The Abbott government’s controversial attempt to outsource claims processing and payments for more than $29 billion of benefits for Medicare, the Pharmaceutical Benefits Scheme and the Department of Veterans’ Affairs could be parked until at least the next federal Budget.

Looming big ticket technology refreshes at the Department of Human Services and the creation of a new government-wide Office of Digital Transformation within the Communications portfolio are understood to be key factors acting as a handbrake on the selection of potential providers by the Department of Health, which conspicuously called expressions of interest in August 2014.

The apparent stalling of the outsourcing push comes as the Labor Opposition and the Community and Public Sector Union (CPSU) escalate their campaign to thwart the move, warning that it will cost thousands of jobs and potentially jeopardise privacy by sending highly sensitive medical information into the hands of global outsourcing companies.

Shadow Human Services Minister, Senator Doug Cameron on Monday accused the Coalition of pursuing a “purely ideological” stand on the proposed outsourcing, saying it demonstrated an “absolute determination to privatise a key element of Medicare”

“It shows that the Abbott Government isn’t listening, cares less, learns nothing and is hell-bent on privatisation and the destruction of Medicare,” Senator Cameron said.

Senator Cameron was backed by CPSU National Secretary Nadine Flood, who said that “most Australians would be appalled to learn that the Government is seriously considering giving foreign multinational companies access to their sensitive personal medical and social security information.”

“With concern about data fraud and identity theft on the rise, why risk handing over so much sensitive personal data to multi-national companies? There is widespread community support for Medicare and widespread anger about the Abbott Government’s relentless attacks on it.”

The CPSU similarly fears that thousands of jobs, particularly in regional Australia, are under threat and Ms Flood said the government needed “to come clean on how many jobs are threatened by their move.”

But just how much progress the great outsourcing push has made remains contestable.

A key issue believed to have been flagged by parts of industry to the government and the bureaucracy is that the piecemeal outsourcing of smaller individual payments processing deals will ultimately be much less efficient and far more expensive than setting up a core base of commercially procured payments processing capacity across the federal government.

Although the $29 billion in Medicare payments volume appears outwardly large, it is dwarfed by DHS’ total payments volume 2012-2013 of $149.4 billion.

Treasurer Joe Hockey last year flagged that transactional systems at both Centrelink and the Australian Taxation Office were in need of replacement at a potential cost of “billions”.

In the event that those transaction systems go to a refresh, along with the core software systems that sit on top of them, a logical move would be to migrate payments switching and processing to commercial providers as part of the wider upgrade.

Complicating that equation is to what extent saving can be made for claims processing undertaken by people rather than machines.

The Department of Finance in September 2013 put into train a review of the federal Governments Enterprise Resource Planning (ERP) software costs, a mechanism that is widely anticipated to recommend changes to how the big systems are procured, especially in terms of dealing with big suppliers like SAP and Oracle.

Both SAP and Oracle have been named in reports as contenders for the Medicare payments outsourcing deal alongside local players like Eftpos, Telstra and Australia Post.

At the same time, SAP is widely regarded as the most likely pick for a core overhaul at Centrelink, especially after the Commonwealth Bank of Australia’s hugely successful migration to a ‘real-time’ new core banking system over the past five years using an SAP back-end.

Although banks with the scale of the CBA still retain their own processing capacity, local institutions (including CBA) have significantly ramped-up investment and modernisation efforts in their jointly owned payments services providers like Eftpos and BPAY under the firm encouragement of payments regulator the Reserve Bank of Australia.

At the same time, there appears to be waning interest in giving Australia Post a mandate to collect government payments and claims processing work after Communications Minister Malcolm Turnbull in January firmly signalled that the MyGov digital identity credential   which initially grew out of Centrelink – was the strongly preferred contender for a set of online keys to for Australians to access almost all government services online.

One problem for Post snaring the Medicare deal is that the government would essentially be shifting work from one state owned organisation to another at substantial cost when Post’s future prospects look highly challenged at best.

Conversely, financial institutions and other commercial users of secure online transactions in Australia have a huge interest in the creation of a new, uniform digital identity credential because they could potentially also use it to help bulletproof their own systems from fraud.

In late 2006 banks were already pushing hard to get access to the subsequently junked Human Services Access Card as a smartcard-based identity verification instrument. Financial services sources Government News this week canvassed were enthusiastic about secure, government minted credentials being made available to private industry.

An obvious benefit to mutual customers of banks and welfare agencies is that they could be able to manage affairs online in one secure session rather than jumping between sites using multiple credentials.

Some state government agencies are also keen to decouple their own photo identity instruments, particularly drivers licenses, from wider uses such as being scanned to gain entry to pubs and clubs.

A chief concern is that the harvesting and retention of such a large amount of personal information could provide a potential vector for identity fraud.

The absence of a photo or smartcard chip on the present Medicare card has seen it repeatedly cited by law enforcement officials as an easily faked “breeder document” that can be used by identity crooks as a base from which to obtain other identity documents.

Further announcements on the full structure and remit of the Office of Digital Transformation are expected in coming weeks.

Watch this space.

(Government News has sought comment from the Department of Health and will update this story when it is received.)