Current Issues Brief no. 3 2002-2003
The Decline in Bulk Billing: Explanations and Implications
Amanda Elliot
Social Policy Group
24 September 2002
Contents
Introduction
What is Bulk Billing?
How Much has it
Declined?
Who is and Who isn't Being Bulk
Billed
Explanations for the Decline
The Scheduled Fee and the Medical
Workforce
Cost Containment
Compliance Costs
Corporatisation
Anti-Competitive Practices
The Implications of the Decline
Cost-shifting to Patients
Cost-shifting to the States
Impact on Health Outcomes
Conclusion
Endnotes
Introduction
The release of the latest Medicare statistics by
the Department of Health and Ageing on the 30 August 2002 provoked
various commentators to claim that bulk billing is disappearing and
that Medicare is in crisis.(1) While the new figures
show that the majority of Medicare services continue to be bulk
billed, the second full year of decline has sparked disquiet that
the universality underpinning Medicare is being undermined. Central
to this concern is the claim that medical services provided by
General Practitioners (GPs) are becoming unaffordable for many
patients and consequently universal access to quality medical care
is being compromised. Moreover a series of claims linking the
decline in bulk billing with increasing pressure on public
hospitals, has sparked claims that there has been a shift in costs
from the Commonwealth to the States and Territories. A
comprehensive response to the decline in bulk billing has been
hampered by disagreement between the peak association for medical
practitioners the Australian Medical Association (AMA) and the
Federal Government over the explanations for the decline.
This paper provides details of the decline in
the proportion of Medicare services being bulk billed, and includes
a summary of the rate of bulk billing amongst different
practitioners and in each State and Territory. Explanations of the
decline in bulk billing are also considered with a focus on the
different positions of the Commonwealth Department of Health and
Ageing and the AMA. Finally, the paper explores some of the
suggested implications of a decline in the rate of bulk
billing.
What is Bulk Billing?
Free or subsidised treatment by medical
practitioners is one of the cornerstones of Medicare, the
Commonwealth funded national health insurance scheme.(2)
Medical services available under bulk billing arrangements are
listed in the Medicare Benefits
Schedule (MBS). The Commonwealth, in consultation with various
stakeholders, sets the Schedule fee for these
services.(3) Under Medicare doctors are payed 85 per
cent of the Schedule fee for outpatient services and 75 per cent
for in-patient services in private hospitals.
Patients themselves may claim Medicare benefits
by paying the doctor's account and then claiming the benefit from
Medicare. Or they can obtain a cheque from Medicare, payable to the
doctor. This cheque along with any balance is then given to the
doctor.
Alternatively, medical practitioners can
directly bill Medicare, accepting the Medicare rebate as full
payment for the service. This arrangement is known as direct
billing or 'bulk billing'. Under these arrangements no additional
charges relating to a bulk-billed service may be made, consequently
there is no out of pocket cost to the patient. Generally, when a
Medicare service is not bulk billed, it is because the practitioner
is charging more than the Medicare rebate.
How Much has it Declined?
From the introduction of Medicare in 1984, the
rate of bulk billing steadily increased throughout the 1980s and
early 1990s. However, this trend was halted in 1996 and between
then and 2000 the proportion of Medicare services bulk billed
remained relatively stable. However, since peaking at 72.3 per cent
in 19992000, the proportion of all medical services bulk billed has
fallen by almost 2.5 per cent. Figures, released on the
30 August 2002 by the Department of Health and Ageing, show
that in the year ending June 2002 the percentage of Medicare
services bulk billed had dropped to 70.4 per cent.(4) At
69.9 per cent, the bulk billing rate for the latest quarter (June
2002) is even lower and indicates that the decline is likely to
continue.(5) The following graph clearly shows the
plateau and then decrease in the proportion of services bulk billed
since 19961997.(6)

Graph 2 provides a quarter by quarter account of
bulk billing rates since September 1999, showing in more detail the
changes in the percentage of Medicare services bulk billed since
September 1999.

