefits, but was opposedto the extension of the power over 'medical and dental services'.

The Opposition argued, with some justification, that the proposed amendmentwould give the Commonwealth constitutional power to nationalise the medicaland dental professions by making all medical practitioners and dentists membersof one government service. In fact, by the time the referendum proposals werebeing debated before the Australian Parliament, medical services had beennationalised in New Zealand. In the United Kingdom, the Labour Governmentintroduced into the House of Commons the National Health and Medical

15 (1945) 71 CLR 237.16 Commonwealth, Parliamentary Debates, House of Representatives, 27 March 1946, 647-8

(Herbert Evatt, Attorney-General).17 Dr Evatt argued that medical services had 'to some extent, already been provided for by the

Pharmaceutical Benefits Act': ibid 649.

[Vol 23


Scrvices Bill 1946 (UK), which led to the creation of the National Health ServiceTrust.1 8 In the House of Representatives, even if Dr Evatt, the then Attor-ney-General, was somewhat coy about the issue of nationalisation of medical anddental services, 19 it was made clear during the course of parliamentary debatesthat some members of the Chifley Government were in favour of introducing asimilar scheme for medicine and dentistry in Australia.20 To prevent this possi-bility, Mr Menzies proposed an amendment that extended the powers of theCommonwealth to the provision of 'medical and dental services (but not so as toauthorize any form of civil conscription)'. 21 Mr Menzies explained that thenotion behind the amendment was, that if 'the industrial workers were entitled tobe protected against conscription, the members of the medical and dentalprofession should be entitled to similar protection.' 22 The amendment wasaccepted by Dr Evatt on behalf of the Government, and the Bill was amended toread

the provision of maternity allowances, widows' pensions, child endowment,unemployment, pharmaceutical, sickness and hospital benefits, medical anddental services (but not so as to authorize any form of civil conscription), bene-fits to students and family allowances.

This proposal was put to the people in September 1946, and was carried bothnationally and in all six States. While supporting the social services amendment,the Opposition campaigned against the other two Bills, with the result that theyfailed to gain the requisite support in the majority of States.

It is clear from the referendum debates that Australians, while accepting thatsocial, pharmaceutical, dental and medical benefits provided by the Governmentwere important for the collective good, also recognised the importance of boththe right to professional independence held by medical and dental practitioners,and the right to personal autonomy in a doctor-patient relationship. Section51 (xxiiiA) guarded against the possibility of the reduction of these rights by theFederal Government.

18 The National Health Service Trust was established in the United Kingdom in 1948 pursuant tothe National Health Service Act 1946 (UK) 9 & 10 Geo 6, c 81.

19 When asked by Mr McEwen, the Opposition member for Murray, whether, if granted, the power

to legislate in respect of medical and dental services would enable the Parliament to nationalisethese services, Dr Evatt said that 'it would enable the Commonwealth to make use of the serv-ices of doctors and dentists to provide national medical and dental services': Commonwealth,Parliamentary Debates, House of Representatives, 27 March 1946, 649 (Herbert Evatt, Attor-ney-General).

20 See especially the speech of Mr Fred Daly, Labor Member for Martin: Commonwealth,Parliamentary Debates, House of Representatives, 4 April 1946, 1058.

21 Commonwealth, Parliamentary Debates, House of Representatives, 9-10 April 1946, 1214(Robert Menzies, Leader of the Opposition).

22 lbid 1215.

1999l


IV BRITISH MEDICAL ASSOCIATION V COMMONWEALTH

Following the 1946 referendum, the Pharmaceutical Benefits Act 1944 (Cth)was redrafted and re-enacted. 23 Certain sections and regulations of the new Actprovided that medical practitioners should write each prescription for a medica-tion listed in the Commonwealth Pharmaceutical Formulary on a governmentprescription form.24 Drugs listed in the Commonwealth Pharmaceutical Formu-lary could be obtained free under the Commonwealth scheme, but the obligationto use the government prescription form was imposed upon medical practitionerswhether or not the medicines were to be obtained free. 25 In particular, s 7A(1)imposed a penalty of £50 on any medical practitioner who failed to use aprescription form supplied by the Commonwealth for a medicine, the formula ofwhich was contained in the Formulary, or for any material or appliance, the nameof which was contained in the addendum to the Formulary, whether or not theseitems could be obtained free of charge. The constitutional validity of theseprovisions was successfully challenged in the High Court of Australia in BMA.26

The majority declared that the Act was valid, but s 7A was found to be beyondthe power of the Commonwealth Parliament and had to be struck down because:

The patient, in the ordinary case to which s 7A applies, employs the doctor andis bound to pay him for his services. The doctor provides the service in returnfor the payment (or promise of payment) of a fee. The Commonwealth does notprovide the service. For this reason s 7A cannot be supported by the provisionin s 51(xxiiiA) relating to the provision (that is the provision by the Common-wealth) of 'medical and dental services' .27

Moreover, the requirement of using the government prescription form, irrespec-tive of whether the drugs were being prescribed from the Formulary or not,amounted to a form of civil conscription. Williams J said that whenever medicalor dental 'services are provided whether as services exclusively or in the courseof providing some other benefit, the law must not authorize any form of civilconscription of such services.' 28

Latham CJ delivered the leading judgment. His Honour first discussed the issueof the nature and scope of the legislative power granted to the Federal Parliamentunder the amendment. He stated that as a consequence of the introduction of thewords 'the provision of' at the beginning of s 51 (xxiiiA), the new power given to

23 Pharmaceutical Benefits Act 1947 (Cth).24 Pharmaceutical Benefits Act 1947 (Cth) ss 7A and 8; Pharmaceutical Benefits Regulations

1947 (Cth) rr4, 11, 15, 16, 17, 18,23,30,31 and 34.25 Section 7A(2), inserted by Pharmaceutical Benefits (No 2) Act 1949 (Cth), provided an

exception to the obligation imposed upon the doctor by s 7A(I). The doctor was relieved of theduty of writing the prescription on the Commonwealth form if the patient in respect of whom orat whose request the prescription was written requested the medical practitioner not to write theprescription on the Commonwealth form. However, the relief from statutory duty dependedentirely upon persons other than the medical practitioner.

26 (1949) 79 CLR 201.27 Ibid 251 (Latham CJ).28 Ibid 287 (Williams J).

[Vol 23


the Commonwealth 'relates only to provision of medical services by the Com-monwealth, and not by ... doctors in private practice.' 29 He defined privatemedical practice as involving employment by a patient of a doctor who providesthe service for which the patient is bound to pay a fee.30 While the Common-wealth Parliament can validly make laws with respect to the provision of thebenefits and for medical and dental services,3 1 it is not authorised to make laws'providing for the complete control of medical services rendered by any person toany other person.' 32 Nor does the Commonwealth legislature have the constitu-tional power to 'control the practice of the medical profession completely or tosuch less extent as Parliament might think proper.' 33

In relation to the issue of the limitation of legislative power embodied in theprohibition, his Honour was particularly concerned with the power of theCommonwealth to control and conscript physicians' services through economiccompulsion. 34 He defined the term 'civil conscription' in the following way:

The term 'civil conscription' is wider than industrial conscription. It is applica-ble in the case of any civilian service, ie non-military, work or service. It couldproperly be applied to any compulsion of law requiring that men should engagein a particular occupation, perform particular work, or perform work in a par-ticular way. 35

Noting that physicians earn their living by practising medicine, his Honourcommented that in determining whether there is compulsion, the court shouldconsider 'not only the bare legal provision but also the effect of that provision inrelation to the class of persons to whom it is applied in the actual economic andother circumstances of that class.' 36 He alluded to European history before andduring World War Two, saying that this experience

has shown that the most successful means of compulsion of services is to befound in the deprivation of means of subsistence. There could in my opinion beno more effective means of compulsion than is to be found in a legal provisionthat unless a person acts in a particular way he shall not be allowed to earn hisliving in the way, and possibly in the only way, in which he is qualified to earna living.

37

Latham CJ stressed the importance of the words 'any form' in the prohibition,and said that '[t]hey show that the Parliament intended that any service to which

29 Ibid 247 (Latham CJ).30 Ibid 251.31 The power granted to the Commonwealth 'is not a power to make laws with respect to, eg

pharmaceutical benefits and medical services. It is a power to make laws with respect to theprovision of such benefits and services': ibid 243.

32 Ibid 242-3.

33 Ibid 243.34 According to Latham CJ, '[t]here are various ways of compelling people to a course of action.

The imposition of a penalty or imprisonment is a common form of compulsion': ibid 252.35 Ibid 249.36 Ibid 253.37 Ibid.

1999]


the limitation applied should be completely voluntary and not procured bycompulsion of law.' 38 His Honour discussed the 'broad purposive construction'approach to interpretation, which was adopted by the Supreme Court of theUnited States in its interpretation of the prohibition against slavery and involun-tary servitude, contained in the Thirteenth Amendment of the Constitution of theUnited States of America.39 Latham CJ applied a similar approach to s 5 1(xxiiiA)of the Commonwealth Constitution, noting that:

The object of conferring power upon the Commonwealth Parliament to makelaws for the provision of pharmaceutical benefits was to enable the Parliamentto make laws with respect to (inter alia) the provision of pharmaceutical bene-fits by the Commonwealth under a scheme which should involve no compul-sion of service by any person, which would leave every person, according to hisown will, and not by reason of the exercise of the will of Parliament or of anyother person, at liberty to take part in the execution of the scheme or to standoutside the scheme altogether, whether as doctor, as chemist or as patient.40

This statement of constitutional objectives contained in the prohibition on thepowers of the Commonwealth elucidated the rights and values protected by theguarantee. With regard to doctors, dentists and chemists, it emphasised the rightto exercise their professional discretion in deciding how to discharge theirresponsibilities without being compelled to act in a particular way by thegovernment. Notably, Latham CJ observed that under our federal system, theState and Territory Parliaments have the power to enact legislation to control theregistration of medical practitioners, and to impose conditions for practice ofmedicine (including conscription of medical and dental personnel) withoutinfringing the Commonwealth Constitution.41

With regard to patients, the constitutional objective was to safeguard the rightto be free from governmental interference in making choices about one's health

38 lbid 250.39 Amend XIII:

Section 1. Neither slavery nor involuntary servitude, except as a punishment for crimewhereof the party shall have been duly convicted, shall exist within the United States, orany place subject to their jurisdiction.

Section 2. Congress shall have power to enforce this article by appropriate legislation.Latham CJ cited the Supreme Court's interpretation of this section in Alonzo Bailey v State ofAlabama, 219 US 219, 243 (1911) and United States v Reynolds; United States v Broughton,235 US 133, 146 (1914), stating in BMA (1949) 79 CLR 201, 253 that

[tlhis prohibition has been construed broadly so as to give effect to its evident purpose and toprevent evasion by the creation of crimes in relation to acts or omissions which are connectedwith the rendering of services ... These cases show that the court regarded the substance ofthe legislation, as determined by its actual operation in the circumstances in which it applied,in reaching a conclusion as to whether or not a law established involuntary servitude.

40 BMA (1949) 79 CLR 201, 253 (Latham CJ).41 This is because, providing they follow the relevant manner and form provisions and avoid

inconsistency with the Commonwealth legislation, the State Parliaments have powers to makelaws within their jurisdictions 'in all cases whatsoever', virtually untrammelled by any human orcivil rights guarantees: cf Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51.

