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Falling through the net

Kees Van Gool by Joanne Saad

Kees Van Gool, photo by Joanne Saad

In summary:

  • With a second review of the Medicare Safety Net now concluded, how should policy makers, health professionals and patients respond to the many costly flaws that have been exposed?
  • Senior Lecturer Kees Van Gool argues the Medicare is not benefiting people in lower socio-economic brackets and privileging the wealthy

The purpose of Medicare is to provide Australians with access to affordable health care, but are higher out-of-pocket costs preventing some patients from using the system, and is the government responding to this appropriately? Health economist and Senior Lecturer Kees Van Gool from the Centre for Health Economics Research and Evaluation (CHERE) examines the holes in the safety net.

The foundations of Medicare can be traced to two Australian academics: John Deeble and Richard Scotton, who, in 1968, argued health care should be available without regard to income, age, length or type of illness, and that the cost of providing this care should be equitably distributed.

Their 40-year-old proposal still provides one of the best summaries of what Medicare is all about.  However, we have lost track of Medicare’s primary purpose: providing universal access to medical care at a reasonable cost. In recent years, government reforms to Medicare have led to greater inefficiency and inequity; wasting taxpayers’ dollars and advantaging wealthier sections of the community.

One of the key aspects of the Medicare system is Australian doctors can determine their own fees and patients have historically only been able to claim a predefined benefit. Those patients who visit a GP or a specialist pay the gap between the Medicare benefit and the doctor’s fee. The bigger the gap, the bigger the out-of-pocket cost to the patient.

There are substantial variations in the out-of-pocket costs faced by patients. Figures show the gap between the fee and benefit is not only bigger for specialist attendances, but has also widened over time when compared to GP consultations. The widening gap for specialist attendances is a result of both increasing provider fees and the failure of Medicare benefits to keep pace with these increases. By contrast, the fees and benefits for GP consultations track each other closely.

Some of the fundamental aspects of Medicare changed in 2004 when the Howard Government introduced the Extended Medicare Safety Net. For the million or so patients who reach the threshold every given year, the safety net pays 80 per cent of all out-of-pocket costs for out-of-hospital, Medicare related services. The key change is that with the introduction of the extended Medicare safety net, the amount of Medicare benefit is tied to the doctor’s fee.

A review (CHERE) completed in 2009 showed some interesting results. The 20 per cent of Australians living in the wealthiest areas received 55 per cent of safety net benefits, whereas those 20 per cent living in the poorest areas received less than 4 per cent of benefits. This reflects the fact that wealthier Australians are relatively greater users of specialists services compared to poorer sections of the community.

Our review also showed the safety net reduced the competitive pressures some doctors face and has increased their ability to charge higher fees, particularly in specialty areas such as private obstetrics and assisted reproductive technology services. In fact, CHERE estimated that for every dollar the government spends on the safety net, around 43 cents went towards increased doctor fees and 57 cents went towards reducing patients’ out-of-pocket costs.

In the 2009/2010 budget, the government introduced safety net caps for a small number of Medicare services where there was evidence of high safety net expenditure and doctors fee increases. The caps place limits on the amount a patient can claim from the safety net.

In our 2011 preliminary review of capping arrangements, we found government expenditure on the safety net fell by 42 per cent in 2010. Considering expenditure growth had been in excess of 20 per cent per annum in the three years prior to capping, it’s a substantial decline in spending. We also found patients faced higher out-of-pocket costs for most services, as well as evidence consistent with providers shifting billing practices in order to avoid caps.

Whilst Medicare was intended to provide comprehensive coverage of health care services giving all Australians equitable access to appropriate care, successive governments have kept the Medicare Benefits Schedule fees for some specialist services well below market rates, resulting in high out-of-pocket costs. In turn, wealthier sections of the community use more specialist services relative to poorer sections.

The safety net, rather than address these inequalities, appears to have entrenched existing patterns of specialist care that favour the wealthy. This is because the safety net has increased specialist providers’ ability to charge higher fees and has reduced competitive pressures to practice in areas of high health care need.

There is a need to reconsider the way Medicare alleviates the high out-of-pocket costs for some patients. As it stands in the context of the Australian health care system, the safety net is an inefficient mechanism by which to fund health care services.

An important first step would be for the government to be clearer as to how it determines benefits for Medicare items, and for doctors to provide patients with full information about their fees. Safety net capping arrangements give patients the incentive to search for low charging providers. Patients are, however, still limited in responding to these incentives if they don’t have a full understanding of what their out-of-pocket costs are likely to be.

Kees Van Gool
Senior Lecturer
Centre for Health Economics Research and Evaluation

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