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Why isn’t the Medicare rebate freeze a major issue?

By Ken Wolff

Although the former Abbott government dropped its $5 co-payment for Medicare it retained and extended a freeze on Medicare rebates that has the potential to introduce a co-payment by stealth.

Wayne Swan in his last budget in 2013 changed the timing of the annual indexation of Medicare rebates from 1 November to 1 July — effectively a freeze from November 2013 to 30 June 2014. In his first budget Hockey extended that to 2016 and then in December 2014 it was extended again to 30 June 2018 (also including some other health services and specialists from 1 July 2015), potentially saving the government between $1.3 billion and $2 billion. This basically means that the Medicare rebate has not increased since the November indexation in 2012 although the costs in medical practices obviously continue to rise.

The rebate for a GP visit for a standard (classification B) consultation remains at $37.05. This applies to patients who are not bulk-billed and is the fee the doctor receives for bulk-billed patients. So as medical practice costs will have gone up since November 2012, and will again by 2018, medical practices are under pressure to increase their consultation fees but the doctor or the patient will still receive that $37, leaving larger out-of-pocket expenses for the patient and a potential increase in the difference between costs and income for the doctor. It was estimated that this could cost the average fulltime GP $9600 in 2015 rising to $29,500 by 2018.

Research reported in the Medical Journal of Australia in 2015 suggests that the average difference in patient cost by 2018 (assuming medical practice costs rise at the inflation rate) would require a co-payment of slightly more than $8 from each bulk-billed patient, higher than what was proposed by the original $5 co-payment.

Already in 2013, the average out-of-pocket cost across all doctors was $52.06, to see a GP was $30.34 and for specialist services up to $227.68 for obstetrics: those costs for non-bulk-billed patients will have increased and will obviously increase significantly more by 2018 if the freeze continues.

While doctors’ income from Medicare is frozen, other costs for running a medical practice continue to rise: wages for receptionists and nurses, rent, medical equipment, cleaning, electricity, computers, insurance and so on.

The potential impact of these changes was spelled out by Associate Professor Brian Owler, President of the Australian Medical Association (AMA):

If the rebates don’t rise those costs have to be passed on in out-of-pocket expenses — we will see less bulk-billing, and there is the possibility of seeing a co-payment by stealth as has been alluded to by some.

I think there is a real issue for private health insurers, they’re going to have to pass on higher private health insurance premiums to people, or, there is a real chance that out-of-pocket expenses for specialist costs are going to rise significantly.

The Doctor’s bag site in August 2015 listed five reasons why the freeze is bad policy:

  1. Many practices will stop bulkbilling. … As a result fewer people will visit the doctor in the early stages of a disease. This will often make treatment later on more difficult, more stressful and more expensive.
  2. The policy disproportionately affects disadvantaged people who cannot afford a co-payment.
  3. The freeze undermines important Australian values such as equity of access and therefore encourages a two-tier health system.
  4. It is likely that more people will visit places where healthcare is free, such as already overloaded public hospitals and emergency departments.
  5. Practices continuing to bulkbill will have to change their business model: doctors will need to see more patients per hour, or practices will have to hire less staff which will affect service. Some practices will close their doors.

The impact is worsened by wider cuts in the commonwealth’s health budget, such as the reduction in funding to the states for hospitals (although an increase of $2.9 billion over three years was promised at the 2016 COAG — only a partial reimbursement of previous cuts).

In the December 2015 MYEFO the Turnbull government also announced a $650 million cut from Medicare rebates for pathology and diagnostic imaging.

Blood tests, urine tests, pap smears and tests for STIs will no longer be able to be bulk billed and patients will be forced to pay upfront.

Under Medicare rules, any patient charged these fees will have to pay the entire amount upfront and then claim a rebate back later — and the costs are not inconsiderable. It’s estimated that patients may have to pay $93 for an X-ray and more than $30 for a pap smear. And if you are unlucky enough to require a PET scan to assess cancer or a brain disease, you could be hit with a cost of $1,000. If you have a serious condition, where you need regular check-ups and tests you pay over and over again.