The decline in the rate of bulk billing is not
spread evenly across all Medicare services. For instance, between
the year ending June 2001 and the year ending June 2002, the
proportion of services provided by Vocationally Registered General
Practitioners (VRGPs) declined by 2.9 per cent, as did the
proportion of obstetric services bulk billed.(7) However
other Medicare services, such as pathology and optometry increased
slightly (0.9 per cent & 0.2 per cent respectively) in the same
period. Different medical services are bulk billed at different
rates. For instance, in the June quarter pathology and optometry
services had bulk billing rates of 83.8 per cent and 96.4 per cent
respectively. The bulk-billing rate for VRGPs was 73.1 per cent.
Obstetric and anaesthetic services are much lower at 19.7 per cent
and 9.1 per cent respectively.(8)
Medicare: Percentage of Services Bulk Billed, financial year of
processing, by broad type of service
|
|
VRGP
|
EPC
|
Specialist
|
Optometry
|
Pathology
|
Obstetric
|
Operations
|
Anaesthetics
|
2001-2002
|
74.1
|
96.7
|
29.5
|
96.4
|
83.9
|
20.1
|
41.3
|
9.1
|
The proportion of Medicare services bulk billed
also varies between each State and Territory. The rate of bulk
billing remains above 70 per cent in NSW and NT, however in the
remaining States and Territories it has fallen below 70 per cent.
In both Tasmania and the ACT less than 60 per cent of Medicare
services are bulk billed. Graph 3 provides details of these
differences.

Of all the States and Territories only NT did
not record a decline in the rate of bulk billing in the twelve
months to June 2002, rather it increased slightly by 0.7 per cent.
In contrast, during the same period bulk billing in the ACT
declined by 3.2 per cent. The following table provides details of
the rate of change in each State and Territory.
|
NSW
|
VIC
|
QLD
|
SA
|
NT
|
WA
|
TAS
|
ACT
|
Percentage Change in bulk billing: year ending June 2002
|
-0.3
|
-1.5
|
-1.5
|
-1.2
|
+0.7
|
-1.0
|
-0.4
|
-3.2
|
Who is and Who isn't Being Bulk Billed
Various press reports have stated that general
practitioners are gradually withdrawing from bulk billing health
care card holders, patients on low incomes and older
patients.(9) In addition, there have long been concerns
that the rate of bulk billing in rural and regional Australia is
much lower than that in metropolitan areas. Senator Kay Patterson,
the Minister for Health and Ageing, claimed in a recent press
release that the bulk billing rate for GP services for patients
aged 65 and over was 82.3 per cent and that the rate of bulk
billing in some suburban areas is over 80 per
cent.(10)
With an overall decline in the proportion of
Medicare services being bulk billed, and an almost three per cent
decline in the number of services provided by VRGPs, it is likely
that there has been a shift in who is and who isn't being bulk
billed for Medicare services.(11) However, the Medicare
Statistics compiled and published by the Department of Health and
Ageing do not include details of the proportion of Medicare
services bulk billed by location. Nor is there available data that
identifies the proportion of services provided to health care card
holders and low income earners that are bulk billed. Until more
extensive data is publicly available it is likely that the
anecdotal claims made about who is and who isn't being bulk billed
will remain unverified.
Explanations for the Decline
Public discussion about the decline in the rate
of bulk billing has focused on the proportion of general
practitioner services being bulk billed. Consequently, explanations
of the decline in the rate of bulk billing have primarily centred
on two competing claims: the level of the Schedule fee, and the
geographical distribution of GPs. Other issues that have been
raised include Medicare compliance costs, the corporatisation of
general practice and anti-competitive practices.
The Scheduled Fee and the Medical Workforce
Debate about the decline in the proportion of
Medicare services bulk billed has proven to be a significant source
of disagreement between the Federal government and the AMA.
