Why has my doctor stopped bulk-billing? The Medicare overhaul explained

For the first time in Medicare’s history, the average gap fee is greater than the rebate for a standard GP visit. Why? And what’s the fix?

Medicare is a beloved institution. Ask Australians what makes them proud of their country, and many are fiercely protective of its promise you can access the healthcare you need – whether it be surgery or a doctor’s appointment – regardless of your income bracket.

But Australia’s universal healthcare scheme, virtually untouched since the 1980s, is no longer fit for purpose. In fact, Health Minister Mark Butler, who oversees the scheme, says it’s in the worst shape of its life.

“General practice, which is the backbone of our healthcare system, is in a truly parlous state,” he has said.

And the symptoms are worsening each month, as fewer doctors offer bulk-billed appointments and patients are asked to wear the cost. There are reports of gap fees of up to $100 in capital cities. In the regions, it can be hard to see a GP full-stop. People are queuing at emergency departments instead, with both minor ailments and more life-threatening conditions.

Mere money is not the solution. What’s being urged is no less than a system overhaul, involving the most significant changes to Medicare since it was introduced last century. How Australians access primary care – their first point of contact with the healthcare system, usually their GP – is set for a shake-up, and state and territory leaders are meeting in Canberra today to find out what that looks like.

So, why has your doctor stopped bulk-billing? Is there a shortage of GPs? And what is the government going to do about it?

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What is bulk-billing and how does it work?

Former prime minister Gough Whitlam introduced Australia’s first version of universal healthcare with “Medibank” in 1975, to end a system where families had to get insurance or pay out of pocket for healthcare. The scheme became Medicare under the Hawke government in 1984. It helps cover the cost of doctor’s visits, surgeries, tests and scans, with more than 5700 services and their costs outlined in the Medicare Benefits Schedule. Most Australians fund Medicare through their income tax, and higher-income earners who don’t have private health insurance pay an additional surcharge.

Medicare funds general practice through a “fee-for-service” model, where the federal government pays your GP clinic a fixed amount for each doctor’s appointment. That payment is known as the Medicare rebate, and the fee is outlined on the Medicare Benefits Schedule, based on the type of service and length of a patient’s visit.

Talk to many Australians and they’ll tell you their GP has stopped bulk-billing their services, or they’re struggling to get an appointment without paying a gap fee.

Bulk-billed doctor visits – where the federal government rebate covers the full cost of the appointment, leaving no out-of-pocket costs for the patient – have long been seen as a stalwart of Australia’s universal healthcare system. They remove financial barriers to healthcare and encourage people to use one of the most cost-efficient forms of care in our health system.

These days, the rebate for a standard GP consult lasting less than 20 minutes is $39.75. If you go to the doctor and can walk away without paying anything from your own wallet, then your appointment has been bulk-billed.

But that’s becoming increasingly rare, especially in wealthy and regional areas. Talk to many Australians and they’ll tell you their GP has stopped bulk-billing their services, or they’re struggling to get an appointment without paying a gap fee.

If you’re being charged out-of-pocket costs – or a “gap fee” – it means you are being asked to subsidise the cost of your doctor’s visit, on top of the Medicare rebate. The average gap fee for a standard consult rose to $40.70 last year.

We’ll get to the reasons for this soon. But before we do, it’s important to note it’s not just GPs who are bulk-billing less. In the area of mental health, almost 70 per cent of psychology treatments are asking for an out-of-pocket payment, with the median gap fee of $90 preventing many people from receiving help. Medical specialists tend to bulk-bill even less and have higher out-of-pocket fees.

But it’s the primary care system – people’s first point of contact with the health system, typically their GP – that governments are most worried about.

That’s because of the flow-on effect on the rest of the health system. The GP is people’s gateway to further care and critical to identifying problems before they get worse. When people avoid seeing GPs, their conditions can become serious enough that they need more intensive medical care. That’s worse for their health, puts more pressure on hospitals, and costs the government more.

The state governments don’t pay for Medicare – it’s a federal government program – but they have a stake in the issue too. State and territory leaders are most concerned that people who can’t afford to see their GP are instead clogging up their hospital emergency departments, which are free to attend. Their data shows that more people with minor illnesses that could be seen by a GP – such as rashes, minor aches and pains, sprained ankles, migraine or earache – have been turning up at emergency departments over time. More concerning to many health economists and emergency department doctors is the rise in seriously ill patients being admitted to hospitals with potentially avoidable conditions that could have been caught and treated early if they were able to access affordable primary care in the community.

How are Australians’ health needs changing?

The fee-for-service Medicare model we mentioned above is tailored to episodic care, when one-off problems were easily treated in one visit. You’d see your doctor for a particular issue, they would treat your ailments or prescribe a medicine, and you’d go away to (hopefully) get better with no need for follow-up care. The government paid your doctor their one-off rebate, and if you came back another time, it was typically for something different.