Health Minister Susan Ley has not ruled out lifting the freeze but gives no timeframe.

I announced when I talked about the co-payment being removed that the pause on indexation of rebates would remain but I wouldn’t like that pause to be there a day longer than it needs to be, and I recognise that essentially what it’s doing is freezing an inefficient MBS structure.

The fact that Ley can refer to the freeze as a ‘pause’ is disconcerting. I don’t think a freeze over almost six years can truthfully be called a ‘pause’.

Australian Institute of Health and Welfare (AIHW) figures up to 2012‒13 showed that individuals already paid 17.8% of overall health costs (which had risen from 16.6% in 2002‒03) and when it came to specialist (or ‘referred’) services, patients contributed 16% of the costs. If that was the situation three years ago, it can only be anticipated that the freeze and other recent changes are increasing those proportions and will continue to do so.

So the impact of the freeze could be substantial but it is no longer a major news item although it deserves to be.

<strong>What do you think?</strong>

What effect do you think the freeze is having? Are you already paying more for your medical services?

Why isn’t the freeze a more significant issue? Is it likely to become more important as the election campaign gets under way?

This article was originally published on TPS Extra.

 

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25 comments

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  1. totaram

    I’m glad you pointed out that it was Wayne Swan who started this, and the reason was he drank the neo-liberal Kool-aid and wanted to show how wonderful he was as a treasurer by “delivering a surplus”. Having just helped Australia dodge the GFC by a spending stimulus which was widely applauded, he then couldn’t add 2+2 to make 4 and conclude that cutting spending when the economy was still fragile was a stupid idea. On top of that he thought squeezing medicare was a good idea, along with all the other contractionary steps he took. Knowing that the coalition has been out to wreck Medicare since it was put in place, this was just asking for trouble. This stupidity is on a par with the Keating stupidity of freezing the indexation of University funding, which John Howard continued for another 11 years. The damage done by that simple step will take years to unwind, if ever. While Labor may claim to help the less well off, all they have been doing is following the neo-liberal play-book, but with “less harsh” measures. Just as stupid as “new labour” in the UK.

    The result is, as many ordinary punters may have noticed, that no matter which govt. is charge, the “welfare state” is being wound down on the plea that “we can’t afford it”. All actual analysis of the data will show that we can afford it as well as we could 40 years ago. If anything, we are more prosperous today than ever before. Nothing has changed except the complete acceptance of neo-liberal macro-economic myths by almost everyone, with the help of the so called “free press” and right-wing “think-tanks” (aka propaganda units). All that is required now is to talk of “debt and deficit disaster” and keep telling people that our children will have to “pay off the debt”. In reality, our children will be holding the govt’s debt as financial assets, the same as we, the private sector, do, even today. But then explaining all this it too complicated. Even our MSM press know nothing about it. Or if they do, they are too scared to show they do.

  2. John Hermann

    Wayne Swan was Treasurer under both Rudd and Gillard, and comes from the right wing of QLD Labor. His level of understanding of macroeconomic principles is (at best) demonstrably no better than that of any of the other successive Treasurers and Finance Ministers (and their shadow counterparts) within both the major parties – from the time of the Fraser government onwards. The last Treasurer to demonstrate anything that could be described as a realistic grasp of macroeconomic principles was Jim Cairns — who held that portfolio during the Whitlam government. Having a PhD in economic history evidently assisted in gaining that understanding.

  3. Ken Wolff

    totaram and John Hermann

    Can’t agree entirely with your comments. I am one who also accepts that Labor has largely adopted neoliberal economic policies but what Swan did was simply to move the date of indexation of Medicare rebates: as I said that was effectively an eight month freeze. No doubt, he saw it at the time as a way to save some government dollars but there is also another good reason for it. The date of 1 November actually links to the old ‘supply period’ when budgets were presented in August. As I recall the end of supply was actually 30 November but having an indexation in November meant the new costs would apply for the budget period from 1 December. Many other processes like this have also changed their dates to fit with the new budget date of May. When May budgets were introduced there was no longer a need for a supply period as the budget applied for the full year from 1 July to 30 June, whereas with August budgets the date was 1 December to 30 June with a supply period in which there could be no new funding from 1 July to 30 November. So I think Swan was taking advantage of that to make the shift and save a small amount of money (although it would be a permanent saving built into future years). Abbott and Hockey extending it to 2018 is a different ball game altogether.

