tag:theconversation.com,2011:/id/topics/medicare-reform-2136/articlesMedicare reform – The Conversation2024-01-28T19:05:20Ztag:theconversation.com,2011:article/2172642024-01-28T19:05:20Z2024-01-28T19:05:20ZMedicare turns 40: since 1984 our health needs have changed but the system hasn’t. 3 reforms to update it<figure><img src="https://images.theconversation.com/files/571353/original/file-20240125-29-9x8icz.jpg?ixlib=rb-1.1.0&rect=0%2C57%2C7719%2C4513&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/selective-focus-photography-of-assorted-color-balloons-Hli3R6LKibo">Ali Goldstein/Unsplash</a></span></figcaption></figure><p>Forty years ago, Medicare as we know it today was born. It was the reincarnation of the Whitlam government’s Medibank, introduced in 1975 but <a href="https://www.sciencedirect.com/science/article/abs/pii/0277953684902661">dismantled</a> in stages by the Fraser Liberal government. </p>
<p>Medibank was developed in the 1960s by health economists <a href="https://grattan.edu.au/news/remebering-richard-scotton-co-founder-of-medicare/">Dick Scotton</a> and <a href="https://openresearch-repository.anu.edu.au/bitstream/1885/159512/1/Daring_to_Dream.pdf">John Deeble</a>, when disease prevalence was different and the politics of reform were diabolical. </p>
<p>But the nation has changed since 1984, and so have our health needs. Medicare is now struggling to ensure the access to health care for millions of Australians we were once promised. </p>
<p>Let’s look at how we got here – and three radical changes we need to keep the Medicare promise into the future: making it cheaper to see a GP; paying less for blood and imaging tests; and covering dental care. </p>
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Read more:
<a href="https://theconversation.com/if-you-live-in-a-bulk-billing-desert-its-hard-to-see-a-doctor-for-free-heres-how-to-fix-this-204029">If you live in a bulk-billing ‘desert’ it's hard to see a doctor for free. Here's how to fix this</a>
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<h2>Free hospital care, but you might pay to see a GP</h2>
<p>One of my first jobs in the health system, in the days before Medicare and Medibank, was acting in charge of revenue collection for three public hospitals. A small subset of people could get free, albeit stigmatised, care. </p>
<p>We had bad debts, because some people couldn’t afford to pay their hospital bills and I was allowed by policy to recommend that some be written off. But for others I had to seek court authorisation to seize their wages to pay off their hospital debt. </p>
<p>Medibank changed that. Now all Australians can get public hospital care without any financial barrier.</p>
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<img alt="Doctor draws blood from patient" src="https://images.theconversation.com/files/571350/original/file-20240125-19-xmbtth.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/571350/original/file-20240125-19-xmbtth.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/571350/original/file-20240125-19-xmbtth.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/571350/original/file-20240125-19-xmbtth.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/571350/original/file-20240125-19-xmbtth.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/571350/original/file-20240125-19-xmbtth.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/571350/original/file-20240125-19-xmbtth.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Before Medicare and Medibank, patients often faced hospital care debts.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/a-woman-laying-in-a-hospital-bed-next-to-a-man-dkZQfm1LLQE">National Cancer Institute/Unsplash</a></span>
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<p>But the financial barriers to seeing a GP or a private specialist (out of hospital) have remained. Doctors continue to charge what they like, with Medicare often only covering a portion of their fees. This has left many patients facing significant out-of-pocket payments.</p>
<p>When Medicare was designed, medical care was provided mostly by solo medical practitioners working in practices they owned. It was a one-to-one professional relationship, with the patient paying the practitioner for each service. </p>
<p>Over time, general practice evolved into group practices organised as partnerships. Next, they <a href="https://onlinelibrary.wiley.com/doi/10.5694/mja2.51038">consolidated and corporatised</a>. A handful of corporates now provide all <a href="https://www.accc.gov.au/system/files/public-registers/documents/ACL%20Healius%20%20-%20Statement%20of%20Issues.pdf">private pathology</a> (which tests blood and other tissues) and <a href="https://www.jacr.org/article/S1546-1440(07)00614-X/fulltext">radiology</a> (which provides imaging services) and a large proportion of GP care. </p>
<p>Corporates have not made the same inroads into most other specialties. But since the 1980s, states have reduced public hospital outpatient services. So patients are now more reliant on private medical specialists for care referred by their GP.</p>
<h2>Much has changed, but cost of living pressures remain</h2>
<p>Health-care needs have changed. As we live longer, we live with more diseases, many of which are chronic. The care required increasingly involves many different health providers and includes non-medical specialties such as podiatry, physiotherapy and psychology. </p>
<p>When Medicare was introduced, university education was offered for only a few of these professions. But their training has evolved and so too what they can do. This is particularly the case for nursing. It has evolved from an apprenticeship model to a profession with its own specialties. A subset – nurse practitioners – have the authority to diagnose and prescribe medication.</p>
<p>Broader technology trends have also had an impact on health care, as with all other sectors. Virtual care and telehealth <a href="https://theconversation.com/what-can-you-use-a-telehealth-consult-for-and-when-should-you-physically-visit-your-gp-135046">proved their worth</a> during the early years of the COVID pandemic, just as generative AI is beginning to show its promise now.</p>
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Read more:
<a href="https://theconversation.com/ai-can-help-detect-breast-cancer-but-we-dont-yet-know-if-it-can-improve-survival-rates-210800">AI can help detect breast cancer. But we don't yet know if it can improve survival rates</a>
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<p>Medicare was first and foremost about efficiently removing financial barriers to access. It was introduced as part of an <a href="https://www.jstor.org/stable/20635272">agreement with the Labor movement</a> about reducing costs of living and, in particular, ensuring people could attend a doctor without having to worry about how they would pay for the visit.</p>
<p>However, <a href="https://www.abs.gov.au/statistics/health/health-services/patient-experiences/2022-23#data-downloads">about 1.2 million Australians</a> deferred or missed out on seeing a GP because of cost in the 2022-23 financial year. Lower-income Australians have higher rates of missing out on care. </p>
<p>Medical fees aren’t regulated and so consumers face a lottery – not knowing whether a fee will be charged and having no control over that decision. Only about 52% of all Australians were <a href="https://www.health.gov.au/sites/default/files/2023-08/medicare-statistics-per-patient-bulk-billing-dashboard-2022-23.pdf">always bulk-billed</a> in 2022-23, down from 66% a year earlier. </p>
<p>So how can we get Medicare back on track towards its goal of universal health care for all Australians? Here are three radical reforms we should prioritise. </p>
<h2>1. Make GP care affordable for all</h2>
<p>Rebates are currently subject to political whim. The Liberal government (in office from 2013 to 2022) froze rebates, leading to increases in average out-of-pocket payments and reduced bulk-billing.</p>
<p>The first step in reducing costs as a barrier to GP care should be introduction of independent fee-setting. </p>
<p>Canadian Medicare – which was the model for Australia’s system – mostly has <a href="https://journals.sagepub.com/doi/full/10.1177/0840470421994304">no out-of-pocket payments</a>. Fees are set by negotiations, not politicians’ whims, and this is <a href="https://laws-lois.justice.gc.ca/eng/acts/C-6/page-1.html#h-151558">enshrined in legislation</a>. </p>
<p>With independent fee-setting in place, a new scheme of “participating providers” should be introduced. Under such a scheme, practices would bulk-bill everyone, and participate in agreed quality-improvement programs.</p>
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Read more:
<a href="https://theconversation.com/what-if-medicare-was-restricted-to-gps-who-bulk-billed-this-kind-of-reform-is-possible-203543">What if Medicare was restricted to GPs who bulk billed? This kind of reform is possible</a>
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<p>If fees are set independently and fairly, extra billing over and above the fee is unjustifiable. Non-participating practices would not be eligible for Medicare benefits. </p>
<p>It’s anticipated the vast majority of practices would agree to participate. In Canada, the participation rate is roughly 100%, and bulk billing in Australia is <a href="https://www.health.gov.au/resources/publications/medicare-quarterly-statistics-bulk-billing-by-primary-health-network-september-quarter-2023-24">still over 75%</a>.</p>
<p>Participating practices should also be eligible for additional grants to employ other health professionals to provide a more comprehensive range of services – such as physiotherapists and psychologists – to meet the contemporary needs of a population with increasing chronic illness. </p>
<p>If successful, these changes would mean all Australians can access a GP and other primary care services without any out-of-pocket costs.</p>
<h2>2. Deal with diagnostics</h2>
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<img alt="Blood vials" src="https://images.theconversation.com/files/571360/original/file-20240125-25-3sefgm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/571360/original/file-20240125-25-3sefgm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/571360/original/file-20240125-25-3sefgm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/571360/original/file-20240125-25-3sefgm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/571360/original/file-20240125-25-3sefgm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/571360/original/file-20240125-25-3sefgm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/571360/original/file-20240125-25-3sefgm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The cost of processing tests varies.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/green-pink-and-purple-plastic-bottles-0jE8ynV4mis">Testalize.me/Unsplash</a></span>
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<p>Despite the evolution of ownership and market structures, pathology and radiology services are still reimbursed by fees for each service (with complex rules about rebates when multiple tests are performed simultaneously). </p>
<p>But while both industries are expensive to set up and buy or lease equipment, the cost of processing an additional test or image is low and sometimes close to zero. This means Medicare pays pathology and radiology providers much more than the tests or images cost.</p>
<p>Both industries are also ripe for further technological change, with the quality of generative AI rapidly improving, and costs likely to further reduce.</p>
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Read more:
<a href="https://theconversation.com/blood-money-pathology-cuts-can-reduce-spending-without-compromising-health-54834">Blood money: pathology cuts can reduce spending without compromising health</a>
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<p>The uncapped fee-for-service model for pathology and radiology needs to be replaced by one in which the benefits of technological change are shared between shareholders and taxpayers, rather than all accruing to the former. </p>
<p>This could be done by replacing fee-for-service payments with a payment model used in the corporate world. Private and public providers could be <a href="https://grattan.edu.au/report/blood-money-paying-for-pathology-services/">invited to tender</a> to provide these services in certain areas, with conditions around geographic access, quality and no out-of-pocket payments for consumers. </p>
<p>The same model could also apply to other technology-intensive types of health care, such as radiotherapy for cancer.</p>
<p>These changes might be cost-neutral for government, and save consumers the $24 they currently pay out of pocket on every pathology test that is not currently bulk-billed and $122 on each non-bulk-billed diagnostic imaging test.</p>
<h2>3. Cover dental care too</h2>
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<img alt="Boy undergoes dental treatment" src="https://images.theconversation.com/files/571358/original/file-20240125-19-wcmr9t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/571358/original/file-20240125-19-wcmr9t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/571358/original/file-20240125-19-wcmr9t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/571358/original/file-20240125-19-wcmr9t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/571358/original/file-20240125-19-wcmr9t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/571358/original/file-20240125-19-wcmr9t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/571358/original/file-20240125-19-wcmr9t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Dental care is largely unaffordable.</span>
<span class="attribution"><a class="source" href="https://unsplash.com/photos/boy-in-blue-long-sleeve-shirt-drinking-from-a-feeding-bottle-loBRFqXm1QA">Lafayett Zapata Montero/Unsplash</a></span>
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<p>A major omission from Medicare from the start, and a source of continuing inequity, is oral health care. More than two million Australians <a href="https://www.abs.gov.au/statistics/health/health-services/patient-experiences/2022-23#data-downloads">missed out</a> on oral health care because of cost in 2022-23.</p>
<p>A new scheme to <a href="https://grattan.edu.au/report/filling-the-gap/">slowly expand universal protection</a> against the costs of oral health care should be phased in over the next decade. This would eventually mean all preventive and basic dental care would be available for everyone, with no out-of-pocket payments. </p>
<p>This would require a parallel expansion of the oral health workforce (dentists and <a href="https://www.dentalboard.gov.au/Registration/Oral-Health-Therapist.aspx">oral health therapists</a>) and development of new payment models based on a participating practice model rather than simply introducing another unregulated schedule of oral health fees paid via Medicare.</p>
<p>Innovation <a href="https://www.health.gov.au/sites/default/files/2023-12/nhra-mid-term-review-final-report-october-2023.pdf">needs to be built into the Australian health system</a>. However, the foundations for innovation must be based on Medicare’s founding principles of addressing financial barriers to provide universal and equitable health care to all Australians. </p>
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Read more:
<a href="https://theconversation.com/expensive-dental-care-worsens-inequality-is-it-time-for-a-medicare-style-denticare-scheme-207910">Expensive dental care worsens inequality. Is it time for a Medicare-style 'Denticare' scheme?</a>
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<img src="https://counter.theconversation.com/content/217264/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Duckett, like all Australians, benefits from Medicare.</span></em></p>The health care world has changed a lot in 40 years, but Medicare hasn’t. Here are three areas for radical forms to the system that will achieve its aims of universal health care for all Australians.Stephen Duckett, Honorary Enterprise Professor, School of Population and Global Health, and Department of General Practice, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1992872023-02-06T03:59:28Z2023-02-06T03:59:28ZWith the training to diagnose, test, prescribe and discharge, nurse practitioners could help rescue rural health<figure><img src="https://images.theconversation.com/files/508244/original/file-20230206-31-xycpwx.jpg?ixlib=rb-1.1.0&rect=53%2C35%2C5892%2C3961&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/coronavirus-pandemic-confident-modern-medical-doctor-1823878736">Shutterstock</a></span></figcaption></figure><p>It can be tough to access front-line health care outside the cities and suburbs. For the seven million Australians living in rural communities there are significant <a href="https://www.aihw.gov.au/reports/rural-remote-australians/rural-and-remote-health">challenges</a> in accessing health care due to serious workforce shortages, geographic isolation and socioeconomic disadvantage. This <a href="https://www.aihw.gov.au/reports/rural-remote-australians/rural-and-remote-health">results</a> in rural people having poorer quality of life, and long-term poor health outcomes.</p>
<p>Primary health care is the entry point into the health system. It includes care delivered in community settings such as general practice, health centres and allied health practices. It can be delivered via telehealth where face-to-face services are unavailable. </p>
<p>But there is a <a href="https://www.abc.net.au/news/2022-09-22/wa-regional-towns-endure-ongoing-doctor-gp-shortage/101454544">critical shortage</a> of general practitioners (GPs) in rural areas. The Royal Australian College of General Practitioners (RACGP) <a href="https://www.racgp.org.au/general-practice-health-of-the-nation-2022">paints a grim picture</a> of an ageing GP workforce, a declining interest in general practice as a career choice and unequal distribution of GPs between urban and rural areas. </p>
<p>Experts are searching for ways to “<a href="https://theconversation.com/how-do-you-fix-general-practice-more-gps-wont-be-enough-heres-what-to-do-195447">fix the GP crisis</a>”, but we can look at the broader picture and ask: “How else might we address the primary health care needs of rural communities?” Highly trained nurses in rural areas could be part of that response – if we support them properly.</p>
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Read more:
<a href="https://theconversation.com/medicare-reform-is-off-to-a-promising-start-now-comes-the-hard-part-197914">Medicare reform is off to a promising start. Now comes the hard part</a>
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<h2>What makes a nurse practitioner?</h2>
<p>There are more than <a href="https://www.acnp.org.au/client_images/2312067.pdf">2,250 nurse practitioners</a> currently trained, qualified and registered to provide services in Australia. Nurse practitioners are the most senior and experienced clinical nurses in the health care workforce. </p>
<p><a href="https://www.acnp.org.au/client_images/2312068.pdf">Nurse practitioners</a> complete a master’s degree and have a minimum of eight years of consolidated clinical practice and expertise. </p>
<p>But nurse practitioners can’t access Medicare rebates or the Pharmaceutical Benefits Scheme unless they enter into a <a href="https://www1.health.gov.au/internet/main/publishing.nsf/Content/midwives-nurse-pract-collaborative-arrangements#:%7E:text=A%20collaborative%20arrangement%20is%20an,a%20specified%20medical%20practitioner%3B%20and">collaborative arrangement</a> with a GP. </p>
<p>Under this arrangement, GPs effectively “supervise” the work of nurse practitioners. This fails to recognise nurse practitioners’ high levels of clinical expertise and skills, which should allow them autonomy. </p>
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Read more:
<a href="https://theconversation.com/the-physio-will-see-you-now-why-health-workers-need-to-broaden-their-roles-to-fix-the-workforce-crisis-188984">The physio will see you now. Why health workers need to broaden their roles to fix the workforce crisis</a>
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<h2>What nurse practitioners can do</h2>
<p>In Australia, nurse practitioners are not working to their full capacity or “<a href="https://www.acnp.org.au/client_images/2159748.pdf">scope of practice</a>” according to the <a href="https://www.acnp.org.au/index.cfm?module=news&pagemode=indiv&page_id=1834299">Australian College of Nurse Practitioners</a>. This scope gives them the legal authority to practice independently and autonomously, unlike registered nurses. </p>
<p>They can assess and diagnose health problems, order and interpret diagnostic tests, create and monitor treatment plans, prescribe medicines and refer patients to other health professionals. Nurse practitioners are qualified to admit and discharge patients from health services, including hospitals.</p>
<p>At the public health level, nurse practitioners can collaborate with other clinicians and health experts to improve health care access, prevent disease and promote health strategies, improving outcomes for specific patient groups or communities. </p>
<p>The federal government’s Strengthening Medicare Taskforce lists nurse practitioners as primary carers and <a href="https://www.health.gov.au/sites/default/files/2023-02/strengthening-medicare-taskforce-report_0.pdf">puts</a> general practice “at the heart of primary care provision”. But the <a href="https://www.racgp.org.au/advocacy/position-statements/view-all-position-statements/health-systems-and-environmental/nurse-practitioners-in-primary-healthcare">RACGP</a> and <a href="https://www.ama.com.au/articles/ama-nurse-practitioners-2022">Australian Medical Association (AMA)</a> say nurse practitioner care should be GP-led. They contend any change to this arrangement would lead to inferior care, a disruption in continuity of care, fragmentation of the health system, and increased care complexity, inefficiency and cost. We have looked closely at these arguments and found they are not supported by evidence.</p>
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<a href="https://images.theconversation.com/files/508243/original/file-20230206-19-spvthz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="sign in rural location to local amenities including health centre" src="https://images.theconversation.com/files/508243/original/file-20230206-19-spvthz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/508243/original/file-20230206-19-spvthz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/508243/original/file-20230206-19-spvthz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/508243/original/file-20230206-19-spvthz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/508243/original/file-20230206-19-spvthz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/508243/original/file-20230206-19-spvthz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/508243/original/file-20230206-19-spvthz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">There is a shortage of rural GPs in Australia.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/williams-western-australia-8-30-2021-2039141012">Shutterstock</a></span>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/how-do-you-fix-general-practice-more-gps-wont-be-enough-heres-what-to-do-195447">How do you fix general practice? More GPs won't be enough. Here's what to do</a>
</strong>
</em>
</p>
<hr>
<h2>What works overseas</h2>
<p>Nurse practitioners have been working as lead practitioners internationally for many years, which means there is a <a href="https://doi.org/https://doi.org/10.1016/j.ijnsa.2021.100034">body of evidence</a> looking at patient <a href="https://doi.org/10.1002/14651858.CD001271.pub3">outcomes and satisfaction</a>. </p>
<p>Experts found nurse practitioners provide equivalent and, in some cases, <a href="https://www.cochranelibrary.com/cdsr/doi/10.1002/14651858.CD001271.pub3">superior patient outcomes</a> compared to doctors across a range of primary, secondary and specialist care settings and for a broad range of patient conditions. </p>
<p>Nurse practitioners were <a href="https://doi.org/https://doi.org/10.1016/j.ijnsa.2021.100034">more likely</a> to follow recommended evidence-based guidelines for best practice care and patients were more <a href="https://doi.org/https://doi.org/10.1016/j.ijnsa.2021.100034">satisfied with the care</a> they received, reporting communication regarding patient illness was better compared to GP care. </p>
<p>Employing nurse practitioners also resulted in <a href="https://doi.org/https://doi.org/10.1016/j.ijnsa.2021.100034">reduced waiting times and costs</a>.</p>
<p>Finally, these studies found while patient consultations were slightly longer for nurse practitioners and the number of return visits slightly higher compared to doctors, there was <a href="https://www.cochranelibrary.com/cdsr/doi/10.1002/14651858.CD001271.pub3">no difference</a> in the number of prescriptions or diagnostic tests issued, attendance at Emergency Departments, hospital referrals or hospital admissions. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1617673580833013760"}"></div></p>
<h2>Clearing the way</h2>
<p>GP practices are <a href="https://www.abc.net.au/news/2022-09-01/brighton-doctors-clinic-closes-doors/101390526">closing</a> in <a href="https://www.theguardian.com/australia-news/2022/aug/31/rural-victorian-town-left-without-bulk-billing-doctor-after-clinic-closes-doors">rural communities</a> all over Australia, leaving people without access to vital, cost-effective primary health care services. Yet the majority of nurse practitioners are ready and willing to work in rural areas, with <a href="https://hwd.health.gov.au/resources/publications/factsheet-nrpr-2019.pdf">2019 workforce distribution data</a> clearly showing many nurse practitioners already work in rural, remote and very remote communities.</p>
<p>A new way of working is required, one that includes nurse practitioners working both independently and in collaboration with health care teams in rural communities.</p>
<p>International evidence shows allowing nurse practitioners to lead patient care and work with greater flexibility and freedom will not fragment the primary health care system, it will enhance it.</p><img src="https://counter.theconversation.com/content/199287/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Leesa Hooker receives funding from the Victorian Government Department of Justice and Community Safety and the Department of Jobs, Skills, Industry and Regions. She is a member of the Australian Nursing and Midwifery Federation and the Australian College of Nursing. </span></em></p><p class="fine-print"><em><span>Fiona Burgemeister and Jane Mills do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Instead of asking how to fix the rural GP shortage, we should look at the bigger picture and ask how nurse practitioners could work to their full capacity.Jane Mills, Professor and Dean La Trobe Rural Health School, La Trobe UniversityFiona Burgemeister, Research Officer, La Trobe Rural Health School, La Trobe UniversityLeesa Hooker, Associate Dean Research and Industry Engagement, La Trobe Rural Health School, La Trobe University, La Trobe UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/818832017-09-20T03:15:14Z2017-09-20T03:15:14Z‘Medicare for all’ could be cheaper than you think<figure><img src="https://images.theconversation.com/files/186297/original/file-20170917-6428-vfxzlb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Some of the original advocates for Medicare in the 1960s hoped to eventually extend it to everyone.</span> <span class="attribution"><span class="source">AP Photo</span></span></figcaption></figure><p>Public support for single-payer health care <a href="http://www.pewresearch.org/fact-tank/2017/06/23/public-support-for-single-payer-health-coverage-grows-driven-by-democrats/">has been rising</a> in recent months amid failed Republican efforts to repeal and replace the Affordable Care Act. </p>
<p>That’s perhaps why Sen. Bernie Sanders on September 13 <a href="https://www.congress.gov/bill/115th-congress/senate-bill/1804?q=%7B%22search%22%3A%5B%22medicare+for+all%22%5D%7D&r=1">introduced a new version</a> of his single-payer plan with the <a href="http://thehill.com/policy/healthcare/350501-sanders-unveils-single-payer-bill-to-cheers-from-supporters">support of 16 Democratic colleagues</a>, a sharp rise from 2013 <a href="http://www.huffingtonpost.com/entry/bernie-sanders-single-payer-bill-major-support-senate_us_59b87dc1e4b02da0e13d465f">when none signed on</a> to a similar proposal. It would not only expand Medicare to all Americans but <a href="https://www.nytimes.com/2017/09/13/us/politics/health-care-obamacare-single-payer-graham-cassidy.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news">make it more comprehensive</a> by covering more services like mental health, dental care and vision, all without copayments or deductibles. </p>
<p>But Sanders’s plan would come at a steep price: <a href="http://www.crfb.org/blogs/analysis-sanders-single-payer-offsets">likely more than US$14 trillion</a> over the first decade, based on an estimate I did of a previous version. </p>
<p>There is, however, a simpler and less costly path toward single-payer, and it may have a better chance of success: Simply strike the words “who are age 65 or over” from the <a href="https://www.ssa.gov/OP_Home/ssact/title18/1811.htm">1965 amendments to the Social Security Act</a> that created Medicare and, voila, everyone (who wants) would be covered by the existing Medicare program. </p>
<p>While this wouldn’t be single-payer – in which the government covers all health care costs – and private insurers would continue to operate alongside Medicare, it would be a substantial improvement over the current system. </p>
<p>I have been researching the economics of health care for four decades. While I prefer a more comprehensive universal health care plan that covers all Americans, a simpler version would be much more affordable – and maybe even <a href="http://www.sacbee.com/opinion/op-ed/soapbox/article165105902.html">politically possible</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/186299/original/file-20170917-8125-dhhmhr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/186299/original/file-20170917-8125-dhhmhr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=486&fit=crop&dpr=1 600w, https://images.theconversation.com/files/186299/original/file-20170917-8125-dhhmhr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=486&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/186299/original/file-20170917-8125-dhhmhr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=486&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/186299/original/file-20170917-8125-dhhmhr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=611&fit=crop&dpr=1 754w, https://images.theconversation.com/files/186299/original/file-20170917-8125-dhhmhr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=611&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/186299/original/file-20170917-8125-dhhmhr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=611&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">President Lyndon Johnson signed the Medicare Bill into law in 1965.</span>
<span class="attribution"><span class="source">AP Photo</span></span>
</figcaption>
</figure>
<h2>What Medicare was and what it was meant to be</h2>
<p>Striking the words “over 65” from the Medicare statutes was an idea <a href="https://theconversation.com/when-pat-and-bob-nearly-saved-health-care-reform-a-lesson-in-senatorial-bedside-manner-81649">championed by the late Senator Daniel Moynihan</a>. Moynihan, who held several roles in the Kennedy and Johnson administrations, was an <a href="http://www.hup.harvard.edu/catalog.php?isbn=9780674574410">original architect of the War on Poverty</a> and a central figure in the evolution of health care policy in the latter 20th century. </p>
<p>In fact, <a href="https://global.oup.com/academic/product/healthy-wealthy-and-fair-9780195170665?cc=us&lang=en&">many advocates originally intended</a> that Medicare be the basis for universal health insurance. A key reason it serves so well as the foundation is that it includes a funding mechanism – the 2.9 percent Medicare payroll tax paid by you and your employer, alongside modest monthly premiums.</p>
<p>In addition, its limited scope, skimpy benefits and cost-sharing keep costs low. Medicare covers only a <a href="https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Age-and-Gender.html">little more than half</a> of participants’ health care spending, forcing many elderly Americans to buy private insurance and pay significant out-of-pocket expenses. A little over 11 million poorer participants <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4193634/">also rely on Medicaid</a>, especially for long-term care.</p>
<p>For example, <a href="https://www.medicare.gov/what-medicare-covers/index.html">Medicare covers</a> hospitalization only after a person has paid the $1,316 deductible, and there’s a copay of $329 per day after 60 days and double that beyond 90. It also covers only 80 percent of the cost of doctor visits and the use of medical equipment – though only after a $183 deductible and the monthly $134 premium. </p>
