Unpacking the Philip Medicare Review

Apr 6, 2023
Medicare card Australia.

Following “revelations” of $8 billion Medicare “rorts” in the Nine newspapers last spring, Health Minister Mark Butler commissioned Dr Pradeep Philip to conduct a review of Medicare integrity and compliance. His report has now been publicly released, and subject to vastly different readings.

Judging by the press reports so far, two versions of the review report have been released.

The one read by Natasha Robinson from The Australian “concluded $1.5bn-$3bn a year is likely lost predominantly from billing errors rather than premeditated fraud”. This is the same version of the report read by the AMA, which noted Philip’s observation that “the overwhelming majority of practitioners are well meaning and protective of the Australian health system, particularly of the care they provide to their patients”.

The other version of the report, read by Natassia Chrysanthos from The Sydney Morning Herald, found that “Medicare is haemorrhaging up to $3 billion a year in waste”, and that the program is “mired in fraud and rorts”.

Philip’s finding on the extent of non-compliance states:

“Calculation of the true quantum of non-compliance is limited by data availability, linkage challenges then muddied by differences in definitions. Previous estimates range from $366 million to $10 billion. Even simple extrapolation of risks currently identified by DoHAC suggests a bottom end figure of $582 million. Reasoning through the data constraints which inform this figure, it is reasonable to consider that estimates put forward in previous ‘top down’ studies that are two to three times this value are entirely conceivable”.

(My arithmetic suggests that this implies “conceivable” estimates of $1.2 to $1.8 billion, not the $1.5 to $3 billion in the review’s executive summary.)

In his letter of transmittal to the Minister, Philip writes:

“It is my strong suggestion to commentators and policymakers that the actual number should not be the main subject of debate, attractive as that may seem, as the main lesson to learn from this Review is that we must focus on the structural issues and controls in the system, to build trust in Medicare and materially reduce non-compliance and fraud”.

It is hardly surprising that Philip has not reached a definitive conclusion.

As I wrote last year, reaching a definitive conclusion would require a major project lasting at least several years, not a four-month review. Philip agrees that an “ideal state audit approach” would “face resource constraints in the first instance and, has the potential to later face legal or ethical approval barriers”.

Regardless of whether non-compliance is $1 billion or $8 billion, the main findings of the report are that the Medicare system is now poorly placed to prevent, detect, and act against non-compliance.

Philip identifies a number of environmental factors that have contributed to this, including the changing burden of disease and the changing nature of health care delivery. As he observes, “it used to be the case that there was a simple relationship between provider, patient, and payments. This is no longer the case as multidisciplinary teams have formed around more complex cases, a broader range of healthcare professionals have been embraced into the remit of the Medicare system, and where the biller is not necessarily the service provider”.

Another important factor is the growing corporatisation of medicine, which “has further weakened the simple relationship between provider, patient, and payment”, and led to practitioners being unaware of what is billed in their name.

A related issue is the “opaque” nature of MBS billings by public hospitals in their relentless search for MBS dollars.

Philip concludes that major reforms are needed to how the system is designed and how non-compliance is managed, and he makes recommendations under six broad headings:

  • Strengthening the governance model overseeing Medicare operations
  • Improving the “claiming journey” to enable continuous monitoring of claim transactions
  • Redesigning the frontline processes and business rules to support earlier identification of fraud and serious non-compliance
  • Redesign the payments system to a level of capability “commensurate with the size and complexity of the scheme”
  • Review Medicare’s legislation to include a contemporary approach to regulation
  • Remove the AMA’s veto power over the appointment of the Director of the Professional Services Review.

While on their face none of these (other than disempowering the AMA) are particularly controversial, they are all major projects.

And they include within them subsidiary recommendations such as “restructuring the design and composition of MBS numbers with a time-based backbone together with additional specific intervention and procedure codes, [and] bundling of co-claimed surgical items to create single procedure codes”.

The last MBS Review took five years and tens of million of dollars to review the existing MBS structure. A total redesign will be considerably more complex.

What now? Minister Mark Butler’s media release accompanying the official release of the report contained a bland boilerplate commitment to “considering the recommendations in Dr Philip’s review and… work[ing] closely with health professionals, patients and peak bodies to develop a comprehensive response”.

Interviewed on the ABC’s 7.30 report on 4 April, Butler was a little more forthcoming: “We are determined to act on this as soon as we appropriately can, and we’re not going to let the grass grow under our feet in responding to this report.”

It may just be semantics, but there is a significant difference between responding to a report and implementing its recommendations.

Implementing Philip’s recommendations will require a major investment of time, money and expertise. There is little evidence that a hollowed-out Department of Health has the policy capability to make a significant contribution to the task.

Implementation will also require political capital. The AMA has already foreshadowed its likely opposition to the recommendation to remove its veto power over the PSR Director.

As system redesign proceeds, there will likely be numerous points of conflict with the medical profession.

Will the Government want to engage in a brawl over the arcane issue of non-compliance? Or, would it rather save its energy for disputes over issues with a more obvious political return, such as urgent care centres?

However, the reforms recommended by Philip are crucial to ensuring the long-term viability of Medicare. Action to address non-compliance is just as important as action to ensure Medicare provides timely access to comprehensive primary care. It would be very disappointing if the government did not pursue Philip’s recommendations with vigour.


For more on this topic, P&I recommends:

Medicare reform must not just be about more money to do the same things the same way

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