Health Medicare

Budget Review 2009-10 Index

Budget 2009 10: Health and ageing


Amanda Biggs

The Government is proposing a number of changes to Medicare in this budget. These are explained by the Government in terms of efforts to modernise and ensure the future sustainability of Medicare. These changes include capping some payments under the safety net, adjusting the schedule fee for some Medicare services and increasing bulk billing incentives for pathology and imaging.

Sustaining Medicare—capping the Extended Medicare Safety Net

From 1 January 2010, the Government will introduce a ‘cap’ on Extended Medicare Safety Net (EMSN) payments for certain Medicare items with ‘excessive fees’. Safety net payments to be capped include: all assisted reproductive technology (or IVF) items, obstetric services including some ultrasound services, treatments for varicose veins, certain eye injection treatments, hair transplants and cataract surgery.[1] At the same time, the Government will increase the Medicare schedule fee for obstetric items with the intention of providing some financial relief to patients, particularly those in rural and regional areas. In 2007, the cost of the EMSN was $414.1 million; these reforms are expected to result in net savings of $451.6 million over four years.[2]

The Medicare safety net is intended to protect patients from high out-of-pocket medical costs. In the lead-up to the 2007 federal election, Labor committed to retain the EMSN, and has repeated this commitment on a number of occasions since.[3]

The current safety net arrangements include the original Medicare safety net—which covers the difference between the Medicare benefit paid and the schedule fee for out-of-hospital services—and the EMSN, which was introduced in 2004. Under the EMSN patients are reimbursed 80 per cent of their out-of-pocket costs for out-of-hospital Medicare services, once annual personal expenditure reaches a certain threshold. The current thresholds are set at: $555.70 for families in receipt of the Family Tax Benefit Part A and concession card holders, and $1111.60 for all others (indexed annually).

While EMSN payments have provided many with financial relief from significant out-of-pocket medical costs, a recent review of the EMSN cites evidence that those in greatest financial need may be missing out, and that some doctors have been charging excessive fees.[4] Concerns over the cost of the safety net and the charging of excessive fees by some doctors have been raised previously.[5] In 2005, the former Howard government raised the safety net thresholds in response to the high cost of the safety net.[6]

Some have welcomed the proposed changes to the EMSN, including Prue Power from the Australian Healthcare & Hospitals Association, and Robert Wells from the ANU who describes the changes as addressing ‘some of the outrageous rorts’ under the current safety net.[7] Others are worried the measure will undermine the affordability of certain services. Dr Andrew Pesce from the national body representing obstetricians and gynaecologists has expressed concern that capping the EMSN will adversely affect the affordability of private obstetric services and force women back into the public hospital system, ‘which is already crowded and under pressure’.[8] The proposed changes affecting assisted reproductive technology services have prompted some, such as AMA President Dr Rosanna Capolingua, to express concern that assisted reproductive services may become unaffordable, except for the ‘most well off'.[9]

‘Modernising’ Medicare

The government is also proposing a series of measures intended to ‘modernise’ Medicare and improve quality, while also delivering significant savings. This includes breaking a commitment made in last year’s budget, to fund MRI scans requested by GPs, expected to generate $15.3 million in savings, and adjusting a number of Medicare fees so that less complex procedures attract a lower fee, expected to generate savings of $153.4 million over four years.[10] Services that will attract lower fees include those where improvements in technology mean procedures can be performed ‘more quickly and safely’, such as for cataract surgery and coronary angiography.[11]

In addition, remuneration for certain mental health services provided under the Better Access to Psychiatrists, Psychologists and GPs through the Medicare Benefits Schedule initiative will be dependent on providers continuing professional development. Allied mental health professionals, such as psychologists, social workers and occupational therapists who provide services under the Better Access initiative, will be ineligible to access Medicare items after June 2011 unless they have undertaken appropriate mental health training—it is estimated that 80 per cent have completed this training already. Those in rural areas will receive a supporting payment of $200 to undertake the required training. Savings of some $21.4 million over four years are expected. From July 2009, GPs providing Mental Health Care Plans will attract lower rebates if they have not undertaken appropriate mental health training. The Government intends this measure will encourage GPs to update their skills and generate savings of $21.7 million over four years.[12]

The reaction to these measures so far has been mixed. The measure to lower fees for less complex procedures has been welcomed by some as a ‘genuine reform’ that recognises that some previously time consuming and complex procedures are now less so.[13] Others have criticised the Government for ‘pocketing the savings’ instead of using them to increase rebates for services for mental and preventive health.[14] It is notable that the Government expects significant savings from the requirement for training under the Better Access changes; in order for these savings to be realised, not all providers can be expected to undertake the appropriate training and be eligible for the higher rebate.

