Health Insurance Amendment (100% Medicare Rebate and Other Measures) Bill 2004

Date Introduced:  17 November 2004

House:  Representatives

Portfolio:  Health and Ageing

Commencement:  Clauses 1 to 3 and Schedule 2 of the Bill commence on the Bill receiving Royal Assent; Schedule 1 commences on 1 January 2005.

Purpose

The Bill proposes to amend the Health Insurance Act 1973 for the following purposes:

1. Schedule 1 will increase the Medicare benefit from 85 per cent to 100 per cent of the Medicare Benefits Schedule fee for general practitioner services, and

2. Schedule 2 will refine the eligibility requirements for the Medicare safety net, to ensure all families who are eligible for Family Tax Benefit A are eligible for the lower $300 safety net threshold. 

Background

Schedule 1—100% Medicare Benefit for certain GP services

100 per cent Medicare

The government’s ‘100% Medicare’ policy, announced during the 2004 federal election campaign, is the latest in a series of reforms to the Medicare system which have taken place this year.

Medicare provides free or subsidised access to services provided by doctors and certain other medical practitioners for all Australians.⁽¹⁾ The services covered by Medicare are contained in the Medicare Benefits Schedule (MBS). The Medicare benefit, or rebate, for services provided outside a hospital is usually 85 per cent of the fee set out in the MBS (‘the schedule fee’). The amendments contained in Schedule 1 of this Bill aim to make general practitioner (GP) services more affordable by increasing the Medicare benefit to 100 per cent of the schedule fee for all GP services (both those that are bulk billed, and those that are not). 

For example, a standard consultation with a GP lasting 15-20 minutes (item 23 on the MBS) has a schedule fee of $30.85.⁽²⁾ The 85 per cent Medicare rebate for this service is $26.25. The amendments to the Health Insurance Act proposed by this Bill will increase the rebate for this service by $4.60 to $30.85. This means that, for a standard GP consultation:

The measures proposed by this Bill will be complemented by an increase in the fees GPs receive from the Department of Veterans’ Affairs for services provided to eligible veterans and war widows through the Repatriation Comprehensive Care Scheme.⁽³⁾ The arrangements through which the Department of Veterans’ Affairs remunerates GPs who provide services to eligible veterans and war widows are set out in a Memorandum of Understanding between the government and the Australian Medical Association (AMA).⁽⁴⁾ Thus, no legislative change is required for these fees to be increased.

Cost

The measures contained in Schedule 1 of the Bill are estimated to cost approximately $1.718 billion over the four years 2004–05 to 2007–08:⁽⁵⁾

Strengthening Medicare

The measures contained in Schedule 1 of the Bill are the latest in a series of reforms to Medicare which have taken place this year, under the auspices of the government’s ‘Strengthening Medicare’ package.⁽⁶⁾ The major reforms contained in the ‘Strengthening Medicare’ package included:

The total cost of the measures contained in the Strengthening Medicare package were initially estimated to be approximately $2.9 billion over four years.⁽⁷⁾ However, figures contained in the Pre-Election Fiscal and Economic Outlook released by Treasury prior to the election suggest the cost of the new Medicare Safety Net will be around double the approximately $120 million originally forecast in this financial year.⁽⁸⁾ If this expenditure pattern on the Safety Net is repeated over the years of the current forward estimates, the Safety Net will cost more than $1 billion over the next four years (compared to the original forecast of $440 million), bringing the total cost of the measures contained in the Strengthening Medicare package to approximately $3.4 billion over the next four years. In addition to other spending commitments on Medicare (worth $392.9 million over four years) announced during the election campaign,⁽⁹⁾ the measures contained in this Bill, worth approximately $1.7 billion over four years, will take the government’s total spending commitments on Medicare made this year to $5.5 billion.