<p>Still, it provides meaningful protection against the <a href="https://www.cnbc.com/id/100840148">potentially crippling cost</a> of accident or illness. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/186298/original/file-20170917-29578-eq2c6w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/186298/original/file-20170917-29578-eq2c6w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/186298/original/file-20170917-29578-eq2c6w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/186298/original/file-20170917-29578-eq2c6w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/186298/original/file-20170917-29578-eq2c6w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/186298/original/file-20170917-29578-eq2c6w.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/186298/original/file-20170917-29578-eq2c6w.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Sen. Bernie Sanders introduces his new single-payer health care bill.</span>
<span class="attribution"><span class="source">AP Photo/Andrew Harnik</span></span>
</figcaption>
</figure>
<h2>Giving Medicare to everyone</h2>
<p>Single-payer, in its purest form, means the government becomes everyone’s insurer, and private insurance is largely dropped as redundant. <a href="http://www.businessinsider.com/us-single-payer-debate-comparisons-to-canada-uk-germany-2017-6">This is the way</a> health insurance is provided in the United Kingdom and Canada, as well as other countries like <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3960712/">Taiwan</a>. Sanders’s plan would follow this framework.</p>
<p>A simple expansion of Medicare would be more like a hybrid system in which the government program exists alongside private insurers, with residents free to use any combination of the two. </p>
<p>One of the reasons single-payer health care has failed in the United States is that even though it might eventually lower costs, it would require substantial new taxes up front. Sanders’s plan, as I noted earlier, <a href="http://democracyjournal.org/arguments/can-we-pay-for-single-payer/">would cost around $1.4 trillion a year</a>. But because of its lower benefit levels and built-in revenue stream, a simple Medicare expansion would cost substantially less, maybe only half that. </p>
<p>In 2015, the last year with complete data, <a href="http://www.kff.org/medicare/state-indicator/total-medicare-beneficiaries/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D">over 55 million Americans</a> received Medicare benefits (including nine million who were disabled). <a href="https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html">Total spending was $646 billion</a> that year, or an average of $11,000 per recipient. </p>
<p>A simple expansion would add the nondisabled population under age 65 to Medicare: <a href="http://www.kff.org/uninsured/fact-sheet/key-facts-about-the-uninsured-population/">28 million without insurance</a>, 61 million <a href="http://www.kff.org/health-reform/state-indicator/total-monthly-medicaid-and-chip-enrollment/?currentTimeframe=18&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D">covered by Medicaid or the Children’s Health Insurance Plan</a> and 181 million with private insurance. For the <a href="http://www.dollarsandsense.org/Funding-Medicare-for-All-explanation-170918.pdf">purposes of my calculations</a>, I assume everyone eligible for Medicare would take advantage of the program. </p>
<p>Because the vast majority of the new enrollees would be younger and healthier than current Medicare participants, the cost per person would be much less, or about $5,527 for the <a href="http://www.thesoutherninstitute.org/docs/publications/Policy%20Resources/KaiserReport.pdf">once uninsured</a> and $3,593 for everyone else. With a <a href="http://www.dollarsandsense.org/Funding-Medicare-for-All-explanation-170918.pdf">few other calculations</a>, the total price tag of an expansion would tally around $836 billion – almost $600 billion less than Sanders’ single-payer.</p>
<h2>Substantial savings</h2>
<p>Something that often gets lost in the debate over the cost of single-payer is that its implementation would lead to a host of savings that make the bill to taxpayers a lot less than the sticker price. </p>
<p><a href="http://www.pnhp.org/sites/default/files/Funding%20HR%20676_Friedman_7.31.13_proofed.pdf">I estimate</a> that a full single-payer system would likely save almost 19 percent of <a href="https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html">current spending</a>, or about $665 billion for 2017. A simple Medicare expansion wouldn’t save quite as much but it’d still be significant.</p>
<p>So where would the savings come from? </p>
<p>To begin with, <a href="http://www.commonwealthfund.org/interactives/2017/july/mirror-mirror/?omnicid=EALERT1243408&mid=gfriedma@econs.umass.edu">studies show</a> that medical billing is more expensive in the U.S. than in many countries. </p>
<p>The U.S. health care system <a href="https://www.ncbi.nlm.nih.gov/pubmed/22419800">spends twice as much</a> as Canada, for example, because <a href="http://annals.org/aim/article/2605414/single-payer-reform-only-way-fulfill-president-s-pledge-more">more “payers”</a> means more complexity. Savings from a simple Medicare expansion could reduce this waste by about $89 billion a year.</p>
<p>Another source of savings is on insurance administration. Private insurers <a href="http://cepr.net/blogs/cepr-blog/overhead-costs-for-private-health-insurance-keep-rising-even-as-costs-fall-for-other-types-of-insurance">spend more than 12 percent</a> of total expenditures on overhead, compared with <a href="http://healthaffairs.org/blog/2011/09/20/medicare-is-more-efficient-than-private-insurance/">around 2 percent</a> for Medicare. Savings from moving everyone to Medicare would approach around $75 billion because of economies of scale, lower managerial salaries and more meager marketing expense. </p>
<p>A third way a simple Medicare expansion would yield savings is by reducing the ability of <a href="https://www.forbes.com/sites/theapothecary/2011/08/22/hospital-monopolies-the-biggest-driver-of-health-costs-that-nobody-talks-about/#47bf25132ce8">hospital monopolies</a> to <a href="https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Medicare-Provider-Charge-Data/Inpatient2015.html">overcharge</a> private insurers. Medicare, in contrast, <a href="http://medpac.gov/docs/default-source/reports/mar17_entirereport224610adfa9c665e80adff00009edf9c.pdf?sfvrsn=0">is able to pay 22 percent less</a> for the same services because of its size. If all Americans used Medicare savings on hospital costs could exceed $53 billion.</p>
<p>These three areas then would save just under $220 billion, bringing the cost down to $618 billion. </p>
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<p><iframe id="TyIEW" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/TyIEW/4/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<p></p><hr><p></p>
<h2>One small step</h2>
<p>While $618 billion still seems like a hefty price tag, taxes wouldn’t have to be raised much to pay for it. </p>
<p>For starters, most everyone would pay the <a href="https://www.medicare.gov/your-medicare-costs/part-b-costs/part-b-costs.html">premiums already charged</a> by Medicare. This would generate an additional $210 billion in revenue from premiums. </p>
<p>In addition, a Medicare expansion would reduce the need for two current insurance subsidies: one for <a href="https://www.treasury.gov/resource-center/tax-policy/Documents/Tax-Expenditures-FY2016.pdf">employer-provided insurance plans</a> and another that the <a href="https://www.cbo.gov/sites/default/files/recurringdata/51298-2015-03-aca.pdf">ACA provides insurers</a>. This would save about $161 billion. </p>
<p>This leaves about $246 billion that would still need to be raised through additional taxes. This could be done with an increase in the <a href="https://www.thebalance.com/fica-taxes-social-security-and-medicare-taxes-39825">Medicare tax</a> that gets deducted from your paycheck. The tax, which is split evenly between employee and employer, would need to rise to 5.9 percent from 2.9 percent today. This would amount to just under $15 a week for the typical employee.</p>
<p>Campaigns for universal health insurance coverage have failed in the United States <a href="http://www.nejm.org/doi/full/10.1056/NEJMhpr1411701">when they run up against</a> the cost of providing coverage. Medicare, <a href="https://hub.jhu.edu/2015/07/23/medicare-at-50/">America’s greatest success</a> in advancing health care, succeeded precisely because it was limited and had its own dedicated funding streams. </p>
<p>We might learn from this example. Rather than jump all the way to a comprehensive single-payer system like the one Sanders favors, we could take a step along the way at a fraction of the cost by simply expanding Medicare to everyone who wants it.</p><img src="https://counter.theconversation.com/content/81883/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gerald Friedman has received funding from state single payer groups in Colorado, Maryland, New York, Oregon, and Pennsylvania. He has also participated in campaigns for single payer throughout the United States over the past 40 years.</span></em></p>Bernie Sanders’ single-payer health care plan is bound to be expensive and politically impossible. A simple expansion of Medicare offers a cheaper and more passable path to universal care.Gerald Friedman, Professor of Economics, UMass AmherstLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/653362016-10-04T23:44:21Z2016-10-04T23:44:21ZFactCheck: Is suicide one of the leading causes of maternal death in Australia?<figure><img src="https://images.theconversation.com/files/140227/original/image-20161004-20213-o9fhmq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Suicide is uncommon during pregnancy -- it occurs more frequently when a pregnancy is over.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/mikel450/7544423608/in/photolist-cuF9i7-rQVijN-6eunts-kAQebc-hfoPc3-8uW4Ee-3wd6ZE-3GSarN-6KUZPG-8dbGLR-npGxaH-79TMC2-9w296Q-aM9d4R-q6L74n-aKH57z-9k2sRG-qQFizY-9G1H4N-ahjewq-3aqnNy-4ZETCg-akNWYh-M9sRY-34wTCm-deFesQ-6ShhSr-oMnyps-M9Ae6-M9sQE-3aqnpj-owUwSb-M9tVb-47gCiJ-3ESukT-6XmKNK-3akRov-6qnV3k-3akQLr-aM9fF8-emcipD-M9u1C-j4wBu-hpsHQ1-M9sSU-6uZESC-2V17Zw-3aqnrd-doDzxQ-h5rET3">Mikel Garcia Idiakez/flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span></figcaption></figure><blockquote>
<p>The Committee notes that … suicide has become one of the leading causes of maternal death in Australia. – The Obstetrics Clinical Committee, <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/24913E0474E75768CA2580180016A033/$File/MBS-Obstetrics.pdf">report</a> to the <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/MBSReviewTaskforce">Medicare Benefits Schedule Review</a>, August 2016.</p>
</blockquote>
<p>The federal government’s <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/MBSReviewTaskforce">Medicare Benefits Schedule review</a> is well underway. Teams of clinicians are looking at more than 5,700 items on the Medicare Benefits Schedule (MBS) to see if health services are up to date and in line with the latest clinical evidence.</p>
<p>In its <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/24913E0474E75768CA2580180016A033/$File/MBS-Obstetrics.pdf">report</a> for the review, the Obstetrics Clinical Committee called for changes aimed at ensuring more women were screened for perinatal (meaning the period just before and after birth) anxiety and depression by suitably qualified health professionals.</p>
<p>The committee said suicide has become one of the leading causes of maternal death in Australia.</p>
<p>Is that right?</p>
<h2>Checking the source</h2>
<p>Obstetrics is the branch of medicine and surgery that specialises in the care of women before, during and after childbirth. The <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/MBSR-committees-obstetrics">Obstetrics Clinical Committee</a> is a group of 11 experts commissioned by the federal government to review the obstetrics items on the MBS and report on their findings.</p>
<p>When asked for data to support the assertion, the committee’s chair Professor Michael Permezel referred The Conversation to the Australian Institute of Health and Welfare report <a href="http://www.aihw.gov.au/publication-detail/?id=60129551119">Maternal deaths in Australia 2008-2012</a>.</p>
<h2>Is suicide a leading cause of maternal death?</h2>
<p>Yes. The <a href="http://www.aihw.gov.au/">Australian Institute of Health and Welfare (AIHW)</a> produces the best data on this question. </p>
<p>Its latest <a href="http://www.aihw.gov.au/WorkArea/DownloadAsset.aspx?id=60129551117">report</a> on the issue, which was the one the committee cited, was released in 2015 and covers the years 2008 to 2012. It shows that suicide is one of the leading causes of maternal death in Australia. If late maternal deaths are included, it is the leading cause.</p>
<p>When we’re talking about this issue, it’s important to distinguish between “maternal death” and “late maternal death”:</p>
<ul>
<li>Maternal death is when a woman dies in pregnancy or within 42 days after the end of any pregnancy</li>
<li>Late maternal death is when a woman dies within 12 months of the end of any pregnancy.</li>
</ul>
<p>In Queensland, suicide is <a href="https://www.health.qld.gov.au/improvement/networks/docs/qmpqc-report-2015-full.pdf">the leading cause of death</a> for women during pregnancy and within 12 months of the end of a pregnancy. Suicide was <a href="http://www.hqsc.govt.nz/assets/PMMRC/Publications/tenth-annual-report-FINAL-NS-Jun-2016.pdf">the leading cause of maternal death</a> in New Zealand between 2006 and 2013, and remains a leading cause today.</p>
<p>Suicide is uncommon during pregnancy – it occurs more frequently when a pregnancy is over. Recent investigations have revealed a high proportion of late maternal deaths are linked to preexisting mental health disorders and what clinicians call “psychosocial distress”. Psychosocial distress is a broad term that covers depression, stress and dissatisfaction with life.</p>
<p>There are standard definitions used worldwide to describe the type, or category, of maternal death: </p>
<ul>
<li>Direct deaths – those directly attributable to the pregnancy, for example, post-partum bleeding</li>
<li>Indirect deaths – when preexisting conditions, such as heart disease, are exacerbated by pregnancy</li>
<li>Incidental deaths – are not usually related to pregnancy, for example, accidents.</li>
</ul>
<p>Suicide, homicide and deaths related to mental health, such as accidental overdose, are described as being due to “psychosocial causes”. </p>
<p>The <a href="http://www.who.int/en/">World Health Organization</a> <a href="http://www.who.int/bulletin/volumes/87/10/09-071001/en/">recently recommended</a> that deaths from psychosocial causes be categorised as “direct deaths” – directly attributable to the pregnancy. This recommendation has not yet been widely adopted. </p>
<p>In Australia, death by suicide is usually categorised as an “indirect” death if there is evidence the mother had a preexisting mental health condition.</p>
<p>Some international reports continue to class deaths by suicide and other psychosocial causes as “incidental” – not related to pregnancy. This means they don’t count towards the maternal mortality ratio, which is the international measure of the number of women dying during pregnancy or within 42 days of a pregnancy ending. </p>
<h2>How many deaths are we talking about?</h2>
<p>The latest AIHW <a href="http://www.aihw.gov.au/WorkArea/DownloadAsset.aspx?id=60129551117">report</a> on the issue notes:</p>
<blockquote>
<p>Maternal death in Australia is a rare event in the context of worldwide maternal deaths. In 2008–2012, there were 105 maternal deaths in Australia that occurred within 42 days of the end of pregnancy, representing a maternal mortality ratio (MMR) of 7.1 deaths per 100,000 women who gave birth.</p>
</blockquote>
<p>The AIHW data show there were 16 deaths in the psychosocial causes category, of which 12 were due to suicide. Death by psychosocial causes ranked equal first with heart disease. Death by suicide ranked equal second with sepsis, obstetric haemorrhage and non-obstetric haemorrhage.</p>
<p>Australian state and territory data also show suicide to be a prominent feature in maternal death. The <a href="https://www.health.qld.gov.au/improvement/networks/docs/qmpqc-report-2015-full.pdf">latest report</a> by the <a href="https://www.health.qld.gov.au/improvement/networks/qmpqc.asp">Queensland Maternal and Perinatal Quality Council</a> reported on 40 maternal deaths – including late maternal deaths – over 2013 and 2014.</p>
<p>Out of these 40 deaths, 12 (28%) were due to psychosocial causes – making it the largest category. Overall, suicide was the leading cause of maternal death in Queensland in 2013-14.</p>
<p>The <a href="http://www.hqsc.govt.nz/assets/PMMRC/Publications/tenth-annual-report-FINAL-NS-Jun-2016.pdf">most recent report</a> from New Zealand shows a similar picture. Between 2006 and 2013, 24% of maternal deaths were due to suicide. That’s 22 women out of 90 who died by suicide during pregnancy or within 42 days of their pregnancy ending.</p>
<h2>What don’t we know?</h2>
<p>What is unknown is the nature of the relationship between pregnancy and suicide. Not all pregnancies are diagnosed or recorded, especially if a woman is early on in her pregnancy when she dies by suicide. </p>
<p>Despite efforts to capture all deaths in pregnancy and in the postpartum period, experts still don’t know yet the full story. To gain a full understanding of the impact of pregnancy on suicide risk, we would need to compare the suicide rates for women who were or had recently been pregnant, and those who had not.</p>
<h2>Verdict</h2>
<p>The <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/MBSR-committees-obstetrics">Obstetrics Clinical Committee</a> was correct to say suicide is one of the leading causes of maternal death in Australia. If late maternal deaths are included in the analysis, it is the leading cause. <strong>– David Ellwood.</strong></p>
<hr>
<h2>Review</h2>
<p>I have reviewed this article and the author presents a fair and accurate view of the data.</p>
<p>Suicide has also been found to be a leading cause of maternal death in the <a href="http://onlinelibrary.wiley.com/store/10.1111/j.1471-0528.2010.02847.x/asset/j.1471-0528.2010.02847.x.pdf;jsessionid=3E32E4EC9E3834118E826600CD8E6AA5.f04t02?v=1&t=itnslmv2&s=3d1cb4776103d69bd1b539684185f1b6ed606c49">United Kingdom</a> and the <a href="https://www.ncbi.nlm.nih.gov/pubmed/22015873">United States</a>.</p>
<p>A paper my colleagues and I <a href="https://www.hindawi.com/journals/bmri/2013/623743/">published in 2013</a> showed that of the women who died by suicide and trauma in Australia between 2000 and 2006, 67% had a mental health condition, and/or a condition related to substance abuse.</p>
<p><a href="https://www.hindawi.com/journals/bmri/2013/623743/">We reported</a> a notable peak in deaths from suicide and trauma from nine to 12 months after the end of pregnancy when compared to deaths in the first three months after the end of a pregnancy. The World Health Organization wants to see more emphasis placed on this issue and clearer identification of deaths by suicide up to one year after the pregnancy ends.</p>
<p>We may be underestimating the numbers of late maternal deaths by suicide. If Australia follows the WHO recommendation to classify more deaths by suicide as directly attributable to pregnancy, we would likely see the numbers rise. <strong>– Hannah Dahlen</strong></p>
<hr>
<p><em>If this article has raised issues for you or if you’re concerned about someone you know, call <a href="https://www.lifeline.org.au/">Lifeline</a> on 13 11 14.</em></p>
<hr>
<p><div class="callout"> Have you ever seen a “fact” worth checking? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article. You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.</div></p><img src="https://counter.theconversation.com/content/65336/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Ellwood is Chair of the Queensland Maternal and Perinatal Quality Council, and a member of the National Maternal and Mortality Advisory Group. He is Deputy Head of School (Research) at Griffith University School of Medicine and Director of Maternal-Fetal Medicine at Gold Coast University Hospital. </span></em></p><p class="fine-print"><em><span>Hannah Dahlen has received funding from the NHMRC and the ARC. She is the national spokesperson for the Australian College of Midwives.</span></em></p>The clinical committee reviewing obstetrics services for the federal government’s Medicare review said suicide is one of the leading causes of maternal death in Australia. Is that true?David Ellwood, Professor of Obstetrics & Gynaecology, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/590802016-06-06T04:31:47Z2016-06-06T04:31:47ZRebate freeze will set GPs back $11 per general patient consultation, but they’re likely to charge them more<figure><img src="https://images.theconversation.com/files/125271/original/image-20160606-11611-3nvdyg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The amount doctors are paid for each consultation has traditionally increased year to year to account for the increased cost of care.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-284516555/stock-photo-female-consultant-working-at-desk-in-office.html?src=giW4oKnhqEXqIHFOUyd47A-1-60">Shutterstock</a></span></figcaption></figure><p>Health is shaping up to be one of the major election issues, with proposed changes to Medicare rebates and the Pharmaceutical Benefits Scheme (PBS) potentially costing patients more to receive health care.</p>
<p>Our new research shows that, by the end of June 2020, an average full-time GP will have lost A$109,000 in total income due to the freeze since July 2015. </p>
<p>By July 2019, this GP would need to charge their general patients an A$11.40 co-payment per consultation to make up for their lost income (relative to 2014-15). </p>
<p>Our modelling also shows the Coalition’s proposed increase to the PBS co-payment will most affect pensioners.</p>
<h2>What is the ‘freeze’?</h2>
<p>When GPs bulk-bill their patients, they directly charge the government for the service provided. What GPs are paid for each consultation depends on the <a href="http://www.mbsonline.gov.au/internet/mbsonline/publishing.nsf/Content/Home">Medicare Benefits Schedule</a> (MBS) item charged, with longer and more complex consultations earning them more. A “standard” consultation rebate is A$37.05, while a “long” consultation rebate is A$71.70.</p>
<p>Traditionally, the amount for each item increases year to year to account for the increased cost of care. This is called indexation. Since July 2014, the government has paused or “frozen” this indexation. The government initially planned this freeze to last until 2017-18. </p>
<p>At the time, <a href="https://theconversation.com/high-cost-of-gp-rebate-freeze-may-see-co-payments-rise-from-the-dead-38786">we modelled the effect of this initial freeze</a>. We found that by 2017-18, a bulk-billing GP would have a relative income loss of 7.1% (5.8%-8.5%) compared with their 2014-15 level of Medicare income. </p>
<p>We concluded that if GPs wished to keep bulk-billing their concessional patients (those with a government health care card), they would need to charge their non-concessional patients an A$8.43 (A$6.71-A$10.16) co-payment for each consultation to make up this loss. </p>
<p>The <a href="http://www.health.gov.au/internet/budget/publishing.nsf/Content/budget2016-glance.htm">2016 federal budget</a> extended the freeze until 2020. </p>
<p>Using the same assumptions we used in our previous modelling, we found that by 2019-20, a bulk-billing GP will have had a relative Medicare income loss of 11.6% compared to their 2014-15 income level (assuming a CPI of 2.5% a year). </p>
<p>However, CPI has been lower than earlier projected. The CPI projections in the <a href="http://budget.gov.au/2016-17/content/bp1/download/bp1.pdf">federal budget</a> were 1.25% in 2015-16, 2.0% in 2016-17 and 2.25% in 2017-18. Using these figures and assuming CPI of 2.25% per year in 2018-20, we estimate a relative income loss of 9.4%.</p>
<iframe src="https://datawrapper.dwcdn.net/QYNnp/3/" frameborder="0" allowtransparency="true" allowfullscreen="allowfullscreen" webkitallowfullscreen="webkitallowfullscreen" mozallowfullscreen="mozallowfullscreen" oallowfullscreen="oallowfullscreen" msallowfullscreen="msallowfullscreen" width="100%" height="430"></iframe>
<p>For an “average” GP (who bills <a href="http://ses.library.usyd.edu.au/bitstream/2123/13765/4/9781743324530_ONLINE.pdf">5,050 consultations a year</a>), this 9.4% income loss will equate to approximately A$26,300 in 2019-20 alone. For an average full-time GP (7,680 consultations a year, assuming 160 consultations per 40-hour week, 48 weeks a year) the loss of relative income will be A$40,000 in 2019-20. </p>
<p>By June 30 2020, a full-time GP will have lost a total of A$109,000 since 2014-15 due to the freeze.</p>
<h2>What does this mean for patients?</h2>
<p>The 9.4% reduction in income may force GPs who bulk-bill to cover their loss by charging general patients (who make up 45.6% of encounters) a co-payment. This co-payment would need to be A$11.40 to maintain 2014-15 levels of income.</p>
<p>Our estimates are conservative as they would be the minimum charge needed to make up for the GP’s lost income. We did not account for: </p>
<ul>
<li>administrative costs in implementing new billing systems</li>
<li>increased bad debt from patients who are charged, but never pay</li>
<li>the previous freeze of fees</li>
<li>lost income when a GP chooses to bulk-bill general patients facing financial hardship.</li>
</ul>
<p>It’s therefore likely that GPs who opt to charge a co-payment will charge more than our estimates. Further, after abandoning bulk-billing, some GPs may take the opportunity to charge more than required to merely recoup their rebate loss.</p>
<p>A poll by <a href="http://www.australiandoctor.com.au/news/latest-news/most-gps-think-rise-in-gap-fees-likely-survey-rev">Australian Doctor</a>, a newspaper for GPs, found that over the next 12 months, almost one-third of the responding GPs said they would charge A$35 or more. More than half the sample said they would charge their general patients A$25 or more for a standard consultation. </p>
<p>In 2013, the Australian Medical Association (AMA) recommended a fee of <a href="https://ama.com.au/ausmed/medicare-lags-further-behind-doctors-forced-increase-fees">A$73</a> for a standard GP consultation. That equates to a co-payment of over A$35 if GPs chose to charge this amount, and even this would only be at 2013 AMA rates.</p>
<p>The freeze is likely to have a greater impact on practices that serve socioeconomically disadvantaged people, as the practices would have to absorb the reduction in gross income, which may not be viable.</p>
<h2>Labor’s alternative</h2>
<p>Isn’t Labor proposing to reverse the freeze? </p>
<p>Well, yes and no. Labor announced it will reintroduce indexation from January 1, 2017. This means the freeze will remain until then. </p>
<p>Prime Minister Malcom Turnbull has dismissed the potential impact of Labor’s proposed increase, <a href="https://www.liberal.org.au/latest-news/2016/05/23/doorstop-premier-new-south-wales-merimbula-new-south-wales">saying</a>:</p>
<blockquote>
<p>If the indexation were to be restored from 1 July, the increase in the benefit paid to doctors would be around 60 cents. 60 cents. And by 2019-20, it would be A$2.50. </p>
</blockquote>
<p>This is true only if you are talking about the rebate for a single “Level B” item (which is below the average rebate per consultation) and if indexation was set at only 1.65% a year, well below the CPI projections in the 2016 federal budget.</p>
<p>A more accurate estimate would be to use the average rebate claimed per consultation (A$50) and use the CPI projections in the budget. This would mean an average increase per consultation of A$1 in 2016-17 and A$4.50 in 2019-20. </p>
<p>Compared with continuing the freeze, the indexation would mean an additional A$34,700 in earnings in 2019-20 alone for an average full-time GP and an additional A$84,400 combined to 2020.</p>
<h2>Changes to the cost of medication</h2>
<p>The government subsidises the cost of important medications through the PBS. General patients currently pay a maximum of <a href="http://www.pbs.gov.au/info/news/2016/01/2016-pbs-co-payment-safety-net-amounts">A$38.30</a> for a PBS-subsided medication and concessional patients pay a maximum of <a href="http://www.pbs.gov.au/info/news/2016/01/2016-pbs-co-payment-safety-net-amounts">A$6.20</a>. These thresholds are indexed yearly, usually in line with CPI.</p>
<p>In the <a href="http://www.budget.gov.au/2014-15/content/glossy/health/html/index.htm">2014 federal budget</a>, the Coalition proposed that these co-payments increase by A$5.00 and A$0.80 respectively – additional to the regular indexation. So far, this proposal has been blocked in the Senate, but associated savings are included in the May 2016 budget. </p>
<p>While it would seem that the A$0.80 increase for concessional patients is small, our <a href="http://sydney.edu.au/medicine/fmrc/beach/bytes/BEACH-Byte-2014-003.pdf">modelling from 2014</a> shows this increase would be larger in dollar terms for concessional patients. Nearly all medications prescribed for concessional patients face this increase, whereas only a fraction of medications prescribed to general patients cost more than the current threshold, so far fewer medications would incur an additional cost. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/125268/original/image-20160606-11611-ri0cts.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/125268/original/image-20160606-11611-ri0cts.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/125268/original/image-20160606-11611-ri0cts.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=263&fit=crop&dpr=1 600w, https://images.theconversation.com/files/125268/original/image-20160606-11611-ri0cts.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=263&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/125268/original/image-20160606-11611-ri0cts.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=263&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/125268/original/image-20160606-11611-ri0cts.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=331&fit=crop&dpr=1 754w, https://images.theconversation.com/files/125268/original/image-20160606-11611-ri0cts.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=331&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/125268/original/image-20160606-11611-ri0cts.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=331&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p>An average 45- to 64-year-old would pay an additional A$12.99 a year if they were a general patient and A$16.59 if a concessional patient. </p>
<p>The patients most impacted by the PBS co-payment increase will be aged pensioners, who on average would see their co-payment for medications increase by A$29.65 a year.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/125263/original/image-20160606-11600-15ap30y.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/125263/original/image-20160606-11600-15ap30y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/125263/original/image-20160606-11600-15ap30y.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=276&fit=crop&dpr=1 600w, https://images.theconversation.com/files/125263/original/image-20160606-11600-15ap30y.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=276&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/125263/original/image-20160606-11600-15ap30y.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=276&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/125263/original/image-20160606-11600-15ap30y.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=347&fit=crop&dpr=1 754w, https://images.theconversation.com/files/125263/original/image-20160606-11600-15ap30y.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=347&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/125263/original/image-20160606-11600-15ap30y.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=347&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p>These estimates are conservative as they only include the number of instances where a script is written and do not include any repeats scripts provided on these occasions.</p>
<p>Labor has announced <a href="http://www.abc.net.au/news/2016-05-22/election-2016-shorten-to-make-pbs-promise-in-sydney-seat-of-reid/7435076">it will not introduce this increase</a>, but will allow the regular threshold indexation (which both parties support).</p><img src="https://counter.theconversation.com/content/59080/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christopher Harrison has volunteered for the Greens.</span></em></p><p class="fine-print"><em><span>Helena Britt receives funding from DoH, multiple pharmaceuitical companies and Government instrumentalilites, all with research contracts with the University of Sydney, which allow complete intellectual freedom in publication of results from the BEACH program.
