Making the rich pay more isn’t the answer to a better Medicare

Government spending is already targeted toward poorer households. AAP Image/Dave Hunt

Should the rich pay more for their health care? This question has raised its ugly head again after health minister Peter Dutton announced the Coalition government was considering more user-pays options – including a $6 co-payment for general practice visits – to get a hold on the rising health budget.

The argument is that government benefits should be tightly targeted to those who can’t pay. But there are a number of weaknesses with it.

Australians already pay comparatively high rates of health costs, either directly or via health insurance. Increasing out-of-pocket expenses will make us a real international outlier in terms of equitable financing and have significant consequences for many poorer households. About 16% of households report deferring visits to the doctor or not filling prescriptions because of costs; additional co-payments will worsen their plight.

The rich already pay more out of their own pockets for medical services. When I visit my GP I don’t get bulk billed and pay roughly $30 out of my own pocket. More broadly, the wealthiest 20% of the population spend an average of $98 per week on health and medical services. Households designated by the Australian Bureau of Statistics as poorer, for statistical comparisons, spend about $39 per week.

Government spending is also already targeted toward poorer households, even in the context of a universal scheme. Again, the wealthiest group get about $146 per week in government health benefits, the poorer group, $220 per week. The wealthy group pays about $731 per week in tax, the poorer group $36.

Finally, residualising Medicare as a scheme for “the poor” will weaken public support for it. Currently, middle-income “battlers”, a key political demographic, share in the strengths and weaknesses of Medicare with richer and poorer Australians. The universality of Medicare increases its political potency and is one reason politicians of all stripes ensure Medicare is seen to “work”. If we are all in the same boat, we all have an interest in making sure the boat doesn’t leak.

Doctors’ fee-for-service payments do not promote continuity of care. Image Point Fr/Shutterstock

Medicare is not perfect and some carefully designed reforms could deliver dramatic improvements. Better funding and incentives to improve care for the chronically ill is one example. Medicare is now 30 years old and it was designed when single visits to the doctor to deal with a single problem were the norm.

Today’s medical consultations are more about chronic conditions and, indeed, people with multiple chronic conditions. Doctors’ payments under Medicare are still predominantly fee-for-service, which is appropriate for episodic care. But it isn’t designed to promote continuity of care which is so much more important when treating people with ongoing conditions.

Supporting people with chronic conditions to better manage their own care would be easier if they had access to a functioning electronic health record in which they, and their general practitioner, had confidence and could use easily.

There are also some easy savings to be made. The Grattan Institute, for example, has identified savings of a billion dollars a year from improved pricing arrangements for pharmaceuticals. These changes would also benefit consumers, as they would pay less for medications. The changes from improved pharmaceutical pricing would dwarf savings from a co-payment.

If there are fears that Medicare is becoming “unsustainable” and that higher-income people should contribute more, a more equitable and more efficient way of achieving that objective is to increase the Medicare levy.

Minister Peter Dutton dismissed this option, saying it would have to rise to 9.5% to cover the full cost of Commonwealth health expenditure. But the Medicare levy was never designed to meet all costs, and doesn’t. It was originally designed to cover the incremental cost to the Commonwealth from the introduction of Medicare.

An increase in the Medicare levy would reinforce the fact that Medicare is for all Australians, and that its cost should be shared equitably. In contrast, shifting costs to consumers increases inequity.

Medicare reform should have multiple components. Changing the funding system to reward better care of people with chronic conditions should be one element. Tackling waste should be another. If necessary, increasing revenue a third. Whatever the mix of solutions, the need to maintain access and ensure high quality care should be paramount.