[Vol 23


care, which John Stuart Mill regarded as a fundamental civil right.42 According toMill, 'the only purpose for which power can be rightfully exercised over anymember of a civilized community, against his will, is to prevent harm to others.His own good, either physical or moral, is not a sufficient warrant'. 43 Conse-quently each adult person of sound mind 'is the proper guardian of his ownhealth, whether bodily, or mental or spiritual.' 44 The majority's view that thecentral area of power under s 51(xxiiiA) concerns the provision of medical andother services by the Commonwealth, not private medical practice, would suggestthat the prohibition would apply to Commonwealth laws regulating privatepractice enacted under other heads of power, not only the amendment.45

Dixon J, in dissent, distinguished between the principal power contained ins 51 (xxiiiA) and the incidental power. His Honour stated that he was concernedwith 'what is incidental to the subject matter rather than with some matter whicharises in or attends the execution of the power of legislation over the subjectmatter and so would itself be a subject of legislative power under s 51 (xxxix).' 46

He explained that the principal grant of power must include within it not onlyeverything necessary to the effective exercise of that power, but also everythingwhich is incidental to the subject matter of a legislative power.47 Dixon J thenquoted a somewhat obscure statement by Lord Selborne, who observed that lawsaccompanying the central area of the head of power may encompass

things which are incidental to it, and which may reasonably and properly bedone and against which no express prohibition is found, may and ought, primafacie, to follow from the authority for effectuating the main purpose by properand general means. 48

The application of these principles of operation of incidental powers to the issueof the constitutional limitation led to the determination that

a wide distinction exists between on the one hand a regulation of the manner inwhich an incident of medical practice is carried out, if and when it is done, andon the other hand the compulsion to serve medically or to render medical serv-ices[.]

49

42 In his influential essay On Liberty (1859), Mill argued that individuals should be amenable to

the power of the State only when their conduct is based on choices which impinge on or concernothers. Reproduced in Gerard Dworkin (ed), Morality, Harm and the Law (1994) 9.

43 Ibid.

44 Ibid 11.45 Cf McMillan, 'The Constitutional Power of the Commonwealth in Public Health', above n 9,

120.46 BMA (1949) 79 CLR 201, 274 (Dixon J). For this characterisation of incidental powers his

Honour relied on Le Mesurier v Connor (1929) 42 CLR 481, 497.4' BMA (1949) 79 CLR 201, 274 (Dixon J). Latham CJ provided a narrower definition of

incidental powers, stating that the incidental power under s 5 1(xxxix) enables the Common-wealth to enact legislation required to provide safeguards against fraud, and other measuresnecessary for the proper administration of benefits and services that are provided for out ofpublic money: at 247.

48 Small v Smith (1884) 10 App Cas 119, 129 (Lord Selbome), quoted by Dixon J in BMA (1949)79 CLR 201, 274.

49 BMA (1949) 79 CLR 201, 278 (Dixon J).

1999]


The latter is within the prohibition, but the former is not. The regulated incidentof practice that is financial and administrative, rather than medical or dental, fallsoutside the prohibition.

Consequently, according to Dixon J, unlike the compulsion to serve medicallyor to render medical services, 50 the regulation of the manner in which financialand administrative incidents of medical practice are carried out - such as usinggovernment forms for writing out prescriptions - does not infringe the prohibi-tion.5 1 Incidentally, his Honour never explained the meaning of the term 'inci-dent', which, when applied to private medical practice, denotes events, circum-stances, episodes, occurrences and experiences whereby medical, administrativeand financial elements are inextricably linked - in other words, the core ofclinical practice. The wide Dixonian interpretation of the incidental powercontained within s 51 (xxiiiA) would be adopted by the High Court in the 1980s.

V THE CREATION OF THE MEDIBANK AND MEDICARE NATIONALHEALTH CARE SCHEMES

BMA was decided long before the introduction of the national health carescheme, which in turn raised the question about the legal principles that underpinthe concept of 'private practice' for the purposes of constitutional interpretation.In 1974,52 the then Labor Government, in reliance upon s51(xxiiiA) ands 5 1(xiv) 53 of the Commonwealth Constitution, enacted the Health Insurance Act1973 (Cth) and the Health Insurance Commission Act 1973 (Cth), whichestablished the original Medibank national health care scheme. The legislationprovided for payments by the Commonwealth for medical benefits, hospitalservices and certain other specific services. 54 Over the years the original schemehas undergone a number of changes. Under the present Medicare system (intro-duced in 1984), the Health Insurance Commission provides payment of Medicarebenefits to patients who incur medical expenses in respect of a professionalmedical service. 55 This means that 85 per cent of the fees specified in the

50 Dixon J accepted that an imposition upon medical practitioners or dentists of an obligation toserve in the employment of the government would fall within the prohibition, as would anyattempt to impose upon physicians a duty of attending patients for fees paid or provided by thegovernment: ibid 262.

51 Ibid 278.52 The Medibank legislation, the Health Insurance Bill and the Health Insurance Commission Bill,

were introduced into the Federal Parliament in 1973. They passed through the House of Repre-sentatives twice and were twice rejected by the Senate. Following a double dissolution and thesubsequent re-election of the Labor Government in May 1974, the Bills were eventually passedat a joint sitting of all members of both Houses of Parliament held in August 1974.

53 Under s 51 (xiv) of the Commonwealth Constitution, the Commonwealth Parliament has thepower to legislate for '[i]nsurance, other than state insurance; also state insurance extendingbeyond the limits of the State concerned'.

54 Commonwealth, Parliamentary Debates, House of Representatives, 29 November 1973, 4142(Bill Hayden, Minister for Social Security).

55 Health Insurance Act 1973 (Cth) s 20(l).

[Vol 23


Medical Services Table of the Medicare Benefits Schedule56 are being financedout of Consolidated Revenue. 57

The question arises whether the major constitutional principles relating to theCommonwealth powers (and limitations) to regulate medical practice as estab-lished by the High Court in BMA apply to the national benefits scheme. Anotherissue that needs to be examined is whether the fee for service model of privatepractice considered in that case is relevant to the model based on the bulk-billingmethod of payment available under the Medicare scheme, and its more recentpermutations. I shall first discuss those aspects of the private practice paradigmthat have remained unchanged, and then analyse the High Court's interpretationof the legal nature of the method of payment known as 'bulk-billing'. This will bedone in the context of cases concerning another constitutional limitation, namely,s 51 (xxxi), with respect to the acquisition of property on just terms.

In BMA, Latham CJ defined private medical practice in Australia as a relation-ship whereby 'the patient ... employs the doctor and is bound to pay him for hisservices. The doctor provides the service in return for the payment (or promise ofpayment) of a fee.' 58 In the 1996 case of Breen v Williams 59 the majority of theHigh Court agreed that the legal relationship between physician and patient iscontractual, 60 in the sense that the medical practitioner performs services inconsideration of fees payable by the patient. 6' Within that contractual relation-ship, the physician has a number of ways of billing the patient. To begin with,contractual arrangements between the medical practitioner and the patient can benegotiated with no reference to the Medicare benefits system. For example, it isestablished practice in the field of cosmetic surgery to draw up a contractoutlining specific cosmetic procedures that the surgeon will perform for anagreed fee payable beforehand.

At the same time, probably the majority of medical practitioners in privatepractice bill their patients in accordance with the three statutory options providedunder the Medicare scheme. The first option allows the private medical practitio-ner to render the account to the patient directly. Under s 20(1) of the HealthInsurance Act 1973 (Cth), a patient who receives an account from a medicalpractitioner for services rendered can pay the account and then claim and obtain

56 Commonwealth Department of Health and Aged Care, Medicare Benefits Schedule,<http://www.health.gov.au/pubs/mbs/mbs4/default.htm>.

57 Medicare is funded from general taxation revenue, plus a levy on taxable income payable bythose earning above a certain income level: Health Insurance Act 1973 (Cth) s 125.

58 BMA (1949) 79 CLR 201, 252 (Latham CJ).59 (1996) 186 CLR 71.60 Ibid 78 (Brennan CJ); 89-90 (Dawson and Toohey JJ): 'Essentially the relationship between

doctor and patient is a contractual one whereby the doctor undertakes to treat and advise thepatient and to use reasonable skill and care in so doing'; 102 (Gaudron and McHugh JJ): Ingeneral terms, '[a] doctor offers a patient diagnosis, advice and treatment', the objectives ofwhich are 'the prolongation of life, the restoration of the patient to full physical and mentalhealth and the alleviation of pain', quoting Sidaway v Governors of Bethlem Royal Hospital[1985] AC 871, 904.

61 CfGummow J in Breen v Williams (1996) 186 CLR 71, 123.

1999]


the Medicare benefit from the Consolidated Revenue of the Commonwealth incash.

Alternatively, by virtue of s 20(2), instead of claiming for and being paid aMedicare benefit, a patient may obtain a cheque payable to the private medicalpractitioner who has rendered the professional service. The billing practice unders 20(1) and (2) is in harmony with the notion of the traditional contractualrelationship - the physician obtains the payment from the patient, and it isirrelevant to the physician that either a part or the whole of the amount due hasbeen claimed by the patient as a benefit from the Medicare account of the HealthInsurance Commission, or that the cheque is issued by the Health InsuranceCommission rather than by the patient. In each case, the physician will have aprivate action in debt against a patient who fails to pay the account rendered.Under the third option, pursuant to the provisions of s 20A of the Health Insur-ance Act 1973 (Cth), the private medical practitioner can bulk-bill the patient.Section 20A(1) allows the patient to assign his or her 'right to the payment of theMedicare benefit' 62 to the physician who accepts the assignment 'in full paymentof the medical expenses incurred in respect of the professional service'. Thus, theconsideration for the services rendered by the physician is not a payment ofmoney, but an acquisition of a right to a benefit.63 By virtue of s 20A(3), once theassignment is validly executed, the Medicare benefit will be payable in accor-dance with the assignment.64

Although under the Medicare system of financing medical benefits, the patientretains the right to choose a physician, and the private physician the right toselect the method of payment from the patient for the services rendered, there is amajor legal difference between the method of billing the patient directly and the'bulk-billing' system. This is because under the latter, the assignee practitioneracquires merely a right to a medical benefit, which is in effect a statutoryentitlement to receive payments from Consolidated Revenue. 65 However, thepatient's entitlement to a Medicare benefit is not a proprietary right, but is in thenature of a gratuity in as much as the patient does not provide any considerationto the Commonwealth for these payments. Consequently, when a patient assignshis or her Medicare benefit to the medical practitioner, the assignee practitionerdoes not acquire any proprietary right which is recognised by general law.66

62 As specified in s 20A(l)(a) and (b) of the Health Insurance Act 1973 (Cth). See Re GeoffreyWalter Edelsten and Health Insurance Commission (1988) 24 FCR 512, 515 (Gummow J).

63 In Alexandra Private Geriatric Hospital Pty Ltd v Commonwealth (1987) 162 CLR 271, 280

('Alexandra'), the High Court adopted the definition of 'benefit' for the purposes of s 51 (xxiiiA)provided by McTieman J in BMA (1949) 79 CLR 201, 279, as including 'pecuniary aid, service,attendance or commodity made available for human beings under legislation designed to pro-mote social welfare or security: the word is also applied to such aids made available through abenefit society to members or their dependants'.

64 Subject to form and lodgment requirements specified in s 20B of the Health Insurance Act 1973(Cth).

65 But see Peverill (1994) 179 CLR 226, 235 (Mason CJ, Deane and Gaudron JJ) discussed below.66 However, as Brennan J pointed out, 'the money received when the Medicare benefit is paid

answers that description': ibid 244 (citations omitted).