I am an Honorary Member of the RACGP.</span></em></p><p class="fine-print"><em><span>Clare Bayram does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>By 2020, the average GP will have lost A$109,000 in income due to the rebate freeze. To make up for this lost income, GPs will need to charge an A$11.40 co-payment per consultation.Christopher Harrison, Senior Research Analyst, Family Medicine Research Centre, Sydney School of Public Health, University of SydneyClare Bayram, Research Fellow, Family Medicine Research Centre, Sydney School of Public Health, University of SydneyHelena Britt, Associate professor, Director of the Family Medicine Research Centre, Sydney School of Public Health, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/596612016-05-20T02:01:17Z2016-05-20T02:01:17ZConfused about the Medicare rebate freeze? Here’s what you need to know<p>The Australian Labor Party <a href="http://www.abc.net.au/news/2016-05-19/labor-to-unveil-$12b-medicare-rebate-freeze-rollback/7426958">announced</a> yesterday that it will lift the Medicare rebate freeze if elected to office in the July federal election. We know health issues feature strongly in <a href="http://www.abc.net.au/news/2016-05-13/election-2016-policy-big-issues/7387588">election debates</a>, but what does this proposal actually mean for most of us? </p>
<h2>How Medicare works</h2>
<p>Medicare is our public health insurance system and funds a range of services such GP visits, blood tests, x-rays and consultations with other medical specialists. </p>
<p>The <a href="http://www.mbsonline.gov.au/internet/mbsonline/publishing.nsf/Content/Home">Medicare Benefits Schedule</a> (MBS) lists the services the Australian government will provide a Medicare rebate for. Medicare rebates do not cover the full cost of medical services and are typically paid as a percentage of the Medicare schedule fee. </p>
<p>GPs who bulk bill agree to charge the Medicare schedule fee and are directly reimbursed by government. </p>
<p>Those who don’t bulk bill are free to set their own prices for services. Patients pay for their treatment and receive a rebate from Medicare. There is often a gap between what patients pay for services and the amount that Medicare reimburses (A$37 for a GP consultation, for example). This gap is known as an out-of-pocket expense, as the patient is required to make up the difference out of his or her own pocket. </p>
<p>Under an indexing process, the Medicare Benefits Schedule fees are raised according to the Department of Finance’s <a href="http://www.healthandlife.com.au/wp-content/uploads/2015/10/Out-in-the-cold_-MBS-freeze-hits-today.pdf">Wage Cost Index</a>, a combination of indices relating to wage levels and the <a href="http://www.treasury.nt.gov.au/Economy/EconomicBriefs/Pages/ConsumerPriceIndex.aspx">Consumer Price Index</a>. </p>
<p>Organisations such as the Australian Medical Association (AMA) have long argued this process is insufficient and Medicare schedule fees have not kept up with <a href="https://ama.com.au/system/tdf/documents/Guide%20for%20Patients%20on%20How%20the%20Health%20Care%20System%20Funds%20Medical%20Care_7.pdf?file=1&type=node&id=40914">“real”</a> increases in costs to medical practitioners of delivering services. The rebate freeze compounds this financial challenge by continuing to keep prices at what the AMA and others argue are <a href="https://ama.com.au/system/tdf/documents/Guide%20for%20Patients%20on%20How%20the%20Health%20Care%20System%20Funds%20Medical%20Care_7.pdf?file=1&type=node&id=40914">“unsustainable levels”</a>. </p>
<h2>Where did the freeze come from?</h2>
<p>Although the Coalition is largely associated with this issue, Labor first introduced the Medicare rebate freeze in 2013 as a “temporary” measure, as part of a A$664 million budget savings plan. The AMA, the Coalition and others <a href="http://www.abc.net.au/news/2013-10-16/medicare-rebate-freeze-row-as-patients-face-increasing-costs/5026996">loudly criticised</a> the then government for the freeze. </p>
<p>On being elected to office, the Coalition put forward a number of proposals to reform the payment of health services and deal with rapidly rising health costs. Health expenditure had grown <a href="https://theconversation.com/tough-choices-how-to-rein-in-australias-rising-health-bill-13658">74% over the past decade</a> and was considered unsustainable in the long term. Primary care and medical services costs (including Medicare) had grown by more than 60%, representing an <a href="https://theconversation.com/tough-choices-how-to-rein-in-australias-rising-health-bill-13658">A$11 billion increase</a>.</p>
<p>The Coalition government proposed a number of ill-fated reforms including: </p>
<ul>
<li>a A$7 co-payment for GP, pathology and imaging services that would offset a A$5 reduction in Medicare rebates</li>
<li>a ten-minute minimum for standard GP consultations</li>
<li>a A$5 reduction in the Medicare rebate for “common GP consultations”.<br></li>
</ul>
<p>The retraction of all these proposals led Prime Minister Tony Abbott to declare co-payments <a href="http://www.abc.net.au/news/2015-03-03/tony-abbott-declares-gp-co-payment-dead,-buried-and-cremated/6275912">“dead, buried and cremated”</a>.</p>
<p>What did manage to stick was a continuation of the indexation freeze, initially for four years starting in July 2014 and further extended in the <a href="https://theconversation.com/federal-budget-2016-health-experts-react-58638">recent federal budget</a> to 2020. It has been estimated this will save <a href="https://ama.com.au/nomedicarefreeze">A$2.8 billion</a> from the health bill over the six years. </p>
<h2>Impact of the freeze</h2>
<p>The extended freeze means GPs and other medical specialists will be reimbursed the same amount for delivering health services in 2020 as they were in 2014. Doctors will pay more for their practices, staff, medical products, utilities and just about anything else that goes into running a medical practice. But the amount paid for medical services will remain static.</p>
<p>At the time the Coalition extended the freeze in 2014, <a href="https://theconversation.com/high-cost-of-gp-rebate-freeze-may-see-co-payments-rise-from-the-dead-38786">research</a> showed this move would have a greater impact on GP income over the initial four-year freeze than the proposed $A5 reduction in the GP rebate would have produced. In other words, failing to lift the reimbursement amount would ultimately prove more detrimental to GP funding than actually reducing the rebate amount. </p>
<p>Opponents to these changes argue this leaves medical services underfunded and may ultimately mean that additional payments will be passed on to patients. AMA president Brian Owler estimates the extended freeze will lead to each GP visit costing <a href="https://theconversation.com/shorten-government-would-end-freeze-on-medicare-rebates-59655">A$20 more</a> for patients. Some commentators referred to this as the introduction of the co-payment by the <a>“back door”</a>. </p>
<p>Some argued it could reduce the number of bulk-billing practices. Yet levels have risen steadily since 2013 to an all-time high of <a href="http://www.australiandoctor.com.au/news/news-review/why-are-gps-still-bulk-billing-at-record-levels">84.3%</a>. </p>
<p>What about costs passed on to patients? The AMA estimates suggest that at present the Medicare rebate (A$37) covers only about 50% of the <a href="http://www.afr.com/news/politics/election/federal-election-2016-bill-shorten-attacks-medicare-freeze-as-backdoor-tax-20160515-govfi2">recommended consulting fee</a>. This means that either medical practitioners cover the remainder of the costs themselves or pass this on to patients.</p>
<p>The impact of the extended freeze goes beyond simply reducing the gross income of GPs, or patients having to pay more for their health services. There are profound implications for equity. The effects of these types of policies are typically regressive in that the impact is often greatest on the <a>most disadvantaged</a> within our community. </p>
<p>Australia already has a large gap between the quality and timeliness of the public and private health systems. Changes such as this could potentially exacerbate this gap, by reducing the number of bulk-billing practices. This has the potential to create a two-tier system, where those who can pay receive the best care and those who can’t pay delay or avoid treatment, which ultimately exacerbates their condition. </p>
<p>The Coalition expects GPs and medical professionals to pass on costs to the patient, thereby sending <a href="https://theconversation.com/gp-co-payments-why-price-signals-for-health-dont-work-28857">“price signals”</a> about health services, with the aim of reducing the numbers of “unnecessary” consultations. However, the international evidence shows that increased co-payments for patients may <a href="https://www.mja.com.au/journal/2014/200/7/copayments-general-practice-visits">save a little money</a> in the short term, but can ultimately increase <a href="http://www.abc.net.au/am/content/2016/s4465085.htm">the number of people accessing hospitals</a> and other acute services, which are more expensive to run. </p>
<h2>Labor’s bid to end the freeze</h2>
<p>Labor’s announcement that it will end the freeze and restore indexation from January 1, 2017, has been costed at A$2.4 billion by 2019-20 and A$12.2 billion over a decade. </p>
<p>The AMA and other medical professional groups that have argued against these measures have welcomed this announcement. And Labor will no doubt be pleased to have such powerful interest groups on side (for now at least). But critics will ask where this money will be found in the budget and what will need to give in return. </p>
<p>Ultimately, just unfreezing the Medicare rebate will not make Australian health services more sustainable in the long term. There is an urgent need to reconsider how we incentivise and reimburse medical practitioners for the services they deliver and how we invest in preventive measures to avoid people becoming sick in the first place. </p>
<p>At a time when we see significant increases in levels of chronic and complex diseases, we need a health system that is designed to serve these issues and not simply episodic periods of illness. Without a broader mandate for change within the health system it is unlikely that this promise alone will lead to better health services for all of our community.</p><img src="https://counter.theconversation.com/content/59661/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Helen Dickinson receives funding from Federal Department of Health </span></em></p>Labor will lift the rebate freeze from 2017, while under the Coalition, GPs will be paid the same amount for delivering health services in 2020 as they were in 2014. So what does this mean for patients?Helen Dickinson, Associate Professor, Public Governance, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/538682016-01-31T19:05:21Z2016-01-31T19:05:21ZHealth in 2016: a cheat sheet on hospitals, Medicare and private health insurance reform<figure><img src="https://images.theconversation.com/files/109598/original/image-20160129-27328-1xkzw9w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The scene for change has been set. But will the health minister act?</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-257615863/stock-photo-icu-room-in-a-hospital-with-medical-equipments-and-patient.html?src=mlFsjbYHq6Yj6KH9zq685A-1-70">Chaikom/Shutterstock</a></span></figcaption></figure><p>We start 2016 as we started 2015 – with big challenges for the health system and uncertainty as to how governments will meet them. </p>
<p>The health care headaches in 2016 are, in fact, the same ones we faced a decade ago, albeit different in severity and symptoms. They include population growth, ageing and the rise of chronic disease; inequality in access to care and health outcomes; technological change (the good, the bad and the expensive) and the seemingly inexorable rise in health costs.</p>
<p>Circling for landing are three major reviews on private health insurance, primary care, and low-value care. Their recommendations, and the government’s response to them, are very much up in the air. </p>
<p>Adding to the uncertainty is the broader review of federalism and its consequences for public hospital funding, along with speculation around the 2016 federal election date and what each party’s Santa sack of election promises might contain.</p>
<h2>Private health insurance</h2>
<p>The number of people with private health insurance continues to <a href="http://www.apra.gov.au/PHI/Publications/Documents/1511-MemCov-20150930.pdf">creep up</a> but the market is not in good shape. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/109594/original/image-20160129-27342-46pl67.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/109594/original/image-20160129-27342-46pl67.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=380&fit=crop&dpr=1 600w, https://images.theconversation.com/files/109594/original/image-20160129-27342-46pl67.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=380&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/109594/original/image-20160129-27342-46pl67.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=380&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/109594/original/image-20160129-27342-46pl67.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=477&fit=crop&dpr=1 754w, https://images.theconversation.com/files/109594/original/image-20160129-27342-46pl67.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=477&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/109594/original/image-20160129-27342-46pl67.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=477&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p>The rebate is one of the fastest growing areas of government health expenditure and complaints about the product abound. High levels of coverage are being <a href="https://theconversation.com/private-health-insurance-carrot-and-stick-reforms-have-failed-heres-why-38501">achieved through</a> carrots (the rebate) and sticks (penalties for the uninsured) rather than genuine consumer appeal. </p>
<p>One solution being floated is for the whole subsidy framework to be thrown out. Instead of subsidising private insurers, which pay private hospitals, the government could subsidise private hospitals directly. </p>
<p>Government advisers are <a href="http://www.pc.gov.au/research/completed/efficiency-health/efficiency-health.pdf">impressed</a> by the efficiency gains that activity-based funding (paying hospitals per procedure rather than a lump sum) brought to public hospitals and believe similar improvement can be brought to the private sector. </p>
<p>The mechanism to achieve this could be a <a href="https://theconversation.com/forget-health-takeovers-heres-how-to-fix-hospital-funding-and-chronic-disease-care-44141">Hospital Benefits Schedule</a> which, like the <a href="http://www.mbsonline.gov.au/internet/mbsonline/publishing.nsf/Content/Home">Medicare Benefits Schedule</a>, would prescribe a schedule fee for private hospital care, based on existing Commonwealth payments for public hospital services under activity-based funding. The same schedule may later be used for public hospitals, replacing grants to the states. </p>
<p>However, it will only be politically palatable if it is cost neutral for consumers or comes with reduced private health insurance sticks.</p>
<p>The devil is in the detail of a new policy such as this. Will payment be to the hospital or surgeon? Will it cover the surgeon’s fee, as in public hospitals? Will it cover diagnostics? Without this information it is impossible to forecast the impact of the shift.</p>
<h2>Public hospitals</h2>
<p>This will be a challenging year for public hospitals. Major <a href="https://theconversation.com/budget-takes-hospital-funding-arrangement-back-to-the-future-26701">reductions</a> in Commonwealth funding for hospital admissions – which continue to grow – will kick in from 2017, and states are likely to start the belt-tightening early. </p>
<p>The cuts far exceed the <a href="https://theconversation.com/public-hospital-efficiency-gains-could-save-1-billion-a-year-23779">productivity gains that can be made</a>, so a reduction in services is certainly possible. Efficiency may be improved somewhat by the ongoing expansion of activity-based funding to mental health and “sub-acute” care such as rehabilitation and palliative care. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/109601/original/image-20160129-27334-1pxly0x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/109601/original/image-20160129-27334-1pxly0x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/109601/original/image-20160129-27334-1pxly0x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/109601/original/image-20160129-27334-1pxly0x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/109601/original/image-20160129-27334-1pxly0x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/109601/original/image-20160129-27334-1pxly0x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/109601/original/image-20160129-27334-1pxly0x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Productivity improvements can be made but not enough to meet the funding shortfall.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-280536563/stock-photo-empty-hospital-cot-in-a-corridor.html?src=mlFsjbYHq6Yj6KH9zq685A-1-7">Anna Jurkovska/Shutterstock</a></span>
</figcaption>
</figure>
<p>The possible changes to private health insurance and a Hospital Benefits Schedule may be one way to put money from the federal government back into the system, but there is no sign that Treasurer Scott Morrison is keen to loosen the purse strings.</p>
<p>Hospitals will also be under pressure to lift quality. Hospitals face increasingly stringent <a href="http://www.safetyandquality.gov.au/our-work/clinical-care-standards/">“quality standards” with tougher monitoring</a> covering a broader scope of issues, including <a href="http://www.myhospitals.gov.au/our-reports/cancer-surgery-waiting-times/october-2014/report">access and timeliness</a>. </p>
<p>Meanwhile, the increasing array of <a href="https://theconversation.com/australian-medical-association-report-shows-public-hospitals-under-the-pump-53750">publicly available data</a> is putting variation in hospital performance under the spotlight more and more, with commensurate calls for greater accountability.</p>
<h2>Medicare</h2>
<p>Two independent reviews of Medicare are expected to land sometime in 2016. </p>
<p>The first examines primary care. It could address any number of challenges, including chronic disease management, “six-minute medicine”, <a href="https://theconversation.com/au/topics/gp-co-payment">co-payments</a>, <a href="https://theconversation.com/high-cost-of-gp-rebate-freeze-may-see-co-payments-rise-from-the-dead-38786">frozen rebates</a>, and the growing corporatisation of general practice. </p>
<p><a href="https://theconversation.com/forget-health-takeovers-heres-how-to-fix-hospital-funding-and-chronic-disease-care-44141">Management of chronic diseases</a> such as diabetes, heart disease and cancer poses the main challenge. The rise of chronic disease is imposing big costs on a system that wasn’t designed to provide the complex, continuous and coordinated care now needed. </p>
<p>The government will have to consider far-reaching reform with only limited and equivocal evidence to draw on. Options on the table include a <a href="https://theconversation.com/new-funding-models-are-a-long-term-alternative-to-medicare-co-payments-35382">shift in the balance</a> of payments to practices, with less emphasis on payment for attendances (fee-for-service) and more emphasis on payment for care over the episode of illness or year (capitation payments). </p>
<p>There may be other changes in payment structures. The government’s long-standing desire to reduce perceived incentives for six-minute medicine may see a <a href="https://theconversation.com/gp-co-payment-2-0-a-triple-whammy-for-patients-35334">minimum consultation time</a> imposed on the standard (level B) fee. </p>
<p>If sense prevails we won’t see a resurrection of the <a href="https://theconversation.com/medicare-co-payment-timeline-38302">GP co-payment policy</a> zombie. We should, however, see an end to the freeze on medical rebates; the only question being when and with what trade-offs.</p>
<p>A further issue to be addressed is the shift toward practices owned by corporate chains that <a href="https://theconversation.com/you-call-it-love-i-call-it-payola-untangling-pharmas-close-ties-with-doctors-8195">profit from</a> referrals to and provision of diagnostic services, such as blood tests and X-rays. The implications of changed ownership structures for practice are not at the forefront of practice payment redesign but should be.</p>
<p>The second <a href="https://theconversation.com/medicare-review-must-deal-with-elephant-in-the-room-incentives-40819">review</a> looks at quality and cost-effectiveness of items on the Medicare schedule. The review got off to a rocky start with wild <a href="http://www.abc.net.au/4corners/stories/2015/09/28/4318883.htm">claims</a> about 30% waste in the system, and release of its <a href="http://www.sbs.com.au/news/article/2015/12/28/ama-concerned-medicare-cuts-will-raise-healthcare-costs">first list</a> of items targeted for delisting in the sleepy period between Christmas and New Year. </p>
<p>The work on modernising the schedule will come to fruition in 2016. There will be individual and group losers in this process who undoubtedly will scream loudly with varying levels of effectiveness. </p>
<h2>What should you expect?</h2>
<p>It isn’t yet clear whether Health Minister Sussan Ley’s appetite for reviews portends massive reform to the sector, or simply a politically judicious preference for treading water in a portfolio still reeling from tumultuous management by her predecessor. However, the auguries are good for the former. </p>
<p>The scene for change has been set, at least with the medical profession. Respectable leaders are engaged and leading some of the review processes. Hopefully this will be the year the health system rises to meet the big challenges of 21st-century health care.</p><img src="https://counter.theconversation.com/content/53868/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Duckett does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>We start 2016 with big challenges for the health system and uncertainty as to how governments will meet them.Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/408272015-05-06T04:14:38Z2015-05-06T04:14:38ZWant to reform Medicare? Target specialist services, not primary care<figure><img src="https://images.theconversation.com/files/80403/original/image-20150505-8376-y86el5.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">GP attendances make up just one-third of Medicare expenditure.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-94624057/stock-photo-doctor-inspecting-muslim-baby-boy-tongue-for-viral-infection.html?src=v5Gl3ZyZq180_rvdktLPWA-7-37">Ezz Mika Elya/Shutterstock</a></span></figcaption></figure><p>The government’s latest attempt at Medicare reform is a review of Medicare-funded items. The aim is to improve and modernise clinical practice by de-funding <a href="https://www.mja.com.au/journal/2012/197/10/over-150-potentially-low-value-health-care-practices-australian-study?0=ip_login_no_cache%3D9f5d5d19ea3ec3101135c1eb8c310c2f">low-value and ineffective health services</a>. Savings will go to fund the promised <a href="http://www.news.com.au/national/medical-research-future-fund-cure-for-cancer-delayed/story-fncynjr2-1227329143739">medical research future fund</a>. </p>
<p>But it <a href="http://www.abc.net.au/am/content/2015/s4221124.htm">seems likely</a> the Coalition is also motivated by a long-term imperative to <a href="http://www.smh.com.au/federal-politics/political-news/australia-running-out-of-money-for-medicare-hockey-20140221-335j0.html">constrain Medicare spending growth</a>.</p>
<p>A policy that has already been enacted is the <a href="http://amavic.com.au/icms_docs/187873_Freeze_on_Medicare_rebates.pdf">Medicare rebate freeze</a>, which was introduced in 2013 and extended by the government last year for a further two years. The freeze is a real-terms cut that grows over time as costs rise and rebates don’t keep up. It is a very crude policy measure, treating all Medicare items as equally deserving of cuts. </p>
<p>However, some rebate cuts and freezes will have more of an impact on patients than others. We therefore need to look closely at the components of Medicare spending to inform more targeted savings measures. </p>
<p>Medicare Benefits Schedule (MBS) spending has a range of small categories but is broadly divided into four main parts: </p>
<ul>
<li>GP attendances (A$6.4bn, 33%)</li>
<li>pathology and diagnostic imaging (A$5.5bn, 28%)</li>
<li>in-hospital specialist procedures (A$3.7bn, 19%)</li>
<li>out-of-hospital specialists services (A$2.4bn, 12%). </li>
</ul>
<p>Cutting rebates for GP services (including the current rebate freeze) will hit all Australian patients, including those on low incomes and in the worst health. Bulk-billing rates will surely fall (although there is <a href="https://theconversation.com/how-likely-are-doctors-to-charge-more-due-to-the-rebate-freeze-38375">no evidence of this as yet</a>) and out-of-pocket payments will increase.</p>
<p>In contrast, other areas of the MBS do not benefit everybody equally and in fact tend to favour the better off. </p>
<p>Take the A$3.7bn spent on in-hospital specialist services as an example. This area of Medicare spending goes towards subsidising treatment of private patients, mainly in private hospitals. As such, this spending does not benefit us all but overwhelmingly the <a href="http://phiac.gov.au/wp-content/uploads/2013/05/Qtr-Stats-Mar13.pdf">47%</a> of Australians with private health insurance. Public patients are funded through a different funding channel via the state government budgets.</p>
<p>To explore this point further we can use Medicare data to explore the contrasts in private health insurance coverage and Medicare spending in different small areas of the country using data from the <a href="http://www.adelaide.edu.au/phidu/data-archive/sha-aust/2008-2014/phidu_data_2014_ml_aust.xls">Public Health Information Development Unit</a>.</p>
<p>The affluent Inner-East Melbourne Medicare Local, for instance, has one of the highest rates of private health insurance coverage at 63% and attracts A$135 million in Medicare spending on in-hospital specialist procedures, 26% of its total Medicare spending. </p>
<p>In contrast, just a few kilometres away in the less affluent South-East Melbourne Medicare Local, there is below-average private health insurance coverage of 38%. This lower-coverage area attracts only 9% of its Medicare spending, A$32 million, on in-hospital specialist procedures. </p>
<p>For anybody who knows Melbourne suburbs, this is a part of the Medicare budget that benefits well-off Camberwell and Kew more than lower-socioeconomic Cranbourne and Dandenong. This pattern is repeated across the data; wealthy areas with high levels of health insurance coverage have larger amounts of Medicare spending on in-hospital specialist procedures.</p>
<p>So cutting MBS rebates for in-hospital specialist procedures could be preferred to cutting GP rebates on equity grounds, but there could be efficiency reasons too. We know that <a href="http://health.gov.au/internet/main/publishing.nsf/Content/1A9DB6D72BD5879ACA257BF0001AFE28/$File/Copy%20of%20MBS%20Statistics%2020144%20DecQtr%2020150120.pdf">more than 80% of GP services are bulk-billed</a>, as opposed to around 40% for in-hospital specialist services. </p>
<p>One reason is that GPs operate in relatively competitive markets, in metropolitan areas at least, and can only make small profit margins. Rebate cuts are therefore very likely to lead to GPs being forced to charge higher co-payments to more of their patients, leading to higher out-of-pocket fees for everybody.</p>
<p>In contrast, the market for in-hospital private specialist care seems much less competitive. Patients are often uninformed about the final price of their treatment in hospitals and are usually allocated to doctors on the recommendation of a GP, or through default if an emergency admission. This removes the market incentive for specialists to keep their prices low to attract patients.</p>
<p>Another complication is health insurance. Private health insurance usually covers some or all of the gap between the Medicare rebate and the price specialist charge. This also removes the incentive to keep prices low.</p>
<p>Overall, it’s reasonable to assert that the market for in-hospital specialist procedures is less “competitive” than for GP services. Economic theory tells us that in this situation, when their subsidy is reduced through a cut in the rebate, specialists will increase their prices by less than GPs.</p>
<p>While the Medicare review should consider many strategies for an efficient reform of the system including the <a href="https://theconversation.com/medicare-review-must-deal-with-elephant-in-the-room-incentives-40819">role of incentives</a> and a <a href="https://www.mja.com.au/journal/2012/197/10/over-150-potentially-low-value-health-care-practices-australian-study?0=ip_login_no_cache%3D9f5d5d19ea3ec3101135c1eb8c310c2f">culling of ineffective treatments</a>, the big differences in equity and efficiency across the categories of Medicare spending should be of paramount importance. </p>
<p>Medicare’s dual roles in funding universal primary care and in subsidising private patients in secondary care are not of equal benefit. The latter should shoulder the burden of cuts more than the former.</p>
<p><em>* Medicare spending figures quoted in this article come from the Department of Human Services Medicare Australia Statistics <a href="http://medicarestatistics.humanservices.gov.au/statistics/mbs_group.jsp">website’s</a> 2013/14 financial year data.</em></p><img src="https://counter.theconversation.com/content/40827/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Sivey currently receives funding from the Australian Research Council and has previously been funded by the National Health and Medical Research Council and Health Workforce Australia.</span></em></p>Cutting Medicare rebates for GPs affects us all, whereas in-hospital private patient rebates, which only benefit the better-off, are ripe for the razor gang.Peter Sivey, Senior Lecturer, Department of Economics and Finance, La Trobe UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/392492015-04-01T19:11:22Z2015-04-01T19:11:22ZThe debate we’re yet to have about private health insurance<p><em>In the final instalment of our series <a href="https://theconversation.com/au/topics/private-health-insurance-in-australia">Private health insurance in Australia</a>, Lesley Russell asks whether Australians need private health insurance, and what a two-tiered system means for quality, access and equity.</em></p>
<hr>
<p>The <a href="https://theconversation.com/au/topics/private-health-insurance-in-australia">six previous papers in this series</a> highlight the poorly defined role private health insurance plays in the funding and delivery of Australian health care, and how the Abbott government might allow this role to expand.</p>
<p>But major changes to Australia’s iconic Medicare system should not happen by stealth. They require full analysis and debate about whether a more integrated public-private system is a feasible option that fits with Australian values and can improve efficiency in health care financing. </p>
<p>Successive governments of both persuasions have failed to convincingly articulate why Australians need what is increasingly a duplicate health care system – with duplicate costs for many – and why the federal financial contribution to private health insurance should be so substantial. The <a href="http://www.budget.gov.au/2014-15/content/bp1/html/index.htm">2014-15 Budget Papers</a> show the cost of the private health insurance rebate will grow from A$5.997 billion in 2013-14 to A$7.187 billion by 2017-18. </p>
<p>Private health insurance is variously seen as an essential feature of a “balanced” health care system comprising both publicly and privately funded and provided health care, or as an instrument of patient choice and responsibility that relieves the pressures in increasingly strained public services. </p>
<p>Most recently, the <a href="http://www.ncoa.gov.au/report/phase-one/recommendations.html">National Commission of Audit</a> (NOCA) has raised the possibility of requiring higher-income earners to take out private health insurance for basic health services in place of Medicare. Both the NCOA and the <a href="http://competitionpolicyreview.gov.au/files/2015/03/Competition-policy-review-report_online.pdf">Harper Competition Policy Review</a> advocate an expanded role and less regulation for the private health insurance sector.</p>
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<p>These are ideological arguments and much of the dilemma facing those who would work to implement effective policy in this area is the dearth of information about what drives people to purchase health insurance and to use it.</p>
<p>Since 1999 a <a href="http://theconversation.com/private-health-insurance-means-test-passes-what-now-5356">raft of government initiatives</a> – financial carrots and sticks – have aimed to encourage more Australians, especially those who are better off, to purchase private health insurance. </p>
