The Abbott government’s $7 co-payment charge for GP, pathology and diagnostic services has generated much hysteria and hypocrisy.
Rather than marking the “death of Medicare”, greater cost-sharing for health services will improve the financial sustainability of the health system while having marginal impact on access to health care including for the poor.
The medical services component of Medicare costs the federal budget more than $19 billion a year. Federal expenditure on health has grown strongly in the past decade. This has been driven mainly by increases in the volume of health services consumed as people have seen the doctor more often and had more tests.
More than three-quarters of all Medicare-funded services are bulk-billed, including 80 per cent of GP visits, 87 per cent of pathology tests and 75 per cent of diagnostic services.
The reason the cost of Medicare continues to increase is that health services are usually consumed without user charges. “Free” healthcare invites unlimited demand, and leads to overuse and inflated costs.
Will the Medicare co-payment fix the problem of overuse by discouraging unnecessary doctors’ visits and tests? No, it will not. The co-payment has been deliberately set at a value lower than the cost of the proverbial sandwich and a milkshake so that the price signal does not restrict access to health care.
In an analysis published last year, Terry Barnes, the former Howard government health adviser, suggested that a modest co-payment of $6 would have little impact on demand for GP services. Barnes estimated that the reduction in doctors’ visits would reduce total spending on GP services by just 3 per cent.
This implies that almost all of the budget savings generated by the co-payment (forecast to be $3.5bn across five years) will be achieved by clawing back part of the Medicare payment to doctors, which will be reduced by $5 from July 1 next year.
Applying the principle of user-pays to Medicare and shifting part of the cost of health services directly on to consumers will simply release public funding for other purposes — the questionable $20bn Medical Research Future Fund.
The Medicare co-payment is designed to change people’s behaviour not by deterring them from using health services but by requiring them to defer a small amount of spending on other things and pay for part of the cost of these services themselves.
A $7 co-payment would simply ask all Australians to treat comparatively minor and lower-cost healthcare as an everyday living expense and make provision in their household budgets to cover part of the cost of accessing what will remain heavily taxpayer-subsidised services.
Moreover, the financial impact of the co-payment on low-income groups will be mitigated by the proposed safety net arrangements, which will see concession-card holders and children bulk-billed after their first 10 Medicare services each year.
There were more than 250 million Medicare-funded GP, pathology and diagnostic services in 2012-13, and this averages out to 11 services per person each year.
The claims being made about the so-called injustice of the Abbott government’s co-payment policy are exaggerated and need to be put into perspective. In 1991, the Labor government under prime minister Bob Hawke proposed a $3.50 GP co-payment. This was subsequently lowered to $2.50 and operated for only three months before being scrapped by the new prime minister, Paul Keating. A $7 co-payment would simply update more or less into today’s money the original Hawke government proposal, which was seen as necessary as long as 24 years ago to contain government health spending by transferring some of the cost on to consumers. If the Senate passes the co-payments legislation, this would also address the anomalies in the health system whereby different patients are charged differently for different services.
Co-payments have applied to the Pharmaceutical Benefits Scheme since 1960. Presently, for PBS-listed medications, non-concession card holders pay $36.90 a script while concession-card holders pay $6 a script.
If the critics of Medicare co-payments were consistent, they should have long been demanding the abolition of PBS co-payments for those on low incomes.
Or at least they should be able to point to clear evidence that co-payments prevent the poor from accessing pharmaceuticals.
In reality, cost sharing on the PBS does not seem to be much of a barrier to healthcare.
As Joe Hockey pointed out in a speech in April, not only is the PBS the 10th largest single area of federal government spending, but nearly 80 per cent of PBS expenditure pays for the medications of concession-card holders.
Healthcare never was and never will be “free”.
Combined federal and state government spending on health accounts for 70 per cent of total national health expenditure. Taxpayers are contributing almost $100bn into the health budget each year. Contributing a $7 Medicare co-payment is a small price to pay even for those on modest incomes who will continue to access world-class healthcare.
Jeremy Sammut is a research fellow at the Centre for Independent Studies. He proposed a $5 Medicare co-payment for GP, pathology and diagnostic services in the CIS’s Emergency Budget Repair Kit (November 2013).