[Vol 23


In other words, the fundamental principle that underlies the bulk-billing systemis that the payment of a Medicare benefit as between the Commonwealth and thepatient is a gratuitous payment.67 Therefore, the assignment of this gratuitouspayment by the patient does not bring the private medical practitioner into acontractual relationship with the Commonwealth. In Peverill,68 the High Courtdetermined that as between the Commonwealth and the medical practitioner thereis no consideration. In that case, Brennan J explained that the s 20A transaction,that is, the agreement to give up a right to payment of a fee for services renderedfor a right to claim a Medicare benefit, is between the assignee practitioner andthe assignor patient. Under the contractual relationship between the physician andthe patient:

Consideration passes from the assignee practitioner to the patient and from thepatient to the assignee practitioner. What the assignee practitioner acquires is astatutory right, which, as between the practitioner and the Commonwealth (orthe Commission), is a gratuity.69

Consequently, as between the Commonwealth and the person who claims theMedicare benefit, the payout by the Health Insurance Commission constitutes 'agratuitous payment' irrespective of whether it is claimed by the assignee doctoror the patient.70

Peverill dealt with the way in which the process of assignment under the bulk-billing system changes the nature of rights to which a medical practitioner isentitled for provision of medical services. Dr Peverill operated a number ofpathology laboratories in the Northern Territory and Queensland. In the 1980s,Dr Peverill's laboratories performed hundreds of pathology tests, involving theso-called ELISA test. In 1991 the then Labor Government enacted the HealthInsurance (Pathology Services) Amendment Act 1991 (Cth) which reduced, withretrospective effect, the benefit of $34.50 which was previously payable underitem 1345 of the Medicare Benefits Schedule for the ELISA test to $17.20. Theamending Act was expressed to operate retrospectively from 1 January 1980,which was before Dr Peverill began to provide these tests. Accordingly, theamounts payable to Dr Peverill for the ELISA tests which he performed forpatients were reduced retrospectively from $34.50 to $17.20. Dr Peverill sued theHealth Insurance Commission, arguing that the retrospective reduction of thebenefit under the amending Act amounted to a law with respect to the 'acquisi-tion of property' within the meaning of s51(xxxi) of the Constitution.7 The

67 Ibid.68 Ibid.69 Ibid 244-5.70 Distinguishing between a debt and the statutory right to claim the benefit conferred upon

assignee practitioners under s 20A, Brennan J stated that 'where a pecuniary benefit payable outof Consolidated Revenue is gratuitously provided by the Parliament to the beneficiary, theamount of the benefit remains until payment within the unfettered control of the Parliament':ibid 245.

71 Under s 51(xxxix), the Commonwealth Parliament has the power to legislate with respect to'[mlatters incidental to the execution of any power vested by this Constitution in the Parliament

1999]


majority decided that it did not, because an assignment of medical benefits doesnot create a proprietary right in favour of a medical practitioner that is recognisedby the general law. The Court approached the legislation under constitutionalchallenge on the premise that it was based on a legitimate economic governmen-tal interest in reducing medical costs.72 This meant that the interpretation of therelevant provisions was deferential to that interest.

For the purposes of the constitutional guarantee of acquisition of property bythe Commonwealth on 'just terms', the term 'property' is given a very widedefinition. It extends not only to a title to or an interest in land recognised at lawor in equity73 but also to 'every species of valuable right and interest'7 4 such as,money and the right to receive a payment of money.' 75 This includes shares,superannuation entitlements, as well as, for example, a right to bring an action fordamages in negligence. 76 However, the right to a medical benefit is excludedfrom the definition of property for the purposes of the 'just terms' constitutionalguarantee. One may ask, why?

The answer, provided by Brennan J in Peverill, was that although the schemecreated by the Health Insurance Act 1973 (Cth) confers on assignee practitionersa right to be paid Medicare benefits, it does not create a debt vis-A-vis theCommonwealth, and consequently, no proprietary rights arise in the context ofassignment. According to Brennan J:

The scheme of that Act [Health Insurance Commission Act 1973 (Cth)] is toappropriate Consolidated Revenue to the extent necessary to allow the Com-mission, after acceptance of claims made to it within the times prescribed, topay out to claimants the amounts prescribed by the Principal Act [Health In-surance Act 1973 (Cth)]. The Principal Act confers on assignee practitioners aright to be paid Medicare benefits subject to the conditions prescribed but itdoes not create a debt.

The right so conferred on assignee practitioners is not property: not only be-cause the right is not assignable (though that is indicative of the incapacity of athird party to assume the right) but, more fundamentally, because a right to re-ceive a benefit to be paid by a statutory authority in discharge of a statutoryduty is not susceptible of any form of repetitive or continuing enjoyment and

or in either House thereof, or in the Government of the Commonwealth, or in the Fed-eral Judicature, or in any department or officer of the Commonwealth.'

72 Peverill (1994) 179 CLR 226, 237 (Mason CJ, Deane and Gaudron JJ).73 Property for the purposes of the constitutional guarantee is 'not to be confined pedantically to

the taking of title ... to some specific estate or interest in land recognized at law or in equity ...but ... extends to innominate and anomalous interests': Bank of NSW v Commonwealth (1948)76 CLR 1, 349 (Dixon J).

74 Minister of State for the Army v Dalziel (1944) 68 CLR 261, 290 (Starke J); see also 285(Rich J), 295 (McTiernan J).

75 Australian Tape Manufacturers Association Ltd v Commonwealth (1993) 176 CLR 480, 509(Mason CJ, Brennan, Deane and Gaudron JJ). See also Mutual Pools and Staff PtyLtd v Commonwealth (1994) 179 CLR 155, 172 (Mason CJ), 184 (Deane and Gaudron JJ).

76 A right to bring an action for damages in negligence is a valuable right: Georgiadis v Australianand Overseas Telecommunications Corporation (1994) 179 CLR 297. See, as to the value of acause of action for personal injuries which is lost in consequence of negligence on the part of asolicitor, Johnson v Perez (1988) 166 CLR 351; Nikolaou v Papasavas, Phillips & Co (1989)166 CLR 394; Kitchen v Royal Air Force Association [ 1958] 2 All ER 241.

[Vol 23


cannot be exchanged for or converted into any kind of property ... That is not aright of a proprietary nature, though the money received when the Medicarebenefit is paid answers that description. 77

In view of subsequent legislation which allows the reassignment of bulk-billingassignments, 78 the part of his Honour's reasoning relating to the incapacity ofthird parties to assume the right is dated. In their joint judgment, Mason CJ,Deane and Gaudron JJ looked at the issue of 'acquisition' for the purposes ofs 51 (xxxi), and said that the entitlement to a direct payment from a patient for amedical service is 'a valuable "right" or "interest" of a kind which constitutes"property"' for the purposes of the 'just terms' guarantee. 79 However, when thedoctor, through the bulk-billing procedure, exchanges the direct right to be paidby the patient for another, less valuable, statutory right to receive a payment fromConsolidated Revenue, the assignment does not necessarily bring about an,acquisition' of the earlier right for the purposes of s 51(xxxi). The joint judg-ment went on to say that:

Rights of that kind [statutory entitlements] are rights which, as a general rule,are inherently susceptible of variation. That is particularly so in the case of boththe nature and quantum of welfare benefits, such as the provision of Medicarebenefits in respect of medical services. 80

In relation to a statutory scheme which involves welfare benefits paid for bypublic funds, the Commonwealth has to balance not only the competing claims,rights and obligations of patients and physicians, but also the interests of theCommission and the taxpayers. Since

[a]ll these factors are susceptible of change ... it is to be expected that the levelof benefits will change from time to time. Where such change is effected by alaw which operates retrospectively to adjust competing claims or to overcomedistortion, anomaly or unintended consequences in the working of the particu-lar scheme, variations in outstanding entitlements to receive payments underthe scheme may result. In such a case, what is involved is a variation of a rightwhich is inherently susceptible of variation and the mere fact that a particularvariation involves a reduction in entitlement and is retrospective does not con-vert it into an acquisition of property.81

Although the reasoning may appear circular, the decision in Peverill makes itclear that medical practitioners who bulk-bill their patients exchange a proprie-tary right to a payment which they have earned by providing medical services fora mere expectation of an uncertain gratuity from the Commonwealth. Moreover,bulk-billing medical practitioners have no control over the monetary amount

77 Peverill (1994) 179 CLR 226, 243-4.78 See s 73BDA(I)(b) of the National Health Act / 953 (Cth), discussed below on pp 333-4.79 Peverill (1994) 179 CLR 226, 235, citing as support Minister of State for the Army v Dalziel

(1944) 68 CLR 261, 285 (Rich J), 290 (Starke J), 295 (McTiernan J); Mutual Pools and StaffPty Ltd v Commonwealth (1994) 179 CLR 155, 172 (Mason CJ), 184 (Deane and Gaudron JJ).

80 Peverill (1994) 179 CLR 226, 237.81 Ibid.

1999]


involved in the gratuitous benefit they are hoping to receive from ConsolidatedRevenue.

82

It was the concept of the gratuitous benefit that led Gummow J inBreen v Williams to raise a query whether the relationship between patients andbulk-billing doctors could appropriately be described as 'contractual'. HisHonour stated:

The relationship between medical practitioner and patient may engage the lawin various respects. Traditionally, there has been a contractual relationship, themedical practitioner performing services in consideration for fees payable bythe patient. That established pattern now may require adjustment to accommo-date wholly or partly state operated or financed health schemes, established bystatute. The 'bulk-billing' provisions of the Health Insurance Act 1973 (Cth) ...provide an example of this. 83

His Honour's point is important, for although at common law the considerationfor contract between doctor and patient is the undertaking by the patient to'suffer' treatment,84 this juristic characterisation of the doctor-patient relation-ship does not encompass the whole concept of private medical practice. Forexample, if control by doctors over the fees they charge for their services isconsidered to be one of the essential elements of the private practice model, thenthe bulk-billing practitioners may fall outside this model, and hence outside theambit of the prohibition.

VI GENERAL PRACTITIONERS SOCIETY V COMMONWEALTH

The Commonwealth has the power to interfere legislatively with private medi-cal or dental practice under any number of heads of power enumerated in s 51,provided the law does not infringe the s 51 (xxiiiA) prohibition.85 The question asto whether this was the case in relation to provisions enacted under s 5 1(xiv) wasconsidered by the High Court of Australia in General Practitioners in 1980.86

The case was decided at a time when the concept of the welfare state began to bequestioned on the grounds of efficiency, with social scientists, health economists

82 Since 1995, a joint Commonwealth and Australian Medical Association Medicare ScheduleReview Board assisted by a joint Medicare Schedule Review Task Force have been conducting areview of the General Medical Services Table of the Medicare Benefits Schedule. The review ofthe Medicare Benefits Schedule was undertaken against the background of dissatisfaction withthe levels of professional remuneration for doctors as reflected in the provision of Medicarebenefits, and the falling incidence of medical practitioners who elect to bulk-bill their patients(estimated at about 71.8% and falling for general practitioners: Health Insurance Commission,Annual Report 1997-98 (1998) 36. The specialists, if they bulk-bill at all, are tending to use thismethod only for pensioners and recipients of social security benefits). One of the reasons for thedecision not to bulk-bill is the growing understanding from medical professionals that by as-signing the benefits under s 20A of the Health Insurance Act 1973 (Cth), they exchange a pro-prietary right which they have earned by providing medical services for a mere expectation of anuncertain gratuity.

83 Breen v Williams (1996) 186 CLR 71, 123 (citations omitted).84 Carlill v Carbolic Smoke Ball [1893] 1 QB 256, 271 (Bowen U).85 See generally McMillan, Commonwealth Constitutional Power over Health, above n 9.86 (1980) 145 CLR 532.