Position of significant interest groups

The government’s 100% Medicare policy received a mixed reaction from interest groups within the health sector when it was announced during the federal election campaign. In this context, it is important to note that the policy was announced on the same day as Labor’s Medicare policy—which also proposed increasing the Medicare rebate to 100 per cent of the schedule fee for GP consultations, but only for those that were bulk billed—thus much of the commentary on the 100% Medicare policy took the form of comparison with Labor’s Medicare policy.

The AMA welcomed the policy, arguing that the increase in rebates would improve access to, and affordability of, GP services. In particular, the AMA argued that it was important for increases in rebates not to be tied to bulk billing, since bulk billing should not be seen as ‘a measure of the health of the medical system in this country’. Accordingly, AMA President Dr Bill Glasson argued that the government’s policy was preferable to Labor’s Medicare policy because it allowed ‘flexibility between those [doctors] who want to bulk bill and those who don’t’.⁽¹⁰⁾

Other doctors’ organisations and interest groups have been more circumspect, however. The Doctors Reform Society, for example, suggested that the ‘unconditional’ increase in the rebate would lead to increases in doctors’ fees. Doctors Reform Society President Dr Tim Woodruff argued that ‘doctors, who believe they are underpaid, will absorb any increases for their practice and simply charge the patient more’. Thus, according to Dr Woodruff, the measures contained in the 100% Medicare policy would not address ‘financial barriers to accessing quality health care’, as there would be little if any change in bulk billing rates as a result of the rebate increase.⁽¹¹⁾ Similarly, the Australian Consumers’ Association argued that the increase in rebates would not necessarily benefit patients, as this would depend on whether GPs decide to pass the benefit on.⁽¹²⁾

‘Affordability’

The central claim of the government’s 100% Medicare policy is that it will make GP services ‘more affordable for everyone’.⁽¹³⁾ The government argues that this will be the case for GP visits where doctors charge their fees upfront, as patients will benefit from a higher Medicare rebate, which should translate to lower out-of-pocket costs.⁽¹⁴⁾ The government also argues that the higher rebate for GP services, which is in addition to the bulk billing incentives contained in the ‘Strengthening Medicare’ package, will encourage GPs to bulk bill, thus improving the affordability of GP services overall.⁽¹⁵⁾

It is possible that the higher rebate will provide an incentive for GPs to bulk bill, particularly as it is in addition to the bulk billing incentives contained in the Strengthening Medicare package. The Strengthening Medicare bulk billing incentives, which came into effect earlier this year, did lead to a rise in the national GP bulk billing rate. Therefore it is reasonable to expect that the higher Medicare rebates proposed by this Bill might lead to a further increase in GP bulk billing. On the other hand, unlike the bulk billing incentives included in ‘Strengthening Medicare’, the increased rebate is not tied to services being bulk billed, and therefore there is probably no real incentive in the measures contained in the Bill for GPs to start bulk billing (as against continuing to charge a co-payment) if they are not already doing so.

The government’s claims about reduced out-of-pocket costs for non-bulk billed services—that is, those services where doctors charge a fee upfront and the patient claims a rebate from Medicare—are perhaps even more contentious. It is the case that for those services where doctors charge fees upfront and patients pay a co-payment, that patients will be entitled to a higher rebate from Medicare (as explained above, for a standard 15-20 minute GP consultation, the existing rebate is $26.25; the new rebate, under the measures proposed by this Bill, will be $30.85, an increase of $4.60). However, the most important measure of affordability is not the actual amount of the Medicare benefit for a particular service, but the out-of-pocket cost associated with the service.    

In the example given above, if a doctor charges $50 for a standard consultation, her or his patients’ out-of-pocket costs will be reduced from $24 to $19 under the measures proposed by this Bill. Yet this will only be the case while the doctor does not raise her of his fees. If, for example, the same doctor was to raise the fee for a standard consultation to $54 or $55, the patient would still be entitled to the higher Medicare benefit of $30.85, but her or his out-of-pocket costs would be around $23 or $24, thus negating the effect of the higher Medicare benefit on the out-of-pocket cost (and therefore, the affordability) or the service. In other words, if doctors increase their fees, but patients’ out-of-pocket costs remain the same, it will be doctors, rather than patients, who will have benefited from the higher rebates. While there may be a case for increasing doctors fees, this is a separate issue: the central claim made by the government in relation to the 100% Medicare policy is that it will improve affordability.

