Tackling rising specialist costs

Government currently provides a rebate to cover doctors' fees as part of the broader public health care system (Medicare). It’s called the Medicare Benefit Schedule (MBS).

The benefit will cover either the full cost of the amount the doctor charges a patient (i.e., the attendance will be “bulk-billed”), or it will cover a portion of the amount the doctor charges, resulting in an out-of-pocket cost to the patient.

There is much debate about bulk billing rates and out-of-pocket costs as out-of-pocket costs increase. This is because health costs are increasing faster than the patient rebates offered via the Medicare Benefit Schedule (see graph below).

Doctors say the schedule fee for most items is too low to cover rising business costs. Government claims that doctors’ fees are rising too fast. The truth is likely somewhere in between.

Increase MBS schedule fees, right?

The seemingly obvious solution is to increase the rebates offered to patients through the Medicare Benefit Schedule.

That’s what the Royal Australian College of General Practitioners (RACGP) and the Australian Medical Association (AMA) are calling for.

If this was to occur, it would cost the federal government and taxpayers significant sums to bridge the widening gap between what government pays and what doctors charge.

Given budget constraints and public anathema to taxes, this might not be the simple solution it seems.

Raising MBS rebates alone doesn’t address health inflation, and in some ways rewards those who profit from health care.

The federal government entered this debate through a consultation on options to address excessive fees. It outlined several reform options, including fee transparency, education, price caps and bulk-billing incentives.

National Seniors Australia (NSA) made a submission to the consultation, which you can read here. We argued that we don’t understand the drivers of health inflation, but should as a matter of urgency.

To support this, we provided data showing how certain specialists appear to charge greater out-of-pocket costs than others, and asked the question – why? 

Until we unpack the cost drivers in the health sector, we won’t have solutions to the problem of rising out-of-pocket costs, unless we are willing to blindly accept these price increases.

We also raised concern about MBS schedule fees (and rebates) being too low and how this contributes to rising out-of-pocket costs. Even though the consultation paper, excluded this from the discussion.

Another issue we raised was the lack of transparency for patients around specialist fees and the difficulties patients have when faced with a referral to a specialist.

Price responsive MBS rebates?

To illustrate these issues, we proposed an alternate solution to the ones put forward in the consultation paper. We proposed that the MBS rebate should reduce if a doctor charged an excessive fee, well above the MBS schedule fee.

For example, if an MBS schedule fee was $100 and the doctor charged $100 – the patient would have no out-of-pocket cost. But if the doctor charged more than $150 then the MBS rebate should be reduced to $80.

But why punish the patient for the sins of the specialist?

To be clear, we are not seriously suggesting this option, our intention is to draw attention to the fact that shopping around is a distant mirage as a tool to mute excessive specialist fees.

For the idea above to work: 

• The MBS schedule fee or rebate would need to be adequate to ensure out-of-pocket costs and excessive fees were minimised – which is highly unlikely.
• A patient needs to be in a situation where shopping around is a practical choice (which it often isn’t when faced with an urgent medical intervention).
• Referring doctors would need to be clear that a patient can choose a specialist and not only the one they have referred.
• The government would need to have a broad campaign to educate the public about choice and workings of the rebate.
• Patients would need access to an easy-to-use comparison website to easily check if a specialist was charging excessive fees or was not eligible for the higher rebate and the website would need to be able to give the patient information about alternative specialists.
• We need to understand why specialists are charging more than what is reasonable.

The list above is not exhaustive, but it points to many of the challenges we face. On the last point, NSA continues to call for a systematic Productivity Commission review of the broader private health sector to illuminate the factors driving health inflation – otherwise specialist fees and out-of-pocket costs will increase unabated.