<p>For the most part, these were not evidence-based and consequently have had little or no impact. Only the Lifetime Health Cover Loading and the “run for cover” campaign <a href="http://www.researchgate.net/publication/4998560_Response_Run_for_Cover_Now_or_LaterThe_impact_of_premiums_threats_and_deadlines_on_supplementary_private_health_insurance_in_Australia">had an impact</a> and this has been interpreted as a response to a deadline and an advertising blitz, rather than a pure price response. </p>
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<a href="https://theconversation.com/private-health-insurance-carrot-and-stick-reforms-have-failed-heres-why-38501">Private health insurance 'carrot and stick' reforms have failed – here's why</a>
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<p>University of Adelaide economist Terence Cheng has <a href="https://www.melbourneinstitute.com/downloads/policy_briefs_series/pb2013n03.pdf">estimated</a> the price elasticity of demand and found that a 10% increase in premiums would result in a reduction in private health insurance coverage of less than 2%. So most Australians who have private health insurance would retain it even if the rebate was completely dropped.</p>
<p>The prevailing wisdom is that people purchase private health insurance to have their choice of doctor and hospital facilities, but as <a href="https://theconversation.com/explainer-why-do-australians-have-private-health-insurance-38788">researcher Sophie Lewis and her colleagues at the University of Sydney</a> have found, it is really more about shorter wait times for hospital procedures, perceived quality of care and “peace of mind”. </p>
<p>Having private health insurance provides the ability to “jump the queue” to access a range of elective procedures in private hospitals. But this comes at a price for all patients. </p>
<p>People with private health insurance are likely getting services ahead of people without insurance but with greater need. The private patient who gets their orthopedic or cataract surgery within weeks rather than months will very often end up with substantial, unexpected out-of-pocket costs. </p>
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<a href="https://theconversation.com/explainer-why-do-australians-have-private-health-insurance-38788">Explainer: why do Australians have private health insurance?</a>
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<p>Contrary to government claims, the increase in services delivered in private hospitals has <a href="https://theconversation.com/private-health-insurance-carrot-and-stick-reforms-have-failed-heres-why-38501">done nothing to ease</a> the pressure on public hospitals and in fact waiting times for urgent procedures in public hospitals has increased. </p>
<p>Private health insurance does not buy extra quality and safety either. The <a href="http://www.pc.gov.au/inquiries/completed/hospitals/report/hospitals-report.pdf">Productivity Commission</a> found that the larger, most comparable public and private hospitals have similar adjusted premature death ratios. And team-based care in large public hospitals means better care coordination.</p>
<p>The peace of mind that private health insurance is supposed to bring is very often illusionary. Sometimes it’s the realisation that certain procedures or prostheses are not covered; more often it’s the shock of unexpected out-of-pocket costs. More than 20% of private care is paid for by <a href="http://phiac.gov.au/wp-content/uploads/2014/10/PHIAC-Annual-Report-2013-14.pdf">patients’ out-of-pocket costs</a>, which in 2014 averaged A$285 per hospital episode.</p>
<p>The mix of levies, surcharges and rebates – and funds that constantly change their policies – make it difficult for even astute consumers to judge the true cost and value of their private health insurance. </p>
<p>In fact, many people <a href="https://theconversation.com/explainer-why-do-australians-have-private-health-insurance-38788">know little</a> about the policy they purchase – what it covers, how much it covers, whether it is good value and suited to their needs. </p>
<p>The Commonwealth government’s decision to subsidise private health insurance means it has a substantial financial stake in the private sector alongside its existing stake in the public sector. However, while there are incentives to encourage the purchase of private health insurance, there is no requirement for it to be used. </p>
<p>About a quarter of people with private health insurance choose to <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/4839.0.55.0012009">use the public system</a>. Therefore, a significant proportion of the private health insurance rebate is effectively wasted as people purchase cover for financial rather than health reasons.</p>
<p>Public policy experts <a href="https://cpd.org.au/wp-content/uploads/2012/01/CPD_DP_Menadue_McAuley_PHI_2012.pdf">Ian McAuley and John Menadue</a> have made the case that private health insurance is an expensive and clumsy way to do what the tax system and Medicare does better: distribute funds to those who need health care and the effective management of health care costs. </p>
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<p><a href="http://www.oecd.org/els/health-systems/33698043.pdf">International evidence</a> shows that private health insurance decreases cost controls and it <a href="http://johnmenadue.com/blog/?p=2884">has been argued</a> that gap insurance has underwritten the dramatic growth in specialist fees. Further, pushing higher income earners (who generally have better health) to take out private health insurance, and then increasingly prejudicing access to services in their favour ensures a <a href="http://www.euro.who.int/__data/assets/pdf_file/0007/96433/E89731.pdf">widening of existing health disparities</a>.</p>
<p>In the absence of a clearly stated and managed role for private health insurance – either as competitor or collaborator – it is effectively undermining the power of Medicare as a single payer and the role of Medicare as a universal provider. This situation is predicted to unravel further, as the Abbott government <a href="http://www.news.com.au/national/private-health-insurers-set-to-manage-patients-gp-care/story-fncynjr2-1227031109206">signaled</a> its agenda to allow private health insurance to play an expanded role in primary care. </p>
<p>Some of larger funds are already expanding their activities in this sector, but with little oversight. </p>
<p>Last year Medibank Private began a program in Queensland that guarantees Medibank members same day GP appointments, fee-free care, after-hours GP visits and a range of health assessments. Medibank <a href="http://www.smh.com.au/business/medibanks-first-numbers-from-gp-trial-20141016-1175sp.html">claims</a> the trial is operating within the bounds of the law because it pays only for administrative costs, as opposed to funding the doctors directly. </p>
<p>The concerns this raises about the generation of a two-tiered health system are further fuelled by the possibility that private health insurance funds were <a href="http://www.news.com.au/national/private-health-insurers-set-to-manage-patients-gp-care/story-fncynjr2-1227031109206">eligible to tender</a> to run the new Primary Health Networks.</p>
<p>It’s an indictment of the passivity of federal government policymakers that private health insurance funds are more willing to kick start the innovative initiatives that are needed to deliver more proactive preventive care, better care coordination and a greater focus in health outcomes. </p>
<p>It’s more troubling that these initiatives are currently occurring in a policy vacuum with a narrow focus on solutions led by the funds for the benefit of their members. This will not assist the millions of Australians who don’t have private health insurance and could have a major impact on the equity and efficiency of the health care system and the budget bottom line.</p>
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<p><em>If you missed any <a href="https://theconversation.com/au/topics/private-health-insurance-in-australia">Private Health insurance in Australia</a> articles or our <a href="https://theconversation.com/infographic-a-snapshot-of-private-health-insurance-in-australia-39237">infographic</a>, visit the <a href="https://theconversation.com/au/topics/private-health-insurance-in-australia">series page</a>.</em></p><img src="https://counter.theconversation.com/content/39249/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lesley Russell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In the final instalment of our series, Lesley Russell asks whether Australians need private health insurance, and what a two-tiered systems means for quality, access and equity.Lesley Russell, Adjunct Associate Professor, Menzies Centre for Health Policy, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/386472015-03-31T19:06:54Z2015-03-31T19:06:54ZAllow Aussies to opt out of Medicare and rely on private health insurance<figure><img src="https://images.theconversation.com/files/76505/original/image-20150330-1229-1c1gs7a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Medicare and private health insurance partly overlap for hospital entitlements. But nobody can purchase full coverage for health-care costs.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-172174124/stock-photo-side-view-of-medical-team-and-man-using-staircase-in-hospital.html?src=mCMExOTXOnVDqrAEYkstyA-2-87">Tyler Olson/Shutterstock</a></span></figcaption></figure><p>Most experts agree Australia’s health financing system needs a reboot to reduce the <a href="https://theconversation.com/private-health-insurance-carrot-and-stick-reforms-have-failed-heres-why-38501">distortions and inefficiencies</a> created by the overlapping coverage between Medicare and private health insurance.</p>
<p>Any new such financing system would need to carefully balance competition and choice, with affordability of coverage and equal access to quality care. It also needs the flexibility to respond to changing health-care needs. </p>
<p>One solution is to allow individuals to opt out of Medicare and require them to buy private health insurance. This voluntary opt-out model, with risk-based government subsidies, would make private cover fully substitutable for Medicare. </p>
<h2>Fragmentation and overlap</h2>
<p>A striking paradox in the current public/private mix in health care financing in Australia is that <a href="https://theconversation.com/infographic-a-snapshot-of-private-health-insurance-in-australia-39237">almost 50% of Australians</a> have two insurances: Medicare and private health insurance. </p>
<p>These insurances partly overlap for hospital entitlements. But nobody can purchase full coverage for health-care costs. General practice care is funded by Medicare, but because GP fees are virtually uncapped and private health insurance is <a href="http://www.afr.com/business/health/pharmaceuticals/two-tier-usstyle-health-system-claim-20140605-ivz38">legally precluded</a> from paying for these services, individuals may face high out-of-pocket costs at the point of service. </p>
<p>Insurers aren’t involved in coordinating effective and efficient primary care interventions for patients – particularly those with chronic diseases – to benefit from care as a continuum. And because patients with private health insurance can go on to choose their doctor and hospital, GPs can’t fully exercise their gate-keeping functions.</p>
<p>Another quirk of the current system is that private patients admitted to public or private hospitals face <a href="https://theconversation.com/explainer-why-do-australians-have-private-health-insurance-38788">gaps in payments</a> covered by private health insurance doctors’ fees, hospital stays and equipment. These gaps are not fully “known” before the treatment occurs are on top of other out-of pockets payments structural to the insurance policy, such as premiums and excesses. </p>
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<img alt="" src="https://images.theconversation.com/files/76507/original/image-20150331-1245-1dr2kwg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/76507/original/image-20150331-1245-1dr2kwg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/76507/original/image-20150331-1245-1dr2kwg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/76507/original/image-20150331-1245-1dr2kwg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/76507/original/image-20150331-1245-1dr2kwg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/76507/original/image-20150331-1245-1dr2kwg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/76507/original/image-20150331-1245-1dr2kwg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Private health insurance cannot provide coverage for primary care serices.</span>
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<p>Of course, there are sound arguments for not having full coverage of all potential health-care costs. The “moral hazard” of using more or more expensive services when someone else is paying the bill can be mitigated by making consumers responsible for part of their health care bills. </p>
<p>But such design is questionable on both equity and efficiency grounds. People on low-incomes, for instance, might forgo necessary care, like going to the GP today, which might result in more costly treatment at hospital later on. </p>
<p>Others might decide not to use private health insurance and join the queue in the public hospital system to avoid the risk associated with “unknown” gaps. But in so doing they will affect overall waiting times and quality by delaying treatment.</p>
<p>The present design <a href="https://theconversation.com/private-health-insurance-carrot-and-stick-reforms-have-failed-heres-why-38501">hasn’t (yet) shown to be effective</a> in reducing the pressure on public finances or in providing stakeholders with the right incentives to maintain a stable and reasonable waiting times in the public sector. </p>
<p>In addition, it hasn’t structurally dealt with the problems of stability in the private health insurance industry and the long-term scenario of a two-tier system, where the wealthy have stronger incentives than the less well off to take out private health insurance. </p>
<p>This problem wasn’t addressed by the <a href="https://theconversation.com/private-health-insurance-carrot-and-stick-reforms-have-failed-heres-why-38501">Howard-era changes</a> to the private health insurance rebate and the Medicare Levy Surcharge. Nor has it been mitigated by the recent introduction of means-testing. And it will potentially be reinforced as publicly participated funds (such as Medibank) have been privatised, increasing competition in the market. </p>
<h2>Opting out of Medicare</h2>
<p>Allowing individuals to voluntarily opt out of Medicare and require them to buy – and solely rely on – private health insurance is one way to address the above distortions. It would also encourage efficiency and choice, while keeping up standards of care and guaranteeing affordability. </p>
<p>Australians would be given the opportunity to choose between public or private insurers, with Medicare acting as the default fund. Those choosing to opt out would receive a risk-adjusted subsidy towards the cost of their premium. </p>
<p>Risk-adjusted subsidies would reflect the expected costs of health services contained in the statutory benefits package that are standard and compulsory for all operating funds to provide, including Medicare. As a result, high-risk individuals would receive larger subsidies than people who are low-risk. </p>
<p>Risk-adjusted subsidy schemes have been in place in various forms in Switzerland, <a href="https://theconversation.com/creating-a-better-health-system-lessons-from-the-netherlands-30270">the Netherlands</a> and Germany since the 1990s. These programs have delivered universal access while maintaining high-quality health-care services, even during the global financial crisis.</p>
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<span class="caption">Risk-adjusted subsidies would reflect the expected costs of health services.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-153098018/stock-photo-team-of-surgeon-in-uniform-perform-operation-on-a-patient-at-cardiac-surgery-clinic.html?src=pp-photo-191473340-FzgFfngPbAUyP8qYlXA2gg-5&ws=1">Dmitry Kalinovsky/Shutterstock</a></span>
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<p>In Australia, such a scheme would provide stronger incentives for efficiency, a more stable private health insurance market with affordable premiums, and a reduction in waiting lists in the public sector. Under the new scheme, public and private services would be substitutable by both Medicare and private health insurance holders. </p>
<p>The scheme would require open enrolment, meaning Medicare and private health insurers must accept applicants without any discrimination. And, importantly, private health insurers would have to cover all types of health services specified in a nationally defined statutory benefits package (identical to Medicare’s) and cover all related expenses. </p>
<p>The current <a href="https://theconversation.com/private-health-insurance-carrot-and-stick-reforms-have-failed-heres-why-38501">regulatory restrictions and subsidies</a> for private health insurance would be replaced by risk-adjusted subsidies and, if necessary, by mandatory reinsurance and premium bands constraining the allowable variation in premiums. </p>
<p>Australian health-care system faces many real challenges. We need a coherent vision followed by consistent action to design and implement the policy changes necessary to guarantee a modern, sustainable and durable health-care financing system capable of responding efficiently and equitably to the evolving needs of Australians. </p>
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<p><em><strong>Click on the links below to read the other instalments of <a href="https://theconversation.com/au/topics/private-health-insurance-in-australia">Private Health Insurance in Australia</a>:</strong></em></p>
<p><a href="http://theconversation.com/can-private-health-insurers-justify-a-6-2-premium-increase-38390">Can private health insurers justify a 6.2% premium increase?</a> </p>
<p><a href="https://theconversation.com/infographic-a-snapshot-of-private-health-insurance-in-australia-39237">INFOGRAPHIC: A snapshot of private health insurance in Australia</a> </p>
<p><a href="https://theconversation.com/explainer-why-do-australians-have-private-health-insurance-38788">Explainer: why do Australians have private health insurance?</a> </p>
<p><a href="http://theconversation.com/private-health-insurance-carrot-and-stick-reforms-have-failed-heres-why-38501">Private health insurance ‘carrot and stick’ reforms have failed – here’s why</a> </p>
<p><a href="https://theconversation.com/if-the-government-wants-price-signals-it-should-stop-supporting-health-insurance-38389">If the government wants price signals, it should stop supporting health insurance</a></p>
<p><a href="https://theconversation.com/the-debate-were-yet-to-have-about-private-health-insurance-39249">The debate we’re yet to have about private health insurance</a></p><img src="https://counter.theconversation.com/content/38647/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Francesco Paolucci received funding from Medibank Private in 2008 for project work with Concept Economics consultancy. He is currently working in a project funded by the Mitchell Institute at Victoria University. </span></em></p>Any new such financing system would need to carefully balance competition and choice, with affordability of coverage and equal access to quality care.Francesco Paolucci, Associate Professor; Head of Health Policy Program, Sir Walter Murdoch School of Public Policy and International Affairs, Murdoch UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/383892015-03-31T19:05:22Z2015-03-31T19:05:22ZIf the government wants price signals, it should stop supporting health insurance<figure><img src="https://images.theconversation.com/files/76514/original/image-20150331-1259-z9035z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Private health insurance is an expensive way to fund health care. </span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-173814836/stock-photo-coprology-test.html?src=pp-same_model-173816189-7&ws=1">Image Point Fr/Flickr</a></span></figcaption></figure><p>Prime Minister Tony Abbott has declared the Medicare co-payment proposals “<a href="http://www.abc.net.au/news/2015-03-03/tony-abbott-declares-gp-co-payment-dead-buried-and-cremated/6275912">dead, buried and cremated</a>”, but two related ideas behind it live on: Medicare is becoming “unaffordable” and our universal health system should morph into a program reserved for the poor.</p>
<p>The government’s original justification for the co-payment was to bring more “price signals” into Medicare. In itself the idea has merit, but the government has been going about it in a ham-fisted way.</p>
<p>Whether by design or accident, the government seems to be undermining the principle of Medicare as a universal tax-funded program, paving the way for private health insurance to <a href="https://theconversation.com/balancing-public-and-private-as-health-insurers-move-into-primary-care-21995">play a role</a> in funding primary care.</p>
<p>But private insurance, by its very nature, suppresses price signals and encourages over-servicing and cost escalation. It is an expensive way to fund health care. </p>
<p>If the government wants more price signals in health care, it can start by standardising the mess of arbitrary co-payments in health care. If those co-payments can be re-designed to carry meaningful price signals, they will guide wise choice and contribute to efficient resource allocation.</p>
<p>The government should also consider requiring those better-off Australians, who have much more liquid savings than in times past, to contribute more to their own health care from their own pockets rather than assuming that someone else – Medicare or private insurance — will cover the minor outlays they could easily afford themselves. </p>
<h2>The unaffordability myth</h2>
<p>It’s easy to panic about the looming cost of health care as Australia ages. That has been the message of successive Intergenerational Reports, the latest of which <a href="http://www.treasury.gov.au/PublicationsAndMedia/Publications/2015/2015-Intergenerational-Report">suggests</a> that under “previous policy” (Labor government) setting, Commonwealth health expenditure would rise from 4.4% to 7.1% of GDP by 2054, but would be contained to 5.7% of GDP under the government’s “proposed policy”.</p>
<p>The sensible response to these projections is to ask “so what?”. As the population ages, Australians will indeed spend more on health care. </p>
<p>But simply shifting costs off-budget and on to individuals, or to private insurance mechanisms is an <a href="http://cpd.org.au/2012/02/ian-mcauley-and-john-menadue-are-private-health-subsidies-worth-it/">expensive and clumsy way</a> to fund health care. It does not make health care more “affordable” – we still have to pay for it. </p>
<p>As John Deeble, one of Medicare’s original designers, pointed out, the simple solution to fiscal pressures on the Commonwealth’s health budget is to <a href="http://www.smh.com.au/national/raising-medicare-levy-the-solution-to-health-costs-says-architect-20140131-31shn.html">raise the Medicare Levy</a>. </p>
<p>The government said that imposing a co-payment and reducing bulk-billing would result in reduced use of Medicare services, which have risen from 11 to 15 a head over the last ten years. </p>
<p>That idea would be sound if Medicare services were stand-alone, but any reduction in demand would most probably be among those in most need of care, particularly early intervention to stave off costly episodes of hospitalisation and chronic disease. And there would be a shift of demand on to hospital emergency services. </p>
<p>The costs to health budgets and to the whole economy (in terms of lost workforce participation resulting from chronic illness), could well be far greater than any saving in Medicare.</p>
<p>But, as the Public Service Commission’s <a href="http://www.apsc.gov.au/publications-and-media/current-publications/capability-review-health">capability review</a> of the health department points out, the department tends to work in “silos”, and seems to lack the capability of considering “whole-of-health-system policy”. </p>
<p>Under pressure to cut expenditure, Medicare is the easy target. Costs outside the “Medicare” silo are not their concern, and if they can move some load on to individuals, private insurers or state government hospitals, that’s clever cost-shifting. That’s not so much a “policy”, which would be concerned with the public interest, as an attempt to contain outlays within an arbitrary fiscal limit.</p>
<h2>Exempting the rich from price signals</h2>
<p>The specific co-payment idea came from the government’s <a href="http://www.ncoa.gov.au/report/phase-one/part-b/7-3-a-pathway-to-reforming-health-care.html">Commission of Audit</a>, which saw it as a first step in a stealthy but radical transformation of health services away from universalism, towards a US-style system with “an expanded role for private insurance” to “cover all services covered by Medicare and public hospitals”. </p>
<p>Medicare would be reduced to a service for the “indigent” (to use the US term).</p>
<p>Despite dumping the co-payment, health minister Sussan Ley still <a href="http://www.abc.net.au/radionational/programs/breakfast/sussan-ley/6278872">wants to</a> “reduce the number of bulk billed consultations to people who can afford to pay something”. This suggests she sees Medicare as a charity or distributive welfare system, not a universal system as it was originally envisaged.</p>
<p>As the freeze on Medicare reimbursements bites harder, bulk-billing will probably fall (as intended), resulting in mounting pressure on the government to change the legislation and permit private health insurance to cover the gap. </p>
<p>The Commission hypocritically calls for people with means to take “individual responsibility for their health care”, but to be guided by “price signals” while they are herded into private health insurance. </p>
<p>But private insurance is no more about “individual responsibility” than Medicare is: it’s still about handing over responsibility to a third party. Far from incorporating “price signals”, it simply changes the message from “Medicare will pay for it” to “HCF/BUPA/Medibank Private will pay for it”. This incentive for over-use is known as “moral hazard”. </p>
<h2>Co-payments and personal savings</h2>
<p>It’s easy to forget that we already have co-payments in health care. Out-of-pocket expenses, not covered by public or private insurance, account for <a href="http://www.aihw.gov.au/health-expenditure/">18%</a> of health care expenditure, <a href="http://www.oecd.org/els/health-systems/health-data.htm">in line</a> with other prosperous countries. </p>
<p>But the breakdown of out-of-pocket expenses is messy and haphazard; a reflection of the “silo” arrangements in the health department. Expenses fall heavily on dentistry, specialist services and non-prescription medications. Many are uncapped, meaning the consumer is left bearing open-ended risk.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/74995/original/image-20150316-9184-1ihtbex.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/74995/original/image-20150316-9184-1ihtbex.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=403&fit=crop&dpr=1 600w, https://images.theconversation.com/files/74995/original/image-20150316-9184-1ihtbex.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=403&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/74995/original/image-20150316-9184-1ihtbex.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=403&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/74995/original/image-20150316-9184-1ihtbex.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=507&fit=crop&dpr=1 754w, https://images.theconversation.com/files/74995/original/image-20150316-9184-1ihtbex.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=507&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/74995/original/image-20150316-9184-1ihtbex.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=507&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p>It’s also easy to forget that Australians, on average, have enough liquidity to cope with modest co-payments when a need arises. <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6554.02011%E2%80%9312?OpenDocument">Australian Bureau of Statistics</a> data show that on average, households have A$37,000 in available funds. </p>
<p>If we want price signals in health care, then there is a good case for requiring personal payments for those with means, without the moral hazard of third party payment.</p>
<p>Some commentators suggest we should go down the path of <a href="https://theconversation.com/creating-a-better-health-system-lessons-from-singapore-30607">health savings accounts</a>, whereby people are required to set aside funds in personal accounts to be drawn on only for health care needs. Only when a person’s health savings account is depleted does the state cover additional expenses. </p>
<p>Health savings accounts certainly have advantages over private insurance, in that they retain a measure of individual responsibility, and they tend to accumulate with age. </p>
<p>But they have their own problems, in that when someone’s HSA reaches a high level there is a “use it or lose it” form of moral hazard. And in economic terms, they tend to privilege health spending over other consumption, thus distorting consumer choice.</p>
<p>In any event, Australia’s compulsory superannuation is already serving some of the same purpose as health savings accounts. Once Australians retire, their superannuation balances become accessible as personal accounts (apart from those whose superannuation is in annuity form). Including superannuation, singles over 65 have <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6554.02011%E2%80%9312?OpenDocument">on average</a> A$170,000 in reasonably liquid assets, while couples have A$430,000.</p>
<p>We could be served well by a requirement that all with means pay for their health care up to a limit before Medicare kicks in to cover high costs. That’s essentially the policy the Coalition took to the 1987 election, when it proposed that all who could afford it should contribute the first A$250 a year to their health costs (equivalent to about A$800 now), without the support of insurance. </p>
<p>That would mean most people make no call on public funds in any one year, while preserving the universality of Medicare as a single national insurer, covering those with high needs or limited means. </p>
<p>That’s essentially the <a href="http://theconversation.com/creating-a-better-health-system-lessons-from-norway-and-sweden-30366">Nordic model</a>. It combines the best or market price signals and the power of a government insurer, without the distortion and high cost of private health insurance or fiddly and paternalistic measures such as health savings accounts. </p>
<hr>
<p><em><strong>Click on the links below to read the other instalments of <a href="https://theconversation.com/au/topics/private-health-insurance-in-australia">Private Health Insurance in Australia</a>:</strong></em></p>
<p><a href="http://theconversation.com/can-private-health-insurers-justify-a-6-2-premium-increase-38390">Can private health insurers justify a 6.2% premium increase?</a> </p>
<p><a href="https://theconversation.com/infographic-a-snapshot-of-private-health-insurance-in-australia-39237">INFOGRAPHIC: A snapshot of private health insurance in Australia</a> </p>
<p><a href="https://theconversation.com/explainer-why-do-australians-have-private-health-insurance-38788">Explainer: why do Australians have private health insurance?</a> </p>
<p><a href="http://theconversation.com/private-health-insurance-carrot-and-stick-reforms-have-failed-heres-why-38501">Private health insurance ‘carrot and stick’ reforms have failed – here’s why</a> </p>
<p><a href="https://theconversation.com/allow-aussies-to-opt-out-of-medicare-and-rely-on-private-health-insurance-38647">Allow Aussies to opt out of Medicare and rely on private health insurance</a> </p>
<p><a href="https://theconversation.com/the-debate-were-yet-to-have-about-private-health-insurance-39249">The debate we’re yet to have about private health insurance</a></p><img src="https://counter.theconversation.com/content/38389/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ian McAuley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Private insurance, by its very nature, suppresses price signals and encourages over-servicing and cost escalation.Ian McAuley, Lecturer, Public Sector Finance , University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/385012015-03-30T18:59:49Z2015-03-30T18:59:49ZPrivate health insurance ‘carrot and stick’ reforms have failed – here’s why<figure><img src="https://images.theconversation.com/files/75892/original/image-20150325-4209-gvf8xy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The relationship between private health insurance and Medicare has been a problem since the Whitlam government introduced universal health care. </span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-187694114/stock-photo-empty-modern-hospital-bed-in-a-sunny-room-with-a-clean-blue-floor.html?src=mCMExOTXOnVDqrAEYkstyA-1-25">Hadrian/Shutterstock</a></span></figcaption></figure><p>If your workplace is anything like mine, this week’s private health insurance <a href="https://theconversation.com/can-private-health-insurers-justify-a-6-2-premium-increase-38390">premium increases</a> might prompt conversations that go something like this:</p>
