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Autopsy of a dead policy: what now for Medicare?

By: Richard Norman, Curtin University
19 January, 2015

The government has backed down from its plan to cut Medicare rebates to doctors – which was to start on January 19 – after several days of public pressure.

For those not au fait with the world of health reform and policy, the issue may have seemed to pass by in something of a flash. And a close look shows the fight the proposed policy caused wasn't, after all, worth it for the government.

After being unable to pass the changes to Medicare described in the 2014 budget, the Coalition government put forward a new proposal in December 2014. It had many of the same features, but importantly, reductions in government support for Medicare items to big areas of spending, such as diagnostics and pathology, no longer applied. They also didn't apply to a variety of high-need groups, including those with concession cards, children under 16, or people in aged-care facilities.

Nonetheless, the proposed changes were substantial.

New policy set

The first change, which has just been cancelled by the health minister Sussan Ley, would have meant a proportion of Level A consultations would have been reclassified as Level B.*

Level A consultations are currently rebated $16.95 and Level B are rebated $37.05. Those Level B consultations under ten minutes would have been reclassified as Level A. So, if a general practitioner wanted to earn the same amount of money for these consultations, they'd have had to increase what the patient would pay (the co-payment) by A$20.10 (the difference between A$16.95 and A$37.05).

The second proposed aspect of the policy, which appears to have been left untouched, is that, as of July 2015, the Medicare benefit for all GP services provided to non-concessional patients will be reduced by A$5. While this reduction is smaller than the A$20 cut that was to be introduced in January, it applies to a much larger set of consultations so has the potential for a much bigger impact on GP activity (and on population health).

Finally, all Medicare rebates are to be frozen until July 2018.

Initially, the Australian Medical Association (AMA) declared the total package to be a "mixed bag", but it has since come out strongly against the proposal. And it appears to have triumphed.

Was it worth it after all?

A close look at the financial implication of the dropped policy of cutting rebates for certain Level B consultations raises questions about whether it was worthwhile starting a fight about.

To understand the policy's cost implications, it's vital to step back and look at Medicare as a whole. Total Medicare spending for 2013-14 was A$19.282 billion (almost A$1,000 per Australia). Of this, professional attendances consisted of A$8.732 billion (45 per cent of the total). And of this second figure, A$4.584 billion was for general practice (23.8 per cent of total Medicare expenditure).

Level A consultations are one item within this subgroup, and are currently described by Medicare as a:

"Professional attendance for an obvious problem characterised by the straightforward nature of the task that requires a short patient history and, if required, limited examination and management."

In 2013-14, the total Medicare benefit paid on this item was A$46.7 million, which is substantial, but not relative to the total for general practice. In fact, it is only 1 per cent of that total – and under 0.25 per cent of total Medicare expenditure. The question is how many of the Level B consultations would be added to this group if the policy had been actioned.

The death of six-minute medicine?

The government claimed that one aim of the proposed change in payment for short consultations was to reduce the prevalence of so-called "six-minute medicine" in which doctors churn through patients to maximise total payment. Reducing the payment for shorter consultations currently considered as Level B could mean doctors see patients for longer, and take a broader medical history. They would, perhaps, address multiple issues in one consultation, among other things.

But recent data from the BEACH study, which collects information about general practice activity, looking at almost 35,000 GP consultations shows doctor visits that go for less than ten minutes represent only 26.1 per cent of GP consultations, some of which will already be classified as Level A.

You can draw a couple of conclusions from this.

The figure is higher than that reported in the Medicare data, suggesting that the assigning of each GP visit to different consultation levels is imprecise. My guess is that many general practitioners assign most visits to Level B irrespective of length. So, both Level A, and levels C and D, which are longer consultations, are under-reported.

Supporting this supposition, the distribution of claims in the Medicare data has a much more pronounced peak at Level B (83 per cent of the total) than the BEACH data does for consultations between ten and 20 minutes (58 per cent).

The second thing to note is that, under either the BEACH data or the Medicare claim data, the prevalence of short consultations is fairly low. In the BEACH data, for instance, less than 10 per cent of consultations are completed in under six minutes. Many of these visits would presumably not be improved by extending them to ten minutes because they're for procedural issues, such as reissuing prescriptions. The shorter consultation is adequate for these purposes.

Challenging future

The AMA may have won this round of the fight by causing the health minister to backtrack on the change that was to come into force on January 19, but other aspects of the policy remain. Indeed, the more substantial issue is the across-the-board reduction to benefits for GP consultations by A$5 and the freezing of rebates until 2018. Both apply to a large pool of services.

The AMA has stated this represents a A$1.3 billion cut to primary care, but I could not replicate this figure. Still, it's fair to say the slated change represents a substantial decline in government financial support for the sector in real terms. And it may impact a variety of areas, including bulk-billing rates, emergency attendances at hospital, retention of doctors in primary care, and ultimately the health of the community.

Implementing changes to Medicare has proven arduous for the Coalition government, and it's likely to continue to pose a challenge during the remainder of its parliamentary term.

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