But the health profile of Australians has changed since this fee-for-service model was introduced, and health experts have warned that the system no longer caters to the needs of modern Australia.

We now have an ageing population, which brings with it more complex and chronic diseases. Many people who need treatment aren’t visiting their doctor just once before going off on their own for several months; they have multiple conditions that require ongoing monitoring and treatment.

“My day is spent dealing a lot more with chronic illness, older patients. We know the population is ageing, and as treatments get better, many conditions that were once acute are now chronic.”

Dr Bruce Willett, the vice-president of the Royal Australian College of General Practitioners, has been a GP for 35 years. In the early days of his career, he would record his notes during patient consults on 4- x 6-inch palm cards, and they’d require three to five lines of scrawling at best. “Most of what I treated was acute illnesses – broken arms, ear infections, pneumonia,” he says.

Now, he sees very few of those things. “My day is spent dealing a lot more with chronic illness, older patients. We know the population is ageing and, as treatments get better, many conditions that were once acute conditions are now chronic conditions,” Willet says.

For instance, an elderly patient might require monitoring of dementia, diabetes and recovery from a broken hip all at once. Advances in medicine also mean people are surviving diseases that used to be fatal, but they need ongoing management. “Fifteen years ago, melanoma or advanced breast cancer were certain death sentences,” says Willett. “Now most patients live with those as chronic illnesses.”

Add to that an increase in mental health issues, and the fact that 80 per cent of people with one chronic illness typically have a second, and you have an increasingly complex GP caseload that cannot be adequately serviced in the one-off visits the system is designed to accommodate.

“One of the issues is that the Medicare system penalises doctors for spending longer with a patient,” Willett says. A doctor who manages five less-than-20-minute sessions in an hour, for example, would receive $198.75 from Medicare ($39.75 rebate per patient). But seeing two patients across that 60 minutes, for about half-an-hour each, would earn $153.90 ($76.95 rebate per patient), a near $50 difference on their hourly rate.

So, why has my doctor stopped bulk-billing?

Let’s talk more about that Medicare rebate: the amount the government gives a GP clinic for each appointment with a patient. One of the major problems, which has come to a head as the cost of living soars, is that the rebate has barely changed in 10 years.

“GPs’ remuneration from Medicare in real dollars has been going down. It’s equivalent to a real pay cut over time.”

A rebate freeze was introduced by the Labor government in 2013 as a temporary savings measure. But it was kept in place and extended by the Coalition government until 2018. Even when the freeze was lifted, the annual rebate increase has never risen above inflation. For example, the rebate rose 1.6 per cent last July – but was no match for the 7.8 per cent spike in the consumer price index that same year.

The consequence is that GPs’ incomes have remained relatively static for almost a decade while all the other costs of running their business – staff wages, rent, insurance, medicine and equipment – have gone up.

That’s where you, the patient, come into it: clinics make up the difference by charging patients an out-of-pocket gap fee. And gap fees are rising. Across all GP visits, the average out-of-pocket cost has risen to $42.44, compared with $28.12 a decade ago.

For the first time in Medicare’s history, the $40.70 average gap fee for a standard 20-minute-or-less consult is more than the government’s average contribution of $39.26. In other words, patients are wearing the cost of the government’s near-decade-long pay freeze. “GPs’ remuneration from Medicare in real dollars has been going down. It’s equivalent to a real pay cut over time,” says public health researcher Dr Christopher Harrison, from the University of Sydney. “That’s going to force more of them to drop bulk-billing.”

Official data from the Health Department tells us that 83.4 per cent of all GP services were bulk-billed in the latest September quarter – the lowest rate since 2013 – which marked a drop of 3.6 percentage points from just three months’ prior. That figure includes repeat visits by the same people. The portion of patients that have all their services bulk-billed is lower: government figures released this week from 2021-22 showed 65.8 per cent of patients was fully bulk-billed, reversing the upward trend of the previous nine years.

Still, the new Labor government and most analysts believe those numbers are an underestimate. PhD candidate Dr Margaret Faux is convinced the true rate is as low as 40 per cent, which is a figure supported by online healthcare directory Cleanbill. Confusing billing processes, for instance, mean some clinics might claim the Medicare rebate and then charge patient fees separately, so they show up in statistics as having bulk-billed when this is not the case.

Doctors and health economists have been calling for Medicare rebates to be raised for years to help solve the problem. But it’s no silver bullet …

The government has requested better bulk-billing data from the Health Department and has also commissioned a separate report into Faux’s claims, following reports by this masthead, which is due later this year.

Doctors and health economists have been calling for Medicare rebates to be raised for years to help solve the problem. But it’s no silver bullet, and some experts warn simply giving GPs more money won’t guarantee more bulk-billing or increase the availability of doctors’ services. The complex problem needs complex solutions, which is why the government has commissioned a Strengthening Medicare Taskforce that is set to hand down its report. We’ll get to that soon.

