LESLEY RUSSELL. Restraining the Free Market That is Specialty Medicine

The past week has seen a series of media articles about how some people must fund raise to cover the cost of expensive brain cancer surgery and a paper released from the Actuaries Institute, How to Make Private Health Insurance Healthier, that highlights (yet again) the needed reforms to Australia’s private and publicly funded healthcare. Together they highlight the need to reign in the free marketplace that is specialist medicine in Australia and that is costly to both Medicare and private health insurance.

Many of the major issues that beset Australian healthcare today – the rising cost of private health insurance (PHI) premiums; burgeoning out-of-pocket (OOP) costs for private hospital and Medicare services; the inability of many Australians to access needed specialist medical services; few incentives for integrated care and teamwork; and growing health disparities between the richest and poorest Australians and those who live in metropolitan and rural areas – have their genesis in a single aspect of Medicare: that private non-GP specialist medicine operates as a free market where cost and location are unregulated.

Recent election commitments focused almost exclusively on public hospitals and primary care. That ignores the ongoing need for specialist care, that the barriers to accessing specialist medicine continue to grow, and that best practice and patient-centred care demand better coordination between specialist and primary care.

Specialist fees are un-regulated and generally unconstrained by either the Medicare Benefits Schedule (MBS) reimbursements or the more expensive Australian Medical Association’s fees schedule; doctors can charge whatever they think their services are worth and the market will bear. That can amount to outrageous sums when the full gamut of surgical and medical services is applied to a patient’s hospital stay, associated out-of-hospital care, and the so-called ‘administrative costs’ that are applied to 11 percent of surgical admittances.

The MBS is the root of the problem. Despite the ongoing efforts of the MBS Review, the items covered and the reimbursements for these are out-of-date and do not reflect today’s technologies, the skills or time required, and the additional services (for example: pre-operative, post-operative and rehabilitation care) that are necessary to ensure optimal outcomes from surgical and medical treatments. In addition, technical skills (such as surgical) are rewarded over cognitive skills (such as diagnosis and patient communication).

The failure to quickly update the MBS to reflect the growing body of evidence about low-value care means that Medicare funds are too often wasted. Worse, because Medicare items for in-hospital services are only used for care delivered in the private sector, such low-value care is delivered to those with PHI and with higher incomes (exemplifying the market approach where ability to pay overrides need). Private health insurers argue that this results in higher PHI premiums.

Specialists’ exorbitant fees can be (and are) applied independent of quality, outcome, the need for and the value of the treatment provided. A paper included in the 2019-20 pre-budget submission of Private Healthcare Australia (PHA) highlights the issue. It is estimated that in 2016-17, the ability of specialists to provide 21 selected low-value services cost at least $152 million and as much as $273 million. For example, knee arthroscopies generated at least $20 million in hospital costs and at least $7.3 million in medical costs. These costs are shared between insurers, Medicare and patients.

A recent publication that measured hospital-acquired complications associated with low-value care, found that the use of these procedures in patients who probably should not receive them harms some patients, consumes additional hospital resources, and delays care for other patients for whom the services would be appropriate.

Realistically the fingers of blame and shame should be pointed at just a few outlier doctors, but the majority are complicit in their silence and failure to drive the changes that are recognised as needed. The PHA paper notes that the top five percent of doctors performing low-value surgery do the majority of this work and the media stories about unexpected and unexplained OOP costs rarely acknowledge that many specialists have reasonable charges with small, predictable costs to the patient.

But the delay in addressing these outliers, who queer the pitch for their colleagues – especially that minority of specialist doctors which still bulk bills – is proving expensive for Medicare, for PHI funds and especially for patients. In a country that claims to have universal health care and community-rated health insurance, no-one should have to resort to social media to raise the funds for necessary medical treatment.

This week brings media reports that surgeons might face sanctions for over-charging. This has been promised multiple time before and it’s clear that self-regulation is unlikely. The Royal Australasian College of Surgeons’ admits that overcharging patients is unethical and breaches its code of conduct but has been unable to determine the threshold for action because “What is appropriate depends largely on what the person is willing to pay for it.”

It is long past time for decisive government actions, starting with the premise that “what is appropriate” must relate to the skills and training involved (generally provided at government expense) and the contributions of the Australian taxpayer to the very substantial income of specialists (in 2016-17 unreferred services cost Medicare $13.7 billion, patients $3 billion and the PHI rebate $608 million).

Consideration should be given to stopping specialists from accessing Medicare rebates if they charge exorbitant fees, or an opt-in Medicare system only for doctors who agree to certain fee restrictions. There is evidence that simply increasing the MBS rebate or PHI benefits does nothing to address the gap that patients must pay.

