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>