The AMA argues that because the Scheduled fee
has not kept pace with either the cost of running a practice or the
Consumer Price Index, rates of bulk billing are declining as
doctors increasingly charge above the rebate level.(12)
Consequently, the AMA claims that an increase in the Scheduled fee
in line with the CPI would improve bulk billing
rates.(13)
In addition to pointing to the failure of the
Medicare rebate to keep up with inflation, the AMA has increasingly
lobbied the Federal government to act on the findings of the
Relative Value
Study of the General Medical Services Table of the Medicare
Benefits Schedule (RVS). The RVS was a review carried out by
the Department of Health and Ageing and the AMA that focused to a
large extent on increasing compliance with the Medicare Scheduled
fee. The AMA claims that the RVS indicates that the Scheduled fee
for GP services should be increased by approximately 50 per cent
and that implementation of the study is necessary for the long-term
survival of Medicare.(14)
The Federal government offers a different
explanation to that of the AMA, arguing that rather than being
driven by inadequate rebates and high practice costs, declining
bulk billing rates and growing out of pocket expenses are the
result of the size and location of the medical
workforce.(15)
Arguing that there is currently a geographical
maldistribution of doctors, the Commonwealth views below average
bulk billing rates as an indicator of an under supply of doctors in
a geographical area and there is some evidence to suggest that this
is the case.(16) An oversupply of practitioners can
drive prices down to the Medicare rebate, increasing bulk billing
rates.(17) Conversely, the AMA has argued that there is
a general shortage of doctors, at least partly due to inadequate
remuneration.(18)
Not all research points to a strong relationship
between the supply of doctors, bulk billing rates and higher
patient costs.(19) The market for GP services is complex
and distorted by a number of factors, including the existence of
bulk billing and that GPs can generate demand for their services.
Fee setting is not simply a product of supply of GPs. Perversely,
there is some evidence to suggest that an increase in the supply of
doctors can lead to both increases in out of pocket expenses for
patients and an increase in the rate of bulk billing. For instance,
noting the complexity of the market for GP services, research by
Richardson, Peacock and Mortimer tentatively concludes that:
an increase in the doctor supply does not reduce fees; that it
increases extra billing but promotes a compensating increase in
bulk billing.(20)
Both the AMA and the Federal Government
recognise that the market for GP services is complex. However,
there continues to be contention over the most effective means of
influencing it. This disagreement about the primary cause of the
decline in bulk billing has meant that the AMA has focused on
lobbying government for an increase in the Scheduled fee and the
implementation of the RVS. In contrast, the Commonwealths policy
focus has been on encouraging the redistribution of doctors
(particularly to rural and outer metropolitan areas) through
incentive payments and other schemes.
Cost Containment
It has been argued that the failure to
adequately reimburse doctors is an indication that the Commonwealth
is undermining Medicare as a universal system, while publicly
maintaining that Medicare has the government's full
support.(21) It is important to note that a decline in
bulk billing does not necessarily lead to a significant decline in
the cost to government of Medicare.(22) If a doctor does
not bulk bill the Commonwealth, patients can claim the Medicare
rebate back from Medicare. The latest figures show that over the
past twelve months the overall number of services for which
Medicare benefits were paid rose by 3.2 per cent and the amount of
benefits paid increased by 6.9 per cent.(23)
Consequently, although the Commonwealth has not increased the
Scheduled fee for Medicare services, the cost of the MBS is
continuing to increase as more services are provided. In the year
ending June 2002, the Commonwealth paid approximately $7.8 billion
in Medicare benefits compared to $7.3 billion in
2000-2001.(24) Regardless of whether the Commonwealth
increases the Scheduled fee for GPs or not, it is likely that the
cost of financing the MBS will continue to increase. However, by
deciding not to increase the Schedule fee, the Federal Government
is containing the growth in costs.
The point that increases in out of pocket
expenses for patients diminish the universal access to medical care
that is at the heart of Medicare is one that resonates with a wide
range of commentators and stakeholders. This resonance is based on
the understanding that the decline in bulk billing is most likely
to impact on the medical care available to those least able to
afford an up front fee.(25)
Compliance Costs
The AMA and individual doctors have often
pointed to the compliance costs involved in bulk billing patients
as being another reason that GPs are deserting bulk
billing.(26) Although the impact of compliance costs on
participation in bulk billing is unclear, a recent survey of
doctors commissioned by Australian Doctor found that GPs spend
approximately seven hours a week completing paperwork generated by
participation in Commonwealth and State government
programs.(27) The Federal government has recently
commissioned a study to examine GP compliance costs associated with
Commonwealth Programs.(28)
Corporatisation
There are several different models of general
practice corporatisation, however, the models that have received
the most attention are those defined as 'vertically integrated'.
