JENNIFER DOGGETT and LESLEY RUSSELL. Tackling Out-of-Pocket Costs

Mar 8, 2019


At the end of February the Federal Government released the report, twelve months in the making, from the Ministerial Advisory Committee on Out-of-Pocket Costs and outlined a national strategy to tackle excessive out-of-pocket costs. It is our opinion that the report’s recommendations and the Government’s response (for a website that provides information about medical specialists’ costs and for an education campaign to improve the understanding of OOP costs for consumers, GPs and medical specialists) do not go far enough, given the substantial and widespread impact of OOP costs. Our recently published paperoffers a road map for tackling the problems associated with OOP costs through short- and long- term initiatives, backed by evidence and informed by on-going consultation and evaluation.

In almost all areas of our supposedly ‘universal’ healthcare system, increasing costs are preventing average Australians from getting the care they need. Last year over 600,000 people avoided or delayed going to the GP due to cost. Almost one million people who needed a prescription medication avoided or delayed filling their prescription for financial reasons. Cost was also a barrier for over two million Australians who avoided seeking needed dental care.

Strategies for dealing with the growing problem of out-of-pocket (OOP) healthcare costs should be central to all political parties’ health policies. OOP costs make up the largest non-government source of health funding in Australia, contributing almost double the amount of funding as private health insurance, and they have a major impact on consumers’ access to care.

However, currently, OOP costs are a ‘policy vacuum’ with payments imposed by providers in an inconsistent, unfair and inefficient manner across the healthcare system in a way that creates barriers to access and reduces the efficiency of our healthcare overall.

Part of the complexity of this issue is that OOP costs are not a single entity but a group of overlapping and inter-related problems. Together these form a ‘wicked’ policy dilemma not solvable by a single strategy or policy change but requiring long-term action on multiple fronts and the engagement of all stakeholders, including governments, industry and providers. Due to the complex and dynamic nature of our healthcare system, any policy changes also require ongoing monitoring to avoid unintended effects elsewhere.

For these reasons, our new paper on this issue proposes a staged approach, starting with agreement on the overall aims and guiding principles for OOP costs and their (constrained) role within the Australian healthcare system. These should take account of the fact that Australia will need to spend more on healthcare in the future to maintain our world class healthcare system, but also recognise that evidence- and value-based expenditures on health are investments that deliver reductions in costs elsewhere in the healthcare system and in the federal budget.

Fundamental to this approach is the need for a dedicated area within the federal Department of Health to consolidate the disparate sources of data on OOP costs, coordinate stakeholder input and lead policy development. One reason for the lack of progress in addressing this issue is that it has been largely invisible to policymakers (although not to consumers) as the effects of OOP costs are spread across different areas of the health portfolio and different levels of government. We cannot solve a problem that we cannot see.

Addressing the current problems with OOP costs will involve choices about how healthcare funding is raised (eg taxation and levies), about what are considered essential vs non-essential services, about which healthcare costs we share with others (eg via Medicare or PHI) and which costs are more suitably borne by individuals. All stakeholders should have input into debating these questions but ultimately it needs to be consumers and the community whose interests guide the development of policy solutions.

Our initial suggestion is to establish some overarching principles for OOP costs, including the following:

  1. OOP costs (for individual services, episodes of care, and ongoing treatments) should not be a financial barrier to accessing essential healthcare.
  2. OOP costs should promote the efficient use of healthcare.
  3. Adequate safety-nets should be established to ensure vulnerable individuals and groups (eg. people on low incomes and those who are high level users of services) are protected from OOP costs and not discriminated against.
  4. Data should be collected on OOP costs across the healthcare system and used to inform policies and strategies. There must be recognition of the cumulative impact of these costs and also that some people do not incur any OOP costs because they are so financially disadvantaged that they never present for needed care.
  5. Consumer experience should be at the centre of policy development to address OOP costs.

We also suggest that priority areas for action should be those areas of healthcare and groups of consumers particularly impacted by OOP costs. These include people with chronic conditions, people who require services/products not currently subsidised (such as non-PBS medications, medical aids and appliances), people on low incomes and those requiring basic dental care.

Based on these principles and priorities we propose a number of strategies, both short- and long-term, including:

  • A ‘fee disclosure’ resource and comprehensive complaints mechanism to support consumers to make informed choices about their health care and seek redress when OOP costs are unreasonable;
  • A comprehensive medical and health care safety-net (initially combining existing MBS and PBS safety-nets and over time including other health care costs);
  • Agreements with the medical and health care professions to limit OOP costs, with support for lower charges and penalties (such as the withdrawal of Medicare entitlements) for egregious billing;
  • Government-backed low/no interest loans for consumers faced with large unexpected health care costs; and
  • Workforce reforms, such as changes to the GP gatekeeper role, increased use of paramedics, nurse practitioners and allied health professionals and a strengthened role for generalists (to reduce reliance on multiple specialists).

Ultimately we believe that the idiosyncratic features of the Australian healthcare system – in which there are no constraints on prices charged by healthcare professionals for Medicare-funded services, and efforts to address the maldistribution of the healthcare workforce are hamstrung by a constitutional provision and that provides billions of dollars annually in subsidies for private health insurance which the majority of Australians do not have and even fewer want – must be addressed.

However, these are controversial and major reforms which we will take time to develop and sell to the powerful stakeholder groups that influence the health system. In the meantime, action on OOP cotss is imperative to ensure our universal health system remains viable long enough for these broader reforms to take place.

Jennifer Doggett is the Chair of the Australian Health Care Reform Alliance and a Fellow at the Centre for Policy Development. Dr Lesley Russell is an Adjunct Associate Professor at the Menzies Centre for Health Policy at the University of Sydney.

This opinion piece was originally published on the Croakey blog, 5 March 2019.

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