Budget Review 2014–15 Index

Amanda Biggs

The Budget contains a number of significant changes to Medicare Benefit Schedule (MBS) arrangements which the Government says are needed to strengthen and improve the sustainability of Medicare. These include the introduction of a patient co-payment, a reduced Medicare rebate for MBS services and a pause in indexation for others, changes to MBS optometry items, and new Medicare safety net arrangements. Adjustments to the Medicare levy low income thresholds will also be made.

Patient co-payment

A $7 patient co-payment on bulk-billed general practice (GP) visits, and out-of-hospital pathology and diagnostic imaging services, will apply from 1 July 2015. In addition, the MBS rebate for these services will be cut by $5, regardless of whether they are bulk billed.[1] For concession card holders and children under 16, the rebate reduction will only apply for the first 10 visits a year, after which the full MBS rebate will apply.[2] Certain MBS services, such as Health Assessments and Chronic Disease Management items will be quarantined from the co-payment. Savings of $3.5 billion over five years will be used to fund a new Medical Research Future Fund.

The imposition of the co-payment is to ensure all patients contribute to the cost of their health care.

Under current Medicare arrangements doctors are free set their own fees, but those who choose to bulk bill accept the MBS rebate as full payment for the service and cannot charge a co-payment. The rebate for out-of-hospital services is 85 per cent of the Medicare Schedule Fee, but GP services attract a 100 per cent rebate.[3] Under this measure, doctors will have the discretion to charge a co-payment of $7 for bulk billed and other services, but their Medicare rebate will also be reduced by $5. This means they will be worse off each time they bulk bill unless they impose the co-payment.

A new Low Gap Incentive payment will replace current bulk billing incentives. Doctors will receive the incentive payment if they only charge concession card holders and children the $7 patient co-payment for their first ten visits. They will then receive an incentive payment if they waive the patient co-payment after ten visits.

The Government will also seek to remove the restriction on charging patients who visit public hospital emergency departments (EDs), so that patients don’t present to EDs for free treatment and shift costs onto state governments. This will require a redrafting of the hospital funding agreement with states and territories.

A $2.50 patient co-payment for GP services and lower MBS rebate was also imposed in 1991, but was short-lived. The imposition of a $6 co-payment was recommended by a former Coalition adviser Terry Barnes late last year.[4] A $15 co-payment was recommended by the Commission of Audit.[5]

Reaction

Stakeholder reaction has been generally negative. The Australian Medical Association expressed concern that patients will face higher out-of-pocket costs, and access to primary care will become more difficult. They are also worried about additional red tape on doctors.[6] The Royal Australian College of General Practitioners warns it will lead to a two tier health system, where vulnerable patients will be disadvantaged.[7] The Consumer’s Health Forum says that it ‘shatters the notion of universal access to primary care under Medicare’.[8]

Legislative change will be needed but it may face defeat in the Senate with Labor and the Greens already indicating opposition.[9]

Medicare safety net

To help patients with high out-of-pocket medical costs two safety nets currently operate: the Original Medicare Safety Net and the Extended Medicare Safety Net (EMSN). Broadly, these provide higher Medicare rebates to patients once an annual threshold of out-of-pocket spending is exceeded, with lower thresholds for concessional patients. The Greatest Permissible Gap, which is the difference between the Medicare Schedule fee and the rebate, also moderates high costs. The budget announced these arrangements will be simplified through the introduction of a single Medicare Safety Net (with lower thresholds for concessional patients). Savings of $266.7 million over five years will be used to fund the Medical Research Future Fund.[10]

From 1 January 2016, new safety net thresholds of $400 for concessional patients, $700 for general singles and Family Tax Benefit Part A families and $1,000 for general families, will apply. Once out-of-pocket spending exceeds these thresholds Medicare will reimburse patients 80 per cent of their out-of-pocket spending for the rest of the calendar year. However, the total benefit for each MBS item will be capped at 150 per cent of the MBS schedule fee.

This will also replace the current EMSN capping arrangements. Out-of-pocket spending related to the new patient co-payment will not count towards the thresholds.

Other savings

Savings of $99.2 million over the forward estimates will also be achieved by lowering the MBS rebate for optometry services (from 85 to 80 per cent of the Schedule fee), and removing a charging cap. The time period for Medicare rebatable eye examinations will also be extended from two to three years for asymptomatic people under 65, and reduced from two to one year for those over 65.[11]

Annual indexation of some MBS fees will be paused for two years from 1 July 2014. Indexation of GP fees will be quarantined from the pause. Indexation of the income tier thresholds that are used to calculate the Medicare Levy Surcharge (a surcharge on high income earners who decline to purchase private hospital cover) and the means-tested Private Health Insurance Rebate will also apply from 1 July 2015. Savings of $1.7 billion are forecast over five years.[12]

Medicare Levy Low Income Thresholds

Consistent with previous annual increases, the Medicare Levy low income thresholds for families will be increased in line with movements in the Consumer Price Index (CPI). Below the Medicare Levy Low Income Threshold, no Medicare levy is imposed. For the 2013–14 income year the threshold for couples with no children will rise to $34,367 and for each dependent child or student it will rise by $3,156.[13]

The increases will only apply to families and couples as the thresholds for pensioners and individuals have already been increased by more than the CPI. The cost to revenue is forecast to be $48.0 million over the forward estimates.

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