PART 1: Review of the Medicare Benefits scheme

The first part of this piece describes the blockages in the past that choked debate on some fundamental issues. The second part outlines some of the important achievements of the current   Medical Benefits Scheme Review Taskforce and set up the basis for sustainable debate about the future of Medicare.

In the almost half century since its introduction, Medicare, Australia’s universal public health insurance scheme, has been the site of constant conflict.  Debate over health policy has been polarised, with little common ground between defenders of universal health coverage and those who wanted to return to a more privatised system. This has narrowed the scope of health policy debate – to the detriment of efficient and equitable services.

Medicare enables access to medical services through government subsidies of fees for services. Payment is made through the Medicare Benefits Schedule (MBS) which lists more than 5,700 services and medical procedures and sets a reimbursement rebate for each individual service. Most conflict has been over remuneration – the levels and forms of reimbursement for (mainly) medical services. The services listed in the MBS have received remarkably less scrutiny.

Medicare suffered a long period of constitutional conflict, where conflicts over issues of remuneration, such as bulk billing, became politicised.

Australia’s first national health system, the Page/Menzies scheme (1953), avoided these conflicts by leaving fee-setting and the content of services to the medical profession and very weak private health funds. Government involvement was indirect, through a contribution to insurance payments. Services covered and the rebates payable were listed in a schedule of the National Health Act (from 1953). New items were added and priced through obscure processes. There was no formal public process of scrutiny.

By the late 1960s the faltering health system had become a political problem for Coalition governments. One fifth of Australians could not afford health insurance. Even the insured found out-of-pocket costs unmanageable. Hospital and medical expenses had become one of the largest causes of bankruptcy. The Gorton government attempted reform of the collapsing private insurance system in 1970. The schedule of medical services was expanded to 1200 items, but Gorton’s focus was in a losing battle to restrain costs. After a sharp battle with the Australian Medical Association, rebates were set at the ‘most common fee’ charged by doctors, determined by a survey run by the AMA. Doctors remained free to charge any further fees above the rebate. Even this medically dominated reform met strident opposition sections of the profession who saw it as the first step towards socialised medicine.

The Whitlam Labor government’s health care reforms met a wall of hostility from doctors’ organizations and the Coalition parties.  Legislation and implementation of Medibank took both terms of government (1972-75). Australian only had 3 months of universal health insurance before the Dismissal. Over the next five years Medibank was ‘reformed’ out of existence by the Fraser government. Fraser was unable to find any model that used the private sector to meet Australians’ demand for access to affordable health care.

Medibank had provided a more powerful instrument to control costs. While doctors remained free to set their fees without reference to rebates paid, bulk billing provided a strong incentive to accept the rebate. There was no scrutiny of the scope of benefits offered, this was a matter for medical judgement by individual clinicians. Government had no desire to intervene.  The first proposal for a review of items in the MBS was proposed by the Fraser government in 1978, but nothing was completed.

Reinstated as Medicare by the Hawke government (1984), Australia’s model of universal health coverage became entrenched in public support.

The emphasis of Medibank and Medicare was on access to existing health services. Medicare, in the words of Neal Blewitt, Hawke’s formidable Minister for Health, had three basic principles. It was to be ‘simple’ with none of the complex eligibility criteria, means testing and contributory requirements of previous systems. Second, it would be affordable. ‘Everyone would contribute to the nation’s health costs according to his or her ability to pay’. Finally, it would be universal. ‘Basic health care should be the right of every Australian’. Certain services were excluded from the ‘basic’ coverage – notably purely cosmetic procedures.

The heat of conflict often obscures continuities.  Even apparent ‘big-bang’ changes in health systems usually prove to be based on existing practices. Medibank and Medicare were no exceptions. Despite opposition from organized medicine and the Coalition Parties, the architects of Australian health insurance were mainly interested in more equitable access to the existing system of medical care. Whitlam’s more radical experiments with community health services were sidelined. The politics of Medicare focused on reducing the costs of services, not around their content, which were set by a schedule of services that go back to the National Health Act in its various enactments since 1953.

John Howard dropped his party’s pledge to abolish Medicare in his successful 1996 election campaign. Howard remained ambivalent on whether Medicare was universal or merely a ‘safety net’. Michael Wooldridge, his health minister (1996-2001), had fewer reservations. In 1998 he initiated the first major reform that looked beyond budgetary battles and interrogated the content of the services delivered under Medicare. The Medical Services Advisory Committee was tasked with giving all new items the detailed scrutiny on clinical safety, efficacy and economic value that pharmaceuticals received. It only covered new proposed items. There was no funding for examining the vast numbers of existing services that had entered with no public or other formal scrutiny.

The issue of rebates   continued to focus on levels of payment and the cost to the Commonwealth’s budget. As an open-ended program, with no cap on expenditure, Medicare presents problems for governments intent on cutting expenditure. The easiest way is to freeze rises in rebates – a move that affects general practitioners more than specialists, as they have less room to increase out of pocket fees. Rebate freezes were used by the Howard government (1996-2004), the Gillard government for specialists (2012). GPs were added to the freeze by the Abbott government (2014). These freezes were eased in 2020. Each was a purely budgetary measure. The effects were to either shift costs to consumers through increased out-of-pocket expenses and to increase the volume of services to maintain revenues.

These measures were purely about government expenditures, barren of any health policy aims.

This came to a head in 2009 when Labor’s Health Minister Nicola Roxon tried unsuccessfully to reduce the Medicare rebate for cataract surgery. Roxon is best remembered for her uncompromising, and successful, battle with global tobacco companies to achieve ‘plain packing’ reforms.

Unlike earlier rebate freezes, this was based on an analysis of changing technologies and the time taken for each procedure. The government made little attempt to prepare the ground, not to discuss with medical organizations. The result was a concerted political and press campaign. Liberal senator Mathias Cormann warned of an explosion in waiting times and Piers Akerman in the Daily Telegraph stated “cutting rebates does nothing to reduce doctors fee, as the government has no control over the fee structure “It had been claimed that an Eye Surgeon was being paid an average $585,000 from Medicare. {Daily Telegraph, 17-11-09}

Eventually, an agreement was reached between the Government and the Australian Society of Ophthalmologists that there would be a cut on cataract MBS rebate of 12% {Media Release Health Ministers Office 29-1-10}.

These conflicts demonstrated that Coalition governments and the medical profession had moved decisively away from the ‘constitutional’ fights over principles of earlier decades.   Rebate freezes did nothing for efficiency and created real problems in equity and access by shifting costs to consumers. But if government was to engage medical professionals, consumers and other stakeholders as serious partners, there could be new opportunities to move from narrow debates over the level of rebates to a thorough in depth Review of the Medical Benefits Scheme.

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Dr Kerry Goulston AO is a retired physician and gastroenterologist. Past positions have included Associate Dean, Northern Clinical School of the University of Sydney, Royal North Shore Hospital and Inaugural Chair of the Postgraduate Medical Council of Australia and New Zealand.

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