<blockquote>
<p>Can you believe our private health insurance costs $421 a month – and we are all really healthy!</p>
</blockquote>
<p>Some people baulk at the cost of private insurance – especially the relatively young and healthy – because they don’t see the value of it when they are already covered under Medicare. </p>
<p>Others see a struggling public hospital system and wonder whether private health insurance is alleviating much of the burden. </p>
<p>The challenge of sustaining a viable private insurance sector alongside Medicare is not a new one. Successive governments have largely ignored the issue, vainly hoping that strengthening either Medicare or private health insurance will be enough to solve the problem. It won’t be.</p>
<h2>Howard’s ‘carrot and stick’ reforms</h2>
<p>The last major attempt to address the role of private health insurance in the context of Medicare occurred during the Howard years. </p>
<p>When John Howard was elected prime minister in 1996, private health insurance membership rates had <a href="http://phiac.gov.au/industry/industry-statistics/">fallen</a> to a low of 34%, down from 48% in 1985, the year after Medicare was introduced. The government quickly embarked upon a series of reforms designed to boost flailing membership rates. </p>
<p>It began in 1997 by introducing the <a href="https://digitalcollections.anu.edu.au/bitstream/1885/41231/3/WP47.pdf">Private Health Insurance Incentive Scheme</a> and the <a href="http://www.privatehealth.gov.au/healthinsurance/incentivessurcharges/mls.htm">Medicare Levy Surcharge</a>. The incentive scheme encouraged people earning below a threshold amount to purchase private health insurance. The surcharge penalised people earning above a threshold amount if they chose not to purchase a plan. </p>
<p>Because these initiatives did not have the desired impact on membership, in 1999 the government introduced a 30% subsidy for which all Australians were eligible, regardless of income.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/76204/original/image-20150327-4802-8rvaks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/76204/original/image-20150327-4802-8rvaks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=509&fit=crop&dpr=1 600w, https://images.theconversation.com/files/76204/original/image-20150327-4802-8rvaks.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=509&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/76204/original/image-20150327-4802-8rvaks.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=509&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/76204/original/image-20150327-4802-8rvaks.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=640&fit=crop&dpr=1 754w, https://images.theconversation.com/files/76204/original/image-20150327-4802-8rvaks.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=640&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/76204/original/image-20150327-4802-8rvaks.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=640&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Admitting doctors often prefer to use public hospitals for more complex procedures.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/compacflt/7317984550/in/photolist-c9EzRq-aqyjcD-arzgMW-8aSdFt-6v8Xj7-aGGLHc-6Xcp9Z-6tpUJv-6KCEK4-cGoQiY-9aRGDU-aapP1P-83zrvk-aizEuc-6rXkq4-9Nu7Y9-aYbQ94-9m812X-c9Eyuh-apfaAN-7dx4Gk-7dAt5f-74KN7i-7ZHnco-fkq64z-4D2uyf-gEGZv6-8m68d5-faUNgK-8pR3yn-9XF7nR-3oYCgF-86z4df-4pam2U-boFsuo-4JmkMy-4D2xm1-7ekVTK-8qzxoc-8qzdut-9o6urd-crVR4Y-8VDi9S-77DF2S-4Gaub8-4zagLY-75Xh84-5wrZLn-aaWEpz-aaWefz">U.S. Pacific Fleet/Flickr</a></span>
</figcaption>
</figure>
<p>This too failed to boost membership to the desired level, so in 2000 the government introduced its <a href="http://www.privatehealth.gov.au/healthinsurance/incentivessurcharges/lifetimehealthcover.htm">Lifetime Health Cover</a> scheme. Under it, funds were required to set different premium levels according to the age at which enrolees first took out cover. Higher premiums were charged for each year insurance cover was not held beyond the age of 30 years. </p>
<p>The intention was to discourage “hit and run” behaviour and improve the stability of the industry by restraining pressures for premium increases. </p>
<h2>Assessing Howard’s reforms</h2>
<p>If private health insurance membership rates are used as the measure of success, the Howard government’s reforms achieved what they set out to do. <a href="http://phiac.gov.au/industry/industry-statistics/">Membership rates</a> rose to 46% by September 2000 after the Lifetime Health Cover scheme came into operation, and stabilised around this level. </p>
<p>However, the Coalition’s reforms also aimed to restore the “balance” between Medicare and private health insurance. In 1997, for example, the health minister at the time, Michael Wooldridge, <a href="http://www.tandfonline.com/toc/rhsr20/15/2#.VQkLfuHQj8M">said</a>:</p>
<blockquote>
<p>A strong public and private health sector standing side by side is vital to the future of the health system for all Australians. I want to keep Medicare in place as it is today… This can only be done if the drop-out rate from health insurance is stopped, and the balance between the public and private systems is restored.</p>
</blockquote>
<p>The rhetoric is strikingly similar to that used by the current government.</p>
<p>Assessing the balance between the public and private sectors in Australia is a more complex task. </p>
<p>Activity in the private hospital sector has definitely increased alongside increases in private health insurance rates. Between 2000-01 and 2004-05, for example, the <a href="http://www.aihw.gov.au/publication-detail/?id=6442467847">growth</a> in separations from private hospitals outpaced that in public hospitals (4.8% versus 2.4%). This trend <a href="http://www.aihw.gov.au/publication-detail/?id=60129546922">continued</a> to 2012-13, the latest available data. </p>
<p>But has the extra activity in the private sector reduced pressure on the public system? </p>
<p>A report from researchers at the <a href="https://melbourneinstitute.com/downloads/reports/phi2004.pdf">Melbourne Institute</a> in 2004 found that the increase in private health insurance membership during the Howard years was matched by an increase in hospital use overall, rather than a substitution of private for public care. </p>
<p>The authors noted one of the reasons was that admitting doctors often prefer to use public hospitals for more complex procedures and private hospitals for non-urgent elective surgery and other low-intensity interventions. As a result, waiting times for urgent cases in the public sector increased rather than decreased in response to the Coalition’s reforms. </p>
<p>In 2005, health economist Stephen Duckett, former secretary of the federal Department of Health, published a <a href="http://www.publish.csiro.au/nid/271/issue/5687.htm">study</a> that confirmed these results. He found that increasing activity in the private sector led to increases in waiting times in public hospitals in some medical areas. </p>
<p>Waiting times in the public sector, however, cannot simply be correlated with private health insurance membership rates and private hospital activity. <a href="http://www.federalfinancialrelations.gov.au/content/npa/health_reform/national-workforce-reform/national_partnership.pdf">Investment in public hospitals</a> also helps reduce waiting times, regardless of what is happening in the private sector. </p>
<p>To complicate the analysis even further, in states such as <a href="https://theconversation.com/does-contracting-public-care-to-private-hospitals-save-money-23910">Queensland</a>, there has been a growing trend towards “outsourcing” or contracting public hospital care to the private sector, in the elective surgery area in particular. </p>
<p>Although the Howard government succeeded in reviving the private health insurance sector by boosting membership, it failed to find a sustainable way of balancing the private health insurance system and Medicare. The cost of private health insurance rebates <a href="http://www.smh.com.au/federal-politics/political-news/abolishing-health-insurance-rebate-would-save-3b-analysis-20140109-30kkc.html">ballooned</a> to A$5.5 billion by 2012-13, prompting Labor, under Gillard, to means-test the rebate. </p>
<h2>Time to reconceptualise the debate</h2>
<p>The uneasy relationship between private health insurance and Medicare has been an ongoing stimulus for reform ever since the Whitlam government introduced Medibank (the precursor to Medibank) in 1975, while also leaving the existing private health insurance scheme in place. </p>
<p>The Hawke-Keating government progressively withdrew subsidies to the private insurance industry during the late 1980s, which contributed to a <a href="http://www.pc.gov.au/__data/assets/pdf_file/0006/156678/57privatehealth.pdf">30% increase</a> in the costs of premiums during that period.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/76208/original/image-20150327-4772-19om0nf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/76208/original/image-20150327-4772-19om0nf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/76208/original/image-20150327-4772-19om0nf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/76208/original/image-20150327-4772-19om0nf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/76208/original/image-20150327-4772-19om0nf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/76208/original/image-20150327-4772-19om0nf.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/76208/original/image-20150327-4772-19om0nf.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Successive governments have largely ignored the issue, vainly hoping that strengthening either Medicare, or private health insurance, will be enough to solve the problem.</span>
<span class="attribution"><a class="source" href="http://one.aap.com.au/#/search/medicare%20protest?q=%7B%22pageSize%22:25,%22pageNumber%22:2%7D">Peter Boyle/AAP</a></span>
</figcaption>
</figure>
<p>So, what are the possible solutions? </p>
<p>Various <a href="http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BN/0809/HealthReform">options for reform</a> of Australia’s health insurance arrangements have been proposed over the years, including: </p>
<ul>
<li>setting private and public insurance up in competition with one another</li>
<li>restricting the role of private health insurance to providing top-up or supplementary coverage </li>
<li>moving away from the insurance model to one where individuals self-manage funds set aside for purchasing health care.</li>
</ul>
<p>Each of these options requires fairly large-scale reform of the health system, which might be achievable over time through incremental reform or, alternatively, through a concerted “big-bang” reform effort. </p>
<h2>Filling the policy gap</h2>
<p>Because both sides of politics have for so long been studiously avoiding the big issue in health insurance – the challenging of operating a <a href="https://theconversation.com/medicare-turns-30-and-begins-to-show-signs-of-ageing-22390">mixed insurance system</a> where private health insurance sometimes functions as a top-up to Medicare and sometimes as a substitute – the private health insurance sector has begun to take the policy lead. </p>
<p>Private health insurance funds, such as Medibank Private and BUPA, have been <a href="http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/FlagPost/2015/February/private_health_insurance_and_primary_care">experimenting</a> with reforms in primary care that, if implemented on a large scale, will have a major bearing on the equity and efficiency of our health system. </p>
<p>While private sector innovation is a good thing, it is the responsibility of governments, and oppositions, to shape the direction of reform and ensure that they lead to better health outcomes for all Australians. </p>
<p>At the moment, neither major party seems to have a clear vision for a sustainable and equitable health system that includes both Medicare and private health insurance. </p>
<hr>
<p><em><strong>Click on the links below to read the other instalments of <a href="https://theconversation.com/au/topics/private-health-insurance-in-australia">Private Health Insurance in Australia</a>:</strong></em></p>
<p><a href="http://theconversation.com/can-private-health-insurers-justify-a-6-2-premium-increase-38390">Can private health insurers justify a 6.2% premium increase?</a> </p>
<p><a href="https://theconversation.com/infographic-a-snapshot-of-private-health-insurance-in-australia-39237">INFOGRAPHIC: A snapshot of private health insurance in Australia</a> </p>
<p><a href="https://theconversation.com/explainer-why-do-australians-have-private-health-insurance-38788">Explainer: why do Australians have private health insurance?</a> </p>
<p><a href="https://theconversation.com/if-the-government-wants-price-signals-it-should-stop-supporting-health-insurance-38389">If the government wants price signals, it should stop supporting health insurance</a></p>
<p><a href="https://theconversation.com/allow-aussies-to-opt-out-of-medicare-and-rely-on-private-health-insurance-38647">Allow Aussies to opt out of Medicare and rely on private health insurance</a> </p>
<p><a href="https://theconversation.com/the-debate-were-yet-to-have-about-private-health-insurance-39249">The debate we’re yet to have about private health insurance</a></p><img src="https://counter.theconversation.com/content/38501/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anne-marie Boxall is an employee of the National Rural Health Alliance</span></em></p>Some people balk at the cost of private insurance – especially the relatively young and healthy – because they don’t see the value of it when they are already covered under Medicare.Anne-marie Boxall, Senior Policy Adviser, National Rural Health Alliance; Adjunct Lecturer, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/392372015-03-29T19:12:40Z2015-03-29T19:12:40ZINFOGRAPHIC: A snapshot of private health insurance in Australia<figure><img src="https://images.theconversation.com/files/79418/original/image-20150427-18126-pqzdlb.png?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"> </span> </figcaption></figure><figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/76062/original/image-20150326-12270-1afelca.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/76062/original/image-20150326-12270-1afelca.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=5736&fit=crop&dpr=1 600w, https://images.theconversation.com/files/76062/original/image-20150326-12270-1afelca.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=5736&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/76062/original/image-20150326-12270-1afelca.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=5736&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/76062/original/image-20150326-12270-1afelca.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=7208&fit=crop&dpr=1 754w, https://images.theconversation.com/files/76062/original/image-20150326-12270-1afelca.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=7208&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/76062/original/image-20150326-12270-1afelca.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=7208&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="attribution"><a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span>
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</figure><img src="https://counter.theconversation.com/content/39237/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Terence Cheng does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>How much do Australians pay for private health insurance?Fron Jackson-Webb, Deputy Editor and Senior Health EditorEmil Jeyaratnam, Data + Interactives Editor, The ConversationLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/383902015-03-29T19:12:32Z2015-03-29T19:12:32ZCan private health insurers justify a 6.2% premium increase?<figure><img src="https://images.theconversation.com/files/76205/original/image-20150327-4766-fivw7n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The increase in benefits paid out by health funds far exceeds the approved increase in premiums.</span> <span class="attribution"><a class="source" href="https://theconversation.com/explainer-why-do-australians-have-private-health-insurance-38788">06photo/Shutterstock</a></span></figcaption></figure><p>The half of the Australian population that has private health insurance can expect higher bills from Wednesday, as premiums <a href="http://www.health.gov.au/internet/ministers/publishing.nsf/Content/health-mediarel-yr2015-ley012.htm">increase</a> by an industry average of 6.18%. The increase <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/0B815BFEB8EDECA7CA257BF000195929/$File/Table%20of%20premium%20increases%202015.pdf">varies</a> across different funds, ranging from 3.98% to 7.92% and will add around A$200 to A$300 a year to the average cost of hospital cover for families.</p>
<p>The increase is two to three times higher than inflation. So, how can the government approve such a hike? And how much profit are private health insurance companies making? </p>
<h2>How are premium increases determined?</h2>
<p>Under the <a href="http://www.comlaw.gov.au/Details/C2014C00791">Private Health Insurance Act 2007</a>, health funds <a href="http://www.health.gov.au/internet/main/publishing.nsf/Content/privatehealth-summary-premiumincreases">must apply</a> to the health minister to change their premiums. The industry regulator, the <a href="http://phiac.gov.au/">Private Health Insurance Administration Council</a>, individually assesses the applications and refers them to the minister.</p>
<p>To justify their application, health funds are required to provide projections of the anticipated changes in premium revenue and benefits outlay, and information about the financial performance of health funds, including operating margins and management expenses.</p>
<p>Premium increases are often justified as being necessary to ensure the solvency of health funds, and to maintain sufficient underwriting margins to meet its obligations.</p>
<p>The Act states the minister must approve the proposed change, unless it’s deemed as contrary to the public interest. The new premium rates come into effect each April. </p>
<p>So, what case do insurance companies have?</p>
<h2>Premium increases vs benefits paid</h2>
<p>The table below shows the total benefits paid by health funds for hospital and general treatment from 2009 to 2014. Over the six year period, benefits outlay grew by between 7.4% and 9.2%, with an average growth rate of 8.4% over the period.</p>
<p><br></p>
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<p>This next table shows the approved (industry weighted) average increase in premiums. In every year, the increase in benefits paid out by health funds far exceeds the approved increase in premiums.</p>
<p><br></p>
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<p>Benefits paid by health funds are influenced by the number of hospitalisation episodes (for things like hospital accommodation and operating theatre fees) and the number of general treatment services provided (such as physiotherapy visits), in addition to the level of benefit that each of these services attract. </p>
<p>In 2014, the number of hospital episodes and general treatment services grew by 5.2% and 3.9% in 2014, whereas total benefits paid in the same year increased by 7.4%. </p>
<p>This suggests that the growth in benefits is driven to a larger extent by an increase in the number of claims made, and to a smaller degree an increase in the average size of claims.</p>
<h2>Where are the growth areas?</h2>
<p>From 2013 to 2014, intensive care and anaesthesia grew by 9.3% and 8.6% respectively; the largest increase in benefits paid. </p>
<p>These increases are significantly higher than the average growth of 5.9% for all services. </p>
<p>On the other end, benefits for obstetrics actually fell slightly by 0.1%, and those from general surgery increased by 2.9%.</p>
<p><br></p>
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<h2>Are health funds making excessive profits?</h2>
<p>With consecutive premium increases year on year, it’s reasonable to ask if health funds are making excessive profits. But it’s a difficult question to answer satisfactorily. </p>
<p>Let’s first look at the gross (pre-tax) and net profit margins, a commonly used measure of profitability. The table below shows the gross profit margins (as net margin data isn’t available) in private health insurance compared with other private health and social assistance industries.</p>
<p><br></p>
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<p>So, the gross profit margin of the private health industry in 2014 is 12.8%, and the net margin is 4.4%. The gross margin is higher than private hospitals (7.7%), and is considerably lower than other sub-industries of private medical services (31.4%) and private residential care services (28.3%).</p>
<p>However, a <a href="http://www.apra.gov.au/PHI/PHIAC-Archive/Documents/PHIAC_Research_Paper_No1-new-format.pdf">research paper</a> by the Private Health Insurance Administration Council notes that the profitability of the private health industry is “generally high by historical standards”, with net profit margins in the range of 3% to 6% since 2005. The report also notes that net profit margin is highest for for-profit funds with open enrolment. </p>
<p>In a very different institutional context of the United States health system, the profitability of health insurers has also been a <a href="http://www.economist.com/blogs/democracyinamerica/2010/03/insurance_costs_and_health-care_reform">topic of debate</a> surrounding the Obama health care reform. The <a href="http://mjperry.blogspot.com.au/2009/08/health-insurance-industry-ranks-86-by.html">average profit margin</a> in the US health insurance industry is 3.3%, which is <a href="http://voices.washingtonpost.com/ezra-klein/2009/09/profit_and_the_insurance_indus.html">substantially lower</a> than related health care industries.</p>
<h2>Impact of the premium rise</h2>
<p>The increase in health insurance premiums will undoubtedly place further strains on household budgets. In the short term, higher premiums may lead to some individuals downgrading their cover, or dropping cover altogether.</p>
<p>The policies introduced by the Howard government to support the private health insurance industry (the <a href="https://www.ato.gov.au/individuals/Medicare-levy/Medicare-levy-surcharge/">Medicare Levy Surcharge</a> and <a href="http://www.privatehealth.gov.au/healthinsurance/incentivessurcharges/lifetimehealthcover.htm">Lifetime Health Cover</a>) will still provide strong incentives for individuals to continue to maintain coverage. Medium and high-income earners are often financially better off by taking out private health insurance rather than paying the higher tax rate. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/76193/original/image-20150327-8682-16iztkn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/76193/original/image-20150327-8682-16iztkn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=376&fit=crop&dpr=1 600w, https://images.theconversation.com/files/76193/original/image-20150327-8682-16iztkn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=376&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/76193/original/image-20150327-8682-16iztkn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=376&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/76193/original/image-20150327-8682-16iztkn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=472&fit=crop&dpr=1 754w, https://images.theconversation.com/files/76193/original/image-20150327-8682-16iztkn.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=472&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/76193/original/image-20150327-8682-16iztkn.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=472&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Some Australians take out private health insurance to avoid the tax penalties.</span>
<span class="attribution"><a class="source" href="http://one.aap.com.au/#/search/private%20health%20insurance?q=%7B%22pageSize%22:25,%22pageNumber%22:2%7D">Dan Himbrechts/AAP</a></span>
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</figure>
<p>There are, however, two groups that are more likely to feel financial pain from the premium increase. The first are individuals whose potential tax liability under the <a href="https://www.ato.gov.au/individuals/Medicare-levy/Medicare-levy-surcharge/">Medicare Levy Surcharge</a> is only slightly larger than the premium cost. </p>
<p>The second are those whose incomes lie below the surcharge threshold, and choose to buy private health insurance for reasons other than to avoid the tax.</p>
<h2>Challenges ahead</h2>
<p>Premium increases are closely tied to the growth in benefits expenditure. So it’s important to study the factors driving the increasing use of private hospital care and general treatment services, as well as the prices private providers charge. </p>
<p>Sustained increases in premiums have significant implications on the private health industry, particularly if rising premiums lead to a significant fall in the proportion of the Australian population with private health insurance coverage.</p>
<p>We have gone down this path before. The Medicare Levy Surcharge and rebates for private health insurance were introduced from 1997 to 2001 to reverse the declining membership that resulted then from rapidly rising premiums. These solutions didn’t, and wouldn’t, work. </p>
<p>What Australia needs is to fundamentally rethink about the role of private health insurance, and private health care.</p>
<hr>
<p><em><strong>Click on the links below to read the other instalments of <a href="https://theconversation.com/au/topics/private-health-insurance-in-australia">Private Health Insurance in Australia</a>:</strong></em></p>
<p><a href="https://theconversation.com/infographic-a-snapshot-of-private-health-insurance-in-australia-39237">INFOGRAPHIC: A snapshot of private health insurance in Australia</a> </p>
<p><a href="https://theconversation.com/explainer-why-do-australians-have-private-health-insurance-38788">Explainer: why do Australians have private health insurance?</a> </p>
<p><a href="http://theconversation.com/private-health-insurance-carrot-and-stick-reforms-have-failed-heres-why-38501">Private health insurance ‘carrot and stick’ reforms have failed – here’s why</a> </p>
<p><a href="https://theconversation.com/if-the-government-wants-price-signals-it-should-stop-supporting-health-insurance-38389">If the government wants price signals, it should stop supporting health insurance</a></p>
<p><a href="https://theconversation.com/allow-aussies-to-opt-out-of-medicare-and-rely-on-private-health-insurance-38647">Allow Aussies to opt out of Medicare and rely on private health insurance</a> </p>
<p><a href="https://theconversation.com/the-debate-were-yet-to-have-about-private-health-insurance-39249">The debate we’re yet to have about private health insurance</a></p><img src="https://counter.theconversation.com/content/38390/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Terence Cheng does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The half of Australians who have private health insurance will be face higher bills from Wednesday, as insurance premiums increase by an industry average of 6.18%.Terence Cheng, Senior Lecturer, School of Economics, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/387882015-03-29T19:05:51Z2015-03-29T19:05:51ZExplainer: why do Australians have private health insurance?<figure><img src="https://images.theconversation.com/files/76196/original/image-20150327-8699-m5550s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Dental care is the most-used private health insurance ancillary service. </span> <span class="attribution"><a class="source" href="http://one.aap.com.au/#/search/dentist?q=%7B%22pageSize%22:25,%22pageNumber%22:2%7D">Peter Kyikos/AAP</a></span></figcaption></figure><p>All Australian residents have access to Medicare, so why do <a href="http://phiac.gov.au/">half the population</a> also decide to take out private health insurance? And what do they get out of it?</p>
<p>The <a href="http://phiac.gov.au/wp-content/uploads/2014/11/qtrstats-Sep14.pdf">biggest users</a> of private health insurance hospital benefits are 60- to 79-year-olds. Women in their 20s and 30s also have a higher claim rate for maternity care. </p>
<p>Payments for extras is <a href="http://phiac.gov.au/wp-content/uploads/2014/11/qtrstats-Sep14.pdf">spread</a> across all age groups, with the biggest component going to dental care, followed by optical, physiotherapy and chiropractic.</p>
<h2>Choice, cost and public service</h2>
<p><a href="http://sydney.edu.au/health-sciences/research/healthcare-choice/index.shtml">Our research</a> shows that some people purchase private health insurance because they want more control over their health care, choice about the services they use and choice of doctor. </p>
<p>They perceive that private health insurance gives them benefits including shorter wait times, choice of the timing of appointments, better quality of care and security or “peace of mind”.</p>
<p>As one of our interviewees responded: </p>
<blockquote>
<p>As a private patient I can … choose my treating specialist and I can say I’m available on these days, how does that work for you, rather than sitting on the wait list. I mean, it costs out of pocket, but I am lucky enough to be in a position that cost isn’t a huge barrier for me. </p>
</blockquote>
<p>Another reason Australians commonly take out private health insurance is to avoid <a href="https://theconversation.com/private-health-insurance-means-test-passes-what-now-5356">financial penalties</a>. </p>
<p>Australia’s tax system encourages high-income earners to take out private health insurance as well as paying the 2% levy to help fund <a href="https://www.ato.gov.au/Individuals/Medicare-levy/">Medicare</a> and the National Disability Insurance Scheme. </p>
<p>If they do not take out private health insurance, they pay a tax penalty called the <a href="https://www.ato.gov.au/Individuals/Medicare-levy/Medicare-levy-surcharge/When-do-you-have-to-pay-the-surcharge-/">Medicare Levy Surcharge</a>:</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/76065/original/image-20150326-12309-1o84wjq.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/76065/original/image-20150326-12309-1o84wjq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/76065/original/image-20150326-12309-1o84wjq.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=252&fit=crop&dpr=1 600w, https://images.theconversation.com/files/76065/original/image-20150326-12309-1o84wjq.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=252&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/76065/original/image-20150326-12309-1o84wjq.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=252&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/76065/original/image-20150326-12309-1o84wjq.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=317&fit=crop&dpr=1 754w, https://images.theconversation.com/files/76065/original/image-20150326-12309-1o84wjq.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=317&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/76065/original/image-20150326-12309-1o84wjq.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=317&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><span class="source">Australian Taxation Office</span></span>
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</figure>
<p>Some under-31-year-olds take out private health insurance to avoid paying a <a href="http://www.privatehealth.gov.au/healthinsurance/incentivessurcharges/lifetimehealthcover.htm">lifetime health cover loading</a> which takes effect by July 1 following their 31st birthday. If they take out private health insurance after turning 31*, they pay an extra 2% for every year delay. </p>
<p>People also take out private health insurance to access subsidies for allied health services such as visits to the dentists and the cost of glasses, which are not covered under Medicare. </p>
<p>Finally, our research shows some Australians purchase private health insurance because they perceive that this will reduce the burden on the public system: </p>
<blockquote>
<p>We used our health fund, because we wanted to help the hospital out. </p>
</blockquote>
<h2>Hidden costs and surprises</h2>
<p>Having private health insurance does not necessarily give people greater choice or access to health care. Access may be limited by what is available in the local area, or the ability to pay additional out-of-pocket costs. </p>
<p><a href="http://sydney.edu.au/health-sciences/research/healthcare-choice/index.shtml">Our research</a> indicates that some people don’t know the type of policy they have, and what it covers. They may be paying too much or are not covered for procedures that they do need. </p>
