Lesley Russell   Too high: the impact of specialists’ fees on patients’ health

Nov 21, 2015

In today’s health care debates around the centrality of primary care, moving towards patient-centred medical homes, improving care coordination for people with chronic illnesses and whether private health insurance provides value for money, there is one element that is almost always missing – the role and the costs of specialist services.

In 2014 over 28 million specialist services were billed to Medicare and 21 million of these were for out-of-hospital services. Only 30% of these services were bulk billed, and the average out-of-pocket cost for the remaining 70% of services was $70.89. However gaps of several hundred dollars are not uncommon.

Specialist fees are the main driver of Medicare out-of-pocket costs and the main reason why people access the various Medicare safety nets (Extended Medicare Safety Net, the Original Medicare Safety Net and the Greatest Permissible Gap measure).

The Government has moved to make changes to the Medicare safety nets in the name of ‘simplification’ and the Health Insurance Amendment (Safety Net) Bill 2015 is currently before the Senate where it has been sent to the Community Affairs Committee for review.

Reforms to the Medicare safety nets are long overdue. There is considerable evidence that the current arrangements are inequitable, do not benefit those with the greatest need, and continue to be inflationary, despite legislative tweeks. This has led to increasing economic pressures on patients from their out-of-pocket costs with consequences for their health outcomes and quality of life. There are also pressures on hospital budgets from preventable admissions that can result when patients skip specialist appointments and fail to comply with treatment regimes because of cost.

As federal parliament considers the new safety net legislation, it is crucial to ensure that this does not have the unintended consequences that were inherent in the Extended Medicare Safety Net (EMSN). One such consequence was that the EMSN actually increased the ability of specialists to charge higher fees, particularly in areas such as obstetrics and assisted-reproductive technology services. In 2009 it was estimated that for every dollar the government spent on the safety net, only 57 cents went towards reducing patients’ costs and the remainder went towards increased doctor fees.

Preventing such problems will require an informed study of the impact of specialist fees and how specialists are likely to respond to efforts to limit reimbursements to patients of fees that are in excess of the Medicare Benefits Schedule (MBS). As it stands there is very little publicly available information in this area. Considerable work was done on a relative value study in the 1990s (regrettably with no outcomes) and the specialist medical colleges presumably have data from their members, but the Department of Health has shown no inclination to analyse their data or to make it available to academic centres for such work.

Medicare data for the June quarter 2015 show the following:

  • The average bilk billing rate for specialists (for services in and out of hospital) is 30.2% although this varies dramatically by speciality.
  • The average fee observance for out of hospital services is slightly higher at 43.4%.
  • The average patient contribution for services that are provided out of hospital and are not bulk billed is $70.89. This varies considerably by state and territory – it is lowest in South Australia ($53.94) and highest in the Northern Territory ($89.38).

Over the past decade there have been some interesting changes in these figures that tell a story of policy and community pressures and influences.

Although the average bulk billing rate for specialist services delivered out of hospital has barely changed, the average out-of-pocket cost has more than doubled (from $32.66 to $70.89). For individual specialties there have been some dramatic changes. For example, the bulk billing rate for obstetrics, currently 51.5%, was only 21.8% in the June quarter of 2005. We can assume that the increase in bulk billing is due to the increases in Medicare reimbursements that were made as part of an effort to tackling the inappropriate use of the ESMN. But the bad news is that those obstetricians who don’t bulk bill have continued to increase their fees and the patient’s average contribution has risen from $51.75 in 2005 to $247.79 today. Moreover, my previous work on Medicare obstetric costs highlights that when loophole is closed, obstetricians look to shift their costs around between capped and uncapped and outpatient and inpatient billing items.

Specialists who work in radiotherapy and nuclear medicine have also changed their billing behaviours over the past decade. While bulk billing rates have increased impressively from 13.3% in 2005 to 68.5 % in June 2015, presumably in response to government agreements and legislation, average out-of-pocket costs for patients who are not bulk billed have more than doubled, from $16.33 to $38.74.

It’s important to think what the growing costs to see a specialist mean for patients such as older Australian with multiple chronic illnesses. A recent study shows 27% of older Australian reported having at least three chronic diseases, with high blood pressure, arthritis and cancer as the most prevalent diseases. Such patients may have a very competent bulk-billing GP coordinating their care, but in addition to the cost of specialist consultations there will be costs for diagnostic tests and monitoring, prescription medicines, over-the-counter medicines, and supplies for conditions such as diabetes, colostomies and incontinence.

National Seniors Australia found that older Australians with five or more chronic conditions spend $3528 per year on out-of-pocket health care costs. Small wonder then that approximately 10% of adults referred to a specialist delay or do not keep their appointment because of cost. This proportion rises to over 12% in the most socioeconomically disadvantaged fifth of the population. The current freeze on Medicare rebates to doctors will only aggravate the growth in gap fees. The gap between what Medicare pays and the AMA-recommended fee for MBS item 104 (initial referral to a specialist) is now $97.72; the new safety net will ignore $40 of this.