The government has rejected concerns that the benefit to patients from the higher rebate will be eroded by doctors charging higher fees.⁽¹⁶⁾ However, there is evidence to suggest that doctors’ fees are set to rise in the next 6-12 months:

The AMA list of recommended fees and charges is only a guide for its members, so the AMA’s recommended fee increase will not in itself necessarily lead to widespread increases in doctors fees. However, the results of the Sun-Herald survey suggest at least some fee increases are likely. If it turns out to be the case that doctors fees do rise, the benefit to patients of reduced out-of-pocket costs from the higher rebate will be eroded (at least to some extent). This weakens the government’s claim that the measures contained in the Bill will make GP services more affordable.   

ALP/Australian Democrat/Greens policy positions

Labor has not announced its position on the measures proposed in the Bill.⁽¹⁹⁾ As noted above, however, Labor released its election policy on Medicare on the same day as the government announced the 100% Medicare measures. Labor’s policy contained a similar proposal to increase the Medicare rebate to 100 per cent of the schedule fee for GP consultations, but only for those consultations which were bulk billed. Accordingly, when the government’s policy was announced,  Labor was critical of the government’s proposal to increase the Medicare rebate to 100 per cent of the schedule fee for all GP services, without there being any incentive to bulk bill.⁽²⁰⁾

According to media reports, the Australian Democrats health spokeswoman Senator Lyn Allison, and Australian Progressive Alliance Senator Meg Lees have indicated they would be unlikely to oppose the measures contained in the Bill in the Senate.⁽²¹⁾ The Australian Greens have not announced a formal position on the measures contained in the Bill, though Greens Senator Kerry Nettle criticised the 100% Medicare policy for its lack of bulk billing incentives when the policy was announced during the election campaign.

Schedule 2—refinement of Medicare Safety Net criteria

As noted above, the new Medicare Safety Net— under which 80 per cent of out-of-pocket medical expenses for medical services provided outside hospital will be reimbursed once certain thresholds are reached—was introduced as part of the Strengthening Medicare package earlier this year.⁽²²⁾

The new Safety Net has been the most controversial aspect of the Strengthening Medicare package: Labor and other commentators, have argued, for example, that the Safety Net will have an inflationary effect on medical expenses (as doctors take advantage of the fact that their patients will have 80 per cent of their out-of-pocket costs covered once they have reached the safety net threshold, and charge higher fees).⁽²³⁾ This argument has been lent some credence by data from the Department of Health and Ageing showing out-of-pocket costs increasing after the Safety Net was introduced in March.⁽²⁴⁾ Further, as noted above, figures released by Treasury during the election campaign show that the Safety Net is costing considerably more than originally anticipated.⁽²⁵⁾ On the other hand, the Health Minister, Tony Abbott, argues that the safety net is ‘the biggest structural improvement to Medicare since it began 20 years ago’, since it effectively provides insurance against high out-of-pocket medical costs.⁽²⁶⁾ Similarly, the AMA strongly supports the Safety Net, arguing that it provides ‘great comfort and security for the poorest and sickest in the community’.⁽²⁷⁾

The amendments contained in Schedule 2 of this Bill, do not represent any change in government policy on the Safety Net. Rather, they refine the Safety Net eligibility criteria contained in the Health Insurance Act, to ensure that families eligible for the Family Tax Benefit A (FTB(A)) are eligible for the lower $300 threshold, as was intended in the original policy: in the existing legislation, for the purposes of the Safety Net an FTB(A) family is defined as a family in receipt of FTB(A) payments. However, some families who are eligible for the FTB(A), for a range of reasons,⁽²⁸⁾ may not actually be in receipt of FTB(A) payments. The amendment to the legislation proposed by Schedule 2 of the Bill will allow these families to be eligible for the $300 threshold.