Pathology and diagnostic imaging

The Government is also proposing reforms in the pathology and diagnostic imaging sector, where government outlays on benefits have grown strongly.[15] Measures proposed in this budget include introducing bulk billing incentives for pathology and diagnostic imaging, costing $948.4 million over four years, to be partly funded through savings of around $763.4 million by lowering the collection fees—the fee paid for collecting pathology specimens— paid to pathology providers. In response, some pathologists have indicated they will increase patient co-payments to recover the loss in revenue from lower collection fees.[16]

In other reforms, the Government will introduce regular reviews of new Medicare Benefits Schedule (MBS) items; ensure patients can obtain pathology and diagnostic services from any accredited provider, rather than the one specified by their referring doctor; review funding arrangements for pathology and diagnostic imaging and consider the need for structural reform; educate referring clinicians on appropriate referring practices for pathology and diagnostic imaging; and, review diagnostic and imaging items listed on the Medicare Benefits Schedule.[17]

[1].       For full details of item numbers affected, see Department of Health and Ageing, ‘Changes to the extended Medicare Safety Net’, Fact sheet, viewed 19 May 2009,

[2].       Net savings for obstetric services are estimated to be $193.7 million, while savings for items with excessive fees are estimated to be $257.9 million. Australian Government, Budget measures: budget paper no. 2: 2009–10, Commonwealth of Australia, Canberra, 2009, p. 290, viewed 13 May 2009,

[3].       See for example, K Rudd and N Roxon, Rudd Labor Government to retain Medicare Safety Net, media release, Canberra, 22 September 2007, viewed 13 May 2009,; N Roxon, ‘Look beyond the election: speech to the Annual Australian Health Insurance Association conference’, Melbourne, 10 October 2007, viewed 14 May 2009,;query=Id%3A%22media%2Fpressrel%2FLHKO6%22 

[4].       Centre for Health Economics Research and Evaluation (CHERE), Extended Medicare safety net: review report 2009: a report by the Centre for Health Economics Research and Evaluation, report prepared for the Department of Health and Ageing, University of Technology Sydney, Sydney, 2009, p. vi, viewed 13 May 2009,$File/ExtendedMedicareSafetyNetReview.pdf

[5].       A Pratt and L Buckmaster, ‘The health budget: a framework for sustainability?’, Implications: budget 2005–06, Parliamentary Library, Canberra, June 2005, viewed 15 May 2009, http://libiis1/Library_Services/Implications/2005-06/HealthBudget.htm 

[6].       T Abbott (Minister for Health and Ageing), Health budget 2005–06—health budget responsible and sustainable, media release, Canberra, 10 May 2005, viewed 15 May 2009,

[7].       R Wells (Director Australian Primary Health Care Research Institute and the Menzies Centre for Health Policy), Policy expert welcomes health reform, media release, Canberra, 13 May 2009; P Power (Executive Director AHHA), Mixed fortunes for hospitals, media release, Canberra, 12 May 2009.

[8].       N Miller, ‘Mothers hit by $550 birth hike,’ The age, 14 May 2009, p. 1, viewed 14 May 2009,;query=Id%3A%22media%2Fpressclp%2F1WJT6%22

[9].       Australian Medical Association (AMA), This is no health budget for a recession, media release, Canberra, 12 May 2009. Although partly funded by Medicare, assisted reproductive technology services in Australia are provided through private clinics.

[10].     Australian Government, Budget measures: budget paper no. 2: 2008–09, Commonwealth of Australia, Canberra, 2008, p. 237.

[11].     Budget paper no. 2: 2009–10, pp. 295–296.

[12].     Budget paper no. 2: 2009–10, p. 288.

[13].     R Wells.

[14].     A Cresswell, ‘Roxon a Robin Hood? No way’, Australian, 13 May 2009, p. 9.

[15].     For example, the Auditor General reported that from 2000–01 to 2006–07, the number of pathology services increased  from  62.1  million  to  87.5  million  per  year  and  Australian  Government outlays/pathology benefits increased from $1.2 billion to $1.7 billion per year (an average  annual  growth  rate  of  7  per  cent). See, Auditor General, Administration of the Pathology Quality and Outlays Memorandum of Understanding, Audit report no. 34, 2007–08 Performance Audit, Australian National Audit Office, Canberra, 2008, p. 37.

[16].     J Breusch and N Ahmed, ‘Drip feed for moribund body’, Australian financial review, 14 May 2009, p. 22, viewed 14 May 2009,;query=Id%3A%22media%2Fpressclp%2F1VJT6%22

[17].     N Roxon (Minister for Health and Ageing), More support for bulk billing pathology and diagnostic imaging tests, media release, Canberra, 12 May 2009, viewed 14 May 2009,; N Roxon (Minister for Health and Ageing) and L Tanner (Minister for Finance and Deregulation), Increasing competition in pathology and diagnostic imaging, media release, Canberra, 12 May 2009, viewed 14 May 2009,

Back to top