Vertical integration within medical practice is characterised by
the co-location and management of a number of different medical
services, including for instance, general practitioners, pathology
services and diagnostic imaging. Vertically integrated medical
services are often owned by large corporations and the range of
different medical services are provided under one corporate
umbrella. Inter-referrals (between co-located services) are another
feature of vertically integrated medical services. Of particular
concern to the AMA is that this form of corporatisation usually
generates profits for third parties, such as shareholders, rather
than to the actual providers of the medical
services.(29)
The AMA has argued that increasing
corporatisation of general practice is to some extent a result of
the Medicare rebate for GPs not keeping pace with
inflation.(30) However, there have been suggestions that
the corporatisation of general practice may have some impact on
bulk billing rates. Some of the larger GP management companies,
such as Endeavour Health Care and Foundation Health, actively
oppose bulk billing and GPs working for them are being encouraged
not to bulk bill.(31)
Anti-Competitive Practices
There has been anecdotal evidence to suggest
that in some geographical areas doctors are deciding, as a group of
practitioners, not to bulk bill certain or all patients. Under the
Australian Constitution the Commonwealth cannot coerce or force
doctors to bulk bill patients. However, the Australian Competition
and Consumer Commission (ACCC) has raised some serious questions
about collusion between doctors, price setting and primary
boycotts.(32)
The Implications of the Decline
The impact the decline in bulk billing is having
on the Australian health system includes increased out of pocket
expenses for individual patients. Speculation and some research has
also indicated that there has been a shift of costs to the States
with patients seeking primary care at Accident and Emergency
Departments in Public Hospitals rather than paying to see a GP.
There are also broader concerns about health outcomes for the
general community.
Cost-shifting to Patients
With the decline in bulk billing amongst GPs,
there has been an increase in the average out of pocket expenses
that patients are paying for Medicare consultations with GPs.
Recent Medicare figures indicate that the average patient
contribution for patient billed services has increased from $17.43
in June 2001 to $18.68 in June 2002, rising by just over 7 per cent
in 12 months.(33) As the following graph shows, such
increases are not unusual. Even when the rate of bulk billing was
increasing during the early 1990s the average patient contribution
for Medicare services was increasing. What has prompted concern in
some quarters is that with a decreasing proportion of services
being bulk billed more patients have to pay a co-payment for
Medicare services.

These increases are not distributed evenly
across the States and Territories. For example in the 12 months to
June 2002 there was an increase of 8.8 per cent in NSW and 6.6 per
cent in Victoria while only a 2.6 per cent increase in the NT.
Similarly, average patient contributions for MBS
services differ depending on which State or Territory the service
is provided in. As the following graph shows, although the NT has
maintained a high rate of bulk billing, it also has one of the
highest average patient contributions for patient billed out of
hospital services.