  4. Keitha Granville

    Swan may have started it, Abbott and Hockey moving it out to 2018 was definitely a spite because they didn’t get their $5 charge passed.
    None of them care, doesn’t matter what side. None of them have to worry about ordinary things like GP visits. Or public hospital ERs. They will never use them, they’ve prob never been in one. They certainly won’t ever need to as soon as they hit the magic 3 terms and get the golden handshake for life.

  5. Athena

    Good article. Some 70% of diagnoses require pathology testing, so the potential adverse impact of ending bulk billing for pathology is huge.

    Please consider signing this petition to support the pathology industry, and in turn every Australian who has pathology testing performed.
    http://www.dontkillbulkbill.com/

  6. Terry2

    My local GP tackled this problem by charging bulk billed patients the full fee – $75 of which $37.05 is refunded by Medicare – for the first consultation in a twelve month period, thereafter consultations are bulk billed during that twelve month period.

    I gather this is a fairly standard approach to the freezing of the Medicare rebate.

    So the government maintains the ‘heads I win, tails you lose’ policy.

  7. Kaye Lee

    Also flying under the radar was the government’s decision to give pharmacies the option to discount prescriptions by $1. This is voluntary and has been adopted by the big chains like chemist warehouse but the impact is too great for small individually owned pharmacies. If they do 500 prescriptions per week, offering the discount would reduce their income by $500 per week, something most small businesses could not endure.

    The government basks in the glory of reducing the price of prescriptions while it is the chemist who wears the loss. The measure will save the government $373 million over four years because when patients spend less on their medicines it takes them longer to reach the PBS safety net.

    Concessional patients who choose to receive a full $1 discount will need to fill an additional 11 prescriptions during the year to reach their Safety Net and access free medicines.

  8. Athena

    Oh it isn’t Chemist Warehouse carrying the loss. Their staff do. I have a pharmacist friend who worked for CW until recently. She said they don’t pay their experienced staff members more over time, as many businesses do. It isn’t the first time I’ve heard of businesses offering substantially cheaper prices to the public and being very tight when it comes to staff remuneration. Amazon is another one that comes to mind.

  9. Don Winter

    Good article but not one mention of Mathias Cormanns sale of OUR Medibank. Where did that money go? It was making a massive profit and was owned by the Australian people, us. Now we are told that taxes will have to rise to pay for health costs.

  10. Ken Wolff

    Don

    Agree the sale of Medibank was a disaster. And there is also the talk of privatising the Medicare records handling. Unfortunately, this was intended as a shorter article. Perhaps a longer piece looking at the full scale assault on our health system is warranted.

    Athena

    Yes, the LNP is certainly trying to privatise our health system, sometimes by stealth and sometimes quite blatantly. There is sufficient evidence that the private health rebate is inefficient, that the government would be better off abandoning it and giving the money to the states for hospitals: the cost of more people attending hospitals would be less than the current cost of that rebate. And, in fact, the private health insurance rebate is the fastest growing part of the health budget, it is growing faster than medicare benefits and the PBS and has been for a few years.

  11. Terry2

    The private health insurance industry have a large lobby group permanently operating in Canberra : the lobbyists have plenty of money and a clear objective. They see universal healthcare through Medicare as unfair competition – just as Murdoch sees the ABC as unfair competition – they believe that the private health subsidy is their due.

    They considered the sale of Medibank Private as a major achievement and will do their utmost to degrade Medicare.