[Vol 23


and consumer advocates urging the government to contain public health carecosts through greater control over the medical profession. 87 Politically, theimposition of such controls was facilitated by the 'consumer revolution' of thelate 1970s, with its ideology of the world as a global market place populatedexclusively by providers and consumers. Members of professions came to beregarded as petty entrepreneurs selling their services to clients just as a used carssalesperson sells cars. Consumer organisations and adherents of economicrationalism, while accusing doctors of enjoying a monopoly and acting inrestraint of trade,88 called for greater regulation of the profession.

The question of the extent to which the Commonwealth Parliament had thepower to control financial aspects of private medical practice arose whenamendments to the Health Insurance Act 1973 (Cth)89 were challenged on thebasis that they infringed the prohibition against civil conscription contained ins 51(xxiiiA). The amendments imposed special conditions and obligations upon,approved' medical practitioners who provided pathology services in respect ofwhich Commonwealth medical benefits were to be payable. Specifically, the thens 16A 90 imposed a fine of no more than $1,000 upon an approved pathologypractitioner who failed to produce 'a written request or a written confirmation ofthe request' for a pathology service from another medical practitioner who haddetermined that such service was necessary, within 14 days after being servedwith a notice from an Officer of the Department of Health.9 1

The then s 16B gave the Minister power to draw up forms of undertaking thatwere to be signed by applicants who wished to become approved pathologypractitioners. The undertaking involved a promise to comply with the HealthInsurance Act 1973 (Cth), regulations made thereunder, and the Code of Conductset out in the schedule to the undertaking. 92 It consisted of several clauses. Inparticular, under clause 9 the practitioner undertook not to 'render, or request tobe rendered', pathology services, in respect of which medical benefits werepayable, that would constitute 'excessive services'. The phrase 'excessiveservices' was defined as professional services 'in respect of which medicalbenefits have become or may become payable, that are not reasonably necessary

87 See generally Heather Gardner (ed), The Politics of Health: The Australian Experience (1989);Linda Hancock (ed), Health Policy in the Market State (1999).

88 These arguments very closely resemble the free market, anti-intellectual climate in the UnitedStates in the first half of the nineteenth century, where there was strong opposition to licensingof professionals. For example, in the 1840s, there were calls for the abolition of the legal profes-sion on the basis that it operated as a monopoly: Richard Harrison Shryock, Medical Licensingin America, 1650-1965 (1967) 31.

89 The challenged sections were inserted into the Health Insurance Act 1973 (Cth), by the HealthInsurance Amendment Act 1977 (Cth). They are contained in pt i, which deals with 'medicalbenefits'.

90 Sections 16A, 16B and 16C were subsequently repealed by s 15(1) of the Health LegislationAmendment Act 1986 (Cth) with effect from 1 August 1987.

91 The provision obligated 'approved pathology practitioners' to retain written requests or writtenconfirmation of the requests for a period of 18 months after the date on which the service wasrendered: Health Insurance Act 1973 (Cth) s 16A(3).

92 General Practitioners (1980) 145 CLR 532, 546.

1999]


for the adequate medical care of the patient concerned.' 93 The object of thisprohibition was to regulate clinical decisions of pathologists about the care oftheir patients. The Code of Conduct contained a number of prohibitions upon the

administration and manner of conducting pathology practice. 94

The then s 16C, inter alia, gave the Minister, acting on behalf of the Common-wealth, the power to accept or refuse to accept the written and signed undertak-ing. Under the Act, the acceptance of the undertaking by the Minister became anessential requirement for eligible applicants to become approved pathologypractitioners. This was because the Act stipulated that patients would only obtainCommonwealth medical benefits if their medical practitioners requested therelevant pathology services from approved pathology practitioners. Since theCommonwealth medical benefits for pathology amounted to 85 per cent of thescheduled fee, and would only be paid to patients of approved pathologypractitioners, it was quite clear that those practitioners who elected not to sign thewritten undertaking, or whose signed undertaking was not accepted by theMinister, would be practically precluded from carrying on or establishing a viablepathology practice.

The High Court of Australia, while affirming the special place of the 'fee forservice' model of private practice adopted in BMA, adopted Dixon J's distinctionbetween regulation of the manner in which an incident of medical practice iscarried out, and the compulsion to serve medically or to render medical services.On the basis of this distinction, the Court decided that the relevant provisions didnot impose upon pathology practitioners an obligation to perform a service,rather, they merely regulated 'the incidents of [their] medical service' throughadministrative procedures. 95 Consequently, the Court held that although thepractical effect of ss 16A, B, and C 96 was to compel pathologists to be registeredunder the Commonwealth scheme, and to comply with the normative standards

93 Health Insurance Act 1973 (Cth), s 79(1B)(a). In 1987, a new definition of 'excessive services'was introduced in s 79(1 B) by s 22 of the Health Legislation Amendment Act 1986 (Cth). It saidthat:

A reference in this Division to excessive services is a reference to professional services (otherthan pathology services), being services in respect of which Medicare benefit has become ormay become payable and which were not reasonably necessary for the adequate medical ordental care of the patient concerned.

94 The Code of Conduct prohibited sharing of fees or benefits in respect of pathology services, theprovision of free service by pathology practitioners as an incentive to medical practitioners toorder tests, making payments to a medical practitioner for illusory services, making paymentsbeyond normal commercial rates for services provided to the pathology practitioner by a medicalpractitioner, advertising to stimulate the ordering of pathology tests except in a manner or to anextent allowed under the legislation controlling the practice of medicine in the relevant State orTerritory, billing of patients by medical practitioners who make the request for pathology tests.

95 General Practitioners (1980) 145 CLR 532, 560 (Gibbs J).96 Under the new s 16A of the Health Insurance Act 1973 (Cth), as amended by s 15(1) of the

Health Legislation Amendment Act 1986 (Cth), no Medicare benefit is payable in respect ofservices rendered by a practitioner until that practitioner has given the new s 23DC undertaking.Section 16B was replaced by s 23DB which provides that the Minister may approve forms ofundertaking to be given by persons who wish to become approved pathology practitioners.Section 16C was replaced by s 23DC, which deals with the giving, acceptance, and time limitsrelating to approved pathology practitioner undertakings.

(Vol 23


thereby imposed for the conduct of clinical practice, the law did not amount tocivil conscription because there was no legal or practical compulsion on them toperform a medical service. 97

Gibbs J delivered the leading judgment. His Honour reiterated the principlethat there is no explicit head of power under which the Federal Parliament canregulate private medical practice, in the sense of the physician-patient relation-ship.98 The Commonwealth's powers are limited to regulation of those financialand administrative incidents of practice that pertain to provision by the Com-monwealth of medical and pharmaceutical benefits. He recognised that amend-ments to the Act, which made the Commonwealth medical benefits payable onlyfor services rendered by 'approved pathology practitioners', meant that thespecialist medical practitioners who wished to establish, or continue in thepractice of rendering pathology services had no real choice - they had tobecome 'approved pathology practitioners'. In so doing, they had to submitthemselves to obligations and sanctions cast upon them by virtue of ss 16A, Band C of the Act, its Regulations, and the undertaking.99 However, although thelegislation had the practical effect of compelling pathologists to be registeredunder the Commonwealth scheme and to abide by the obligations therebyimposed, it would apply only if they wished their patients to be eligible forMedicare benefits. Consequently, the legislation did not impose 'any form ofcivil conscription', as defined by his Honour. °°

Gibbs J was critical of the wide interpretation of the civil conscription prohibi-tion clause provided by Latham CJ, Webb and Williams JJ in BMA. Specifically,he disagreed with the notion that without strong restraints, Parliament would beable to legislate so as to bring about a complete control of medical and dentalpractices. His Honour opined that:

No doubt their Honours had in mind the principle of interpretation under whicha statutory provision, if ambiguous, may be construed so as to avoid inconven-ience and injustice. However, it would seem to me impermissible to give to thewords of a constitutional prohibition a meaning wider than that which theynaturally convey out of an apprehension that the legislative powers, if notheavily fettered, might be used to effect a wide control of professional activi-ties.101

Gibbs J posited the following interpretation of the prohibition clause 'but not soas to authorize any form of civil conscription':

There is nothing in the Constitution that would indicate that the expression 'anyform of civil conscription' where it appears in s 51(xxiiiA) should be given anenlarged meaning which its words do not naturally bear. The words 'any form

97 General Practitioners (1980) 145 CLR 532, 560 (Gibbs J).98 Ibid 548.

99 According to Gibbs J, the Act, the Regulations and the undertaking relating to provision ofbenefits for pathology services 'do have the effect - legal or practical - of compelling medicalpractitioners to observe certain positive requirements': ibid 554.

100 Ibid 557 (Gibbs J).101 Ibid 556.

1999]


of' do not, in my opinion, extend the meaning of 'conscription', and that wordconnotes compulsion to serve rather than regulation of the manner in which aservice is performed. 10 2

It is of note that both Mr Menzies and Dr Evatt, who drafted the compromiseamendment which resulted in the insertion of the prohibition clause into theConstitution Alteration Bill 1946 (Cth), were known for their precise and eruditeuse of the English language. The amendment could have simply read: 'but not soas to authorize civil conscription', yet they decided to add the qualifier 'any formof' to 'civil conscription' to which the prohibition applies. At the very least, theadverb 'any' (the meaning of which includes 'in any manner or way', 'to anindefinite extent', 'at all', 'in any degree'' 0 3) emphasises the width of the formsof civil conscription to which the prohibition applies. However, Gibbs J, havingconcluded that the adjectival phrase 'any form of' was not intended to extend themeaning of 'civil conscription', limited the meaning of the term by adding that itdid not include a prohibition on the regulation of the manner in which servicesare to be performed. His Honour did so without explaining either the reason forthe presence of the phrase 'any form of' in the context of the prohibition, or whatthis qualifier is supposed to qualify.

In his judgment, Gibbs J defined the phrase 'civil conscription' as denoting 'thecalling up of persons for compulsory service other than military service.' 1° 4 Heargued that the term civil conscription encompassed any compulsion of lawrequiring that physicians should engage in a particular occupation, or performparticular work. 105 However, this term does not extend to the requirement by theCommonwealth that they perform work in a particular way, if that requirement ismerely incidental to, and intends to regulate the manner in which administrativeand financial incidents of their medical practice are carried out, and did notoblige the physicians to perform a medical service.10 6

This narrow reading of the prohibition clause, together with the wide Dixonianinterpretation of incidental powers, has enabled the Commonwealth to exercisequite comprehensive controls over dental and medical professional practice in thecontext of implementing its Medicare program, without apparently infringings 51 (xxiiiA). 107

The High Court followed the same interpretive approach to incidental powersin s51(xxiiiA) in the case of Alexandra Private Geriatric Hospital PtyLtd v Commonwealth.10 8 The Court held that provisions of the National Health

102 lbid 557.103 Webster's New Twentieth Century Dictionary of the English Language (2rd rev ed, 1978) 83.

104 General Practitioners (1980) 145 CLR 532, 555.105 Gibbs J agreed with the majority view in BMA that the effect of the expression 'any form of civil

conscription' is not limited to compulsory service which is performed full-time, or regularly, butis intended to prevent any form of compulsion to perform particular services: ibid 556.

106 Gibbs J determined that the constitutional prohibition applied solely to a compulsory service of amedical or dental kind: ibid 557.