Home > Commentary > Opinion > Critics of a modest GP co-payment should get over it, healthcare has never been free
Critics of a modest GP co-payment should get over it, healthcare has never been free
The Abbott government’s $7 co-payment charge for GP, pathology and diagnostic services has generated much hysteria and hypocrisy.
Rather than marking the “death of Medicare”, greater cost-sharing for health services will improve the financial sustainability of the health system while having marginal impact on access to health care including for the poor.
The medical services component of Medicare costs the federal budget more than $19 billion a year. Federal expenditure on health has grown strongly in the past decade. This has been driven mainly by increases in the volume of health services consumed as people have seen the doctor more often and had more tests.
More than three-quarters of all Medicare-funded services are bulk-billed, including 80 per cent of GP visits, 87 per cent of pathology tests and 75 per cent of diagnostic services.
The reason the cost of Medicare continues to increase is that health services are usually consumed without user charges. “Free” healthcare invites unlimited demand, and leads to overuse and inflated costs.
Will the Medicare co-payment fix the problem of overuse by discouraging unnecessary doctors’ visits and tests? No, it will not. The co-payment has been deliberately set at a value lower than the cost of the proverbial sandwich and a milkshake so that the price signal does not restrict access to health care.
In an analysis published last year, Terry Barnes, the former Howard government health adviser, suggested that a modest co-payment of $6 would have little impact on demand for GP services. Barnes estimated that the reduction in doctors’ visits would reduce total spending on GP services by just 3 per cent.
This implies that almost all of the budget savings generated by the co-payment (forecast to be $3.5bn across five years) will be achieved by clawing back part of the Medicare payment to doctors, which will be reduced by $5 from July 1 next year.
Applying the principle of user-pays to Medicare and shifting part of the cost of health services directly on to consumers will simply release public funding for other purposes — the questionable $20bn Medical Research Future Fund.
The Medicare co-payment is designed to change people’s behaviour not by deterring them from using health services but by requiring them to defer a small amount of spending on other things and pay for part of the cost of these services themselves.
A $7 co-payment would simply ask all Australians to treat comparatively minor and lower-cost healthcare as an everyday living expense and make provision in their household budgets to cover part of the cost of accessing what will remain heavily taxpayer-subsidised services.
Moreover, the financial impact of the co-payment on low-income groups will be mitigated by the proposed safety net arrangements, which will see concession-card holders and children bulk-billed after their first 10 Medicare services each year.
There were more than 250 million Medicare-funded GP, pathology and diagnostic services in 2012-13, and this averages out to 11 services per person each year.
The claims being made about the so-called injustice of the Abbott government’s co-payment policy are exaggerated and need to be put into perspective. In 1991, the Labor government under prime minister Bob Hawke proposed a $3.50 GP co-payment. This was subsequently lowered to $2.50 and operated for only three months before being scrapped by the new prime minister, Paul Keating. A $7 co-payment would simply update more or less into today’s money the original Hawke government proposal, which was seen as necessary as long as 24 years ago to contain government health spending by transferring some of the cost on to consumers. If the Senate passes the co-payments legislation, this would also address the anomalies in the health system whereby different patients are charged differently for different services.
Co-payments have applied to the Pharmaceutical Benefits Scheme since 1960. Presently, for PBS-listed medications, non-concession card holders pay $36.90 a script while concession-card holders pay $6 a script.
If the critics of Medicare co-payments were consistent, they should have long been demanding the abolition of PBS co-payments for those on low incomes.
Or at least they should be able to point to clear evidence that co-payments prevent the poor from accessing pharmaceuticals.
In reality, cost sharing on the PBS does not seem to be much of a barrier to healthcare.
As Joe Hockey pointed out in a speech in April, not only is the PBS the 10th largest single area of federal government spending, but nearly 80 per cent of PBS expenditure pays for the medications of concession-card holders.
Healthcare never was and never will be “free”.
Combined federal and state government spending on health accounts for 70 per cent of total national health expenditure. Taxpayers are contributing almost $100bn into the health budget each year. Contributing a $7 Medicare co-payment is a small price to pay even for those on modest incomes who will continue to access world-class healthcare.
Jeremy Sammut is a research fellow at the Centre for Independent Studies. He proposed a $5 Medicare co-payment for GP, pathology and diagnostic services in the CIS’s Emergency Budget Repair Kit (November 2013).
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