Cost-shifting to the States
There is some evidence to suggest that patients
are seeking treatment at Accident and Emergency (A&E)
departments in Public Hospitals rather than pay the extra cost of a
visit to a GP, although a clear causal relationship has yet to be
verified. This issue was the subject of a letter from State and
Territory Health Ministers to the Federal Minister of Health and
Ageing in August 2002. The State and Territory Ministers claimed
that the decline in bulk billing combined with the closure of 24
hour medical clinics and increased out of pocket expenses for
patients visiting GPs was placing added pressure on public hospital
A&E departments.(34) There is some research that
appears to support this position. For instance findings from a
recent NSW Department of Health study indicate that in rural towns
where bulk billing was low or non-existent, there was a significant
increase in presentations in local hospital emergency departments
compared with towns in which GPs did bulkbill.(35)
Another report funded by the ACT Division of General Practice
indicates that the lack of availability of after hours care from
GPs also results in increased presentations at A&E
departments.(36) The ACT study indicates that bulk
billing rates are not only to do with the billing practices of GPs,
but are also to do with the match (or lack thereof) between GP
workforce numbers, hours of work and patient need. If these studies
are accurate then the result of increased presentations at A&E
departments will be a cost-shift to the States and Territories, as
they are financially responsible for public hospitals. This issue
is likely to arise during the negotiations over the next Australian
Health Care Agreements.(37)
Impact on Health Outcomes
The increase in the out of pocket expenses for
medical services provided by GPs has begun to cause concern over
the likely impact this may have on the health of individuals. Since
1996, a particular focus of Commonwealth health policy has been on
developing an integrated primary health care system that addresses
chronic disease management.(38) A significant role for
GPs has been established in the management of diabetes and asthma,
immunisation programs, mental health and health screening. It is
foreseeable, although not yet substantiated, that recent gains in
primary health care will be unsustainable in the face of declining
bulk billing rates and higher out of pocket expenses for patients
with complex needs.
Conclusion
Because of its centrality in the national health
insurance system any decline in bulk billing rates provokes a
significant amount of public and political interest. While the AMA
maintains that the decline has been caused by a failure to increase
the Schedule fee, other features of the Australian health system
may also be contributing, including compliance costs and pressures
resulting from the corporatisation of general practice. The Federal
government continues to maintain that the decline is due to the
supply and distribution of the medical workforce and has
concentrated its policy efforts on encouraging doctors to work in
areas where there is an under supply.
Outcomes of the decline in bulk billing include
an increase in the direct cost of health care for patients and
possible cost shifting to the States. There is also a possibility
that some of the recent gains in primary care will be eroded.
Endnotes
- John Loizou, 'Our doctors too poor to bulk bill', Northern
Territory News, 30 August 2002. Stephen Smith, MP, 'Biggest
yearly decline ever in GP bulk billing', Media Release,
30 August 2002.
- Other components include free public hospital treatment and
access to subsidised medicines through the PBS.
- Details of the production of the Medicare Benefits Table are
available through the Department
of Health and Ageing, Medicare Benefits Branch Committees and
Groups.
- Medicare Statistics, June Quarter
2002, released 30 August 2002, p. 4.
- ibid, p. 7.
- The data for all graphs included in this publication has been
drawn from the Medicare Statistics, June Quarter
2002, released 30 August 2002.
- ibid, p. 4.
- ibid, p. 11.
- Darren Gray, 'Too many health cards destroying credibility, say
doctors', The Age, 27 August 2002; Danielle Teutsch, 'GPs
who fail to bulk bill hit raw nerve amongst jobless',
Sun-Herald, 18 August 2002.
- Senator Kay Patterson, Minister for Health and Ageing, Media
Release, 30 August 2002.
- An issue related to the decline in bulk billing has been a
concern over veterans access to free medical treatment. Under the
Repatriation Private Patient Scheme (RPPS), eligible war veterans
are issued with a gold card that is supposed to provide the holder
with access to free medical treatment by general practitioners and
a range of specialists. This program is funded by the Department of
Veterans Affairs. A GP, who has a contract as a Local Medical
Officer with the Department of Veterans Affairs, is able to claim
100% of the Medicare Scheduled fee as payment for services rendered
to veterans. Those GPs who do not have a contract with the
Department of Veterans Affairs can claim 85 per cent of the
Medicare Scheduled fee for an MBS consultation with an additional
60 cents. The AMA has argued that because of inadequate
reimbursement for the extra costs associated with treating
veterans, GPs are beginning to refuse to treat under the scheme.
There is currently an inter-departmental committee considering
payments under the RPPS. See Misha Schubert, 'Doctors 'dumping'
vets', The Australian, 13 August 2002; Brad Crouch, 'GPs
refuse veterans' health card' Herald Sun, 4 August 2002;
Fia Cumming, 'Appeal to PM on veterans' health',
Sun-Herald, 11 August 2002; AMA, 'Government goes
AWOL on Veterans' Health', Media Release, 4 September
2002.