Cost

According to the Explanatory Memorandum accompanying the Bill, there is no cost associated with the measures contained in Schedule 2 because these were included in the original costing of the Strengthening Medicare package.⁽²⁹⁾

Position of significant interest groups

Since the measures contained in Schedule 2 of the Bill represent a minor amendment to the safety net legislation and do not constitute a change in, or introduction of new, government policy, interest groups within the health sector have not announced positions. As indicated above, the AMA strongly supports the Medicare Safety Net itself, while other doctors groups such as the Doctors Reform Society have been more equivocal about both the sustainability and long term benefits of the Safety Net system.⁽³⁰⁾

ALP/Australian Democrat/Greens policy positions

As is the case for significant interest groups, because the measures contained in Schedule 2 of the Bill are relatively minor, the ALP, the minor parties, and independent parliamentarians have not announced positions on the amendments proposed by Schedule 2. However, as indicated above, Labor opposed the introduction of the Safety Net originally (and promised to abolish it if elected). The Democrats and the Greens also opposed the Strengthening Medicare package in the Senate earlier this year.  (if any)

Main Provisions

Schedule 1—100% Medicare Benefit for GP services

Item 1 proposes to insert a new paragraph into Section 10 of the Health Insurance Act, to enable a Medicare benefit equivalent to 100 per cent of the schedule fee to be paid for services prescribed in the regulations proposed by item 2.

Item 2 proposes to insert a new subsection into section 10, to enable the services which will attract the higher Medicare benefit to be prescribed by regulation.

Item 3 provides for the higher rebates to commence on 1 January 2005.

Schedule 2—refinement of Medicare Safety Net criteria

Item 1 proposes the addition of a new paragraph to subsection 8(1A) of the Health Insurance Act, to include in the definition of ‘FTB(A) family’ for the purposes of the safety net, families deemed eligible by the Minister by the determination provisions proposed by item 3.

Item 2 proposes a technical amendment to correct a drafting error.

Item 3 proposes to allow the Minister to determine the definition of ‘FTB(A) family’ for the purposes of the safety net. A determination issued under the provisions proposed by item 3 would be a disallowable instrument. 

Concluding Comments

As discussed above, the measures proposed by Schedule 1 of this Bill are likely to be somewhat controversial: debate has centred around the key issue of whether the measures proposed by the Bill will make medical services more affordable. The government argues that the measures contained in the Bill will make medical services ‘more affordable than ever before’,⁽³¹⁾ while other commentators have argued that the increased Medicare rebates for GP services proposed by the Bill are likely to be absorbed by doctors through higher fees, and consequently, the prospective benefits to patients from higher rebates will be quickly negated. This is because, while patients will receive a higher rebate from Medicare for GP services under the measures proposed by this Bill, if doctors raise their fees for patient-billed services, patients’ ­out-of-pocket costs may not be greatly reduced (if they are reduced at all). The available evidence discussed above suggests that doctors’ fees are likely to rise in the next 6-12 months.

Another source of debate has been the question of whether the measures proposed by Schedule 1 of this Bill are likely to increase bulk billing of GP services. The government argues that GPs will be more likely to bulk bill following the introduction of higher Medicare rebates, while Labor and other commentators have argued that there is no incentive to bulk bill under the measures proposed by the Bill because the higher rebates are not tied to bulk billing. Since the higher Medicare rebates proposed by this Bill will be available in addition to the bulk billing incentives contained in the Strengthening Medicare package, it is possible that they will provide further encouragement for GPs to bulk bill. On the other hand, there is probably also some merit in the argument that higher rebates will not provide an incentive for GPs to bulk bill if they are not tied to bulk billing. However, it is difficult to predict what the effect of the measures proposed by the Bill on bulk billing practices will be.

