The Mid Year Economic and Fiscal Outlook (MYEFO) announced a number of savings in the health budget. Some of the most significant of these are changes to the incentives paid to pathology and diagnostic imaging providers to bulk bill out of hospital services. According to the MYEFO (p. 174) this measure alone will deliver savings of $650.4 million to the budget over four years.
From 1 July 2016, all bulk billing incentives paid to pathology providers will be removed. Specifically, incentives paid for bulk billing designated pathology services (so-called Group P13 services, with fees ranging from $1.60 to $4.00) will be removed. Bulk billing incentives paid to general practitioners who provide basic pathology tests in their own practices if they are registered as a Category M laboratory (items 74990 and 74991) will not be affected. For diagnostic imaging providers, only incentives to bulk bill children and concession card holders will be retained, but bulk billed MRI services will attract a rebate equal to 95% of the Schedule fee, rather than the current 100%.
Bulk billing incentives for pathology and diagnostic imaging services were introduced under the former Labor government in 2009–10. They are an additional payment made to providers who choose to bulk bill their patients in an out of hospital setting so that patients do not face out of pocket costs. According to annual Medicare statistics (Table 2), in 2014–15 some 114.3 million pathology services were provided out of hospital, almost all of these (98.7%) were at no cost to the patient.
The Minister for Health, Sussan Ley argues that bulk billing incentives for pathology are not needed due to the high rates of bulk billing in this sector and its competitive nature, and these changes—aimed at providers—should not affect the majority of consumers. The Minister argues that the 1% growth in bulk billing rates which occurred after the incentives were introduced is the same as the ‘natural growth’ that occurred prior to their introduction. In other words, the incentives—which have cost $1.3 billion over five years—did not contribute to any additional growth in bulk billing rates beyond what would have occurred naturally. However, the 1% figure cited refers to the percentage point increase in bulk billing for both in and out of hospital services; for out of hospital services alone the increase has been higher: around 3 percentage points, according to Medicare statistics.
Opposition health spokesperson Catherine King argues the changes to incentives will hurt patients, and those needing intensive treatment may face higher out of pocket costs or miss out on treatment altogether if they cannot afford the additional cost.
Doctor and patient groups are also critical of the measure. The peak group representing pathology providers, Pathology Australia, warns that bulk billing rates will fall leaving patients facing higher out of pocket costs, or patients deferring or declining essential tests. In addition, they argue that some pathology collection centres may be forced to close—including those in rural and regional areas and in hospitals—due to the high costs of maintaining these centres. They are also critical that the changes were announced outside of the Medicare review process currently underway.
The Consumers Health Forum is worried that consumers who previously faced no out of pocket costs for pathology may be dissuaded from undergoing essential tests due to concerns over cost.
The announcement to adjust bulk billing incentives before the Government’s review of Medicare services is completed appears to have taken many in the sector by surprise, and seems to have generated particular discontent. Notably, the announcement pre-empts the expiration in July 2016 of the 5 year agreement between the pathology sector and government which governs arrangements around Medicare funded pathology.
The pathology sector’s capacity to resist these changes should not be underestimated. The 2009 Budget (Budget Paper No. 2, pp. 291–294) which announced the bulk billing incentives for pathology and diagnostic imaging also included a number of savings measures applying to pathology, which were criticised by the sector at the time. Some pathology operators warned that in response they would have to increase patient costs to maintain profitability.
Companies in the sector reportedly mounted a letter-writing campaign urging referring doctors to only request a bulk billing service for those patients in genuine hardship, prompting calls for the Australian Competition and Consumer Commission (ACCC) to investigate. The sector denied any collusion. Quarterly Medicare statistics (Table 2) show that bulk billing rates for pathology (out of hospital) fell from 95.6% in the March quarter 2009 to 93.4% in the December quarter that year, and only recovered after the bulk billing incentives commenced.
The changes to bulk billing incentives will not require the passage of legislation, but can be achieved through changes to the Health Insurance (Pathology Services Table) Regulation 2015. The regulation is, however, a designated legislative instrument and could face a disallowance motion in the Parliament.
[Note: this revised version corrects previously incorrect information]