- The scheduled fee is indexed to the Wage Cost Index 5 (WCI5).
Formulated by the Department of Finance and Administration, the
WCI5 is a compilation of the CPI and a safety net adjustment. The
WCI5 does not usually keep pace with the CPI. Indexation to the CPI
could create inflationary pressures as there is a medical services
component in the CPI.
- Kerryn Phelps,
GP bulk billing rates dive again, Press Release, 30 August
2002
- AMA, Government's Intergenerational report on Health and Aged
care, 16 April 2002.
- Health workforce planning, Health Cover, vol. 11, no
6, 2002, pp: 1920.
- AMWAC, Australian
Medical Workforce Benchmarks, AMWAC, North Sydney, 1996; Monica
Pflaum, The Australian
Medical Workforce, Department of Health and Aged Care,
Occasional Paper No. 12, August 2001.
- ibid, 57, see also AMWAC, op. cit.
- Access Economics
An Analysis of the Widening gap between Community Need and the
Availability of GP Services, Canberra ACT February 2002.
- See particularly Jeff Richardson, Duncan Mortimer & Stuart
Peacock, 'Does an Increase in the Doctor Supply Reduce Medical
Fees? An Econometric Analysis of Medical Fees across Australia
paper presented to the 24th Australian Conference of Health
Economists Sydney, 1819 July 2002.
- ibid, p. 20.
- Editorial, 'Medicare needs own Medicine', Sydney Morning
Herald, 06/09/02; Stephen Smith, MP 'Government Can't Escape
biggest yearly bulk billing decline, Media Release 2 September
2002.
- Of course a failure to increase the Medicare Scheduled fee does
contain costs by diminishing the real cost to government of
Medicare services.
- Medicare
Statistics, June Quarter 2002, Released 30 August 2002, p.
4.
- ibid.
- Jeff Richardson, Stuart Peacock and Duncan Mortimer Does an
Increase in the Doctor Supply Reduce Medical Fees? An Econometric
Analysis of Medical Fees across Australia, Paper presented to the
24th Australian Conference of Health Economists, July 2002, p.
1.
- AMA,The
Review of Red Tape in General Practice, August 2002.
- Cresswell, A, 'A day a week for government forms',
Australian Doctor, 12 April 2002,
pp. 12.
- The study was commissioned by Treasury and the Department of
Health and Ageing and is being conducted by the Productivity
Commission. The Commission is due to report it's findings in
February 2003.
- AMA General Practice Department,'General
Practice Corporatisation', September 2000, p. 1.
- ibid.
- Nicola Ballenden, 'Doctors in the House', Consuming
Interest, no. 91, Autumn 2002,
pp. 1819.
- Sam DiScerni, The ACCC and competition in health, ACCC
Journal, no. 35, July/August 2001, pp. 17; Alan Fels
Efficiency in delivering health care: The professions, competition
and the ACCC, Healthcover, vol. 11, no. 6, Dec 2001/Jan
2002, pp. 2833.
- Medicare Statistics,June Quarter
2002, released 30 August 2002.
- Danielle Cronin, 'Ministers join forces to press for bulk
billing, The Canberra Times, 14 August 2002; Stephen
Smith, MP, 'Bulk billing crisis overloading our hospitals', media
Release, 14 August 2002; Darren Gray, 'Ministers push for action on
emergency wards' The Age, 15 August 2002.
- Heather Ferguson, 'Bulk billing drop overloads A&E',
Australian Doctor, 3 May 2002, p. 6.
- Wendy Armstrong, 'I wouldn't be here if I could see a
GP', 2002.
- The Australian Health Care Agreements (ACHAs) are the main
source of health funding provided for public hospitals by the
Commonwealth to the States and Territories. The current agreements
are due to finish in June 2003 and the next agreement is due to be
negotiated towards the end of 2002 and the beginning of 2003. The
Commonwealth Department of Health and Ageing provides a brief
description of these agreements and links to each of the1998-2002
AHCAs.
- Population Health
Section, General Practice Branch, Department of Health and
Ageing.