The amendments to the Health Insurance Act proposed by Schedule 2 relate to the Medicare Safety Net. As discussed above, the Safety Net has been one of the most contentious aspects of the Strengthening Medicare package. However, the amendments proposed by Schedule 2 of the Bill are relatively minor, and do not represent any change to government policy.

Endnotes

1. Services are provided free to the patient where the doctor accepts the Medicare benefit as full remuneration for the service, and ‘bulk bills’ Medicare for payment (thus the patient is not required to pay any fee upfront); services are subsidised where the doctor charges more than the amount of the Medicare benefit, and the patient is required to pay a co-payment (in this case, the doctor charges the patient, and the patient can claim reimbursement from Medicare for the Medicare benefit).

2. Australian Government Department of Health and Ageing, Medicare Benefits Schedule, 1 November 2004 edition, p.68, see: http://www7.health.gov.au/pubs/mbs/mbsnov04/MBSNov2004_PDF/MBS_Book_1_Nov_2004.pdf (accessed 27 November 2004).

3. The Repatriation Comprehensive Care Scheme provides a range of health care services to eligible veterans and war widows, through Local Medical Officers (LMOs). LMOs are GPs registered with the Department of Veterans’ Affairs to provide medical services to eligible veterans and war widows. Under a Memorandum of Understanding between the Repatriation Commission (the body responsible for managing veterans’ entitlements) on behalf of the Commonwealth Government, and the Australian Medical Association (AMA), LMOs currently receive the equivalent of 100 per cent of the Medicare schedule fee from the Department of Veterans’ Affairs for services provided to eligible veterans and war widows. This level of remuneration—which is higher than the 85 per cent of the schedule fee doctors receive from Medicare for services provided to the rest of the population—provides an incentive for GPs to participate in the provision of medical services to the veterans’ community. Accordingly, to maintain the relativities between the levels of remuneration provided by Medicare and those provided to LMOs through the Department of Veterans’ Affairs, and thus keep this incentive in-tact, the increase in the Medicare benefit to 100 per cent of the schedule fee for GP services to the non-veteran community will be accompanied by a corresponding increase in the Department of Veterans’ Affairs fees to LMOs, from 100 per cent to 115 per cent of the schedule fee. Information on the Repatriation Comprehensive Care Scheme can be found on the Department of Veterans’ Affairs website at

   http://www.dva.gov.au/health/provider/rccs/rccs.htm (accessed 25 November 2004).

4. The Memorandum of Understanding between the government and the AMA for services provided to eligible veterans and war widows by LMOs can be found on the Department of Veterans’ Affairs website at http://www.dva.gov.au/health/provider/rccs/mou-ama-dec99.htm (accessed 25 November 2004).

5. 100% Medicare: Making GP services more affordable than ever before, The Howard Government Election 2004 Policy, 6 September 2004,

   see: http://www.liberal.org.au/2004_policy/sept06_100_percent_Medicare.pdf (accessed 27 November 2004). Note that the total cost of the measures contained in the 100% Medicare policy over the four years to 2007–08 is forecast to be $1.801 billion. This includes $83 million for the increase in fees paid by the Department of Veterans’ Affairs to LMOs. As explained above, the arrangements under which LMOs are remunerated by the Department of Veterans’ Affairs do not come under the auspices of this Bill.  

6. The ‘Strengthening Medicare’ package had its genesis in the ‘Fairer Medicare’ package announced by Prime Minister Howard and former Health Minister Senator the Hon. Kay Patterson in April 2003. A revamped version of this package was unveiled by Health Minister the Hon. Tony Abbott in November 2003, under the banner of ‘Medicare Plus’. A revised version of this package was passed by the parliament in March 2004, following negotiations between the government and the four independent senators. In the subsequent government promotional campaign, the package was renamed ‘Strengthening Medicare’.