Another element to consider is that the village-style GP clinic, where the same doctor might see the same family for three generations and know everyone’s name, is no longer the norm. In 2008, 35 per cent of GP practices were owned by GPs themselves. By 2020, that figure had fallen to 25 per cent, due to the growth of large, corporate-owned clinics.

One advantage of the corporate model is it frees doctors from the administrative burdens of practice and running a business. But some of these new owners – which might operate practices in several locations – also do market research on the local area to determine how much people are prepared to pay, meaning gap fees in wealthier areas can become less about covering costs and more about making money. Raising the rebate in these circumstances won’t necessarily stop gap fees.

Where have all the GPs gone?

Another issue surrounds the workforce. There’s a shortage of GPs, making demand for their services even greater. In the 1980s, about 40 per cent of all medical graduates went on to be GPs. Today, according to the Royal Australian College of General Practitioners (RACGP), it’s just 15 per cent. In 2019, the college reported that for every new GP, there were nearly 10 new non-GP specialists.

This comes down to a few factors: general practice was once seen as a good option for work-life balance, compared to shift work, but increasing complexity and costs have changed that. Diminished funding and workforce shortages create a self-perpetuating cycle that can make the work more stressful and less desirable. Another factor is pay.

By 2032, research projects a shortfall of more than 11,000 GPs. That’s almost 30 per cent of the workforce.

While GPs are well-remunerated compared to the public and other white-collar workers, their pay is not competitive with other medical specialists who completed similar levels of training. In fact, GPs earn less than any other specialty: a survey by University of Melbourne researchers, using figures from 2018, rated GPs’ median hourly income last out of a list of 30 specialties. Their median annual income was little more than half that of the other specialties: $188,000, compared with $329,000.

According to the RACGP’s General Practice: Health of the Nation 2022 report, one-quarter of all GPs plan to retire within the next five years, and only half of current GPs say they will still be practising in 10 years. Australia’s two years of COVID border issues only reduced the flow of extra doctors from overseas and between states, leading to further deficits. By 2032, research projects a shortfall of more than 11,000 GPs. That’s almost 30 per cent of the workforce.

“Not enough medical graduates, young doctors, are choosing general practice as their career because they see the difficulty of working as a general practitioner. We’ve got to turn this around,” Butler said this week.

What’s the fix?

Labor promised $750 million for a “Strengthening Medicare” taskforce before it won last year’s election, and its report will be published later today after a National Cabinet meeting. The state and territory premiers have Medicare reform at the top of their list of demands.

We don’t yet know what the taskforce has recommended – and which of those recommendations the government will adopt – but there are some front-running options for the Albanese government.

“We don’t just need to add more money to the existing systems. We need to change the existing system.”

Doctors have been calling for an increase to the Medicare rebate to start with. Butler has been careful not to give much away, but he has not committed to a rebate rise, nor promised to index the rebate to inflation each year. He also has other options, such as increasing the bulk-billing incentive the government pays GPs in some circumstances: it would be one way to both give doctors more money and ensure the funding is funnelled into reducing patients’ financial burden.

Even so, Butler has emphasised that throwing money at the problem won’t fix it. “We don’t just need to add more money to the existing systems. We need to change the existing system. Because the consensus from doctors, from nurses, from patient groups and many others, is that the Medicare designed 40 years ago – with a completely different disease profile to the one we see today – is not delivering the wraparound, multidisciplinary care that modern Australia needs, an older Australia with much higher levels of complex chronic disease,” he said this week.

Butler has flagged he wants to see all health professionals – from pharmacists to physios – working “to the top of their scope of practice” in multidisciplinary teams. This would mean cutting red tape and bolstering the role nurses and the allied health sector play in delivering primary care, alongside GPs.

One way of doing this would be moving to a blended model of funding. This could involve paying GP clinics lump sums that subsidise the employment of nurses or different health professionals, as well as their traditional fee-for-service funding.

A report by the Grattan Institute, which was presented to the federal taskforce, proposes a new model that would enable GPs to lead multidisciplinary teams of clinicians and to prioritise the most complex cases. It suggests some work currently done by doctors could be safely carried out by other health professionals such as nurse practitioners, physiotherapists and pharmacists at a far lower cost.

But the execution is shaping up to be controversial. While all professions including GPs acknowledge the importance of team-based care to utilise a fuller range of skills, particularly for people with chronic illness, the structure will be important.

The RACGP and Australian Medical Association want GPs to remain firmly at the centre of patient care, and are also concerned about a conflict of interest from pharmacists, who profit from prescriptions. But the Pharmacy Guild – representing pharmacy owners – is pushing to do more, citing their efforts administering COVID vaccines as evidence of their capacity, as are nurse and allied health associations.

Meanwhile, state governments want more university places for people studying medicine and better incentives for international GPs to make Australia home, to boost the workforce.

Whatever the federal government announces, it will be just the first step in long-term reform of the system. “More of the same is simply not going to cut it. Strengthening Medicare means also modernising Medicare,” Butler says.

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