There are no Medicare incentives to encourage specialists to bulk bill. Because poorer Australians can’t afford to pay the gap fees to reach the safety net thresholds, less than 4% of EMSN benefits go to the most socioeconomically disadvantaged 20% of the population while over 50% of benefits go to the most advantaged 20% of Australians. This exemplifies the inverse care law – and poor public policy – as it is the poor who are most likely to suffer ill health, who have the lowest discretionary income, and who are most in need of protection from out-of-pocket costs.

The government’s “simplification” of safety net arrangements, eliminates the confusion of multiple Medicare safety nets and caps on reimbursement for selected items and ostensibly will make it easier for people to qualify for support if they have high out-of-pocket expenses. But this comes at a cost for patients – the new safety net actually provides patients with less financial protection against high out-of-pocket costs – and a saving for government.

It is estimated that new threshold levels will mean an additional 60,000 people will qualify each year for the Medicare safety net. The big question is whether the reforms will lead to a change in the type of people who qualify for safety net benefits and that is not easily answered. In testimony to the Senate Community Affairs Committee, Dr Kees Van Gool indicated that the answer depends on how many concession card families experience annual costs between $400 and $638 how many general families have out-of-pocket costs between $1,000 and $2,000 because these are the people who stand to benefit under the new arrangements. However he noted that concession card status is a poor proxy for household income. Capping the amount of out-of-pocket costs that contribute to the safety net threshold will have further implications for how many and what type of families qualify for the new benefits.

This reform may invoke a number of behavioural changes by both doctors and patients seeking to derive maximum benefits from the safety net. There are clearly greater incentives for patients to seek out doctors who charge less than 150% of the MBS fee and this, in turn, may invoke price competition amongst doctors. Doctors may act to redistribute their fees across an episode of are, as obstetricians have done, or increase the volume of services they offer. The Minister for Health has indicated that she wants to prevent the inappropriate provision of complicated medical services outside of hospitals, although it is not clear how the safety net legislation will address this.

In an era of budget restraint, what can be done to address the impact of rising specialists’ fees on the federal and individuals’ budgets in ways that do not undermine the business needs of the medical profession? In a paper written earlier this year, Jennifer Doggett and I proposed greater transparency around specialists’ outpatient fees and the out-of-pocket costs to the patient. This approach was also put forward by Dr van Gool in his testimony to the Senate Community Affairs Committee.

Anecdotal evidence indicates a wide range of fees charged, with some specialists charging dramatically more than the Australian Medical Association recommended fee (which is itself higher than the MBS reimbursement). However there is no evidence that specialists charging the highest fees deliver the best outcomes and patients and referring GPs might make different choices about specialist care if they knew the costs involved. At the very least the major outliers should be named and shamed. It is also important that consumers are provided with comprehensive information about their health care choices and are made aware of options, such as public outpatient clinics, where they can receive specialist services at no (or lower) cost.

There has been some support for this approach from the medical profession, perhaps driven to action by the fact that a few greedy colleagues are making life difficult for those doctors who bulk bill or have only a small gap fee. In July 2014, the Royal Australasian College of Surgeons spoke out against excessive fees, saying that the College “is highly concerned at the amount of reported out-of-pocket costs being incurred by patients in the health-care sector“ and further stating that the College “believes that extortionate fees, where they are manifestly excessive and bear little if any relationship to utilisation of skills, time or resources, are exploitative and unethical. As such, they are in breach of the College’s Code of Conduct and will be dealt with by the College”.

An information sheet on the College website strongly supports full disclosure and transparency of fees as early as possible in the patient-doctor relationship, advocates that patients understand all available treatment options, and encourages concerned patients to seek second opinions on recommended treatments and the fees to be charged.

Just recently, the Urological Society of Australia and New Zealand has been prompted by a study showing that out-of-pocket costs for prostate cancer can be in excess of $30,000 (this includes not just specialists fees but private hospital services, medicines and other costs) to talk to its members about the perils of extortionist fees and of not telling men about public health options for treatment.

Most importantly, the issue of out-of-pocket costs for patients and the impact these have on health outcomes and costs elsewhere in the health care system and the federal budget needs to be addressed across a range of issues currently under consideration – not just Medicare safety nets, but the Medicare Benefits Schedule review, the mental health and primary care reforms, and welfare supports. Many people will predictably always have trouble meeting their health care costs, and the solutions will not always lie within the purview of the Health portfolio.

There are branches within the Department of Health that deal with the medical profession, the pharmaceutical industry, and private health insurers; it’s time for a branch with specific responsibilities for consumers’ and patients’ needs. It’s an important part of the effective, efficient and equitable delivery of health care services.

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



Share and Enjoy !

Scroll Up

Receive articles straight to your Inbox

How often?

Thank you for subscribing!