  12. Athena

    Many private hospitals are not equipped to handle complex cases. Most in SA do not have an emergency department. In SA, SA Health has a Safety Learning System (SLS) which is used for reporting and investigating incidents within public health that have an adverse effect on a patient, or could have resulted in an adverse effect on a patient. Anyone can report to the SLS and they can do so anonymously if they wish. There’s no ability to use it for the private sector. I’d like to know how the private health sector treats incidents. Since they’re running as a business, rather than a service, how many incidents get covered up? My ex-husband is an ICU nurse. A frequent topic of conversation when socialising with his workmates was job interviews for nurses in private hospitals. They liked to ask the applicants “Who are our clients?” Public hospital nurses consider that patients are their clients. The correct answer in the private hospital setting is the doctors. The doctor is the client and brings in the patients. How willing are private hospitals to report incidents when it has the potential to cost them their clients? My ex also worked agency shifts during his annual leave, at an ICU in a private hospital. It was the practice of that hospital to fill vacant ICU beds with cases that did not warrant intensive care, because they charged more for an ICU bed than a regular bed. I recall him coming home one morning and telling me that overnight in ICU there were 9 patients, with only 2 needing to be there. Two of the cases were post-op vasectomies! Everyone who pays for private health insurance is paying for this overservicing and the private hospitals are laughing all the way to the bank.

  13. Ken Wolff

    Terry2 and Athena

    This was written in the New England Journal of Medicine in August 1999, obviously in relation to America’s privatised health system. Are we heading down the same path here?

    “Our main objection to investor-owned health care is not that it wastes taxpayers’ money, nor even that it causes modest decrements in quality. The most serious problem with such care is that it embodies a new value system that severs the communal roots and Samaritan traditions of hospitals, makes doctors and nurses the instruments of investors, and views patients as commodities.”

    Athena: the question you raised about ‘who is the client’ matches the dangers of the 1999 quote.

  14. Athena

    Thank you, Ken. Which issue in August was that?

  15. Ken Wolff

    In relation to my earlier comment about Wayne Swan and the old style ‘supply period’, I note that that is what has happened in parliament today. The Senate passed supply bills that willl provide government revenue until 30 November. That simply provides for ongoing costs of current programs at current rates and not for any new funding in that period. That now begs the question, whichever party is elected, will it have to wait until at least 1 December before it can activate any new policy proposals?

  16. Ken Wolff

    Athena

    Sorry. It was a quote I used in an article in 2014 and now I can’t find the full reference.

  17. Athena

    Ken, I’ve found it now, in an editorial on 5th August. There’s also an interesting article in the same edition looking at the association between for-profit hospital ownership and increased Medicare spending.

  18. Graeme

    The plan is to break bulk billing at ANY cost. They want the doctor patient relationship to require a financial transaction in every case. Once they have this they have won – universal health care is dead. Medicare becomes a 2nd class “safety net” only.

  19. Ken Wolff

    Athena

    Glad you found it. I should have mentioned it was an editorial — I did remember that much!

    Graeme

    Yes, going all the way back to Fraser the Libs have been trying to undermine Medibank/Medicare. Now with its commitment to the free market even stronger (courtesy of a neoliberal dominance in their economic thinking), the Libs would like to see ‘the market’ in control of everything. In its view, there is no need for government-provided services. And I would be willing to put a dollar or two on the prospect that, if they ever did achieve a complete win on health services being privatised, education wouldn’t be too far behind.

  20. Ken Wolff

    Athena: a PS. I forgot to mention earlier that I have now signed the petition.

  21. Athena

    Thanks for your support re: the petition Ken.

    It’s probably a good thing I didn’t know it was in an editorial when I searched, otherwise I may have overlooked that very good review of the effect of private hospitals on Medicare expenditure. 🙂

  22. Ken Wolff

    Rather than lifting the freeze, last night’s budget has extended it to 2019-20. I am still trying to find a more detailed account that gives an actual date but I think it probably means a one year extension to 30 June 2019.

  23. Ken Wolff

    No, it is a two year extension to 30 June 2020. And yet little is being said about it in the reports and analysis of the budget — although obviously the AMA has commented but that has not made a ‘splash’ either.

  24. jim

    To Totaram, I’ll take the “less harsh measures” every time.

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