107 McMillan, 'The Constitutional Power of the Commonwealth in Public Health', above n 9, 114.108 (1987) 162 CLR 271.

[Vol 23


Act 1953 (Cth), which created a system of controls over the location, number ofbeds, level of fees, selection of patients, auditing of accounts, and inspection ofapproved private nursing homes, were substantially connected with the subjectmatter (provision of hospital and sickness benefits to residents of those homes)conferred on the Commonwealth under s 5 1(xxiiiA). 10 9

In their joint judgment, Mason ACJ, Wilson, Brennan, Deane and Dawson JJobserved that:

It may be that the degree and nature of the controls imposed on proprietors se-riously affect their freedom to run their business as they wish. It might be ar-gued that those controls are more stringent than are strictly necessary to achievethe objectives of the legislation and in some instances, even the economic vi-ability of a home may be threatened. But it is not for the Court to determine thatargument or to pass [judgment] upon the wisdom or the suitability of the par-ticular scheme that the legislature has chosen to institute, so long as the Court isunable to say that it lacks a sufficient connexion to the head of power."10

The Court's admission in Alexandra that the controls found to be incidental to thehead of power were more stringent than was 'strictly necessary to achieve theobjectives of the legislation and in some instances, even [threatened] the eco-nomic viability of a [nursing] home' suggests that the judges were unwilling toapply either the purposive approach or the proportionality principle of constitu-tional interpretation to limit the scope of incidental powers. I '

In retrospect, it appears that the concerns of the majority in BMA, criticised byGibbs J in General Practitioners, were well-founded. Once restraints imposed bythe Constitution upon the legislative powers of the Commonwealth are attenuatedthrough wide judicial interpretation of incidental powers, it becomes difficult forthe courts to confine these amorphous powers so as to restrain the Common-wealth from going too far in a coercive direction.

This is not to argue that private practitioners who rely on Medicare benefitsshould be free from all regulation and control. Rather, at issue is the balance, thatlay at the core of the s 51 (xxiiiA) amendment, between the values of economicefficiency, and accountability, which inform the regulatory regimes imposed bythe Commonwealth and the values of professional autonomy and ethical obliga-tions that lie at the core of clinical practice.'12

109 Ibid 283-4 (Mason ACJ, Wilson, Brennan, Deane, Dawson JJ).'1O Ibid 283.111 Cf McMillan 'The Constitutional Power of the Commonwealth in Public Health', above n 9,

115.112 An example of such direct interference was the regulation requiring disclosure of most

confidential information about severely impaired psychiatric patients introduced in 1996 underthe Medicare Benefits Schedule Item 319 Amendment: Medicare Benefits Schedule, above n 56.Item 319 made the payment of Medicare benefits for visits to a psychiatrist over and above 50times in a 12 month period to patients diagnosed as suffering from borderline personality disor-der, anorexia, bulimia, or psychiatric injury arising from severe sexual or physical abuse, con-tingent on proof of 'the history of failed psychiatric treatment and a defined level of functionalimpairment': Dr Michael Wooldridge, Minister for Health and Family Services, Media Release,11 December 1996, <www.health.gov.au/archive/mediarel/I 996/mw I 1496.htm>.

1999]


VII PRACTICAL AND ECONOMIC COMPULSION

Since Alexandra involved the provision of benefits for private nursing carehomes rather than medical or dental services, 113 the issue of the bracketed clauseprohibiting civil conscription did not arise. Nonetheless, the High Court statedthat it regarded as 'settled' the notion that although the prohibition contained inthe words 'but not so as to authorize any form of civil conscription' ins 5 1(xxiiiA) applies only to the provision of medical and dental services,1 14 thewords of the prohibition

are not irrelevant to the scope of the other matters described in the paragraph atleast to the extent that whenever medical or dental services are provided pursu-ant to a law with respect to the provision of some other benefit, for example,sickness or hospital benefits must not authorize any form of civil conscriptionof such services. 115

In General Practitioners, Gibbs J mentioned, but did not discuss, the questionof whether practical and economic compulsion could amount to civil conscrip-tion.116 Barwick CJ, however, agreed with Latham CJ's statement in BMA that'civil conscription could result from practical or economic considerations.' 17 Atthe same time, Barwick CJ considered that in the absence of explicit legalcompulsion, the force of circumstances would need to be so strong, in real terms,as to leave 'the individual with no choice but to submit to what the statuterequired, though it did not command it.' 118 Aickin J confirmed that the words'but not so as to authorize any form of civil conscription' were designed toimpose an important limitation on legislative power, and that this limitationextends to practical as well as legal compulsion. 119 His Honour pointed out thatimposition by legislation of economic pressure that is difficult or unreasonable toresist

would be just as effective as legal compulsion, and would, like legal compul-sion, be a form of civil conscription. To regard such practical compulsion asoutside the restriction placed on this legislative power would be to turn whatwas obviously intended as a constitutional prohibition into an empty formula, ahollow mockery of its constitutional purpose.120

113 The plaintiffs in Alexandra, who were private nursing home proprietors, argued that provisionsof the National Health Act 1953 (Cth) in issue were invalid because the Commonwealth Parlia-ment had no legislative power to enact a law with respect to nursing homes. The High Court,however, rejected this argument pointing out that: '[a] single law can possess more than onecharacter and it suffices for constitutional validity if any one or more of those characters fairlyfalls within a head of Commonwealth legislative power': Alexandra (1987) 162 CLR 271, 279.

114 See BMA (1949) 79 CLR 201, 255 (Rich J), 261, 269, 277 (Dixon J), 281-2 (McTieman J),286-7 (Williams J), 250-1 (Latham CJ dissenting).

115 Alexandra (1987) 162 CLR 271, 279. The Court referred to BMA (1949) 79 CLR 201, 286-7(Williams J) and General Practitioners (1980) 145 CLR 532, 549 (Gibbs J).

116 General Practitioners (1980) 145 CLR 532, 554.117 Ibid 538.118 Ibid.119 Ibid 566.120 Ibid.

[Vol 23


Murphy J stated that practical compulsion, as distinct from legal compulsion, isenough to satisfy the concept of 'civil conscription' in s 5 1(xxiiiA), 12 1 whereasMason and Wilson JJ decided to leave this question open. 122 Consequently,although not found to be relevant to the facts of General Practitioners, theconcept of practical and economic compulsion as a form of civil conscription isstill germane to the operation of the constitutional prohibition.

Nevertheless, following General Practitioners, the wider ambit of the power ofthe Commonwealth to regulate the way in which medical and dental services areperformed was relied upon by the Commonwealth Government in 1995, when itenacted amendments to the National Health Act 1953 (Cth) and the HealthInsurance Act 1973 (Cth). 123 The question that needs to be posed is whetherthese initiatives are authorised by the power in s 51 (xxiiiA) of the Common-wealth Constitution.

VIII THE PURCHASER-PROVIDER AGREEMENTS

The enactment of the Health Legislation (Private Insurance Reform) Amend-ment Act 1995 (Cth) 124 enabled the introduction into Australia of what iscommonly referred to as the 'managed care' system of health care. The 'managedcare' system in Australia is built around the concept of 'casemix'.125 In hersecond reading speech, Dr Lawrence, the then Minister for Human Services andHealth, having announced that 'casemix is the most significant Commonwealthhealth financing initiative developed in Australia', went on to explain that:

The term 'casemix' means the types or mix of patients which a hospital treats,but can refer to a scientific approach to the classification of patient care epi-sodes and ideas on how to use those classifications to help make decisionsabout health care.126

Dr Lawrence's definition of 'casemix' involves the regulation of medicalpractice. Moreover, the 'casemix' concept has provided the government andprivate health insurance companies with a tool for reconceptualising the notion of

121 [bid 565 (Murphy J).122 Ibid 564 (Mason J), 572 (Wilson J).123 Health Legislation (Private Insurance Reform) Amendment Act 1995 (Cth).124 The Health Legislation (Private Insurance Reform) Amendment Act 1995 (Cth) amended the

National Health Act 1953 (Cth), which provided for a scheme of contributory health insuranceand the Health Insurance Act 1973 (Cth).

125 The 'casemix' reimbursement system is based on identification and classification of variouspatient diagnoses ('diagnostically related groups') and requires a fixed rate of funding to allother patients with similar diagnoses. It was originally developed by health economists at YaleUniversity in the United States in the 1970s: William Curran, Mark Hall and David Kaye,Health Care Law, Forensic Science, and Public Policy (4

th ed, 1990) 719-20. In Australia, theCommonwealth Department of Health and Family Services has developed a list of AustralianNational Diagnosis Related Groups as the basis for a casemix episodic payment: Health Legis-lation (Private Health Insurance Reform) Amendment Act 1995 (Cth) s 73BD(4)(a)(i). Seegenerally Commonwealth Department of Health and Family Services, Casemix Overview, 16April 1999, <http://www.health.gov.au/hfs/casemix.casehome.htm>.

126 Commonwealth, Parliamentary Debates, House of Representatives, 2 February 1995, 324(Carmen Lawrence, Minister for Human Resources and Health).

1999]


disease from a factor that adversely affects the health and the well-being of anindividual into a commodity to be exploited for financial gain in the medical caremarketplace. Once human ailments come to be regarded as commodities of tradeand commerce, previously non-profit organisations such as health insurancefunds, hospitals and other health care facilities (both public and private) areencouraged to make a profit. In fact, in 1998, the Coalition Government intro-duced amendments to the National Health Act 1953 (Cth), specifically designed'to remove obstacles to for-profit organizations applying for registration as healthfunds as well as making it easier for existing not-for-profit funds to become for-profit funds.' 1 27 Federal legislation which has laid foundations for this structuralshift within the health care system has also affected the nature of the doctor-patient relationship.

The traditional patient-physician relationship, which Latham CJ referred to inBMA,' 28 is based upon the Hippocratic model which consists of three compo-nents - 'the disease, the patient and the physician'.129 The professional relation-ship between the physician and the patient is strictly limited to the individualsconcerned, with the subject matter of that relationship being the disease. Apatient who is attended to by a private physician is considered to be in a con-tractual relationship with him or her.130 In the case of Breen v Williams, Bren-nan CJ noted that:

In the absence of a special contract between a doctor and a patient, the doctorundertakes by the contract between them to advise and treat the patient withreasonable skill and care. The consideration for the undertaking may be either apayment, or promise of payment, of reward or submission by the patient, or anundertaking by the patient to submit, to the treatment proposed.' 31

The concept of 'casemix' is very closely connected to the 'managed care'system of health care, which is based on the principle of maximising profitsthrough the economic efficiency of mass purchasing at a discount. The 'managedcare' model, as presented by Dr Lawrence in the second reading speech, involvesat least three parties to what formerly constituted a patient-physician relation-ship: the private insurance fund which acts as the 'purchaser' of health careservices (referred to as 'products'); the physician and other health care profes-sionals, re-named 'providers of the health care products'; and the patient, 132

127 Bill Digest to the Health Legislation Amendment Bill (No 2) 1997 (Cth).128 (1949) 79 CLR 201, 251.129 Danuta Mendelson, 'Medical Duty of Confidentiality in the Hippocratic Tradition and Jewish

Medical Ethics' (1998) 5 Journal of Law and Medicine 227.130 Sidaway v Governors of Bethlem Royal Hospital [1985] AC 871, 904 (Lord Templeton);

Breen v Williams (1996) 186 CLR 71. See also Danuta Mendelson, 'Historical Evolution andModem Implications of Concepts of Consent to, and Refusal of, Medical Treatment in the Lawof Trespass' (1996) 17 The Journal of Legal Medicine 1.

131 Breen v Williams (1996) 186 CLR 71, 78.132 The term 'patient' derives from Latin patiens (to suffer). In hospitals and day care facilities,

patients are nowadays referred to as 'throughput units', denuded of both humanity and thecapacity to suffer.