<p>Consumers are also hit hard by the “unknown” or “hidden” costs of private services that are not covered in full by insurance. As one interviewee told us: </p>
<blockquote>
<p>I probably didn’t research it properly to know what I’d be covered for, so I was surprised that I wasn’t covered, but I shouldn’t have been … Yeah I paid around almost A$5,000 for the surgeon and surgeon’s assistant and [am] only going to get the Medicare cover for that. Then also an anaesthetist … my private health insurance won’t cover that either.</p>
</blockquote>
<p>Gap payments may include costs for the hospital stay, doctor’s fees, procedures, equipment and prosthesis. But there is very little information for consumers about the gap they’re expected to pay. The onus is on the patient, before they go to hospital, to ask their surgeon to estimate what their charges will be, and ask their health fund how much is covered with their policy. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/76199/original/image-20150327-4777-w4kdm0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/76199/original/image-20150327-4777-w4kdm0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/76199/original/image-20150327-4777-w4kdm0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/76199/original/image-20150327-4777-w4kdm0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/76199/original/image-20150327-4777-w4kdm0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/76199/original/image-20150327-4777-w4kdm0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/76199/original/image-20150327-4777-w4kdm0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Respondents often had positive experiences in the public hospital system.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/twentysixcats/3850965022/in/photolist-6SicJE-5v8Com-632kAe-3ouq3D-eiZYGZ-8DW71F-cbHzdQ-636zxh-anoMTQ-5S4S2B-d4pQnS-kSAHkt-crVL5C-4BroPs-hfwSgV-9u3yBs-5Yt79V-6u9QTC-8hciMG-dtzEsE-b1d7Wx-aiCrK9-a5tAAd-6UKzJD-dnbWk9-dUcEav-crVKBJ-7YoE2Z-frdt1L-5NTvFA-89miKd-7BypF1-3vPVvt-89miSu-bHc2vT-hgbv47-hgcLQK-hgcVg2-djfMyn-6aduLa-4GeBT1-8NQQDw-cR1yJE-hgcPvz-hgcJqK-9TxqGg-pgNWPU-8mh8fz-dnbShn-tyrgy">twentysixcats/Flickr</a></span>
</figcaption>
</figure>
<p>Out-of-pocket expenses for hospital benefits <a href="http://phiac.gov.au/wp-content/uploads/2014/11/qtrstats-Sep14.pdf">average</a> A$285.27 per episode, and the average out of pocket cost per episode covered for ancillary benefits A$46.47 (in the quarter to September 2014).</p>
<p>Out-of-pocket costs will vary greatly depending on what hospital they choose, the specialist they see, and their policy and excess, as funds will have different arrangements with different hospitals. Doctors are free to set their own fees and decide on a case-by-case basis whether to use an insurer’s gap cover arrangement. </p>
<p>This means some consumers feel that they pay more than once for their health care needs. As one respondent said:</p>
<blockquote>
<p>I think sometimes it’s unfair. Because we pay a Medicare levy, we pay private health insurance, and we pay a gap, so we pay three times.</p>
</blockquote>
<h2>Public or private?</h2>
<p>Some people with private health insurance choose not use it, and instead access public services. </p>
<p>Many of our participants had positive experiences in the public system, particularly in emergency situations, for low-risk procedures or when there were no waiting periods. </p>
<p>Some thought the quality of care in both public and private hospitals was the same, or that choice of doctor or a private room was not certain. </p>
<p>Others, who accessed a public hospital as a private patient, were surprised that they did not receive a better level of care: </p>
<blockquote>
<p>We were still in a mixed room, shared room. We had no choice about beds, we had no choice or any of those options. The level of care was the same.</p>
</blockquote>
<p>Where people are able to choose – and are able to pay the out of pocket expenses – factors such as waiting periods influence their decision to have these procedures done privately.</p>
<p>People waiting for total knee replacements, for example, are likely to experience pain and restricted mobility, which can <a href="http://www.aihw.gov.au/WorkArea/DownloadAsset.aspx?id=60129544691">reduce their quality of life</a>. But the procedure has one of the longest public hospital wait times: a median wait time of 196 days, with 12% of patients waiting over one year. </p>
<p>This drove a <a href="http://www.hica.com.au/health-insurance-news/the-growing-cost-of-hip-and-knee-replacements">41% increase</a> in private knee replacement surgeries from 2011-12 to 2012-13. </p>
<h2>Is it worth it?</h2>
<p>Government rebates for private health insurance are now <a href="http://www.privatehealth.gov.au/healthinsurance/incentivessurcharges/insurancerebate.htm">means tested</a>. So, rather than everyone with private health insurance receiving the 30% rebate, the rebate is tiered:</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/76090/original/image-20150326-30367-2bmtlz.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/76090/original/image-20150326-30367-2bmtlz.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/76090/original/image-20150326-30367-2bmtlz.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=405&fit=crop&dpr=1 600w, https://images.theconversation.com/files/76090/original/image-20150326-30367-2bmtlz.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=405&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/76090/original/image-20150326-30367-2bmtlz.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=405&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/76090/original/image-20150326-30367-2bmtlz.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=509&fit=crop&dpr=1 754w, https://images.theconversation.com/files/76090/original/image-20150326-30367-2bmtlz.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=509&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/76090/original/image-20150326-30367-2bmtlz.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=509&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><span class="source">health.gov.au</span></span>
</figcaption>
</figure>
<p>The mix of levies, surcharges and rebates can make it difficult for consumers to judge the true cost and value of their private health insurance policy or whether they may be better to rely on the public system to meet their health needs.</p>
<p><em>* This article has been updated to reflect that people pay the lifetime health cover loading when taking private health insurance out after their 31st birthday.</em> </p>
<hr>
<p><em><strong>Click on the links below to read the other instalments of <a href="https://theconversation.com/au/topics/private-health-insurance-in-australia">Private Health Insurance in Australia</a>:</strong></em></p>
<p><a href="http://theconversation.com/can-private-health-insurers-justify-a-6-2-premium-increase-38390">Can private health insurers justify a 6.2% premium increase?</a> </p>
<p><a href="https://theconversation.com/infographic-a-snapshot-of-private-health-insurance-in-australia-39237">INFOGRAPHIC: A snapshot of private health insurance in Australia</a> </p>
<p><a href="http://theconversation.com/private-health-insurance-carrot-and-stick-reforms-have-failed-heres-why-38501">Private health insurance ‘carrot and stick’ reforms have failed – here’s why</a> </p>
<p><a href="https://theconversation.com/if-the-government-wants-price-signals-it-should-stop-supporting-health-insurance-38389">If the government wants price signals, it should stop supporting health insurance</a></p>
<p><a href="https://theconversation.com/allow-aussies-to-opt-out-of-medicare-and-rely-on-private-health-insurance-38647">Allow Aussies to opt out of Medicare and rely on private health insurance</a> </p>
<p><a href="https://theconversation.com/the-debate-were-yet-to-have-about-private-health-insurance-39249">The debate we’re yet to have about private health insurance</a></p><img src="https://counter.theconversation.com/content/38788/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Karen Willis receives funding from The Australian Research Council for a project on healthcare choice</span></em></p><p class="fine-print"><em><span>Marika Franklin and Sophie Lewis do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>All Australian residents have access to Medicare, so why do half the population also decide to take out private health insurance?Sophie Lewis, Senior Research Fellow, Centre for Social Research in Health, UNSW SydneyKaren Willis, Professor, Allied Health Research, Melbourne Health, La Trobe UniversityMarika Franklin, PhD Candidate, Australian Catholic UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/387862015-03-22T19:15:06Z2015-03-22T19:15:06ZHigh cost of GP rebate freeze may see co-payments rise from the dead<figure><img src="https://images.theconversation.com/files/75036/original/image-20150317-9211-yoxy6l.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">New modelling shows the Medicare rebate freeze will leave GPs A$8.43 worse off per consultation</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/diacimages/5774894486">DIBP images/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>Prime Minister Tony Abbott has <a href="http://www.smh.com.au/federal-politics/political-news/gp-copayment-fee-is-dead-buried-and-cremated-tony-abbott-20150303-13u3ec.html">declared</a> that GP co-payments are “dead, buried and cremated”. This contrasts with health minister Sussan Ley’s <a href="http://www.skynews.com.au/news/politics/national/2015/03/04/ley-rules-out-means-testing-bulk-billing.html">desire</a> to “reduce the number of bulk-billed consultations to people who can afford to pay something”. </p>
<p>So, what is likely to emerge from Ley’s Medicare reform consultations? </p>
<p>In a paper published today in the <a href="https://www.mja.com.au/journal/2015/202/6/cost-freezing-general-practice">Medical Journal of Australia</a>, our new modelling shows the freeze on Medicare fees paid to GPs will leave doctors A$8.43 worse off per consultation with non-concessional patients by 2017-18. That’s a bigger shortfall than the now-abandoned A$5 rebate cut – and is likely to prompt many GPs to start charging a co-payment. </p>
<p>Currently, legislative restraints mean that GPs are only able to charge the government directly for patient care (bulk-billing) if they do not charge the patient a co-payment.</p>
<p>However, Ley has suggested that the government would consider legislative change that would <a href="http://www.news.com.au/lifestyle/health/lazarus-or-zombie-the-gp-fee-is-rising-from-the-dead/story-fneuz9ev-1227248137618">remove this restriction</a>. This would mean that GPs could bulk-bill the scheduled fee and also charge a co-payment. </p>
<p>With GPs facing greater economic pressure and the health minister considering legislative changes to make it easier for GP to charge them, GP co-payments, like Lazarus, may rise again from the dead.</p>
<h2>First, a quick recap</h2>
<p>The first of the recent co-payment policies was revealed in the 2014-15 Federal budget. It proposed a A$7 patient co-payment for GP, pathology and imaging services to offset a A$5 reduction in the associated Medicare rebates. The financial impact of the original co-payment proposals was <a href="https://theconversation.com/co-payment-will-hit-harder-than-expected-sydney-university-study-finds-28871">greatest</a> for Commonwealth Concession card patients.</p>
<p>Facing strong opposition, the government withdrew the A$7 co-payment policy in December 2014, and replaced it with three new policies. The first, a ten-minute minimum for standard GP consultations (the “A$20 co-payment”) was retracted in January. </p>
<p>The second, a A$5 reduction in the Medicare rebate for “common GP consultations” for non-concessional patients was retracted in March. It was this retraction that led Prime Minister Abbott to state co-payments were “dead, buried and cremated”.</p>
<p>However, the third policy announced in December remains on the table. It is a continuation of the indexation freeze for all Medicare schedule fees until July 2018. While not a direct cut to GPs’ income, over time GPs would earn relatively less while their costs would increase. </p>
<h2>The cost of the ‘freeze’</h2>
<p>In our modelling for MJA, we used data from the University of Sydney’s <a href="ses.library.usyd.edu.au/bitstream/2123/11882/4/9781743324226_ONLINE.pdf">Bettering the Evaluation and Care of Health</a> (BEACH) study to estimate the amount of rebate claimable through Medicare per 100 GP consultations. BEACH is a continuous cross-sectional, national study of the content of GP-patient encounters in Australia.</p>
<p>More than half (54.4%) of GP consultations were with concessional patients (those under 16 years of age or those holding a health care card) while 45.6% were with non-concessional patients.</p>
<p>We calculated that in 2014-15, an average bulk-billing GP would earn A$4,998.28 from Medicare rebates per 100 consultations. </p>
<p>For GPs to maintain rebate income equivalent to 2014-15, the Medicare scheduled fees would have to increase in line with CPI. So assuming an annual CPI increase of 2.5%, by 2017-18 these fees would need to increase by 7.7% – A$384.32 per 100 consultations. </p>
<p>By freezing fees until 2017-18, the government is cutting the GPs’ gross earnings by 7.1% in relative terms. Assuming concessional patients are all bulk-billed, this A$384.32 decrease equates to A$8.43 per non-concessional patient consultation.</p>
<p>In comparison, the (now retracted) A$5 reduction in rebate for most consultations with non-concessional patients would have amounted to a loss of A$219.53 per 100 consultations, or A$4.81 per consultation with a non-concessional patient.</p>
<p><br></p>
<iframe src="https://d3602hfvnbc5pq.cloudfront.net/23iyK/4/" frameborder="0" allowtransparency="true" allowfullscreen="allowfullscreen" webkitallowfullscreen="webkitallowfullscreen" mozallowfullscreen="mozallowfullscreen" oallowfullscreen="oallowfullscreen" msallowfullscreen="msallowfullscreen" width="100%" height="400"></iframe>
<h2>Making up the shortfall</h2>
<p>While public discussion has focused on the now retracted A$5 reduction, the freeze will have a greater impact: A$8.43 per non-concessional patient consultation by 2017-18, nearly double the amount of the rebate reduction. </p>
<p>The 7.1% reduction in GP rebate income by 2017-18 from the freeze may economically force GPs who currently bulk-bill to charge a co-payment to their non-concessional patients. As Grattan Institute health economist Professor Stephen Duckett <a href="http://www.abc.net.au/news/2015-03-05/duckett-we-still-have-a-gp-co-payment-by-stealth/6282094">notes</a>, this is a “co-payment policy by stealth”.</p>
<p>Our estimates are conservative. The A$8.43 figure would be the minimum charge needed to make up for the GPs lost income. We did not account for: administrative costs in implementing new billing systems; increased bad debt; the previous freeze of fees; and lost income when a GP chooses to bulk-bill non-concessional patients facing financial hardship. </p>
<p>It is therefore likely that GPs who opt to charge a co-payment, will charge more than our estimates. Further, after abandoning bulk-billing, some GPs may take the opportunity to charge more than that required to merely recoup their rebate loss. </p>
<p>Statements by health minister Ley and the ongoing effect of the index freeze suggest we’re likely to see GP co-payments in the near future.</p><img src="https://counter.theconversation.com/content/38786/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Christopher Harrison is a Greens volunteer.</span></em></p><p class="fine-print"><em><span>Graeme Miller is co-chief investigator of the BEACH program. In 2013-14 BEACH was funded by a competitive grant from the Commonwealth Department of Health, and through University of Sydney research agreements with Astra Zeneca Pty Ltd, Novaritis Pharmaceuticals Australia Ptry ltd, and CSL Biotherapies Pty Ltd.</span></em></p><p class="fine-print"><em><span>Helena Britt is co-chief investigator of the BEACH program. In 2013-14 BEACH was funded by a competitive grant from the Commonwealth Department of Health, and through University of Sydney research agreements with AstraZeneca Pty Ltd (Australia), Novartis Pharmaceuticals Australia Pty Ltd, bioCSL (Australia) Pty Ltd, and Merck, Sharp and Dohme (Australia) Pty Ltd. </span></em></p><p class="fine-print"><em><span>Clare Bayram does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>With GPs facing greater economic pressure and the health minister considering legislative change to make it easier for GP to charge them, GP co-payments, like Lazarus, may rise again from the dead.Christopher Harrison, Senior Research Analyst, Family Medicine Research Centre, Sydney School of Public Health, University of SydneyClare Bayram, Research Fellow, Family Medicine Research Centre, Sydney School of Public Health, University of SydneyGraeme Miller, Associate Professor of General Practice, University of SydneyHelena Britt, Associate professor, Director of the Family Medicine Research Centre, Sydney School of Public Health, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/389662015-03-18T19:43:43Z2015-03-18T19:43:43ZTime for policy rethink as frequent GP attenders account for 41% of costs<figure><img src="https://images.theconversation.com/files/75205/original/image-20150318-2476-s1uppb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Very high GP attenders cost Medicare an average of A$3,202 in 2012-13, compared to an Australian average of A$690.</span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-134706641/stock-photo-multiethnic-people-waiting-for-the-doctor-in-hospital-lobby.html?src=gQE7LY_2KOVxUR-2THj_mQ-1-6">Tyler Olson/Shutterstock</a></span></figcaption></figure><p>The Commonwealth government’s big idea for primary health care in the past year was to charge everyone who visits the GP a <a href="https://theconversation.com/federal-budget-2014-health-experts-react-26577">A$7 co-payment</a>. The idea had many problems – it could have led to a blowout in <a href="https://theconversation.com/gp-co-payment-would-increase-emergency-department-wait-times-28658">emergency department demand</a>; it was <a href="https://theconversation.com/higher-health-co-payments-will-hit-the-most-vulnerable-29590">inequitable</a>; and it <a href="https://theconversation.com/gp-co-payments-why-price-signals-for-health-dont-work-28857">may not have worked</a> anyway. It has finally been <a href="https://theconversation.com/medicare-co-payment-a-case-study-in-policy-implosion-38311">abandoned</a>.</p>
<p>The failed policy betrayed a simplistic belief that all patients are basically the same. The government thought all patients should make a co-payment and all would respond to it in the same way. Eventually, the government decided to exempt some people, but even then, patients were only divided into two categories.</p>
<p>A new report from the <a href="http://www.nhpa.gov.au/internet/nhpa/publishing.nsf">National Health Performance Authority</a>, released today, shows that all patients are not equal. It divides GP users into six groups:</p>
<ul>
<li>Very high attenders, who had 20 or more visits to a GP in 2012-13</li>
<li>Frequent attenders (12 to 19 visits)</li>
<li>Above-average attenders (six to 11 visits)</li>
<li>Occasional GP attenders (four to five visits)</li>
<li>Low GP attenders (one to three visits)</li>
<li>People who did not attend a GP at all in 2012-13.</li>
</ul>
<p>The very high attender group comprises just 3.8% of the population but consumed 17.7% of Medicare out-of-hospital expenditure (see the graph below). </p>
<p>On average, each of these very high GP attenders accounted for A$3,202 of non-hospital Medicare expenditure in 2012-13, compared to an Australian average of A$690. </p>
<p>By grouping together the very high and frequent attenders, we see that 12.5% of the population were responsible for 41% of Medicare out-of-hospital expenditure.</p>
<p><strong>Frequent and very high users account for 41% of the costs</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/75190/original/image-20150318-12148-pxkesu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/75190/original/image-20150318-12148-pxkesu.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=345&fit=crop&dpr=1 600w, https://images.theconversation.com/files/75190/original/image-20150318-12148-pxkesu.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=345&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/75190/original/image-20150318-12148-pxkesu.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=345&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/75190/original/image-20150318-12148-pxkesu.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=433&fit=crop&dpr=1 754w, https://images.theconversation.com/files/75190/original/image-20150318-12148-pxkesu.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=433&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/75190/original/image-20150318-12148-pxkesu.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=433&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">GP visits are non-referred Medicare-funded patient-doctor encounters. Data are for 2012-13.</span>
<span class="attribution"><a class="source" href="http://www.nhpa.gov.au/internet/nhpa/publishing.nsf">National Health Performance Authority</a></span>
</figcaption>
</figure>
<p>As well as being responsible for a large share of total costs, people who visit the GP more often are more likely to live in the most disadvantaged areas, and to report being in poor health.</p>
<p>A conventional measure of quality is <a href="http://hsr.sagepub.com/content/11/4/248.abstract">care continuity</a> – that a patient sees the same doctor regularly rather than shopping around. Very high GP-attenders saw an average of 4.8 GPs in 2012-13. More than one-third of them (36%) saw five or more GPs.</p>
<p>Seeing so many different GPs can lead to duplicated tests and treatments, which might help to explain why the frequent GP visitors got so many tests and referrals to specialists. On average, referrals to specialists, x-rays and pathology tests by these people were almost 50% higher than their spending on GPs. Frequent GP visitors spent A$906 on GPs per head, and A$1356 on other services.</p>
<h2>What does this mean for health policy?</h2>
<p>The National Health Performance Authority report clearly shows why one-size-fits-all thinking in health care policy development isn’t good enough. </p>
<p>People who see the GP most often tend to have more health problems than low-attenders and a greater level of disadvantage. But the original A$7 co-payment policy applied the same set of incentives to both groups. The A$5 rebate reduction was barely more nuanced.</p>
<p>The next generation of health policies should respond to complexity and diversity, not pretend it doesn’t exist. Does the system work for all kinds of patients? Which patients are getting costly care that doesn’t benefit them? By asking these questions, we can uncover how to improve the quality of care while also saving money.</p>
<p>People who see the GP every two weeks probably need better co-ordination of their care. They might also need a different team of health care workers helping them. </p>
<p>For many frequent GP visitors, the traditional model of paying doctors a fixed fee per visit is <a href="https://theconversation.com/new-funding-models-are-a-long-term-alternative-to-medicare-co-payments-35382">probably wrong</a>. Instead, part of a GP’s payment should be for helping a patient draw on the right mix of appropriate, effective and efficient care. That might include support to manage their own care better, getting regular advice from a pharmacist or nurse at short notice, maybe online, and seeing the GP less often.</p>
<p>Differentiating among types of patients can lead to better policy. So can distinguishing among types of providers. </p>
<p>Previous Grattan Institute work has found that some hospitals have <a href="http://grattan.edu.au/report/controlling-costly-care-a-billion-dollar-hospital-opportunity/">extreme, unjustified costs</a>. Despite this, little is done to rein in these costs – hospitals that run a deficit are often treated much the same as those that manage their costs well. The funding and management of hospitals remains fairly one-size-fits all, despite huge variations in efficiency.</p>
<p>Our upcoming work will show that different hospitals also vary widely in whether or not they provide ineffective treatments. Once again, we can do a lot more to distinguish the best hospitals from those that have serious problems and to manage them differently.</p>
<p>The National Health Performance Authority report is a reminder that we have more information than ever about patients, just as we do about providers and treatments. We should make the most of it by looking at how these patients, providers and treatments differ and what that means for policy.</p><img src="https://counter.theconversation.com/content/38966/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Duckett does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As well as being responsible for a large share of total costs, people who visit the GP more often are more likely to live in the most disadvantaged areas, and to report being in poor health.Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/383742015-03-11T03:20:33Z2015-03-11T03:20:33ZFactCheck: has Medicare spending more than doubled in the last decade?<blockquote>
<p>This is necessary with government expenditure on Medicare more than doubling from about A$8 billion to A$20 billion over the past decade, despite the proportion of Medicare spending covered by the Medicare levy falling backwards from about 67% to 54% over that same period. – Health Minister Sussan Ley, <a href="http://www.health.gov.au/internet/ministers/publishing.nsf/Content/223AE2CC4BB4C324CA257DFD0014DDD3/$File/SL013.pdf">press conference</a>, March 3, 2015.</p>
</blockquote>
<p>Concern over a growing Medicare bill has underpinned policy proposals such as the GP co-payment, so it is important to have an accurate picture of the true levels of government health spending.</p>
<p>What does the data say?</p>
<h2>Has Medicare spending more than doubled in the last decade?</h2>
<p>A spokesman for the health minister told The Conversation that budget papers showed that Medicare spending overall is expected to be “about $20.3 billion in 2014-15”, a figure that checks out with the expenditure estimates in Statement 6, Table 8.1 in <a href="http://www.budget.gov.au/2014-15/content/bp1/download/BP1_combined.pdf">Budget Paper 1</a>.</p>
<p>Until 2008-09, budget papers did not reveal expenditure on the line item “Medicare”. To keep the estimates for the Private Health Insurance Rebate confidential, Medicare and the Private Health Insurance Rebate (and some other expenses) were bundled in one item, “Medical Services and Benefits”.</p>
<p>According to the minister’s spokesman, Medicare expenditure in 2003-4 was A$8,599,952,315 (a surprising level of precision!). He said this figure was available on the Department of Health and Human Services website, though did not provide a link. </p>
<p>I had been surprised by the Minister’s initial statement of “about A$8 billion”, but that low figure results in part from the minister having used a rounded down figure: it would have been more conventional to have rounded that figure up to “about A$9 billion”.</p>
<p>But assuming that expenditure on Medicare comprised the same percentage (71%) of “Medical Services and Benefits” expenditure in 2003-04 as it did in the years 2007-08 to 2014-15, when it was revealed, my estimate for 2003-04 was that it would have been about A$9 billion. In other words, the minister’s statement of expenditure does not seem to be out of line. </p>
<p>Ley’s figures for Medicare spending, therefore, are broadly correct when she says that Medicare spending more than doubled from about A$8 billion to about A$20 billion in the last decade, although it would have been more conventional to have rounded the figure up to “about A$9 billion”. It would also have been more conventional to have used a deflator, such as the GDP deflator, to bring the figures to constant prices. Rounding down the base figure, and failing to adjust for inflation, tends to overstate the impression strongly rising in expenditure. </p>
<p>Using the minister’s 2003-04 Medicare expenditure statement (A$8.6 billion), the 2013-14 estimate ($19.3 billion) from <a href="http://www.budget.gov.au/2014-15/content/bp1/download/BP1_combined.pdf">Statement 6, Table 8.1 in Budget Paper 1</a>, and deflators from Table 4 of <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/5204.02013-14?OpenDocument">2013-14 National Accounts</a>, an accurate presentation would be to say: in 2014 prices, Medicare outlays have risen from about A$11.9 billion to A$19.3 billion over the decade to 2013-14. (We do not yet have deflators for 2014-15). Even that figure does not account for the rise in population over that period.</p>
<h2>Has the proportion of Medicare covered by the levy fallen from 67% to 54%?</h2>
<p>The minister’s spokesman said the Australian Bureau of Statistics’ <a href="https://data.gov.au/dataset/taxation-statistics-2011-12/resource/f163573b-49a8-483a-bb21-f858a94414ee">Taxation Statistics</a> show that the <a href="https://www.ato.gov.au/individuals/medicare-levy/">Medicare levy</a> plus the <a href="https://www.ato.gov.au/individuals/Medicare-levy/Medicare-levy-surcharge/">Medicare levy surcharge</a> in 2003-4 came to just over A$5 billion. So as a percentage of the total Medicare expenditure that year (about A$8.6 billion), the Medicare levy and surcharge is about 67%. </p>
<p>You can see <a href="http://www.budget.gov.au/2014-15/content/bp1/html/bp1_bst5-03.htm">here</a> that the 2013-14 budget estimated that Medicare levy would raise about $10.4 billion that year. As a percentage of total Medicare spending that year of <a href="http://www.budget.gov.au/2014-15/content/bp1/download/BP1_combined.pdf">$19 billion</a>, it’s close to 54%.</p>
<p>So the health minister is broadly correct when she says that the proportion of Medicare covered by the levy has fallen backwards from 67% to 54% in the last decade.</p>
<h2>What Medicare and its levy were designed for</h2>
<p>Linking the Medicare levy to the cost of Medicare is questionable in policy terms. The Medicare levy was never meant to cover the entire cost of Medicare. </p>
<p>When the Hawke Government re-introduced universal health insurance in 1984, the levy was based on the incremental cost of providing universal publicly-funded health insurance under Medicare. The levy was a once-off political expedient 30 years ago. It is past its use-by date and ideally should be built into tax tables.</p>
<p>Nevertheless, the levy’s share of total Commonwealth health expenditure has held up fairly well at about 17% of the Commonwealth’s health care expenditure.</p>
<p>It should be noted that the word “Medicare” has a specific definition in budget papers to refer to benefits funded under the <a href="http://www.health.gov.au/internet/mbsonline/publishing.nsf/Content/432EE55FAB58E5C4CA257D6B001AFB8A/$File/201411-MBS.pdf">Medicare Benefits Schedule</a>. That schedule does not cover government expenditure on pharmaceuticals, dental care, or state government expenditure in public hospitals (although it does cover medical expenditures in private hospitals). But politicians use the term “Medicare” loosely, sometimes referring to the whole government health funding system, and sometimes focusing only on GP services as in the recent arguments over co-payments.</p>
<p>In a recent <a href="http://www.abc.net.au/radionational/programs/breakfast/sussan-ley/6278872">interview on RN Breakfast</a>, when the health minister made the same claim about the falling contribution of the Medicare levy, Ley suggested strongly that she sees free Medicare services (that is, bulk billed) services as a distributive welfare measure for those of limited means, rather a universal tax-funded insurance scheme.</p>
<p>It would not be surprising if the next move by the government will be an attempt to allow private health insurers to cover the “gap” between the dwindling schedule fee and what doctors charge, thus moving away even further from a universal tax-funded health insurance system.</p>
<p>If the government wishes to redefine Medicare as a distributive welfare scheme, rather than as a universal tax-funded insurance scheme, then it should engage with the public in an open debate, rather than changing it by stealth. And it should acknowledge that private health insurance is an <a href="http://cpd.org.au/2012/01/private-health-insurance/">expensive way to fund health care</a>.</p>
<p>If the Minister is concerned about a funding shortfall, the obvious question she should be putting to the electorate is “why not increase the levy?”.</p>
<h2>Verdict</h2>
<p>The health minister’s numbers are broadly correct, but they are framed in a way that overstates the impression of rising health care expenditure. And linking the Medicare Levy to the cost of Medicare is misleading, because the levy was never meant to cover the full cost of Medicare.</p>
<hr>
<h2>Review</h2>
