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Phase out GP consultation fees for a better Medicare

In the fourth part of our series Health Rationing, Peter Sivey explains why it might be time to abandon Medicare’s fee-for-service model. Teachers aren’t paid a fee for each lesson they teach, nor are…

The current fee-for-service model makes it difficult to contain costs and boost the quality of care. Image from shutterstock.com

In the fourth part of our series Health Rationing, Peter Sivey explains why it might be time to abandon Medicare’s fee-for-service model.


Teachers aren’t paid a fee for each lesson they teach, nor are police officers paid for each arrest they make. Doctors, on the other hand, are paid for each patient they see. This funding model is the basis of Medicare, the main funder of out-of-hospital care across the country.

Medicare is largely a “fee-for-service” system. This has the benefits of simplicity and ease of administration: doctor sees patient, doctor collects fee. But the simplicity can also be a disadvantage for such a complex and multidimensional process as health care.

In 2010–11, Medicare Australia paid benefits of A$16.4 billion (up from A$10.9 billion in 2005-6), but taxation revenue from the Medicare Levy (including the Medicare Levy Surcharge) was only A$8.3 billion. So Medicare is a drain on government finances and there is increasing pressure to contain costs.

Fee-for-service pitfalls

The main issue with a fee-for-service system is defining what constitutes a “service”. For primary care, that usually means a level B consultation, where the GP sees the patient for up to 20 minutes. The GP receives A$36.30 from Medicare and can also charge the patient a co-payment.

This definition of a service automatically gives GPs incentives to see more patients and recommend follow-up appointments rather than provide long consultations to patients with multiple health conditions.

Anybody who’s been to an inner city 100% bulk-billing clinic will probably be familiar with what’s known as “six-minute medicine”. You barely sit down in the consulting room and tell the doctor what’s wrong before being ushered out, script or referral in hand. This phenomenon demonstrates the financial incentives of a fee-for-service system at its worst.

The dominance of fee-for-service medicine also inhibits team work in primary care, or task delegation, particularly between GPs and other health-care professionals such as nurses.

Practice nurses can play an important role in managing health conditions of the most complex and needy patients, such as those with diabetes or cancer. And employing more practice nurses can save expensive GPs from conducting routine vaccinations and cervical screening procedures.

But some GPs are reluctant to hire practice nurses, preferring to instead provide these services and receive the government rebates. As a result, Australia has just one practice nurse for every three GPs, compared with one nurse for every two GPs in the United Kingdom.

The fee-for-service system causes problems for both cost containment and quality of care – it’s certainly ripe for reform.

A better alternative?

The primary alternative to fee-for-service is capitation. This system involves paying 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 health improves and they require less care in the future.

Capitation has been the primary funding method for general practice in the United Kingdom for more than 100 years, and despite recent policy reforms to introduce performance payments, it remains the source of the majority of GPs' revenue.

More recent examples of capitation come from North America. First is the growth of managed care in the United States, where capitation has been widely used, with the primary motivation of constraining costs.

A second example is in Canada, and the province of Ontario in particular, where voluntary adoption of capitation by GPs has become increasingly popular over the past decade. Policymakers there see the main benefits of capitation as increased quality of care through team work and stable, controllable costs.

Sounds great so far? Well, there are some downsides. For capitation to work, patients have to be enrolled in only one practice - say goodbye to the convenience of visiting one doctor near your workplace and one near home.

Also, the annual payments need to be adjusted to meet the needs of enrolled populations (which means more capitation money for enrolling older, sicker patients).

The road to reform

While all health-care financing methods have disadvantages, to me the upsides of capitation outweigh the downsides. Having said that, a new payment system for doctors in Australia cannot be adopted overnight.

A voluntary scheme that gives GPs the option to enrol some patients and receive (initially small) capitation payments alongside their Medicare rebates, would be a good place to start. The fee-for-service system could be slowly phased out by freezing rebate levels so they become less valuable in real terms over time. Concurrently, capitation payments could be gradually increased to make them more attractive.

Capitation also has the advantage of working well alongside pay-for-performance schemes such as the Quality and Outcomes Framework in the UK. Indeed, the current Diabetes Care Project being run as a pilot scheme by the Australian Department of Health and Ageing, uses enrolment and capitation payments alongside performance pay to try and improve care for diabetes patients.