Steps must also be taken to address the very substantial variations in surgical rates, medical treatments and prescribing. The Australian Atlas of Health Variation series shows the extent of unwarranted variation in healthcare services and that more attention needs to be paid to matching healthcare to people’s needs and minimising harms. The analyses of the Royal Australian College of Surgeons and Medibank show the enormous variation in outcomes and costs from surgery. Yet there is no correlation between costs and outcomes; the most expensive doctor will not necessarily deliver the best care.

The government’s to-do list is long – there is no silver bullet solution. A multi-faceted response and considerable bravery to face down the inevitable outrage from organised medicine and the specialist colleges is required.

There have been delays and back pedalling on implementing the recommendations from the MBS Review. Yet just one recommendation from the report from the Specialist and Consultant Physician Consultation Clinical Committee, relating to the requirements for an annual referral from a GP to a specialist, could reduce a substantial financial barrier to specialist care (for example: the average OOP cost for an initial attendance at a specialist’s office ranges from $68 to $161).

In response to the report from the Ministerial Advisory Committee on Out-of-Pocket Costs, the government has pledged to build a searchable website that will list individual specialists’ fees for specific services to help patients avoid unexpected costs and to crackdown on doctors charging egregious OOP sums. But even with this information, many patients will not be equipped to make an informed choice and to challenge, compare or decline their treatment. The power and information in-balance between doctor and patient is too unequal, there will be no linked data about quality and safety, and there are costs involved in seeking second opinions.

The removal of low-value items from the MBS will, in many cases, require ensuring that more appropriate alternatives are available. For example: too often low back pain is treated inappropriately and recent guidelines prioritise non-medical approaches, but the healthcare system is not funded to support this approach.

There is concern that the increasing numbers of medical graduates will mean a much more competitive career path for doctors. There is certainly increased competition for some speciality training places, but others (such as those for psychiatry) remain unfilled. To date competition in the specialists’ marketplace has done nothing to reduce fees and earnings continue to rise. There is currently no policy and no workforce planning to maximise the benefits and reduce the downside of the influx of new doctors and to ensure that they are encouraged and supported to work in the specialties and localities with the highest need.

In 2012, writing in the Medical Journal of Australia, Professor Tim Usherwood called for a comprehensive policy framework for specialist care as a means of ensuring a more comprehensive and multidisciplinary range of specialist services working with primary care, requiring timely communications and transitions of care between specialists and GPs, requiring accreditation of practices (as for GPs) to drive quality and safety, expanding the collection and communication of data to improve outcomes and address inappropriate variation, and addressing the geographical maldistribution of specialist services.

Specialist care is too important to sick Australians and too expensive to taxpayers to be left to the vagaries of the marketplace. In 2019 as in 2012, private specialist practice should not be the forgotten sector of healthcare reform.

Dr Lesley Russell is an Adjunct Associate Professor at the Menzies Centre for Health Policy at the University of Sydney.

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2 Responses to LESLEY RUSSELL. Restraining the Free Market That is Specialty Medicine

  1. Richard Barnes says:

    Lots if good points in this excellent article.
    Outrageous charging by a single specialist neurosurgeon has captured everyone’s attention, but the much bigger problem as regards wastage of health dollars is that we reward specialists far more than GPs; and we reward “doing” (technical skills) far more than “thinking and communicating”.
    Clearly, no-one in this country ‘needs’ to crowdfund to have neurosurgery performed by a ‘hero’. The cultural and psychosocial factors at play here are many, as is the woeful inability of medicine and society to control a maverick.
    But in fact no-one would need to have anything done in a private hospital (save a knee arthroscopy ‘next Tuesday’) were the universal public health system adequately funded. Not saying anything new here, but the first steps would be total removal of transfer of public money to the private system via the PHI rebate; a radical review of the MBS system, supported by a minister immune to special pleading; and a rule that medicare will not contribute to any medical fee exceeding say 150% of the MBS schedule fee.
    Once specialists find the income from private practice suitably constrained, the more modest but still generous remuneration on offer in the public system will suddenly become a whole lot more attractive.

  2. Toshi Uematsu says:

    “Consideration should be given to stopping specialists from accessing Medicare rebates if they charge exorbitant fees, or an opt-in Medicare system only for doctors who agree to certain fee restrictions. ”

    This would be a disaster; there is already a plethora of specialists – especially orthopods – who have opted out of Medicare and will only see privately insured patients. In some places – Canberra being a good example – it is impossible to a specialist if you don’t have PHI. Even if you are prepared to pay out of pocket you won’t get an appointment. What we need is a mechanism to compel specialists to opt in, see public patients and accept the Medicare fee.

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