Dissecting the controversy around Medicare reform and a disappointing response from the ALP

Jun 24, 2021

Any plan to change Medicare — especially if it comes from a Coalition government — is bound to attract controversy. So when health minister Greg Hunt announced a fortnight ago that more than 900 items on the Medicare benefits schedule would be changed with just a month’s notice, the reaction was immediate.

The changes mean that the Medicare reimbursements for a large number of surgical procedures — orthopaedic, heart and other general surgery — will fall. The aim is to encourage modern clinical practices by shifting funding from lower-value to higher-value healthcare.

Doctors’ groups, private health insurance funds and private hospitals have called for the changes to be delayed to allow them time to adjust their internal processes and charging. The Australian Medical Association says that the changes, if rushed, could result in unexpected out-of-pocket costs for patients. Other industry and consumer groups, along with the Grattan Institute’s Stephen Duckett and UNSW’s John Dwyer, have supported the call for a delay.

Despite the lengthy process of expert deliberation leading up to the changes, Labor has called for them to be scrapped altogether, adding more confusion to an already complex issue.

The review of the schedule, which began in 2015, was a massive undertaking. Supported by a consumer panel and a public consultation process, a network of committees and working groups examined 5700 items listed on the schedule, producing more than sixty reports and 1400 recommendations.

As well as recommending changes to Medicare, the review proposed measures to increase the quality and safety of treatments and to make access to medical services more equitable.

The review of ophthalmology, for example, recommended increasing rebates in rural and remote areas to tackle current shortages. Some services that GPs are currently allowed to provide should, it recommended, be limited to specialists with the training that enables them to deliver a higher-quality result.

It’s hard to argue against recommendations like this that are based on evidence and developed collaboratively by clinicians, health economists and other experts, and consumers. And the sheer number of recommended changes highlights how overdue the review of the schedule was.

That shouldn’t be any surprise. Medicare was designed more than a generation ago, and since then our health needs have changed. Advances in medical and pharmaceutical research and technological innovations have driven changes in clinical practice.

In some areas, these have been dramatic. A procedure that was once time-consuming and demanded a high level of skill might now, with the assistance of technology, be performed much more quickly by a clinician with less training. Other services that were once common should no longer be performed because the alternatives are more effective and safer.

Implementing the changes may be complex, and arguments about the detail are inevitable, but the review was necessary and had wide support across the health sector. In fact, many Australians might be surprised to learn that this type of review doesn’t occur as a matter of course.

That’s why the controversy is more about the implementation than the changes themselves, though we’re also seeing the politicisation that inevitably accompanies any debate about Medicare.

Of course, the major professional groups can’t help protecting their own interests. The AMA, for example, is being disingenuous when it claims that concern about out-of-pocket costs is motivating its desire to delay the changes. It’s had plenty of time to act on this longstanding problem by doing more to tackle fee variations, particularly by reining in specialists who charge significantly above the recommended fees.

But the changes are administratively complex, and the short timeline does put unnecessary stress on hospitals, health funds and doctors. And it’s hard to see how delaying them for a few weeks or even months would cause any major problems; it would certainly buy the government some valuable goodwill across the sector.

Particularly at the moment, when the government is struggling with its own challenges in implementing the Covid-19 vaccine rollout, it should be sympathetic to organisations with fewer resources trying to grapple with changes to the Medicare schedule.

Labor’s blanket opposition — clearly motivated by the hope of a Mediscare-type campaign at the next election — isn’t helping. It may be understandable, but it’s a disappointing response from a party that should have a sophisticated understanding of the need to keep Medicare up to date. That’s not to say there’s no truth in Labor’s claims about the lack of underlying support for Medicare within Coalition ranks. But the Medicare schedule review is not the best target for trying to make this point.

Labor’s commitment to Medicare shouldn’t mean allowing it to ossify in the 1980s. If Medicare is to continue serving the needs of the Australian community, it needs to evolve. A sustainable and robust Medicare can’t continue to subsidise low-value care with outdated and non-evidence-based rebates.

What’s important at this point, though, is to make sure these administrative hiccups and attempts to politicise the review don’t derail longer-term improvements. So far the focus has been on changes to individual Medicare items, but the review also dealt with the need for system-wide reform.

A continuous review mechanism is needed, it said, to ensure that Medicare can evolve with changing clinical practices and community needs. The government and the AMA support that recommendation, but its success will depend on collaboration between the major interest groups. The government’s recent willingness to work with the AMA on implementing future review recommendations is a positive sign.

Also urgent is action on out-of-pocket costs, which make up 17 per cent of total health funding, or around double the contribution of private health insurance. Despite these costs’ impact on access and choice, the government shows little interest in how much consumers pay for medicines, health and medical services, and devices. Limited safety nets provide little protection for people with chronic, complex conditions who must pay a large number of relatively small amounts for medicines, supplements, dental services, allied health, medical gap payments, aids and appliances.

People who are charged unfairly by health professionals have little recourse, and the government’s half-hearted attempts to help them avoid these charges — via the medical costs website, for instance — don’t appear to have had any impact. Meanwhile, an entire branch of the health department deals with private health insurance, which is used by less than half the population and contributes only 9 per cent of health funding.

Medicare is a blunt instrument for tackling many of these issues. Changing rebates often has a limited impact, is complex to enforce and can result in perverse incentives. But it is often the only tool the federal government has to drive changes and therefore should be used to its full potential. Allowing the sector some latitude in implementing the current changes will help create a climate in which longer-term improvements can be made.

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