Perhaps the results of the trial will shed some light on the potential benefits of capitation payment for Australian GPs more widely. But we’ll have to wait – the project won’t begin its evaluation phase until early next year.

This is the fourth part of our series Health Rationing. Stay tuned for more articles in the lead up to the May budget or click on the links below:

Part one: Tough choices: how to rein in Australia’s rising health bill
Part two: Explainer: what is health rationing?
Part three: A conversation that promises savings worth dying for
Part five: Focus on prevention to control the growing health budget

Join the conversation

33 Comments sorted by

  1. Nick Denniston

    Dietitian

    Thought provoking article and particularly interesting that gp practices have accepted this model volunteerly . The current model rewards throughput and bulk billing at the expense of quality and communication then spends billions bribing go practices with mechanisms like care plan payment. this billing model doesn't favour hiring nurses or allied health as it is not the best business decision. I am however careful of the belief the our nurses are an effective tool in CDM management for diabetes particularly in primary health. I think this belief is actually potentially negatively affecting the health of diabetes suffered as the Australian trained practice nurse has significantly less skills and knowledge in this area than the other players supporting diabetes such as diabetes educators dietitians podiatry and exercise physiology

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  2. ian cheong

    logged in via email @acm.org

    Be careful what you wish for. The problem part of medicare fee for service is the "free" bulk billing, which generates unlimited demand for wasteful services. When patients are paying even a subsidised fee for service, they are making an economic choice if it is worth their time and money.

    Experience with the UK's capitation scheme is that there is still 6-minute medicine. (I met someone who had seen a GP who looked after UK dignitaries and they still got 6 minutes.) Because of the rationing…

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  3. Peter Ormonde
    Peter Ormonde is a Friend of The Conversation.

    Farmer

    Another excellent piece.

    Can't see much of a problem with "losing" the option of visiting a multitude of doctors on the public tick myself. If you are such a slave to convenience then pay for the others. Moreover it stops "doctor shopping" or at least puts a price on it.

    There's another option worth considering: reducing the number of GP visits required for the essentially mechanical process of re-issuing scripts perhaps by expanding this role for suitably skilled nurses.

    I live in chronic disease country - an aging overweight town chockers with dodgy tickers and diabetes type 2 - and pills are one of the basic food groups. And the doctors' waiting room is full of oldies getting a signature on their scripts. Not really necessary is it? They'll be on these pills for keeps. A damn boring way to fill one's days as a doctor and a waste of skills, time and money.

    Great article in a series of great articles.

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    1. Greg Young

      logged in via Facebook

      In reply to Peter Ormonde

      Excellent point Peter. I have chronci conditions which require ongoing repeats, and my GP refuses to renew a prescription without a consultation. Last time, he kept me waiting 1 hour to see me, hung on the phone for another 15 minutes and then sent me away empty-handed. I finally got my script 3 days later.

      When living in the USA, my HMO had full record of all of my prescription activity. I just had to ring them up and they mailed the tablets to me. Simple.

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  4. Jane Mills

    logged in via Twitter

    In many cases nurses in general practice are very effective at CDM. The current funding model however, does not provide an incentive for GP employers to support nurses in general practice to acquire postgraduate qualifications such as a PGCert in Diabetes. All registered nurses have the knowledge and skills to nurse clients with chronic disease, but to be highly skilled specialist case managers they, like all other health professionals, need to be able to engage in CPD. Currently the general practice…

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  5. Jon Wardle

    Chancellor's Research Fellow, Faculty of Health at University of Technology, Sydney

    Capitation is a great idea but unfortunately one that is impossible to implement without a referendum. The current fee-for-service model was implemented to get around the cause prohibiting 'civil conscription' in the delivery of health services. The successful High Court challenge by the BMAA (the AMA's precursor) against the government's attempts at implementing a national health service (similar to the UK) has meant that although everyone agrees FFS is entirely inefficient, it is the only way a public health system can currently be run without changing the constitution. You're simply not allowed to tell medical practitioners they have to practice a certain way (the difficulty in getting a decent patient records system is also partly due to this).

