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A new, simpler Medicare safety net… but with holes

The new Extended Medicare Safety Net will no longer provide patients with protection against high medical costs. flickr:tanakawho, CC BY-NC

Buried in the details of the health budget are some changes to Medicare not widely discussed in the last 36 hours. Just as important as the introduction of co-payments for medicines and GP visits are changes to safety net arrangements that protect people from high out-of-pocket health costs.

In his budget speech on Tuesday night, treasurer Joe Hockey emphasised that one of the main roles of government was to protect the most vulnerable in society. The government clearly failed in this when introducing co-payments for GP services and PBS medicines.

But obscured by that big announcement was the government’s “simplification” of safety net arrangements, ostensibly making it easier for people to qualify for support if they have high out-of-pocket expenses.

At first glance, this proposal looks sensible because it combines the bewildering array of safety nets currently used for people facing high out-of-pocket costs for medical services provided outside hospitals.

But there is a sting – the new safety net actually provides patients with less financial protection against high out-of-pocket costs. And this is particularly bad news because it’s been predicted the GP co-payment could rise well above the $7 co-payment, and it will hurt the very ill and poor the most.

How things stand

Under the current Medicare Safety Net, all people with a Medicare card who have out-of-pocket health costs in excess of a threshold amount (the amount differs for singles, families and concession card holders) are reimbursed for all additional costs incurred in that year.

The safety net covers out-of-hospital services such as general practitioners, specialists, and some pathology and diagnostic imaging services.

So, if a doctor charges the Medicare scheduled fee, the patient pays nothing further. If the doctor charges more than then scheduled fee, the patient must pay the gap but additional protection is provided through the Extended Medicare Safety Net.

Under this safety net, people are reimbursed 80% of their out-of-pocket costs for the rest of the year once this second threshold is reached (the Extended Medicare Safety Net threshold is separate from the one for the original Medicare Safety Net).

The total amount the government will pay under the Extended Medicare Safety Net is capped for some Medicare items. These include some assisted reproductive technology, pregnancy ultrasound, obstetric and midwifery services.

Many other services provided under Medicare are also subject to caps (including general consultations with GPs and medical specialists). That cap is set at 300% of the Medicare scheduled fee, with the government paying a maximum of $500. For example, if the Medicare schedule fee is $100, you can only claim $300, even if the doctor charges much more.

All out-of-hospital Medicare services, even if they are subject to a cap, count towards the threshold.

People may still incur out-of pocket expenses that are not covered under the original Medicare Safety Net or the Extended Medicare Safety Net. This tends to occur when providers charge fees well in excess of the Medicare scheduled fee, or the services being used are not covered under Medicare, such as dental services and medical aids and appliances.

Changes afoot

Until recently, additional protection against high out-of-pocket costs was provided to taxpayers through the Net Medical Expenses Offset Tax Offset.

Under this scheme, after spending over an annual threshold amount, patients were able to claim medical expenses for a range of services and products as an offset against their taxable income. This scheme is being phased out for most people after last year’s budget. It will continue to be available for taxpayers with out-of-pocket medical expenses relating to disability aids, attendant care or aged care expenses until July 1, 2019.

Under the new Medicare Safety Net arrangements outlined in this year’s budget, there will only be one threshold applied to determine whether or not Medicare cardholders are eligible for support under the safety net scheme.

If you spend over the relevant threshold amount on out-of-pocket costs for eligible out-of-hospital services, Medicare will soon pay 80% of any subsequent out-of-pocket costs, but only up to an amount totalling 150% of the scheduled fee (not 300% as it is now under the Extended Medicare Safety net for many services).

If providers charge more than that, the additional amount will not be covered under the safety net, and it will not count towards meeting the threshold.

The budget papers state that the eligibility thresholds are lower under the new arrangements, which means some people will qualify after spending less money. This is true, but they will have to pay more of the high out-of-pocket costs than they do now.

It will not provide protection for costs well in excess of the Medicare scheduled fee. And it’s not clear yet whether caps for services that tend to have very high fees (obstetrics and assisted reproductive technology) will remain in place under the new arrangements.

Safety net benefits are claimed by people with chronic illnesses or those with children who have chronic illnesses. They surely qualify as the most vulnerable in our society.

While the government should be applauded for starting to tackle the excessively complex safety net currently arrangements we have in Australia, it could have done better.

To truly provide protection to the most vulnerable in our society, the safety net should have done two things. It should have covered all health services and products, not just out-of-hospital services. And, it should have shifted more of the risk of excessively high fees onto the government rather than individuals.

The Future of Medicare Conference opens on 13th August in Sydney.

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