Doctor, charge what you dare

David Gadiel

24 March 2015 | The Australian

stethoscope2 800x450Rather than flogging the dead horse of the GP co-payment, the government could have avoided this embarrassment by leaving the responsibility of patient cost sharing to the marketplace.

The current benefit for GP services is 100% of the fee specified in Medicare Benefits Schedule, the so-called Schedule Fee.

In the case of Concession card holders and children under 16, each time their GP charges the Schedule Fee and bulk bills them at 100%, the government also pays the GP a special incentive. During 2014, these GP incentives cost some $0.6 billion—nearly 10% of benefits for GP services.

So GPs adhering to the Schedule Fee without cost to patients do so, not because government has constitutional authority to enforce their adherence, but largely because of the generous bonus they are paid for doing so.

It is ironic that both Labor and Coalition governments from time to time since 1991 have explored how to make patients more responsible for the cost of their care by seeking to mandate a GP co-payment. Yet they have simultaneously courted populism by paying GPs extra to provide care that is free.

Doctors’ attitudes to medical fees have been as equivocal as the inconsistency of government. GPs accept the government’s bulk billing incentive payments, especially in competitive environments where their numbers are plentiful or where substitute public hospital outpatient services exist. But where their services are scarce—in rural localities or where it is uncongenial to practise—doctors are happy to charge what the market will bear.

The AMA, in unison with public health advocates, supports bulk billing and has branded the co-payment proposed in the 2014 Budget a “wrecking ball". This is hard to reconcile with an AMA Fee List much above the Schedule Fee, particularly for specialists.

GPs charge the way they are best rewarded either by government bonuses or local conditions. Government should save itself the contradiction and cost of paying GPs incentives to bulk bill while at the same time advocating the virtue of patients contributing to the cost of their care.

Both the Schedule Fee and the GP incentive payment it attracts when doctors bulk bill should be abolished. This would simply enable publication of a benefit payable for services on the Schedule. Because government cannot control what doctors charge, the Schedule Fee is in any case redundant.

Any justification for quasi-statutory GP co-payments would cease, saving government the political embarrassment of introducing them; and in the case of the bulk billing incentives, the burden of their cost.

GPs would be free to set fees and their services would continue to attract benefits. Doctors concerned about co-payments creating a barrier to primary preventive services could maintain fees equivalent to the Medicare benefit—although at a zero price, the risk of unnecessary care would remain.

On the other hand, GPs inclined or accustomed to charging above the benefit benchmark would be free to compete in the market place—but without the Schedule Fee as a background price signal to thwart price competition and provide a springboard for charging excessively above the benefit.

Removal of the bulk billing subsidy may prove unpopular with GPs, but they could always charge to recoup their loss. Rather than continuing to shift their business risk onto third parties, they would be competing in the marketplace for custom—as any other small businesses without the umbrella of public patronage must do.

Under a simplified and reformed Medicare, co-payments, and the public odium they attract, would become the business of doctors rather than government. This would focus patients’ minds on doctor charges instead of government payments; and it would engineer a shift towards greater competiveness in fee determination, as it does in markets without price signals for doctors, such as New Zealand and Singapore. Apart from local conditions, variances in GP charges would depend upon skill sets, special interests and professional reputations.

Abolition of the Schedule Fee would have implications not just for GP co-payments but also for services of specialists whose considerably greater market power reflects charges often guided by the inflated AMA Fee list. Abolition of the Schedule Fee could also invite greater scrutiny of the AMA Fee List by the ACCC and pave the way for greater competition for all doctors’ services.

David Gadiel is a Senior Fellow at the Centre for Independent Studies

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