[Vol 23


labelled 'consumer', who is the contributor to a private insurance fund. 133 Thus,the Australian 'managed care' model is conceived of as a series of commercialtransactions based upon a pre-determined price for products that the ultimaterecipient - the consumer - has contracted for with the private health insurancefund. By virtue of s 73BD of the National Health Act 1953 (Cth), private healthinsurance funds can enter into purchaser-provider agreements with hospitals andday care facilities that enable them to purchase, in bulk, casemix health productsfor their members. Under the agreements, the respective health insurers makepayments directly to the private hospitals 'in full satisfaction of any amount thatwould otherwise be owed by the patient'. These agreements involve:I the contract between the 'consumer'/patient and the insurance fund for the

purchase of agreed 'health care products' in the form of designated casemixepisodes of hospital treatment; and

2 the purchase of agreed 'health care products', designated casemix episodes ofhospital treatment in bulk from hospitals which are a party to a purchaser-provider agreement.

That agreement involves:I the undertaking by the contracted hospital to provide the specified 'health

care product' to the consumer; and2 the payment by the insurance fund to the hospital for the 'health care product'

to be provided to the consumer. However, the payment will only be madeafter the insurance fund has ascertained whether the contemplated 'health careproduct' falls within the category purchased by the consumer.

In return, the hospitals agree

to accept payment by the organization [the insurance fund] in satisfaction of theamount that would, apart from the agreement, be owed to the hospital or dayhospital facility, in relation to an episode of hospital treatment, by an eligiblecontributor. 1

34

These agreements are independent of and separate from any agreements thatphysicians may enter into with the private insurance funds, such as those unders 73BDA of the National Health Act 1953 (Cth).

This provision allows registered health insurance funds to negotiate agreementswith individual medical practitioners regarding the price payable by the funds forprofessional services rendered by contracted physicians to fund members. Theagreements under s 73BDA(l)(a) and (b), respectively, include the acceptance byindividual medical practitioners of

133 For an assessment of Dr Lawrence's amendments analysed from the patient/consumer point ofview, see Shaun Gath, 'Enhanced Consumer Rights in Private Health Care: Have the "LawrenceAmendments" Delivered?' (1999) 6 Journal ofLaw and Medicine 241.

134 Section 73BD(1 )(b) specifies that 'payments by the organization to the hospital or day facility inrespect of episodes of hospital treatment are to be casemix episodic payments'.

1999]


1 'the payment by the organization [private insurance fund] in satisfaction ofany amount that would, apart from the agreement, be owed to the medicalpractitioner, in relation to a professional service, by an eligible contributor';and

2 the agreement by the fund 'to accept assignments under s 20A(2A) of theHealth Insurance Act 1973 of Medicare benefits payable in respect of theprofessional service.' Under the assignment agreement, patients do not payfees for services rendered by contracted physicians to the physicians, instead,75 per cent of the Medicare benefits are transferred directly to the healthfunds. 135

Section 73BDA(2)(c) of the National Health Act 1953 (Cth), which is to beread together with s 73BDA(5), specifies that under the agreement between thefund and the practitioner, the physician is required to inform the eligible con-tributor at any time before the professional service is rendered, or as soon ascircumstances permit after a professional service is rendered, of any amounts thatshe or he will be liable to pay. By virtue of s 73BDA(2)(d) the agreement mustalso 'require the organization to maintain the medical practitioner's professionalfreedom, within the scope of accepted practice, to identify appropriate treatmentsin the rendering of professional services to which the agreement applies'.

Section 73BDAA of the National Health Act 1953 (Cth) is similar in nature tos 73BDA, but it relates to purchaser-provider agreements between hospitals andphysicians. It provides for hospitals to act as purchasers of professional servicesfrom doctors, with the hospital making payments directly to the practitioner 'infull satisfaction of any amount that would otherwise be owed by the patient'. TheHospital Purchaser Provider Agreement between the hospital and the relevantinsurer under s 73BD may then provide for the payment of medical practitionerfees by the health insurer to the hospital. Like s 73BDA, s 73BDAA specifies thatunder the agreement between the fund and the practitioner, the physician isrequired to inform the eligible contributor at any time before the professionalservice is rendered, or as soon as circumstances permit after a professionalservice is rendered, of any amounts that she or he will be liable to pay. Section73BDAA(I)(d) also states that

the practitioner agreement requires the hospital or day facility to maintain themedical practitioner's professional freedom, within the scope of accepted prac-tice, to identify appropriate treatments in the rendering of professional servicesto which the agreement applies[.]

In her second reading speech, the Minister claimed that contracted physicians'will still be able to receive fee for service'.136 However, the legislation has

135 Health Insurance Act 1973 (Cth) para 69, sch 1.136 Commonwealth, Parliamentary Debates, House of Representatives, 2 February 1995, 325

(Carmen Lawrence, Minister for Human Services and Health). The fees to be negotiated arecalculated on the basis of the casemix payments: Commonwealth, Parliamentary Debates,House of Representatives, 2 February 1995, 324 (Carmen Lawrence, Minister for Human Re-sources and Health).

[Vol 23


effectively introduced an interloper in the form of the health insurance fund intothe very essence of the physician-patient relationship. Under the assignmentagreements provided for by ss 73BDA and 73BDAA, 75 per cent of the Com-monwealth Medicare benefits payable as fees for services rendered by contractedphysicians to patients are directly transferred to the insurance funds or hospitals,not to the physician. Indeed, schedule 8 provides for a system whereby healthinsurers and hospitals can become 'approved billing agents', thus entitling themto take an assignment of the Medicare benefit that the patient would haveotherwise received in respect of a professional medical service provided to thepatient by a practitioner. Thus, health insurers and hospitals are responsible forpayment of the full amount of the practitioner's fees as determined in accordancewith an agreement between them and the practitioner. Consequently, the physi-cian who enters such an agreement is a party to a contractual relationship notwith the patient but with the insurance fund or hospital. It is arguable, therefore,that the purchaser-provider agreements under the National Health Act 1953(Cth) are incompatible with the 'fee for service' model of private practice.

The fact that under the managed care system, the contracted physician has acontractual relationship solely with the insurance fund or the hospital rather thanwith the patient, 137 is emphasised by the requirement that physicians inform thepatients about the costs of services to be rendered before undertaking treat-ment. 138 This requirement turns traditional clinical medical practice on its head.Ethical tradition going back to the Hippocratic Corpus139 enjoined doctors not tocharge fees before the cure. The reasons were both medical and ethical. It wasalready well-known in ancient Greece that the patient's psychological state isvital to the outcome of the therapy and, as the author of Precepts140 pointed out,worry over a fee may reduce the patient's chances of successfully undergoing thetreatment. More importantly, the insurance company requires notification beforeany treatment is undertaken in order to enable it to ascertain whether the patienthas insurance cover for it, and if so, at what level. This concern is not alleviatedby s 73BDAA(l)(d), which can be read in two ways. The first interpretationsuggests that the legislation requires hospitals and day facilities to do nothing thatwould prevent contracted doctors from sorting out and classifying 'appropriate

137 In relation to non-contracted medical practitioners, patients with health insurance may claim 75per cent of the medical benefits schedule fee from Medicare and the remaining 25 per cent fromthe fund. If the doctor's charge exceeds the scheduled Medicare fee, the patients are expected topay any such additional amounts from their own pockets: Department of Human Resources,Your Guide to the Commonwealth Governments Private Health Insurance Reforms (1995) 5.

138 See Health Insurance Act 1973 (Cth) s 20A(2C)(e).139 Corpus Hippocraticum refers to the collection of about 60 medical treatises, a set of aphorisms,

and writings on ethics and professional etiquette included in the Oath, the Canon, On Decorumand the Precepts. Some of the treatises and aphorisms were written by Hippocrates himself(born c 460 BCE). However, the Corpus as a whole is the work of a large number of medicalwriters of ancient Greece compiled between 430 and 300 BCE, with later interpolations. TheCorpus can be found in W H S Jones (trans), Hippocrates (4 vols, 1923-31), while selectedworks within it are available from the internet at <http://classics.mit.edu/cgi-bin/search.cgi>.

140 Precepts, [III]-[XIII], in W H S Jones (trans), Hippocrates (1923) vol 1, 317-29. This treatise onpractical medical ethics was probably composed in the first century BCE.

1999]


treatments' in the performance of their professional duties. As such, the provisionamounts to no more than a commendable but ineffectual 'motherhood' statement.

Alternatively, the provision can be construed as prohibiting hospitals and dayfacilities from pressuring contracted doctors to conceal from patients appropriatebut expensive services - such practice would amount to both negligence andmisleading and deceptive conduct in breach of s 52 of the Trade Practices Act1974 (Cth) ('TPA') on the part of these organisations. 141 In either case, despitethe reference to 'professional freedom', there is no indication in the language ofthis provision that hospitals and day facilities are required to allow the identified'appropriate treatment' to actually be carried out. This suggests that, in the eventof inadequate insurance or no insurance for a particular medical condition,having identified the 'appropriate treatments', the patient and the medicalattendant have to make health care choices not on the basis of what is therapeuti-cally the most efficacious and, often, the least toxic therapy for the relevantmedical condition, disease or illness, but on the basis of what, in the finalanalysis, the insurance fund or the contracted hospital considers that the patientcan afford. If the legislators were earnest about safeguarding the professionalautonomy of medical practitioners and the best interests of patients, the provisionwould have required insurance funds and contracted hospitals to actually providereasonable treatment once it is identified by doctors as 'appropriate' in thecircumstances. Reference to treatment having to be reasonable in the circum-stances would acknowledge the fact that the choice of treatment is to a certainextent predicated on its financial ramifications. In most cases, reasonabletreatment will be treatment that can be justified in terms of efficacy, toxicity andcosts. However, the development of clinical medicine will be stifled if no'appropriate' treatments for a given condition are allowed by the private sector onthe grounds that they are too experimental and too costly, even if the proposedtherapy is the most reasonable one for the particular patient.

Furthermore, by prohibiting contracted medical practitioners from carrying onprivate practice in what was formerly the normal way, that is, by billing thepatient after the service has been rendered, the new law compels them to carry onpractice in a different way; it imposes upon relevant medical practitioners ashaman-like obligation to diagnose and predict the course of their patients'condition, disease or illness before undertaking treatment. From a legal point ofview, the requirement presupposes that the decision as to whether and what kindof treatment should be undertaken or continued will not be made by the twoparties to the doctor-patient relationship, but rather treatment advice should bedetermined in accordance with what the patient-contributor can afford under theparticular insurance policy. This requirement goes far beyond the regulation of

141 Contracted doctors who conceal from patients appropriate but expensive services wouldprobably be in breach of s 74 of the TPA, which requires that the provision of services be carriedout with skill.

[Vol 23


merely administrative or financial aspects of medical private practice, 4 2 andstrikes at the core of the therapeutic relationship. However, if the High Courtfollows its reasoning in Alexandra, the requirement of billing the patient beforethe service is rendered may be considered as incidental, and consequently withinthe power of Federal Parliament.