<p>I agree with this analysis. It’s also important to note that the Medicare levy is not <a href="http://en.wikipedia.org/wiki/Hypothecated_tax">hypothecated</a> to or earmarked for health: it is just another income tax. The most recent increase in the levy was not even linked to health care – it was designed to fund the <a href="https://www.google.com.au/search?q=ndis&oq=ndis&aqs=chrome..69i57j69i60l5.624j0j7&sourceid=chrome&es_sm=91&ie=UTF-8">National Disability Insurance Scheme</a> trials. </p>
<p>The failure to use deflated figures and to ignore population growth in the Minister’s statements helps to obscure the real issues. It makes the cost escalation more dramatic, but equally exposes the minister to the type of analysis undertaken here that shows the figures are correct but misleading.</p>
<p>Health costs are increasing on a real, per capita adjusted basis. We should use adjusted figures in public debate so we can have an informed discussion about whether this is a problem (do the benefits outweigh the costs?) and, if so, what we should do about it. – <strong>Stephen Duckett</strong></p>
<hr>
<p><div class="callout"> Have you ever seen a “fact” that doesn’t look quite right? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article. You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.</div></p><img src="https://counter.theconversation.com/content/38374/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Health Minister Sussan Ley is broadly correct on the numbers – but they are framed in a way that overstates the impression of rising health care expenditure.Ian McAuley, Lecturer, Public Sector Finance , University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/384932015-03-10T19:32:35Z2015-03-10T19:32:35ZFederal health spending is forecast to slow, but states face rising bills<p>The <a href="http://www.abc.net.au/news/2015-03-10/matthewson-three-jostling-budget-narratives/6291502">narrative for the upcoming budget</a> appears to be in a state of flux. Is it still to be “tough love” or “we’re from the government and here to help you”? </p>
<p>The framers of the <a href="https://theconversation.com/we-need-medicare-reform-but-co-payment-3-0-is-the-wrong-place-to-start-36508">health spending narrative</a> face the same quandary. For the last 15 months all we have heard is the “health system is unsustainable” discourse. However, last week’s <a href="http://www.treasury.gov.au/PublicationsAndMedia/Publications/2015/2015-Intergenerational-Report">Intergenerational Report</a> delivered a confusing prediction: Commonwealth health expenditure will decline over the next two decades. </p>
<p>Previous <a href="http://grattan.edu.au/report/budget-pressures-on-australian-governments-2014/">Grattan Institute work</a> has shown health to be the fastest-growing area of government spending. And the reason for the shift in the 2015 Intergenerational Report is not changed assumptions, since the 2015 ones are <a href="http://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/FlagPost/2015/March/IGR-Assumptions">very similar</a> to those in previous reports. So, how can this be? </p>
<p>The Intergenerational Report looks at the Commonwealth government’s finances, not the whole of the public sector: federal, state and local. It therefore presents only <a href="https://theconversation.com/time-to-rethink-the-charter-of-budget-honesty-37851">half the picture</a> and may leave Australians with a warped view of government finances.</p>
<h2>Projected health expenditure</h2>
<p>The Intergenerational Report is organised around three spending projections: two based on whether the 2014 budget measures are implemented and another, labelled “previous policy”. </p>
<p>Both the report’s “proposed policy” scenario and its “currently legislated” one show a remarkably different outlook for government health spending from previous intergenerational reports.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/74258/original/image-20150310-13546-wh0ko.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/74258/original/image-20150310-13546-wh0ko.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=372&fit=crop&dpr=1 600w, https://images.theconversation.com/files/74258/original/image-20150310-13546-wh0ko.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=372&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/74258/original/image-20150310-13546-wh0ko.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=372&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/74258/original/image-20150310-13546-wh0ko.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=467&fit=crop&dpr=1 754w, https://images.theconversation.com/files/74258/original/image-20150310-13546-wh0ko.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=467&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/74258/original/image-20150310-13546-wh0ko.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=467&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Intergenerational report projections of Commonwealth government health expenditure as share of gross domestic product.</span>
<span class="attribution"><span class="source">2015 Intergenerational Report/Grattan Institute</span></span>
</figcaption>
</figure>
<p>Following a decline in Commonwealth health expenditure over the next couple of decades, the report projects health will account for a much lower proportion of GDP than previously reported. </p>
<h2>Budget impact on the states</h2>
<p>The 2015 Intergenerational Report adopts the same mixed focus as the previous three: it looks both on the economy broadly and the Commonwealth budget specifically. It captures the big picture about ageing, productivity growth, GDP and so on. </p>
<p>Yet when it comes to budget impacts, it is truly myopic. It describes the impact on the Commonwealth budget with great clarity but its description of the impact on the budgets of the states and territories is so out of focus as to be non-existent. </p>
<p>This doesn’t matter for those areas of government expenditure that are solely the preserve of the Commonwealth, but it has a significant impact in areas of policy where responsibility is shared and there are significant intergovernmental transfers.</p>
<p>In 2014-15, the Commonwealth is <a href="http://www.budget.gov.au/2014-15/content/bp3/html/bp3_03_part_2a.htm">budgeted to transfer</a> A$46.3 billion to the states as specific purpose payments. Health grants will account for more than a third of the transfers (A$16.4 billion).</p>
<p>The 2014-15 budget took an axe to Commonwealth payments to the states for health care. It abruptly terminated grants to states under the ironically named <a href="http://www.federalfinancialrelations.gov.au/content/npa/health_reform.aspx">National Partnership Agreements</a>, and, from 2017, sliced more than $1 billion a year from public hospital grants through reduced indexation. </p>
<p>Because changes to state grants don’t require Senate approval, these cuts are incorporated in both the Report’s “currently legislated” scenario as well as in “proposed policy’.</p>
<p>The effect is that the Commonwealth appears to have its health outlays more or less under control. The problem for the states, however, is dire. </p>
<h2>Rising health costs</h2>
<p>Health spending as a share of state taxation revenue has already increased from about 18% in 2002 to 28% in 2012.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/74259/original/image-20150310-13550-15zc2pd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/74259/original/image-20150310-13550-15zc2pd.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=324&fit=crop&dpr=1 600w, https://images.theconversation.com/files/74259/original/image-20150310-13550-15zc2pd.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=324&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/74259/original/image-20150310-13550-15zc2pd.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=324&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/74259/original/image-20150310-13550-15zc2pd.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=407&fit=crop&dpr=1 754w, https://images.theconversation.com/files/74259/original/image-20150310-13550-15zc2pd.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=407&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/74259/original/image-20150310-13550-15zc2pd.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=407&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Health share of tax revenue.</span>
<span class="attribution"><span class="source">AIHW/Grattan Institute</span></span>
</figcaption>
</figure>
<p>The Premier of New South Wales, Mike Baird highlighted the health Commonwealth <a href="https://theconversation.com/in-conversation-with-mike-baird-full-transcript-38171">funding shift</a> in a recent interview: </p>
<blockquote>
<p>The biggest challenge facing this state and the nation is health funding. And what happened last federal budget is not sustainable. That was, the commonwealth and the federal government said "we are going to allocate a large part of the future growth in health costs from ourselves to the state governments”.</p>
<p>…The states do not have the capacity to meet those health costs on their own.</p>
</blockquote>
<p>The states have been sharing more and more of the hospital cost burden. In 2000-2001 the state share of public hospital costs was 51%. By 2012-13 it had risen to 59%. </p>
<p>Projections of <a href="http://www.aihw.gov.au/publication-detail/?id=6442468187">health spending growth</a> in 2008 predicted that state spending would double, in real terms, between 2012-13 and 2032-33.</p>
<p>It was obvious this was not sustainable. A new <a href="http://www.federalfinancialrelations.gov.au/content/npa/health_reform/national-agreement.pdf">National Health Reform Agreement</a> was negotiated and signed by the Commonwealth and all states and territories. A specific objective of the agreement was to:</p>
<blockquote>
<p>ensure the sustainability of funding for public hospitals by increasing the Commonwealth’s share of public hospital funding through an increased contribution to the costs of growth</p>
</blockquote>
<p>That agreement was ripped up in the 2014 budget.</p>
<p>Slashing more than A$1 billion a year from state hospital revenues, as the 2014 <a href="https://theconversation.com/budget-takes-hospital-funding-arrangement-back-to-the-future-26701">Commonwealth budget did</a>, will exacerbate the pressures state governments already face. The Commonwealth has simply improved its position by hurting that of the states. Shifting a problem does not solve it.</p>
<p>The 2015 Intergenerational Report, like its predecessors, gives only half the picture of health-care spending. If these reports are to <a href="http://www.theguardian.com/commentisfree/2015/mar/05/the-intergenerational-report-is-redundant-hockey-should-abandon-it">continue</a>, they must take a broader, national perspective, not merely the Commonwealth’s own interest.</p><img src="https://counter.theconversation.com/content/38493/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Duckett does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Commonwealth appears to have its health outlays more or less under control. The problem for the states, however, is dire.Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/366022015-02-09T19:18:38Z2015-02-09T19:18:38ZAbbott redux needs to revisit ‘sustainable’ health spending<p>The Abbott government “reset” yesterday provides a valuable opportunity to reconsider health policies based on the idea that Australia’s health system is unsustainable. But first it will need to embrace a new understanding of what a sustainable health-care sector actually is. </p>
<p>The idea of sustainability has spread from ecology to apply to most aspects of human endeavour. In the context of health care, it can mean many things. The English National Health Service (NHS), for instance, launched a <a href="http://www.sduhealth.org.uk/policy-strategy/what-is-sustainable-health.aspx">strategy for a sustainable health system</a> in 2014 with emphasis on reducing environmental damage and promoting healthy lifestyles. </p>
<p>But discussions about Medicare’s sustainability under the Abbott government have only concerned how much we spend on the health sector. </p>
<h2>Understanding sustainability</h2>
<p>One way to think about sustainability is to examine the amount of resources devoted to the sector under consideration and compare it with the nation’s overall capacity to pay. A commonly used measure is expenditure as a percentage of gross domestic product (GDP), or total economic activity. </p>
<p><a href="http://www.oecd.org/els/health-systems/health-data.htm">Latest OECD data</a> shows the health sector accounts for 9.1% of Australia’s economic activity. That’s below the OECD average of 9.3%, as well as being lower than other countries. The United States, for instance, devotes 16.9% of the national income to health. </p>
<p>Over time, this percentage has steadily increased in all countries. But between 2000 and 2011, the growth rate was <a href="http://stats.oecd.org/index.aspx?DataSetCode=HEALTH_STAT">substantially smaller in Australia</a> when compared to average OECD growth. </p>
<p>In fact, the <a href="http://www.aihw.gov.au/publication-detail/?id=60129547205">most recent local figures</a> show health spending growth has actually slowed to the lowest rate recorded since the mid-1980s. As <a href="https://theconversation.com/australias-unsustainable-health-spending-is-a-myth-26393">previously argued on this site</a>, there’s no real evidence that the Australian economy is unable to accommodate likely growth in health spending.</p>
<p>Sustainability could also be seen through a more narrow government perspective, by taking expenditure and total tax revenue into account. In 2012, <a href="http://www.aihw.gov.au/publication-detail/?id=60129548871">25.9% of tax revenue</a> was devoted to health care, whereas in 2002 this figure was only 20%. </p>
<p>At first glance, these figures present some cause for concern, particularly if this percentage is expected to continue rising. But government revenue is strongly linked to economic activity and there was considerable volatility around 2008 because of the global financial crisis. Tax collection plummeted and, as a result, health expenditure as a percentage of tax revenue peaked at 27.4% in 2009. As revenues picked up, this percentage declined. </p>
<p>An even narrower view of sustainability is to look at health expenditure as a percentage of revenue for different levels of government. The various <a href="http://archive.treasury.gov.au/igr/igr2010/report/pdf/IGR_2010.pdf">inter-generational reports</a>, for example, focus heavily on the federal government’s contribution to health spending. Abbott government policies about price signals appear to have adopted this narrow perspective. </p>
<p>Policies announced in the 2014 budget have attempted to shift health-care expenditure away from the Australian government’s ledger and onto patients and state governments. These policies include the impending $5 rebate cut for GP visits, for instance, as well as cuts to hospital funding. </p>
<p>But <a href="http://www.aihw.gov.au/publication-detail/?id=60129547205">recent experience shows</a> state and territory governments are coming under considerably more strain than the federal government. In 2012, 27% of state, territory and local government tax revenues were devoted to health (up from 17% in 2002), whereas the federal government contributed 25% of its tax revenue to health (up from 21.6% in 2002). </p>
<h2>The right kind of sustainable</h2>
<p>There are two sides to the sustainability coin. </p>
<p>The first is the tax revenue side. While governments cannot be held responsible for external factors such as the end of the mining boom, they do determine tax policy and have the power to compel tax payment. </p>
<p>The 2014 budget introduced a (temporary) 2% tax rise on incomes over $180,000, while the Howard government made a series of tax cuts during the resources boom. So, a great deal of the revenue side is clearly the direct result of government policy. </p>
<p>The second side of the coin is expenditure. Here, the Abbott government has proposed very blunt policy instruments that do not guarantee a fall in expenditure. Patients may respond to the co-payment for GP visits by seeking care elsewhere – for instance, the emergency department. </p>
<p>And providers may increase referrals to protect incomes, by inviting more patients to come back for repeat consultations, or by undertaking additional diagnostic tests that require pathology services – particularly when there are financial links between GPs and pathology providers.</p>
<p>There are other important demographic issues to consider. With Australia’s ageing population and the rise of chronic diseases, good access to general practice has become essential to prevent people from going down the path of ill health and high costs. </p>
<p>All governments have a duty to maximise the benefits of health-care funding to the population, as well as ensure there’s sufficient funding for other social priorities such as education, social welfare and defence. Let’s hope the Abbott government will now embrace a health-system perspective rather than a narrow view of what it means to have a sustainable health system.</p><img src="https://counter.theconversation.com/content/36602/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jane Hall receives funding from NHMRC and APHCRI.</span></em></p><p class="fine-print"><em><span>Kees Van Gool receives funding from NHMRC and APHCRI</span></em></p>The Abbott government “reset” yesterday provides a valuable opportunity to reconsider health policies based on the idea that Australia’s health system is unsustainable. But first it will need to embrace…Jane Hall, Professor of Health Economics and Director, Centre for Health Economics Research and Evaluation, University of Technology SydneyKees Van Gool, Health economist, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/371182015-02-04T19:02:10Z2015-02-04T19:02:10Z$5 Medicare rebate cut could cost patients up to $40 more<figure><img src="https://images.theconversation.com/files/71018/original/image-20150204-25520-s819s6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Non-concession patients may end up paying a A$30 to A$40 co-payment, not a A$5 one.
</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/comedynose/5755803052">Pete/Shutterstock</a></span></figcaption></figure><p>The Christmas-New Year silly season gave Australia three health policies. At the start of December, the policy from the <a href="https://theconversation.com/federal-budget-2014-health-experts-react-26577">2014 budget</a> was still on life support. But in mid-December, then-health minister Peter Dutton announced a <a href="https://theconversation.com/gp-co-payment-2-0-a-triple-whammy-for-patients-35334">new rebate reduction policy</a>. This survived less than a month. </p>
<p>In January, the new health minister, Sussan Ley, dumped the minimum time requirement for a level B consultation – the most common type of patient visit – and <a href="https://theconversation.com/early-signs-are-that-the-new-health-minister-doesnt-get-it-either-36943">promised to consult</a> on what should replace it. </p>
<p>Two other elements of the government’s revised co-payment policy remain: a A$5 cut to GP funding for each service a GP performs for patients who are over 15 and don’t have a concession card; and a freeze on Medicare rebates until 2018. </p>
<p>As I’ll argue today at the hearings of the <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Health/Health/Public_Hearings">Senate Select Committee on Health</a>, the cumulative impact of the freeze and the A$5 rebate reduction on general practices, and therefore on patients, will be substantial. Non-concession patients may end up paying a A$30 co-payment, not a A$5 one.</p>
<h2>Impact on general practices</h2>
<p>Data from University of Sydney <a href="http://ses.library.usyd.edu.au/bitstream/2123/11882/4/9781743324226_ONLINE.pdf">BEACH surveys</a> suggest that up to 57% of visits would be exempt from the reduced rebate because the patient has a Commonwealth Concession Card, Repatriation Card, or is a child up to the age of 15. </p>
<p>To account for other exclusions (15-year-olds, patients getting GP health plans and GP management plans) and to be conservative, let’s assume that two-thirds of patients are exempt from the A$5 funding cut.</p>
<p>The average practice (with an average distribution across the four consultation items, an average proportion of exempt patients and an average bulk billing model), would suffer about a 4% reduction in revenue across level <a href="https://theconversation.com/gp-co-payment-2-0-a-triple-whammy-for-patients-35334">A to D consultation items</a> (the overwhelming majority are level B; A is for simpler, shorter consults; C and D are for complex, longer consults). </p>
<p>The more significant impact is the second, slow-burn reduction: the freeze on all rebates. The table below shows the estimated impact on per patient revenue in general practice under this policy for the four common consultation items.</p>
<p>Assuming inflation of 2% a year, the low end of the <a href="http://www.rba.gov.au/inflation/inflation-target.html">Reserve Bank target</a> and <a href="http://www.rba.gov.au/inflation/measures-cpi.html">recent experience</a>, the cumulative impact on the freeze between now and June 2018 will be a further 6% cut in general practice revenue. </p>
<p><strong>Estimated average funding reduction per patient in 2018</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/70907/original/image-20150203-25557-8bm6p7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/70907/original/image-20150203-25557-8bm6p7.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=279&fit=crop&dpr=1 600w, https://images.theconversation.com/files/70907/original/image-20150203-25557-8bm6p7.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=279&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/70907/original/image-20150203-25557-8bm6p7.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=279&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/70907/original/image-20150203-25557-8bm6p7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=351&fit=crop&dpr=1 754w, https://images.theconversation.com/files/70907/original/image-20150203-25557-8bm6p7.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=351&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/70907/original/image-20150203-25557-8bm6p7.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=351&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Funding reductions for mid-2018 are relative to today (in real terms); analysis is restricted to level A-D consultations; assumes bulk billing will decrease and incentive payments will reduce from 84% to 67%.</span>
<span class="attribution"><span class="source">Grattan Institute</span></span>
</figcaption>
</figure>
<p>In total, if inflation runs at 2% and the A$5 rebate cut goes ahead with its 4% revenue impact, general practices will face effective, real reductions in rebates from these consultation items of just over 10%. Cuts of that magnitude will challenge the business model of most general practices. </p>
<p>The result is likely to be a move away from bulk billing. This is indeed the objective of the government’s policy.</p>
<h2>Impact on patients</h2>
<p>So, if a practice decides to reduce bulk billing, what fees will it charge?</p>
<p>For bulk-billing practices, the cost of introducing fee-collection processes, including potential cash handling, is not trivial and may be more than A$5 a consultation. The Australian Medical Association <a href="https://ama.com.au/media/proposed-co-payment-model-costly-red-tape-nightmare-medical-practices-%E2%80%93-independent-report">described</a> the initial co-payment proposal as a “costly red tape nightmare”. The A$5 scheme is likely to attract the same description.</p>
<p>A move away from bulk billing also means that the practice will lose the current bulk-billing incentive of A$6.15 or A$9.25 (depending on location and other factors). </p>
<p>In deciding their strategy, practices would need to consider not only the immediate impact of the A$5 rebate reduction, but also the slower but greater impact of the rebate freeze. If practices know that the value of the government rebate will erode over time, it would be prudent to set fees now that take this into account, especially as they have absorbed the impact of the <a href="http://www.abc.net.au/news/2013-10-16/medicare-rebate-freeze-row-as-patients-face-increasing-costs/5026996">existing freeze</a> initiated by the previous Labor government.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/71019/original/image-20150204-25544-1ls02lm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/71019/original/image-20150204-25544-1ls02lm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/71019/original/image-20150204-25544-1ls02lm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/71019/original/image-20150204-25544-1ls02lm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/71019/original/image-20150204-25544-1ls02lm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/71019/original/image-20150204-25544-1ls02lm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/71019/original/image-20150204-25544-1ls02lm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The rebate reductions and the freeze are likely to lead to reductions in bulk billing and increases in co-payments.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/10422334@N08/4130595143">Guy Mayer/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>The <a href="http://health.gov.au/internet/main/publishing.nsf/Content/Quarterly-Medicare-Statistics">average out-of-pocket payment</a>, when there is one, is A$31 at present. The combined impact of the freeze and the A$5 rebate reduction raises the risk that practices would move to the prevailing non-bulk-billed co-payment. </p>
<p>If practices decide to maintain bulk billing for some non-concessional patients subject to the A$5 rebate reduction, GPs may offset the reduction by increasing the co-payment for people who already pay one. The average co-payment for non-bulk-billed services could then increase significantly above its current level.</p>
<h2>Impact on patient demand</h2>
<p>Imposing a A$31 fee may reduce demand, as patients baulk at paying the fee, defer the visit until they have multiple problems, or go to a <a href="https://theconversation.com/gp-co-payment-would-increase-emergency-department-wait-times-28658">hospital emergency department</a> or pharmacy instead.</p>
<p>The impact of a reduction in daily demand on practices is unclear. Many practices can’t meet demand on any given day and already fill more appointments than they have available by making patients wait a day or two or longer for appointments. More than a quarter of people who visited a GP <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4839.0Main+Features32011-12">felt they had to wait</a> longer than was acceptable. </p>
<p>Some patients don’t wait and seek care elsewhere, from pharmacies or other GPs. But if demand drops as a result of co-payments, waits might reduce and patients who might otherwise have sought alternative treatment sources would see a GP. The overall impact might be no reduction in realised demand.</p>
<p>In summary, the rebate reductions and the freeze are likely to lead to reductions in bulk billing and increases in co-payments. This is as the government intends. But the increase in co-payments is likely to be significantly greater than the A$5 rebate reduction, probably in the range of A$30 to A$40 for a standard, level B visit.</p><img src="https://counter.theconversation.com/content/37118/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Duckett's general practitioner charges him a $35 co-payment for a standard consultation.</span></em></p>The Christmas-New Year silly season gave Australia three health policies. At the start of December, the policy from the 2014 budget was still on life support. But in mid-December, then-health minister…Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/364352015-02-01T19:07:39Z2015-02-01T19:07:39ZShaping 2015: Time to go back to the drawing board on health<p><em>As the 2015 parliamentary year approaches, The Conversation is <a href="https://theconversation.com/au/topics/shaping-2015">examining five key policy areas</a> that have a new minister in charge: health, immigration, defence, social services and science. Today we begin with health, and look at what’s on minister Sussan Ley’s agenda in 2015 – and what should be.</em></p>
<hr>
<p>Australia does well in terms of health outcomes and <a href="http://ahha.asn.au/news/australia-7th-most-efficient-healthcare-system-worldwide">ranks high internationally</a>. However, the health system faces a number of pressures. These include rising demand due to an ageing population, increasing consumer expectations and growing burden of complex chronic health conditions. </p>
<p>All of this is leading to rising expenditure on health and increasing pressure on government budgets. Commonwealth health expenditure is <a href="https://federation.dpmc.gov.au//issues-paper-3">estimated to increase</a> by 3.9% in real terms from 2014-15 to 2017-18. </p>
<p>Australia also faces equity issues. Disadvantaged groups such as <a href="https://www.lowitja.org.au/sites/default/files/docs/AustIndigneousHealthReport.pd">Indigenous Australians</a>, those on low incomes and people who live in <a href="https://theconversation.com/au/topics/rural-health">rural and regional areas</a> are often unable to access high-quality care in a timely fashion. </p>
<p>The current system in Australia is no longer fit for purpose. It <a href="https://theconversation.com/creating-a-better-health-system-lessons-from-england-30144">does not function well</a> for those with complex and chronic conditions, such as heart disease and diabetes, who often require services from a number of different health providers. </p>
<p>The lack of connection and co-ordination is <a href="https://theconversation.com/federal-state-health-relations-can-anything-be-salvaged-27259">exacerbated</a> by different tiers of government, which are often criticised for <a href="https://theconversation.com/blame-game-cutting-through-the-spin-on-victorias-hospital-funding-cuts-11881">cost-shifting</a> between primary (general practice, which the Commonwealth funds) and secondary (hospital) care, which the states manage. The system in Australia is fragmented and focused on <a href="https://theconversation.com/new-funding-models-are-a-long-term-alternative-to-medicare-co-payments-35382">provider needs</a> rather than those of the patient. </p>
<p>The current Commonwealth government’s record on health policy tends to be focused largely on short-term financial gain. The <a href="https://theconversation.com/federal-budget-2014-health-experts-react-26577">abolition</a> of a number of agencies and continued cuts in public health and preventive services may well reduce spending over the shorter term, but could prove costly over the longer term. </p>
<p>The decision to <a href="http://www.abc.net.au/news/2014-05-13/budget-2014-534-cut-to-indigenous-programs-and-health/5451144">take funding</a> from Indigenous programs and move Indigenous affairs to the Department of Prime Minister and Cabinet seems like a backwards step that will have significant impacts on an already disadvantaged group. </p>
<p>The decision to disband <a href="https://theconversation.com/let-medicare-locals-find-their-feet-and-improve-primary-care-22008">Medicare Locals</a> to Primary Care Networks was made without any real evidence base and is <a href="https://www.mja.com.au/insight/2015/1/lesley-russell-stephen-leeder-rough-road">estimated to cost</a> A$112 million. </p>
<p>The proposed GP co-payments would <a href="https://theconversation.com/gp-co-payment-2-0-a-triple-whammy-for-patients-35334">hit vulnerable groups</a> the hardest, and <a href="https://theconversation.com/gp-co-payment-would-increase-emergency-department-wait-times-28658">increase pressure</a> on hospitals. GPs act as gatekeepers to more expensive care and treating early can stop the development of more serious conditions. </p>
<p>Under pressure from <a href="https://theconversation.com/the-ama-and-medicare-a-love-hate-relationship-36346">lobby groups</a>, the government has <a href="https://theconversation.com/autopsy-of-a-dead-policy-government-shelves-impending-medicare-change-36295">shelved</a> many of its suggested GP changes. This is welcomed in most camps, as is Health Minister Sussan Ley’s promise of a more consultative process to explore future reform options. </p>
<p>But consultation needs to go beyond just a select few groups or individuals and draw on a number of viewpoints, which need to be evidence-based. This is, after all, what makes for good public policy.</p>
<p>There is compelling evidence internationally that integrated health systems – with a strong primary care focus that puts the consumer at the heart of decision-making – are more efficient and have better patient outcomes than fragmented systems. Having pooled budgets can reduce bureaucracy and streamline care pathways, leading to a more effective and efficient health system.</p>