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    1. Peter Sivey

      Senior Lecturer, School of Economics at La Trobe University

      In reply to Jon Wardle

      Hi Jon, thanks for your comment. I have heard of these legal arguments against reform of Medicare before. Couldn't the system be implemented as a voluntary one? GPs would be able to keep seeing patients privately, and charging them FFS, but the only government money available to them would be for 'signing up' enrolled patients for capitation payments. So Medicare would still be a subsidy system, GPs would still be privately operated firms, but the Medicare subsidy would be an annual capitation payment rather than a per-consultation fee. This might not be the optimal system but something that is achievable within Medicare.

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    2. Jon Wardle

      Chancellor's Research Fellow, Faculty of Health at University of Technology, Sydney

      In reply to Jon Wardle

      Sorry for late reply, have just been flying back from UK the last two days. The model you espouse is very similar to what happens in Germany, where services are largely provided by independent companies and contractors (e.g. even state-owned hospitals are 'private' in the sense that they are autonomous from a national or state-based health service). There they focus instead on regulating and holding to account the insurance industry, rather than the clinical practice, and it is the insurance companies…

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    3. Sue Ieraci

      Public hospital clinician

      In reply to Jon Wardle

      "The legislative barriers to delivering a decent national health service in this country is a bugbear for many in public health.""

      Jon - do you know of examples of countries running a capitation system that have better health outcomes than we do?

      I'm also interested to know about the payment system in your naturopathic practice - do you charge FFS?

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    4. Tracy Soh

      Addiction Medicine Physician at Eastern Health / Turning Point Alcohol & Drug Centre

      In reply to Jon Wardle

      The clause prohibiting conscription is only a small part of the issue.

      We have a system where the government relies on private small business (most general practices are small businesses, excluding the growing minority of corporate practices) to provide the bulk of primary health care. When we look at the examples held up for comparison in the article - teachers and police officers are usually salaried employees of either the government or large organisations (in the case of teachers in private…

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  6. Wendy Oakes

    Program Manager

    I don't think it's as simple as fee-for-service versus captitation payment systems. Payment is not the only driver for GP practice behaviour. In fact issues proximal to the consultation seem to be significant drivers (eg how many people are sitting in the waiting room). The MBS system is littered with quick fix 'solutions' which haven't resolved perceived GP practice behaviour problems. I think we need to be clearer about what drivers we're trying to change and how they work before launching into another round of system changes which just complicate the business end of things without changing GP behaviour or patient outcomes.

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  7. Ben Smith

    logged in via Facebook

    Thank you for a well written and insightful article. Managing change is a difficult process, and I'm concerned that some doctors will chose to leave the profession at a time when we need them the most? I suppose that's a good thing for patients but it could lead to a shortfall in the number of HCPs. The second query I have is how do you think we will overcome the inherent problem of critical care patients? Generally this means that the elderly and complex cases may receive a lower standard of care since the cost of the care required exceeds the amount assigned to them.

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  8. Andrew Dennis

    Dip. Prac. Man., B. Sc. (Hons) Ph. D.

    There are many things in this article that are misleading or inappropriate. To start with comparing income streams in such disparate professions as teaching, policing and medicine is not appropriate, they are too different. Other errors in the article, though minor, suggest a lack of understanding of the full picture. For example suggesting that GPs receive 36.30 from the government for a level B consultation is incorrect. The patient does. For convenience the patient may sign this over to the GP…

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    1. Peter Ormonde
      Peter Ormonde is a Friend of The Conversation.

      Farmer

      In reply to Andrew Dennis

      Not that many refugees from the NHS really Andrew considering what else is on offer here - http://www.ft.com/cms/s/0/5063a2a0-b651-11e1-8ad0-00144feabdc0.html#axzz2S0ISluWc and as this article points out ther outflow of disgruntled poms is balanced by an influx of overseas trained doctors into the UK who seem quite happy with capitation type funding.

      That's not to say I'm a fan of the chronically underfunded NHS system at all but the recent revelation that some of our local GPs are routinely seeing more than 80 patients per day according to Medicare records is seriously problematic.