The new managed care model of medical practice, based on a tripartite rela-tionship between the contracted physician, insurance fund and patient-contributoris further entrenched by the 1995 amendments to the National Health Act 1953(Cth), which nullify the principle of the patient's privilege to confidentiality ofmedical information. It has been recognised by law that the medical practitioner'sethical duty of confidentiality is pivotal to the patient-doctor relationship. 43 Theinterest in maintaining professional duties of medical confidence, originallyembodied in the Hippocratic Oath,144 is today regarded as an important publicinterest based upon the principle that it is in the interest of public health toencourage patients to truthfully disclose personal information without fear ofembarrassment, stigma or incrimination that such disclosure may otherwisegenerate.145 The professional duty of confidentiality can be enforced through the

142 In General Practitioners (1980) 145 CLR 532, 546, Gibbs J acknowledged that the FederalParliament has no general power to regulate private medical practice, in the sense of the physi-cian-patient relationship. The Commonwealth's powers are limited to regulation of those finan-cial and administrative incidents of practice that pertain to provision of Commonwealth medicaland pharmaceutical benefits; for instance, having to write prescriptions on appropriate forms,and sign undertakings promising compliance with the provisions of the Health Insurance Act1973 (Cth) and of the regulations made thereunder.

143 Within the doctor-patient relationship, the patient has an obligation to disclose all factors whichmay be relevant to the diagnosis, prognosis and treatment of his or her complaint or condition,and the medical practitioner has a concomitant responsibility to exercise professional skill.According to Dawson and Toohey JJ in Breen v Williams (1996) 186 CLR 71, 93:

A doctor is bound to exercise reasonable skill and care in treating and advising a patient, butin doing so is acting, not as a representative of the patient, but simply in the exercise of his orher professional responsibilities. No doubt the patient places trust and confidence in the doc-tor, but it is not because the doctor acts on behalf of the patient; it is because the patient isentitled to expect the observance of professional standards by the doctor in matters of treat-ment and advice and is afforded remedies in contract and tort if those standards are not ob-served and the patient suffers damage.

144 The penultimate clause of the Hippocratic Oath imposes upon each medical practitioner thefollowing injunction: 'What I see or hear in the course of the treatment or even outside of thetreatment in regard to the life of men, which on no account one must spread abroad, I will keepto myself holding such things shameful to be spoken about': Ludwig Edelstein, Ancient Medi-cine (1967) 6.

145 Rose J explained the public interest principle of medical confidentiality in X v Y [1988] 2 All ER648, 653 in the following way:

In the long run preservation of confidentiality is the only way of securing public health. Oth-erwise doctors will be discredited as a source of education, for future individual patients 'willnot come forward if doctors are going to squeal on them'. Consequently, confidentiality is vi-tal to secure public as well as private health, for unless those infected come forward they can-not be counselled and self-treatment does not provide the best care.

In this case, Rose J granted a permanent injunction restraining a reporter of a national newspa-per from publishing any information which would disclose the identity of two medical practitio-ners who were treated in hospital for AIDS. The reporter obtained the confidential informationfrom an employee of the hospital. For further discussion of the medical duty of confidentiality,see: Danuta Mendelson, "'Mr Cruel" and the Medical Duty of Confidentiality' (1993) I Journalof Law and Medicine 120; Alister Abadee, 'The Medical Duty of Confidentiality and Prospec-tive Duty of Disclosure: Can They Co-Exist?' (1995) 3 Journal of Law and Medicine 75.

19991


law of equity,146 the common law, 147 professional codes of ethics 148 and statutoryprovisions in a number of Australian States and Territories. Typically, thesestatutes preclude health service providers from giving any identifying informa-tion, where this information has been acquired by reason of such a person being apublic hospital staff member, if the patient could be identified in any way fromthe information. 149 Yet, under s 23EA(3A)(a) of the Health Insurance Act 1973(Cth), a declared private hospital must provide data specified in the HospitalCasemix Protocol in a patient identifiable state, to a registered private healthinsurance organisation which has an applicable agreement with the patient. Therequired information includes clinical notes, because under s 73BD of theNational Health Act 1953 (Cth), the relevant hospitals are required to provide'all reasonable assistance' to the health insurance funds to enable the funds toverify:

(i) essential variables for accurate casemix assignment; and(ii) the payability of amounts by the organization under the agreement; and(iii) the payability of other amounts by the organization relating to profes-

sional services rendered in connection with the hospital treatment.

However, as the then Minister for Human Services and Health pointed out inthe second reading speech, a condition of agreements between the health fundsand hospitals is the requirement that they 'submit a single account covering allservice and facility components and provide data for modelling, evaluation andresearch purposes'. 150 Consequently, under s 73AB(4), there is a two-step'information relay'. First, a hospital or a day hospital facility under a hospitalpurchaser-provider agreement provides information to the relevant registeredhealth insurance fund about each patient-contributor who was discharged by thefacility during each period of one calendar month. Then, the health insuranceorganisations supply this information in a patient de-identified state to the Health

146 Stephens v Avery [1988] 2 All ER 477, 482 (Lord Browne-Wilkinson V-C). In Breen v Williams(1996) 186 CLR 71, 107-8 Gaudron and McHugh JJ observed that:

Patients ... invariably confide intimate personal details about themselves to their doctors. Insome circumstances, the dependency of the patient or the provision of confidential informa-tion may make the relationship between a doctor and patient fiduciary in nature. But that doesnot mean that their relationship would be fiduciary for all purposes. As Mason J pointed out inHospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41, 98 a personmay stand in a fiduciary relationship to another for one purpose but not for others.

147 Furniss v Fitchett [1958] NZLR 396; Wv Egdell [199012 WLR 471, 488-9 (Bingham U).148 Medical boards throughout Australia have tended to interpret breach of confidentiality strictly,

and regard it as misconduct in a professional respect: S Barnes, 'Breach of Confidentiality: ACase Study' (1989) 1 Australian Medicine 337.

149 See McGarvie J in PQ vAustralian Red Cross Society [1992] 1 VR 19 referring to s 141(2) ofthe Health Services Act 1988 (Vic). There are similar legislative requirements of confidentialityin: Mental Health (General Amendment) Act 1990 (Vic) s 25; Health Administration Act 1982(NSW) s 22; Health Services Act 1991 (Qld) s 63(1): Health Commission Act 1976 (SA) s 64;Health Services (Conciliation and Review) Act 1995 (WA) s 71.

150 Commonwealth, Parliamentary Debates, House of Representatives, 2 February 1995, 323(Carmen Lawrence, Minister for Human Services and Health).

[Vol 23


Department and the Private Health Insurance Administrative Council. 151 Al-though not expressly stated, contracted hospitals or hospital day facilities, if theyare going to be paid, must provide patient-identified information about thecondition and treatment of each patient-contributor to his or her health insurancefund. It should be noted that clinical information about the privately insuredpatients can be disclosed by the relevant hospitals to private insurance fundsirrespective of whether the treating physicians are contracted to the funds,152 andwithout having to inform, let alone obtain consent to disclosure from, patients-contributors. 153 It is to provide immunity from action for breach of theprofessional duty of confidentiality that s 73G of the National Health Act 1953(Cth) was enacted. It provides that

(2) No action (whether criminal or civil) lies against a hospital or a day hospitalfacility, or a person acting on behalf of a hospital or a day hospital facility,for a breach of confidence, or breach of similar obligation, in relation to thedisclosure of information if the disclosure is reasonably necessary in con-nection with:(a) making a payment under an applicable benefits arrangement or assess-

ing whether or not to make such payment; or(b) any other matter relating to the operation of an applicable benefits ar-

rangement.

(3) This section has effect despite:(a) any law (whether written or unwritten) of the Commonwealth, a State or

a Territory; and(b) any contract, arrangement or understanding;to the contrary.

The amendments might have been enacted under the ubiquitous incidentalpower under s 51 (xxxix) and applied to the scheme providing for Commonwealthbenefits under s 51(xxiiiA). Moreover, in the case of New South Wales v Com-monwealth, 154 the majority of the High Court of Australia held that the powerwith respect to insurance under s 51(xiv) gave the Commonwealth power to

control and regulate the relationship between registered health benefits organisa-

151 Health Insurance Act 1973 (Cth) s 23EA(3A)(b). The Private Health Insurance AdministrativeCouncil was established as an independent statutory body by pt VIAA of the National HealthAct 1953 (Cth). Under the National Health Act 1953 (Cth) s 73ABB(5), the information pro-vided by registered health insurance organisations is exempted from the operation of the PrivacyAct 1988 (Cth) on the grounds that it is obtained 'only for the purposes of modelling, evaluationand research by the department and the Council.'

152 National Health Act 1953 (Cth) s 73BDA(2) requires contracted medical practitioners toforward to the organisation all accounts for professional services rendered to the pa-tient-contributor under the agreement, and to specify in each such account any amounts that aneligible contributor will be liable to pay to the medical practitioner. The best way to verify theaccuracy of these accounts is to check them against the practitioner's clinical notes. Conse-quently, contracted medical practitioners, in order to be paid, would need to provide patient-identified information to their purchaser-provider organisation.

153 Agreements between contributors and insurance funds contain information about the disclosure,however since these forms are standard contracts of adhesion, patients-contributors have nopower to refuse consent to such disclosure.

154(1983) 151 CLR 302.

1999l

340 Melbourne University Law Review [Vol 23

tions and their contributors. Thus, ss 5 l(xxxix) and 5 l(xiv) would have given theCommonwealth the power to comprehensively nullify the patient-contributor'srights to medical confidentiality vis-A-vis their private benefit organisations unders 73G of the National Health Act 1953 (Cth). Nevertheless, s 73G, when readtogether with ss 73BDA and 73BDAA, strengthens the argument that theseamendments have the effect of substantially interfering with the therapeuticpatient-doctor relationship.155

IX AUSTRALIAN COMPETITION AND CONSUMER COMMISSION

The notions of a global marketplace and the associated ideology of economicrationalism have as their chief tenet financial competitiveness premised onfreedom of market forces, which are supposed to minimise the cost of providingmedical care. The idea that governments must ensure through regulation thatcompetition extends to all persons engaged in any activity which involves theprovision of services reached its apotheosis in the work of the National Competi-tion Policy Review Committee, chaired by Professor Hilmer. The Committee wasestablished in 1992, with the support of the Council of Australian Governments.Following the completion of the Hilmer Committee's report, 156 the TPA wasamended by the enactment of the Competition Policy Reform Act 1995 (Cth),which became Part IV of the TPA. Under the federal distribution of powers, thetwo most relevant Commonwealth heads of power, namely ss 5 1(i) and 51 (xx),did not expressly extend to regulation of the conduct of unincorporated busi-nesses engaged in intra-state trade. This possible constitutional limitation,contained in s 51 (i),' 5 7 was overcome by three intergovernmental agreements: theConduct Code Agreement, the Competition Principles Agreement, and theAgreement to Implement National Competition Policy. The Competition CodeAgreement was inserted as a schedule into the TPA. 158 The Competition Codenow contains the rules set out in Part IV of the TPA. However, they refer to'persons' rather than 'corporations'. Under the Competition Principles Agree-ment, States and Territories have enacted identical complementary legislation, 159

155 For a further discussion of this issue see Danuta Mendelson, 'Health Legislation (PrivateInsurance Reform) Amendment Act 1995 (Cth) and the Question of Medical Confidentiality:The Money or the Ethics?' (1996) 4 Journal of Law and Medicine 107.

156 Commonwealth of Australia, National Competition Policy Review (1993).157 Under s 51(i) of the Commonwealth Constitution, the Commonwealth Parliament has the power

to make laws with respect to '[t]rade and commerce with other countries, and among the States'.158 Section 4(1) specifies that 'Conduct Code Agreement' means the Conduct Code Agreement

made on 11 April 1995 between the Commonwealth, New South Wales, Victoria, Queensland,Western Australia, South Australia, Tasmania, the Australian Capital Territory and the NorthernTerritory, being that agreement as in force from time to time. 'Competition Principles Agree-ment' means the Competition Principles Agreement made on 11 April 1995 between the Com-monwealth, New South Wales, Victoria, Queensland, Western Australia, South Australia, Tas-mania, the Australian Capital Territory and the Northern Territory, being that agreement as inforce from time to time.