7. The Hon. Tony Abbott MP, MedicarePlus, Media Release, 10 March 2004. 

8. Department of the Treasury and Department of Finance and Administration, Pre-Election Fiscal and Economic Outlook 2004, September 2004, p.7, see: http://www.treasury.gov.au/documents/886/PDF/02_Main_Body.pdf (accessed 27 November 2004).

9. Round the Clock Medicare: Investing in After-Hours GP Services, The Howard Government Election 2004 Policy, 26 September 2004, see: http://www.liberal.org.au/2004_policy/Sept26_Round_the_Clock_Medicare_-_Investing_in_After-Hours_GP_Services.pdf (accessed 27 November 2004).

10. Partial Transcript of Doorstop Interview—AMA President, Dr Bill Glasson, Brisbane, Monday 6 September 2004, see: http://www.ama.com.au/web.nsf/doc/WEEN-64KVLT (accessed on 26 November 2004).

11. Doctors Reform Society, Doctors’ Fees set to Rise, Media Release, 6 September 2004, see: http://www.drs.org.au/media/2004/media060904a.htm (accessed on 26 November 2004).

12. Leanne Edmistone and Chris Jones, ‘Doctors divided over best prognosis for Medicare’, Courier Mail, 7 September 2004, p.5.

13. The Hon. Tony Abbott MP, More Affordable Health Care, Media Release, 7 September 2004.

14. ibid.

15. ibid.

16. Andrew Fraser and Ross Peake, ‘Splurging out on Medicare—Coalition upstages Labor’, Canberra Times, 7 September 2004, p.1.

17. AMA, AMA List of Medical Services and Fees, Media Release, 15 October 2004, see :http://www.ama.com.au/web.nsf/doc/WEEN-65S3SE (accessed 27 November 2004); see also Phillip Hudson, ‘GP fee rise would wipe out Medicare package: ALP’, Sunday Age, 17 October 2004, p. 2.

18. Miranda Wood, ‘GPs fees to rise despite Howard’s incentives’, Sun Herald, 31 October 2004, p. 9.

19. ‘Medicare rebate faces delays’, Daily Telegraph, 15 November 2004, p. 7.

20. Transcript of Federal Labor Leader Mark Latham with Julia Gillard (Response to Government’s Medicare Announcement), 6 September 2004, Sydney.

21. Mark Metherell and Cosima Marriner, ‘Senate trouble looms for health insurance rebate’, Sydney Morning Herald, 3 November 2004, p.5.

22. For concession card holders and families receiving Family Tax Benefit (A), the annual threshold will be $300; for all other individuals and families, the annual threshold will be $700.

23. Mark Metherell, ‘Rich cashing in on safety net’, Sydney Morning Herald, 17 September 2004, p. 1; Sophie Morris, ‘Safety net package passed on “a bribe”’, The Australian, 11 March 2004, p. 4.

24. Department of Health and Ageing, Medicare Statistics, Table B5—Average Patient Contribution per Service (patient billed services only),

    see: http://www7.health.gov.au/haf/medstats/tableb5.xls (accessed on 27 November 2004).

25. Department of the Treasury and Department of Finance and Administration, op. cit.

26. The Hon. Tony Abbott MP, Medicare’s Best Friend, Speech Notes for Sydney Institute, Sydney, 15 September 2004.

27. AMA, ‘Revised Medicare Plus—Better safety net and access to dental care but more complexity on red tape’, Media Release, 10 March 2004, see: http://www.ama.com.au/web.nsf/doc/WEEN-5WX7A8 (accessed 27 November 2004).

28. For example, they may choose to defer payments until the end of the year.

29. Explanatory Memorandum, p. 2.

30. Sophie Morris, ‘Safety net package passed on “a bribe”’, The Australian, 11 March 2004, p. 4.

31. 100% Medicare: Making GP services more affordable than ever before, op. cit.