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  9. Dan Pettersson

    Doctor

    Several inaccuracies in this article.
    The $36.90 that a GP receives is not his "fee" This is a myth pushed buy politicians of all stripes. The $36.90 is a patients rebate on the national health insurance scheme which is often automatically paid to the GP to save the patient claiming it back. If the GP accepts this agreement, i.e. "bulk bills" the consult it is ILLEGAL to charge a co payment. If a consult is billed privately then the patient pays the full fee and then claims the $36.90 back. How could a senior research fellow in health economics not know this???

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    1. Peter Sivey

      Senior Lecturer, School of Economics at La Trobe University

      In reply to Dan Pettersson

      Thanks for the comment Dan. I am aware of how the Medicare rebates work but I chose to simplify my description of the system in this short article. Apologies if you think this is misleading. I don't think whether the patient claims the rebate or the doctor bulk-bills Medicare makes much of a difference to the issues I'm discussing though.

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    2. Tony Grant

      Student

      In reply to Dan Pettersson

      Yes, a better system...no all medical practitioners aren't criminals!

      I still give assistance to The Fred Hollows Foundation.

      Don't your crowd have enough censoring...moderation..protection?

      Just sometimes we have to mix some of the facts with "Our Conservation"!

      "I don't have any issues, it's your profession, you clean it up?

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    3. Dan Pettersson

      Doctor

      In reply to Dan Pettersson

      Thanks for the reply Peter, I think its an important debate to have which is why I think it's very important to get all the facts correct, because larger inaccuracies are built upon the backs of smaller ones.
      "The enemy of trusted journalism is disinformation and spin." so proclaims this site.
      " The GP receives A$36.30 from Medicare and can also charge the patient a co-payment." is just plain incorrect and wrong, and is disinformation. Lets be quite clear. The patient receives a $36.90 rebate on the visit. If the doctor agrees to receive this automatically he CANNOT charge a co payment.

      Reads a little differently doesn't it, yet factually correct.

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    4. Peter Sivey

      Senior Lecturer, School of Economics at La Trobe University

      In reply to Dan Pettersson

      Hi Dan, maybe I can clarify our disagreement with an example. Assume I visit a GP and am charged $60 for the visit, for which I claim a $36.90 rebate from Medicare (which can often be claimed directly from the GP surgery using the electronic claiming system). I would summarise this transaction as "the GP has received $36.90 from Medicare and charged the patient a copayment of $23.10".

      To me it makes little difference that the $36.90 has travelled through the patient's bank account on the way from Medicare to the doctor. You may regard this as a crucial distinction which I have not pointed out but I can assure you it is not disinformation (ie intentionally false or inaccurate), but simply an attempt to describe the payment system succinctly.

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  10. Peter Hindrup

    consultant

    Patients view:

    Roughly two years ago I carved my left arm open above the elbow with an angle grinder.
    A dirty cleaning rag, bound with gaffa tape and off to the Medical Centre, which for me was less than 60 metres.

    Rushed into the treatment room, the Doctor set about stitching me back together. While it happened that this was the Dr I usually saw — regular visits for ‘pills’ — this was all done before any paper work was done. The waiting room was crowded at the time.

    Bulk billed…

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  11. Joy Johnston

    midwife

    I can't envisage a capitation system being any more efficient than the inefficient system we have now.
    ... with one exception - primary maternity care.

    Pregnancy and birth are not an illness, and the majority of women who are pregnant are able to progress through the episode of care, in the care of a primary maternity care provider - midwife or doctor or hospital. Specialist obstetric services would be accessible for those who need them, on referral - as a specialist services in any other…

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  12. Sue Ieraci

    Public hospital clinician

    One of the most challenging things in health service provision is that demand is uncapped - there is no objective level of service that is "enough", with an increase in services often picking up unmet need. Structural changes can only reap financial dividends if we stop providing new and better services, and concentrate on good basic care for everyone. This is not as easy as it sounds.

    A person's health status is not just dependent on how long their GP spends with them - it depends on a whole…

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    1. Ulf Steinvorth

      Doctor

      In reply to Sue Ieraci

      Is it accurate and fair to describe affordable bulk-billing as the options 'for less complex illness or injury' where you cannot find 'your trusted family GP'?

      Is it accurate and fair to describe practices that decide to charge their patients double for each consultation (for which reasons exactly?) as the ones providing the 'trusted family GP', more caring and providing better medicine, only because they double their fees?

