Ian McAuley. Pay for a GP visit.

May 12, 2014

The Commission of Audit’s proposal to charge a $5 or $6 fee for “bulk-billed” GP services has little to commend it. But that doesn’t justify knee-jerk outrage from medical and consumer groups, or from the Labor Opposition, for there is no reason why Medicare should not incorporate fixed and limited co-payments.

As it stands the proposal is poor public policy. It bears resemblance to the ideas in a discussion paper prepared by the Australian Centre for Health Research in October, proposing a $6 charge in order to bring price discipline into service use, but which contradicted itself by suggesting those co-payments could be funded through private health insurance (PHI).

There is no explanation of principles, no system-wide view, and no consideration of the costs of handling 140 million small transactions each year.

It’s simply a proposal to save $750 million in Commonwealth outlays over four years. Why four years? Because that’s the “forward estimates” period. Why Medicare services and not all health expenditure? Because that’s the budgetary line item. Why only fiscal outlays and not total health care costs? Because fiscal considerations have taken over from economic considerations, and if the cost falls on state governments through a move to outpatient services, that’s none of the Commonwealth’s responsibility. We have a fiscal system, not a health care system, and a political imperative around the budget bottom line.

If we had a completely free health care system, the indignation of lobby groups and the Opposition would be understandable, because it would indeed be a wedge into our system.  But we already pay 19 percent of our health care outlays from our own pockets (about the OECD average of 20 percent).  We may have the luck to find a “bulk billing” GP, but if we have to fill a pharmaceutical prescription scrip we have to pay up to $36.10, or $5.90 if we hold a concession card, and if the suggested medication is not on the Pharmaceutical Benefits Scheme, it’s whatever the pharmacist charges. If we cannot find a bulk-billing GP (only 81 percent of GP services are bulk-billed, and they would be disproportionately for card holders), then we are paying on average $29 from our own pockets.

We don’t know the rationale behind the proposal – this Government is not given to policy openness – but it’s probably driven by the tremendous growth in use of medical services over the years. In 1984-85 we used about 7 Medicare services per head, in 2002-03 we used 11, and in 2012-13 we used 15. Ageing explains some of this, but there has been growth in utilization across all age groups. While half the population uses 7 or fewer services a year, 10 percent of the population uses 31 or more services – more than one a fortnight – accounting for 44 percent of services.  (These figures relate to 2007-08, so they would understate the skew to heavy users. The Department no longer publishes this data.)

Penny Wong portrayed the proposal as a disaster of Thatcheresque proportions, claiming that a $6 fee would be a barrier to access, ignoring the barriers imposed by long waits at bulk-bill clinics (many people would be spending more than $6 in parking fees), and the closed books at GP surgeries whose capacity has been absorbed by heavy users.

Oppositions criticize – that’s their job. But they shouldn’t close off avenues for possible reform.  An opposition with a little nous could complain about the process issues mentioned above.  “Yes, we have a problem, and we need some rationalization of co-payments, but this is an inept and counterproductive way to go about it ……”.

The political reaction is similar to what happened in 1991, when the Hawke Government proposed fixed co-payments.  The squeals from groups supposedly on the “left” forced the Government to a hasty retreat.  “Medicare” became implanted in the political and public mind as a “free” primary care service.  (Earlier, in 1987, the Coalition had abandoned their plans for people to spend $250 before receiving Medicare support, because of similar protests.)  In 1991 the most common protest was that Medicare would become a “safety net” rather than a universal free service.

The gaping flaw in that protest is that we have never had a universal free health care service.

In those campaigns of last century the “left” exhausted its political energy defending free Medicare services.  But what has developed, a resurgence of private health insurance (PHI), is far worse by any reasonable criteria of equity or allocative efficiency.  As for the protests about a safety net, a safety net would be far better than our inconsistent arrangements which leave people, particularly those with chronic illnesses, bearing open-ended liability for uncapped expenses.

There are three ways to fund health care – direct consumer payments, a single national insurer, and competing private insurers. Two of these mechanisms, one a market mechanism, one a countervailing power mechanism, can keep health care costs in check and assure there is universal access to affordable services. The third mechanism, private health insurance, fails to achieve these outcomes and leads to price inflation and inequity. Its elimination should be the focus of consumer and Opposition energies.

Why should any consumer group or a party aspiring to government rule out one of the two mechanisms that actually have a chance of working?

Ian McAuley is a researcher and teacher in the fields of public sector management and public policy.

For other posts on this subject, see ‘health’ category on right side of home page.


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