159 Competition Policy Reform (Australian Capital Territory) Act 1996 (ACT) s 4; Competition

Policy Reform (Northern Territory) Act 1996 (NT) s 4; Competition Policy Reform (New SouthWales) Act 1995 (NSW) s 4; Competition Policy Reform (Queensland) Act 1996 (QId) s 4;


whereby each is responsible for its own jurisdiction, while still enabling theCompetition Code to be operative throughout all Australian jurisdictions. 160

Conduct prohibited under Part IV of the TPA includes, inter alia, exclusivedealing.' 61 The offence of exclusive dealing is broadly defined under the Act asinvolving one person who trades with or provides services to another imposingrestrictions on the other's freedom to choose with whom, or in what, to deal. 162

While it is possible to obtain exemption in relation to general conduct involvingexclusive dealing, a form of exclusive dealing known as 'third line forcing' isprohibited outright by the Act.' 63 The absolute liability offence of 'third lineforcing' involves the supply of services on condition that the purchaser acquiregoods or services from a particular third party or a refusal to supply because thepurchaser will not agree to that condition. 164 Pecuniary penalties for a breach ofPart IV of the TPA provide for up to $10 million for companies and $500,000 forindividuals. 165 Apart from statutory penalties, ss 82 and 87 of the TPA provide forrecovery of damages by any person who has suffered (or, in the case of s 87, islikely to suffer) loss or damage 'by conduct of another person' which contravenesPart IV, (or engaged in conduct that is 'unconscionable within the meaning of theunwritten law, from time to time, of the States and Territories' contrary tos 51AA).

166

In the medical context, the proscription of exclusive dealing and the absoluteprohibition of third line forcing means that a private physician commits anoffence under the Act if he or she carries on practice in accordance with the

Competition Policy Reform (South Australia) Act 1996 (SA) s 4; Competition Policy Reform(Tasmania) Act 1996 (Tas) s 4; Competition Policy Reform (Victoria) Act 1995 (Vic) s 4; Com-petition Policy Reform (Western Australia) Act 1996 (WA) s 4. Amendments to the law must bemade collectively. The application of competitive conduct rules to all businesses came intoeffect on 21 July 1996.

160 TPA s 5 1 AAA (concurrent operation of State and Territory laws): 'It is the Parliament's intentionthat a law of a State or Territory should be able to operate concurrently with this Part unless thelaw is directly inconsistent with this Part [Part IV].'

161 TPA s 47. Other prohibitions include: anti-competitive agreements and exclusionary provisions,including primary or secondary boycotts (ss 45-45D); misuse of market power (s 46); resaleprice maintenance (ss 48, 96-100); and mergers which would have the effect, or likely effect, ofsubstantially lessening competition in a substantial market (ss 50, 50A).

162 The term 'services' is defined in s 4(l) of the TPA as includingany ... benefits, privileges or facilities that are, or are to be, provided, granted or conferred intrade or commerce ... that are, or are to be, provided, granted or conferred under:(a) a contract for or in relation to:

(i) the performance of work (including work of a professional nature), ...but does not include rights or benefits being the supply of goods or the performance of workunder a contract of service.

See ACCC v Health Partners Inc (1997) 151 ALR 662.163 TPA ss 93-93A.164 Section 4C(b) of the TPA provides that: 'In this Act, unless the contrary intention appears ... (b)

a reference to the supply ... of ... services includes a reference to agreeing to supply ... serv-ices.' Refusal to do an act as defined in s 4(2)(c) of the TPA, includes '(i) refraining (otherwisethan inadvertently) from doing that act; or (ii) making it known that that act will not be done'.

165 TPA s 76. See also ACCC v Cromford Pty Ltd [1998] ATPR 141-618.166 Marks v GIO Australia Holdings Limited [19981 HCA 69 (Unreported, McHugh, Hayne and

Callinan JJ, II November 1998).

1999]


principles of medical ethics. The doctor's primary ethical obligation is to furtherthe well-being of patients, as expressed in the Latin maxim primum (or saltem)non nocere (above all, at least do no harm), 167 which encapsulates the funda-mental principle of the Hippocratic tradition in medicine. 168 The more preciseoriginal Greek formulation of the Latin maxim 'help, or at least not to doharm', 69 focuses on the doctor's engagement to the provision of benefit, ratherthan to the mere avoidance of harm. An anaesthetist who refuses to workalongside a non-specialist anaesthetist will commit the offence of 'exclusivedealing' under s 47 of the Act, even though the conduct of the non-qualified'competitor' may endanger the life of the customer-patient and, in case of injury,lead to an action for negligent breach of duty of care. 170 A country generalpractitioner who directs a drug-addicted patient to obtain methadone from thesole accredited pharmacy in the town commits an offence of third line forcing.Likewise, a private non-contracted medical specialist who is accredited with asingle private facility commits an offence of third line forcing each time he or sheindicates that the patient enters that facility as a condition of continued personaltreatment. This predicament applies as much to non-contracted cardiologists whoadmit patients suffering from cardiac arrest to a private hospital with which theyare accredited, as to psychiatrists, neurologists, and surgeons. It does not,however, apply to medical practitioners who have entered the ss 73BDA and73BDAA purchaser-provider agreements with insurance funds and hospitals.This is because the anti-competitive provisions of Part IV of the TPA do notapply to 'vertically integrated' commercial entities, and the system of purchaser-provider agreements provides for such 'vertical' integration. '7 '

Another absolute offence under Part IV of the TPA involves s 48, which pro-hibits corporations or other persons from engaging in the practice of resale pricemaintenance. In 1998, the Chairman of the Australian Competition and Con-sumer Commission ('ACCC'), Professor Allan Fels, stated that 'doctors whoshare facilities and administrative staff, but otherwise remain in independentpractices' must not 'fix prices in co-operation with other associates'. 72 He alsodisclosed that the ACCC was investigating claims - including a complaintforwarded to the Commission by Dr Wooldrige, the Federal Minister for Health

167 The Latin version probably comes from Claudius Galen, c 130-c 200 AD, a Greek physician.168 Ruth Faden and Tom Beauchamp, A History and Theory of Informed Consent (1986) 10.169 Edelstein, above n 144, 14, citing Epidemiae I, [XI], which can be found in Jones (trans), above

n 139, vol 1, 164, as well as from the intemet at <http://classics.mit.edu/Hippocrates/epidemics. 1.i.html>.

170 This example was provided by Dr Ray Cook in the discussion that followed Allan Fels,'Competition in Health: Two Years On' in Australian Medical Association, Competition inHealth (1998) 67, 76. In Breen v Williams (1996) 186 CLR 71, 97 Dawson and Toohey JJ de-fined the legal obligations of medical practitioners in the following way: 'It is indeed the doc-tor's duty to act in the best interests of the patient - if by that is meant no more than that thedoctor must exercise reasonable care and skill in the treatment and advice of the patient'.

171 By virtue of s 47(12) of the TPA, s 47(l) 'does not apply with respect to any conduct engaged inby a body corporate by way of restricting dealings by another body corporate if those bodiescorporate are related to each other.'

172 Allan Fels, 'Competition in Health', above n 170, 71.

[Vol 23


and Aged Care - that some general practitioners have 'colluded to cease bulk-billing'. Professor Fels commented that 'if true, this would be in breach of theprice-fixing provisions'. 173 At the same time, he emphasised that associateshipmedical practices which collusively decide to bulk-bill would not be investi-gated.' 74 These statements may be interpreted as an effective pressure, if not anactual coercion, upon medical practitioners to stay within the bulk-billing pricemaintenance scheme devised by the Federal Government.

As noted above, the central area of the power granted to the Commonwealthfollowing the 1946 referendum related to the provision of medical and dentalservices. The States and Territories (unless the Commonwealth Parliamentexercises its powers under s 122 of the Commonwealth Constitution) havetraditionally exercised control over the qualifications of medical practitioners, aswell as the manner and conduct of their private practice. The anti-competitiveconduct provisions in Part IV and schedule of the TPA regulate the actual mannerin which private medical practitioners carry out their professional duties ratherthan the financial and administrative incidents of private practice related to theMedicare benefits. Since the Competition Code that governs the application ofthe schedule within their jurisdictions is a law enacted by the Parliaments of theStates and Territories, the arrangement seems to be, prima facie, constitutionallyvalid. Yet the schedule, with its punitive regime of fines, when read together withthe amendments to the National Health Act 1953 (Cth), can be regarded asleaving individual private medical practitioners with no choice but to submit tothe managed care scheme in the form of provider-purchaser agreements, eventhough the Commonwealth Act does not actually command it.175 This kind ofindirect economic pressure imposed by the legislation might come within thedefinition of 'civil conscription' prohibited by s 51(xxiiiA) of the CommonwealthConstitution, as defined by Latham CJ in BMA176 and reaffirmed by Barwick CJ,Murphy and Aickin JJ in General Practitioners. 177 It is arguable that becauses51(xxiiiA) was enacted in 1946, the prohibition against civil conscriptionshould apply only to benefits and services enumerated under that paragraph. 178

However, in General Practitioners, where the provisions under challenge wereenacted primarily under the insurance power, s 51(xiv), the Court did not dismissthe issue on the basis that the Commonwealth could thus regulate private practiceof medical practitioners without reference to the civil conscription limitation, butfound instead that the provisions did not infringe the constitutional limitation.

The question that must be answered by the High Court of Australia is whetherit is legally valid for the States and the Commonwealth to sterilise a constitutionalguarantee by indirect legislative means. Part IV of the TPA arrangement between

173 Ibid 69.174 Ibid 76.175 The constitutional prohibition against civil conscription does not stop the States from com-

manding that all doctors enter provider-purchaser agreements.176 (1949) 79 CLR 201, 249, 253.177 (1980) 145 CLR 532, 538 (Barwick CJ), 565 (Murphy J), 565 (Aickin J).178 McMillan, 'The Constitutional Power of the Commonwealth in Public Health', above n 9, 120.

1999]


the States and the Commonwealth, to paraphrase Felix Frankfurter's well-knownstatement, has effectuated profound alterations to the Commonwealth Constitu-tion, a right which our democracy, through the process of referenda, has reposedin the people. 179 In Georgiadis v Australian & Overseas TelecommunicationsCorporation, Mason CJ, Deane and Gaudron JJ observed that:

It is often said in relation to constitutional guarantees and prohibitions that 'youcannot do indirectly what you are forbidden to do directly' ... That maxim is, infact, an important guide to construction, indicating that guarantees and prohibi-tions are concerned with substance not form.180

It is arguable that the High Court's interpretation of s 51 (xxiiiA) in GeneralPractitioners does not support all aspects of the subsequent legislation discussedin this article. Despite changes in the community's Weltanschauung, and theinfluence of the ideology of economic rationalism, the civic values affirmed bythe people of Australia in the 1946 referendum, which imposed limitations on theFederal Parliament with regard to the guarantee against 'civil conscription' ofdoctors and dentists, are still pertinent today. If the Constitution is to be amendedby removal of the guarantee, then this should be done not through complexcovert arrangements, but by putting the question openly to the people in areferendum.

179 Felix Frankfurter, 'Some Reflections on the Reading of Statutes' (1947) 47 Columbia Law

Review 527, 533.180 Georgiadis v Australian & Overseas Telecommunications Corporation (1994) 179 CLR 297,

305.

[Vol 23

(,1 2 1/,1( - danuta mendelson

Documents