<p>But while there are <a href="https://federation.dpmc.gov.au//issues-paper-3">some instances</a> of Australia’s Commonwealth and state governments transferring funds for health, there is little by way of <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/8313/1508565.pdf">pooling funds</a> and combined decision-making. Instead, Australia’s funding models reward activity and volume, rather than outcome and value. This means services tend to focus on a “sickness” rather than a “wellness” model of care. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/70604/original/image-20150130-25939-vjcs0z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/70604/original/image-20150130-25939-vjcs0z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=475&fit=crop&dpr=1 600w, https://images.theconversation.com/files/70604/original/image-20150130-25939-vjcs0z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=475&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/70604/original/image-20150130-25939-vjcs0z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=475&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/70604/original/image-20150130-25939-vjcs0z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=596&fit=crop&dpr=1 754w, https://images.theconversation.com/files/70604/original/image-20150130-25939-vjcs0z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=596&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/70604/original/image-20150130-25939-vjcs0z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=596&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Pooling state and Primary Health Network budgets can help integrate care.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-4355401/stock-photo-female-doctor-and-assistant-filling-out-medical-cards.html?src=lm_eEYBHo9COvlMRgtpdqQ-1-73&ws=1">StockLite/Shutterstock</a></span>
</figcaption>
</figure>
<p>It is unlikely that current or future governments will radically change health funding models. However, the way funds are distributed around the system should be a key policy focus. </p>
<p>The new <a href="http://www.health.gov.au/internet/main/publishing.nsf/content/primary_health_networks">Primary Health Networks</a>, for instance, are set to take on a more developed role in the commissioning and procurement of services (such as GP and hospital care). This could provide an opportunity to focus on more <a href="https://theconversation.com/creating-a-better-health-system-lessons-from-england-30144">integrated models of care</a> and commissioning health services that focus on outcomes rather than volume. </p>
<p>Pooling state and Primary Health Network budgets and focusing on joint commissioning of integrated services would be a major advance on the current siloed approaches to funding and service delivery. However, this would involve commitment from both state and Commonwealth governments and require a bipartisan approach for success over the longer term. </p>
<p>Integration and procurement of services that focus on wellness rather than sickness would also require a different kind of service provision – and this could see some services being radically changed or disbanded. As we’ve learnt from <a href="http://www.ncbi.nlm.nih.gov/pubmed/23083894">health systems abroad</a>, reconfiguring services and dis-investing in others is a difficult process. It requires strong leadership and a high level of expertise in population planning, procurement, contract management and governance processes. </p>
<p>Ley needs to develop policy that places the consumer at the centre of health, providing patients with the “right care at the right place in the right time”. This will require working with stakeholders and having a stronger dialogue with the public about the costs of health care and their experiences accessing quality health services. </p>
<p>We know from the past that structural and cultural change can take time. This is often something that governments don’t have, given the short election cycle. But if we are to have a health system that provides high-quality, sustainable care, governments and political parties (both federal and state) need to agree on a long-term approach to reform.</p>
<hr>
<p><em>This in the first article in The Conversation’s <a href="https://theconversation.com/au/topics/shaping-2015">Shaping 2015</a> series. Stay tuned for more instalments this week.</em></p><img src="https://counter.theconversation.com/content/36435/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Suzanne Robinson receives research funding from WA State and Commonwealth Governments; Healthways</span></em></p>As the 2015 parliamentary year approaches, The Conversation is examining five key policy areas that have a new minister in charge: health, immigration, defence, social services and science. Today we begin…Suzanne Robinson, Associate Professor of Health Policy and Management, Curtin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/365082015-01-22T03:59:04Z2015-01-22T03:59:04ZWe need Medicare reform, but co-payment 3.0 is the wrong place to start<figure><img src="https://images.theconversation.com/files/69694/original/image-20150122-29909-1cx71vw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Medicare reform must focus on increasing value, not just cutting costs.</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/worldbank/8575330872">World Bank Photo Collection/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span></figcaption></figure><p>The primary care reform debate of the last 15 months got off on the wrong foot. It was <a href="http://www.cormorant.net.au/wordpress/wp-content/uploads/18-oct-2013-achr-gp-copayment-paper-final.pdf">framed</a> in terms of cutting government spending, with an overlay that consumers needed to bear the brunt of system reform. Although no one can deny the importance of money, nor the importance of consumers as being part of reform, the framing led policy makers down the path to perdition. </p>
<p>In response, both <a href="http://theconversation.com/co-payment-will-hit-working-poor-says-new-ama-chief-27150">policy experts</a> and <a href="http://theconversation.com/six-dollar-co-payment-to-see-a-doctor-a-gps-view-21915">medical professionals</a> denounced co-payments as inequitable and, <a href="http://theconversation.com/gp-co-payment-would-increase-emergency-department-wait-times-28658">potentially inefficient</a>. </p>
<p>A second frame was that Medicare was unsustainable. Again, this assumption was <a href="http://theconversation.com/australias-unsustainable-health-spending-is-a-myth-26393">challenged</a> and shown to be a myth.</p>
<p>Consider what the reaction of the public and the medical profession would have been if the frame was: how do we improve the quality of primary care? Or, what steps will keep growth in primary care spending in line with population growth while protecting access and quality?</p>
<p>Medicare reform must focus on increasing value, not just cutting costs. This means changing how things are done and what gets done, not just who pays for it. Policymakers can learn from patients about what is wrong with the system.</p>
<h2>Reduce duplication</h2>
<p>One area for savings is through reducing duplication. Extracting savings from duplication will be neither easy nor quick, but eliminating duplication can increase the speed of diagnosis and patient convenience while cutting costs.</p>
<p>In a <a href="http://www.commonwealthfund.org/publications/surveys/2013/2013-commonwealth-fund-international-health-policy-survey">2013 survey</a> of 1,500 Australians conducted by the New York-based Commonwealth Fund, 7.9% of respondents said that in the past two years their doctor had ordered a medical test that the patient felt was unnecessary because the test had already been done. </p>
<p>One in eight has experienced a situation where information, including test results, was not available at a consultation when required.</p>
<p>At present, a general practitioner or a specialist might order a pathology test not knowing that the same test was ordered by someone else a week before. But what if all pathology tests had to be ordered electronically and results uploaded to a secure site? </p>
<p>If a duplicate test was ordered, a real-time message could tell the doctor and ask for confirmation that another test was necessary. The technology to do this is <a href="http://www.albertanetcare.ca/InfoForAlbertans.htm">available now</a> and has been for a decade at least. What is required is getting that technology onto the desktops of clinicians.</p>
<p>Patients would be happier not having the inconvenience of having to present for multiple tests. Clinical care would be improved by quicker diagnosis. Savings to the taxpayer would automatically flow. A win-win-win situation.</p>
<h2>Get the right person doing the right task</h2>
<p>Previous <a href="http://grattan.edu.au/report/access-all-areas-new-solutions-for-gp-shortages-in-rural-australia/">Grattan Institute work</a> has shown that almost 20% of general practitioner visits were “less complex”. This means they only involve one problem, with only one or two medications prescribed. They don’t involve referrals to specialists or allied health services, ordering of tests and investigation, conducting procedures or providing other treatment.</p>
<p>A significant proportion of these visits could reasonably and safely be handled by other professionals: physician assistants, pharmacists and practice nurses. </p>
<p><a href="http://theconversation.com/good-news-for-rural-health-physician-assistants-join-the-workforce-35312">Physician assistants</a> could work under the direction of general practitioners to examine, diagnose and treat patients. Physician assistants are an established part of the health-care team in <a href="http://www.hwa.gov.au/sites/default/files/hwa-physician-assistant-report-volume2-literature-review-20120816.pdf">several countries</a> and their <a href="http://www.biomedcentral.com/1472-6963/13/223">patients report</a> high levels of satisfaction. Physician assistants aren’t widely employed in Australia because they are not authorised to write PBS-subsidised prescriptions or offer Medicare rebates for consultations.</p>
<p><a href="http://theconversation.com/pharmacists-under-prescribed-in-sickly-health-system-1185">Pharmacists</a> could work in collaboration with general practitioners to issue repeat prescriptions. Pharmacists have four years of drug <a href="https://theconversation.com/should-pharmacists-get-50-to-give-you-a-health-check-23187">training</a> and can safely dispense drugs and provide advice on medicines. Pharmacists in the United Kingdom, United States, Canada and New Zealand already deliver a wider range of primary care services and Australian pharmacists should follow suit. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/69696/original/image-20150122-29877-193ff1e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/69696/original/image-20150122-29877-193ff1e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/69696/original/image-20150122-29877-193ff1e.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/69696/original/image-20150122-29877-193ff1e.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/69696/original/image-20150122-29877-193ff1e.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/69696/original/image-20150122-29877-193ff1e.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/69696/original/image-20150122-29877-193ff1e.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Non-doctor providers can safely perform a range of health services.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/christianacare/8189209594">Christiana Care/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-sa/4.0/">CC BY-NC-SA</a></span>
</figcaption>
</figure>
<p><a href="http://theconversation.com/the-nurse-will-see-you-now-sharing-patient-care-in-general-practice-12168">Practice nurses</a> could take a greater role in management of chronic illness. They could be responsible for monitoring patients and coaching them about how to manage their illness. </p>
<p>The expected annual remuneration for all these professions is up to two-thirds that of general practitioners. Developing models which involve a shift of care from general practitioners, freeing them up to perform the more complex care that fully uses their skills, would be a move in the right direction and would add to their work satisfaction. </p>
<p>Again, as well as improving the health system financial bottom line patients would get quicker access to care.</p>
<p>The challenge for policymakers will be ensuring that those other professionals are true substitutes and not additive. </p>
<h2>Next steps</h2>
<p>The two proposals outlined here are just the tip of a reform iceberg. Money is to be saved in improving prescribing and in improving referral pathways too. </p>
<p>None of the options described here will deliver savings within six months, but then again, neither did Co-payment Policy 1.0 or 2.0. All these changes are difficult. They require shifting a complex system, managing implementation and often taking on vested interests. </p>
<p>Making the system work better is hard, but the government is learning that not doing it, and passing the buck to patients, might be even harder.</p><img src="https://counter.theconversation.com/content/36508/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Stephen Duckett does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The primary care reform debate of the last 15 months got off on the wrong foot. It was framed in terms of cutting government spending, with an overlay that consumers needed to bear the brunt of system…Stephen Duckett, Director, Health Program, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/363462015-01-20T19:25:36Z2015-01-20T19:25:36ZThe AMA and Medicare: a love-hate relationship<p>The Australian Medical Association (AMA) has emerged from the recent brouhaha over the Abbott government’s proposed Medicare reforms as both a winner in the protection of doctors’ incomes and an apparent champion of the affordability of health care for patients. </p>
<p>Medicare changes that were due to come into effect this week would have imposed a ten-minute minimum for regular (Level B) GP consultations, which currently attract a A$37.05 rebate. Consultations under ten minutes would have attracted a smaller rebate of A$16.95. GPs were faced with a choice: absorb the cuts or pass them on to patients. </p>
<p>The AMA <a href="http://www.smh.com.au/federal-politics/political-news/patients-face-new-20-fee-for-seeing-their-gp-20150112-12mpag.html">framed the change</a> as a A$20 cut to patient rebates for short visits and used data to dismiss government claims of “six-minute medicine”. </p>
<p>The proposals drew widespread public condemnation. When the opposition vowed to disallow the regulations implementing the cut when the Senate resumed in February, the government was left with little choice but to abandon the plan days before it was due to take effect. </p>
<p>It was an effective demonstration of the power and profile of the AMA, using a potent combination of evidence and scare tactics. </p>
<p>Now the real work begins for the new health minister, Sussan Ley, the cabinet and all the stakeholders in Medicare. The AMA is (rightly) guaranteed a place at the consultation table, but others are equally entitled to be there – including other professional medical groups, a wide range of primary care workers, pharmacists, aged care and mental health representatives and consumer and patient organisations. </p>
<p>Students of the history of Medicare are entitled to expect that in the upcoming negotiations the AMA will revert to standard practice, crowding out others and zealously safeguarding turf, <a href="https://theconversation.com/phase-out-gp-consultation-fees-for-a-better-medicare-13690">fee-for-service</a> and doctors’ incomes. </p>
<p>But the definition of a successful resolution to the current impasse does not lie solely with an agreement between the health minister and the AMA; the problems to be addressed are much broader than an adequate reimbursement for Medicare services provided through general practice. </p>
<p>The AMA has a tradition of opposing key health reforms, good and bad, dating back to the 1940s when the <a>Pharmaceutical Benefits Scheme</a> (PBS) was introduced. The AMA (then an offshoot of the British Medical Association) opposed the PBS with unrelenting vigour. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/69468/original/image-20150120-14495-wf1obq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/69468/original/image-20150120-14495-wf1obq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=402&fit=crop&dpr=1 600w, https://images.theconversation.com/files/69468/original/image-20150120-14495-wf1obq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=402&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/69468/original/image-20150120-14495-wf1obq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=402&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/69468/original/image-20150120-14495-wf1obq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=505&fit=crop&dpr=1 754w, https://images.theconversation.com/files/69468/original/image-20150120-14495-wf1obq.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=505&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/69468/original/image-20150120-14495-wf1obq.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=505&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The then-BMA opposed socialised medicine and tried to block the PBS.</span>
<span class="attribution"><a class="source" href="http://www.shutterstock.com/pic-242820400/stock-photo-operation-at-provident-hospital-chicago-illinois-in-showing-increased-use-of-antiseptic.html?src=dVcPYQBy5NwU4QfItBVyjA-1-11">Everett Historical/Shutterstock</a></span>
</figcaption>
</figure>
<p>Robert Menzies, then leader of the opposition, agreed to support the government’s case. But the price for this, extracted by the BMA, was a referendum question to <a href="http://www.jstor.org/discover/10.2307/40111513?sid=21105657425573&uid=3737536&uid=2&uid=4">change the constitution</a> to prohibit any form of civil conscription, thus effectively making socialised medicine forever impossible. </p>
<p>Similarly, the AMA met the introduction of <a href="http://www.aams.org.au/contents.php?subdir=library/history/funding_prof_med_au/&filename=index">Medibank and later Medicare</a> with ferocious opposition, although it was not alone – many in the medical professions, the General Practitioners’ Society and the private health funds were also against these reforms. Opponents argued that the system constituted a socialist takeover of medicine that would limit their incomes and the freedom of Australian citizens. </p>
<p>Fortunately, the AMA eventually agreed that perhaps there were some benefits to publicly subsidised health care. No AMA spokesperson today would advocate the abolition of these programs. And in fairness, on the other side, <a href="http://www.theage.com.au/articles/2003/12/31/1072546587433.html?from=storyrhs">cabinet documents</a> released some years ago revealed that the Whitlam government had its own – largely irrational – fears that doctors would treat Medibank as a licence to print money, by over-servicing patients, knowing the government would foot the bill.</p>
<p>These confrontations occurred decades ago, but they highlight deep-rooted suspicions on the part of both the AMA and government about each other’s value systems that still linger, mostly hidden, but emerging regularly. Last week, the AMA described the proposed reimbursement changes for level B consultations as “an assault on general practice”, while Liberal Party backbencher Andrew Laming called for a crackdown on “cowboy doctors”. </p>
<p>It is increasingly clear that Tony Abbott and his government are not the “<a href="http://www.abc.net.au/news/2014-02-20/tony-abbott-says-coalition-medicare-best-friend/5272376">best friend that Medicare has ever had</a>” and the Coalition’s preferred position would be a Fraser-government-style retreat on publicly funded health care, leaving Medicare as an increasingly ragged safety net for the poor. So there are no great expectations for real reforms to emerge from the promised consultations, despite the strong case for change.</p>
<p>In recently published articles with colleagues <a href="https://www.scribd.com/doc/252087121/05-01-2015-Tackling-OOP-Costs">Jennifer Doggett</a> and <a href="https://www.mja.com.au/insight/2015/1/lesley-russell-stephen-leeder-rough-road">Stephen Leeder</a>, I have outlined the need to focus on delivering increased value and quality in health care, how growing out-of-pocket costs are arguably leading to increased hospital costs, and the need for more teamwork and connected and coordinated care. </p>
<p>Reforms are needed to address these and other problems, including:</p>
<ul>
<li>years lost needlessly to disability</li>
<li>growing health disparities in some population groups</li>
<li>a health workforce that does not reflect current and future needs in its make-up and distribution</li>
<li>outdated reimbursement methods</li>
<li>a failure to direct spending to ensure improved long-term health outcomes and economic sustainability. </li>
</ul>
<p>Will the AMA be an effective protagonist for these issues in the upcoming discussions and negotiations? </p>
<p>On the one hand the AMA has an <a href="https://ama.com.au/advocacy/position-statements">outstanding record</a> as an advocate for issues as important and varied as the social determinants of health, climate change, asylum seekers’ health, problem gambling, violence against women and rural health. Most years over the past decade have seen the production of an <a href="https://ama.com.au/advocacy/indigenous-health">Indigenous health report card</a> and the AMA has used its resources to highlight the need to close the gap on Indigenous disadvantage and to encourage Indigenous doctors. </p>
<p>On the other hand, the AMA has generally opposed Medicare reforms at their introduction, regardless of political parenthood. AMA panned <a href="https://ama.com.au/media/fairer-medicare-package-not-answer">Fairer Medicare</a>, <a href="https://ama.com.au/media/medicare-plus-positive-second-best-option">Medicare Plus</a>, <a href="https://ama.com.au/media/gp-super-clinics-not-so-super-ama">GP Super Clinics</a>, <a href="https://ama.com.au/ausmed/govt-told-think-gp-medicare-locals">Medicare Locals</a> and <a href="https://ama.com.au/ausmed/governments-diabetes-plan-gps-say-no-thanks">coordinated care for diabetes</a>. Its support for bulk billing has been lacklustre at best, although the AMA has <a href="https://ama.com.au/submission/submissions-out-pocket-costs-australian-healthcare">spoken out</a> about the impact of out-of-pocket costs.</p>
<p>The AMA has campaigned aggressively around <a href="https://ama.com.au/media/doctors-fight-back-soaring-indemnity-costs">medical indemnity costs</a>, <a href="https://ama.com.au/ausmed/governments-diabetes-plan-gps-say-no-thanks">managed care programs</a>, <a href="https://ama.com.au/media/ama-applauds-decision-scrap-cap">Scrap the Cap</a> on work-related self-education expenses for professionals, <a href="https://ama.com.au/media/ama-calls-commonsense-prevail-cataract-surgery-senate-standoff">reduced reimbursements</a> for cataract surgery, the <a href="https://ama.com.au/media/ama-questions-safety-pharmacy-vaccinations">provision of immunisation</a> and other services in pharmacies, and the ability of <a href="https://ama.com.au/media/optometry-board-puts-glaucoma-patients-care-risk">optometrists to manage</a> glaucoma patients. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/69474/original/image-20150120-22679-11eadm3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/69474/original/image-20150120-22679-11eadm3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/69474/original/image-20150120-22679-11eadm3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/69474/original/image-20150120-22679-11eadm3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/69474/original/image-20150120-22679-11eadm3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/69474/original/image-20150120-22679-11eadm3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/69474/original/image-20150120-22679-11eadm3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">An astute minister will consult widely to ensure all doctors’ voices are heard.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/proimos/6869336880">Alex Proimos/Flickr</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span>
</figcaption>
</figure>
<p>Basically the AMA is very good at doing what most unions do: protecting members’ income and interests. In health policy terms this boils down to two basics: <a href="https://ama.com.au/media/ama-speech-ama-president-aprof-brian-owler-private-healthcare-australia">fee-for-service as the gold standard</a> for reimbursement and aggressive turf protection as non-medical health professional boards look to <a href="https://ama.com.au/media/ama-takes-strong-stance-non-medical-prescribingple.com/">expand their scope of practice</a>. </p>
<p>Given the growing recognition that fee-for-service encourages volume over value and that primary health care is about more than general practice, there will eventually be showdowns on these issues, even if they are not on the table this time around. </p>
<p>It is important to realise that there are <a href="http://blogs.crikey.com.au/croakey/2010/04/07/the-ama-says-its-the-chief-health-policy-advisor-really/?wpmp_switcher=mobilhttp://example.com/">many Australian doctors</a> who do not see their interests as well represented by the AMA (only about 40% of Australian doctors are AMA members), so an astute health minister will consult more widely to ensure that all doctors’ voices are heard, along with those of other health professionals and – most importantly – the patients. </p>
<p>The AMA is just one of the keys to unlocking an effective resolution to the current health and budget impasse.</p><img src="https://counter.theconversation.com/content/36346/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Lesley Russell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The Australian Medical Association (AMA) has emerged from the recent brouhaha over the Abbott government’s proposed Medicare reforms as both a winner in the protection of doctors’ incomes and an apparent…Lesley Russell, Adjunct Associate Professor, Menzies Centre for Health Policy, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/353822015-01-20T19:25:23Z2015-01-20T19:25:23ZNew funding models are a long-term alternative to Medicare co-payments<p>The Abbott government is struggling with its Medicare co-payment reform, <a href="http://www.abc.net.au/news/2015-01-15/medicare-government-shelves-propsosed-rebate-cut-changes/6018990">scrapping the latest version</a> for a period of consultation, starting this week. The government claims it wants to make Medicare sustainable by controlling costs. However the proposed reforms are piecemeal and inequitable, antagonising Medicare’s stakeholders without addressing underlying problems.</p>
<p>To recap, the <a href="https://theconversation.com/gp-co-payment-2-0-a-triple-whammy-for-patients-35334">revised Medicare co-payment policy</a> as of December 9, 2014 was to reduce Medicare rebates by A$5 and encourage GPs to recoup this from patients; freeze the indexation of Medicare rebates for all doctors; and perhaps most controversially, impose a ten-minute minimum duration for level B appointments. This would have meant a A$20 rebate cut for short visits but the government <a href="https://theconversation.com/autopsy-of-a-dead-policy-government-shelves-impending-medicare-change-36295">scrapped this part</a> of the plan. </p>
<p>Introducing demand restraints such as co-payments points to a lack of faith in the principles of universal health care and the <a href="https://theconversation.com/medicare-spending-on-general-practice-is-value-for-money-33948">preventive benefits</a> of primary care. Hence they prompt outrage from the public and doctors alike who see the “slippery slope” to further increased co-payments, and reduction in government funding for public health care.</p>
<p>A blueprint for Medicare reform must include cost control, but also support quality and equity. Crucially, it must also be accompanied by adequate piloting and evaluation strategies to find out what works best in Australia. <a href="http://theconversation.com/phase-out-gp-consultation-fees-for-a-better-medicare-13690">My suggestion</a> is to phase in a system based on capitation with some pay-for-performance and residual fee-for-service elements.</p>
<h2>What is capitation?</h2>
<p>Capitation is a system which pays doctors an annual fee for each patient they have enrolled in their practice. The payment is in return for the GP “looking after” that patient for the whole year. So GPs do not receive more money for seeing their patients more often, and indeed will benefit from lower costs themselves if patient’s health improves and they require less care in the future.</p>
<p>Capitation has been the primary funding method for general practice in the United Kingdom for <a href="http://www.historyextra.com/feature/nhs-what-can-we-learn-history">more than 100 years</a>. More recent examples of capitation implementation come from North America: from the growth of managed care in the United States, where capitation has been widely used, to <a href="http://www.cmaj.ca/content/181/10/668.short">the province of Ontario</a> in Canada, where a voluntary capitation system <a href="http://www.cmaj.ca/content/181/10/668.short">was introduced in 2007</a>.</p>
<p>Evidence from Ontario, Canada is particularly relevant to Medicare in Australia, because voluntary capitation was recently phased in from an existing fee-for-service system. The model has been termed “mixed capitation” as it allows GPs to charge small fees in addition to capitation payments for enrolled patients, plus full fee-for-service for non-enrolled patients up to a cap. </p>
<p>This is how the transition to capitation could be implemented in Australia.</p>
<h2>What does capitation achieve?</h2>
<p>Early evaluations are cautiously optimistic. A <a href="http://onlinelibrary.wiley.com/doi/10.1111/caje.12003/full">recent study</a> shows the mixed capitation payment method reduced the number of services (consultations) GPs provided by around 6% per day, while increasing their likelihood of meeting preventive care quality targets by 7%. </p>
<p><a href="http://www.sciencedirect.com/science/article/pii/S0168851013002698">Another study</a> by the same authors finds no evidence that GPs using the capitation model “cost-shifted” by avoiding enrolling high-cost patients, a potential concern in capitation. This evidence and others has led <a href="http://www.cdhowe.org/pdf/Commentary_365.pdf">experts to recommend</a> mixed capitation schemes to reduce costs and support quality.</p>
<p>An added advantage of capitation systems is that because patients are enrolled with GP practices they work well with pay-for-performance schemes. <a href="https://theconversation.com/should-doctors-be-paid-to-keep-patients-healthy-3298">Pay-for-performance</a> is when doctors are paid “bonuses” when they meet quality targets for patient care. </p>
<p>Pay-for-performance arrangements now play a large role in the funding of primary care in the United Kingdom and United States. Australia is lagging behind.</p>
<h2>Towards a mixed funding system</h2>
<p>Capitation and pay-for-performance arrangements are not completely new to Australia. The <a href="http://www.biomedcentral.com/1471-2458/13/1212">Diabetes Care Project</a> randomised 50 GP practices to receive capitation and pay-for-performance payments for their diabetes patients (alongside other interventions). Practices received up-front payments and performance bonuses for achievements on indicators such as patient HbA1c level (indicating good blood sugar control). </p>
<p>The trial finished in 2014 and the evaluation has yet to be published. The results of this trial could be a valuable input into designing capitation and pay-for performance schemes in Australia.</p>
<p>So how can an ambitious reform of GP payment schemes proceed in Australia? </p>
<p>Reform could be incremental and gradual, offering capitation initially as a voluntary incentive for enrolling patients, alongside existing Medicare “fee-for-service” incentives. </p>
<p>Phasing in the new funding arrangements by states would provide excellent opportunities for evaluating aspects of the reform such as different ratios of capitation, fee-for-service or pay-for-performance in the funding mix.</p>
<p>This proposal would not be designed to provide a “quick fix” to health-care costs in the short term. Costs may even be higher in the first years of introducing new payment schemes than they would otherwise be with the status quo, as incentives are offered to doctors to adapt to change. Health care policy should aim over the time-horizon of our lifespans, not just the budget forward estimates.</p><img src="https://counter.theconversation.com/content/35382/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Sivey has received funding from the Australian Research Council, the National Health and Medical Research Council and Health Workforce Australia.</span></em></p>The Abbott government is struggling with its Medicare co-payment reform, scrapping the latest version for a period of consultation, starting this week. The government claims it wants to make Medicare sustainable…Peter Sivey, Senior Lecturer, School of Economics, La Trobe UniversityLicensed as Creative Commons – attribution, no derivatives.