      If there is any evidence that suggests higher consultation charges…

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    2. Sue Ieraci

      Public hospital clinician

      In reply to Sue Ieraci

      Of course you are right, UlfSteinvorth - I was not trying to say that all bulk-billing rapid-turnover clinics were only doing low complexity medicine, or that non-bulk billers were doing the opposite. What I was saying is that the rapid-turnover easy-assess medical centres do give people more rapid access for relatively simple problems, where seeing their usual family doctor might not be important. That type of use could well influence the casemix at such centres. Do you disagree that this happens?

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  13. Tony Grant

    Student

    Just a point...medical practitioners of over 40 years ago pre Whitlam education revolution, were often from families of medical folk. I'm not saying 90% of MD's but a large section...who-else could pay for 6 years of university training...old money?

    Therefore, the status of being a medical practitioner without the pressure of "needing" to make ends meet.

    Just an observation of pre Medibank from history.

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  14. Idmon Ng

    Clinical Lecturer, Dept of GP, University of Melbourne

    co-payment? really? last time I checked it's illegal. I agree with Andrew Dennis, Dan Pettersson and others that getting the facts right is really important when writing these articles.

    the writer might want to enlighten the readers that Ms Roxon has tried voluntary capitation for Diabetes and the outcome of that trial. Well, basically, it failed. So do you still want to push that agenda?

    Currently, most of my students are opting out of General Practice for specialist training. If we can…

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    1. Peter Sivey

      Senior Lecturer, School of Economics at La Trobe University

      In reply to Idmon Ng

      Thanks for your comment Idmon. With regard to co-payments, this may be an issue with confusing terminology I have used. I apologise for not making this clearer.

      By 'co-payment' I mean GPs can charge a fee higher than the medicare rebate. I would call the difference between the fee charged and the rebate a 'co-payment' (the amount the patient is out-of pocket) . I understand that the consultation can only be bulk-billed if there is no copayment but I didn't think it important to go into these details in the article.

      With regard to the diabetes care trial, I did indeed mention this in the final two paragraphs. I think it will be an interesting test of capitation in Australia. To my knowledge, the trial is still underway and the 'evaluation phase' will start next year so I would say it's a bit early to say if its failed or not.

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    2. Idmon Ng

      Clinical Lecturer, Dept of GP, University of Melbourne

      In reply to Idmon Ng

      http://news.smh.com.au/breaking-news-national/roxon-shelves-450m-diabetes-care-plan-20101112-17qm9.html

      this was the outcome of roxon's 2010 attempt.

      I understand a new smaller 3 year trial is being planned, but we won't know that outcome for another few more years. And that is a disease specific capitation, probably targeted to a specific population of GPs with special interest in Diabetes management. (and if not, it should be). It's not the general capitation you're proposing in this article.

      We do need discussion and research in this very important area of health spending, but history has provided us with important lessons and let's not make the same mistakes again. I thoroughly enjoyed this series of articles.

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  15. Michael Tam

    General Practitioner, and Conjoint Senior Lecturer at UNSW Australia

    Thank you for this article Peter.

    I certainly think that this is a conversation that needs to be had. As others have mentioned, funding general practice is not a simple one and I concur with others that there are downsides to capitated payments that were not expressed in the article. I recognise that this article was not meant to be a comprehensive treatise though!

    Fundamentally, this debate is one about choice. Restricting it will conceivably contain costs and perhaps improve efficiency…

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  16. David Wright

    Electrician

    1. Dr. Sivey, starts by making 2 broadly disanalogous statements.

    a) Just because police and teachers *can not* have fee for service (I would argue that this is impossible because being the victim of policing is involuntary, and because teachers provide services to multiple clients at one time. To work out appropriate, timely and defensible billing practices for service in these professions would be highly impractical), Dr. Sivey feels that doctors *ought not*. Dr. Sivey must not forget that…

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  17. Jan Burgess

    Retired

    Patient perspective.

    I am a (non-winging) Pom, arrived here in my 20s and recently spent 5 years back there. .My experience of the NHS compared to Australian health-care was not positive, and some of the stories I heard from friends and relatives were horrendous. As a non-expert "consumer" of medical services, I feel some of the problems in the NHS are due to the principles under which it is funded.

    The main problems I found and people told me about were gross over-demand for scarce services…

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