When accessing particular services in the healthcare system, individuals
contribute to the financial cost of those services—in the form of a co-payment.
However, a number of services are also provided to individuals 'free' at the
point of service delivery—that is, no co-payment contribution is required.
This chapter discusses the following terms of reference:
(b) the impact of co-payments on consumers'
ability to access health care, and health outcomes and costs;
(c) the effects of co-payments on
other parts of the health system; and
(g) the appropriateness and
effectiveness of safety nets and other offsets.
Medicare and Pharmaceutical
Benefits Scheme co-payments
The introduction of a Medicare co-payment and an increase in the PBS
co-payment were discussed by the National Commission of Audit (the Commission) in
its report into Government expenditure released in February 2014.
In the 2014–15 Budget, the Australian Government announced a range of
health initiatives including: a new Medicare Safety Net and changes to the
Pharmaceutical Benefits Scheme Safety Net, establishment of a Medical Research
Future Fund, and pausing of the thresholds for the Private Health Insurance
Rebate and most Medicare fees.
The Budget also announced the introduction of a $7 Medicare
co-contribution or co-payment. From 1 July 2015, bulk-billed patients will be
required to pay $7 per visit toward the cost of general practitioner consultations,
and out-of-hospital pathology and imaging services.
Under the proposed changes, $5 will be invested in the Medical Future Research
Fund and $2 will be paid directly to the doctor or service provider. Medicare
rebates for items attracting a patient contribution will be reduced by $5.
The Government has indicated that doctors will be paid a 'low gap
incentive payment’ to encourage them to charge concession card holders and
children under 16 no more than a $7 patient contribution for their first 10
visits, and to bulk bill these patients (after 10 initial visits) and not
charge them for subsequent visits.
Currently, the incentive payment for bulk-billing concession patients is
$6 for metropolitan areas and $9.10 for regional areas and Tasmania. GPs do not
receive an incentive payment when bulk-billing patients without a concession
Evidence provided to the inquiry by the Royal Australian College of
General Practitioners (RACGP) explained the proposal as follows:
The current reality is that, if I bulk-bill someone who is a
concession card holder or a child under 16—they are seen as vulnerable groups
who are likely to be most affected by fees—I am also paid a bulk-billing
incentive payment. It is $6 in metropolitan areas, and in some rural areas and
areas of workforce shortage it is $9. Effectively, in this new system, if I
waive the co-payment and I bulk-bill, my rebate will be reduced by $5 because
that is what they are paying and that bulk-bill incentive is lost. So that will
be a decrease of between $11 and $14, and on a standard consultation that
represents a 25 to 31 per cent reduction in the Medicare rebate, which has only
increased from about $22 to $36 over a 20-year period anyway. So, as it is, it
is a fairly low rebate.
In the Budget, the Government also announced that from 1 July 2015,
general patients will pay an extra $5.00 towards the cost of each PBS
prescription. Patients with a concession card will pay an extra $0.80 towards
the cost of each PBS prescription.
Submissions made to the inquiry prior to the budget announcement
commented on the potential introduction of the Medicare co-payment, whereas
submissions made after 13 May 2014 referred to the announced measure. In
either case, submitters overwhelmingly did not support the introduction of a
Similarly, the committee received submissions which included comments on
the potential increase to the PBS co-payment. Submitters overwhelmingly did not
support an increase in the PBS co-payment.
The majority of the evidence provided to the committee discussed
co-payments in the context of the proposals announced in the Budget. This
chapter will present the evidence about the impact of co-payments on access to
health care and then the evidence received about the impact on health outcomes
In order to provide some context for the discussion about the impact of
co-payments, this next section will discuss the rationale and effectiveness of
the proposed co-payments as well as the issue of price signals in healthcare.
Rationale for co-payments
Several submitters questioned whether a strong case had been made to
justify the introduction of a co-payment, in particular the justification that
a co-payment was necessary to reduce the number of visits individuals make to
The Tasmanian Council of Social Service observed:
The aim to “send messages” to people who access the GP
unnecessarily is, at best, a risky healthcare strategy. It is the role of GPs
to ascertain the severity of symptoms, injuries and illness. To place the
burden of this onto unqualified members of the public is irresponsible and
unrealistic. To send a message that says “stay home unless you are acutely
unwell” will result in presentations to the GP that are beyond the preventative
The Australian Council of Social Service (ACOSS)
submitted that they have not seen any compelling evidence to support the
introduction of a co-payment for GP services and that the proposals presented
provide no evidence of over-servicing. Furthermore, there has been no analysis
presented of the administrative costs of the co-payment schemes.
Witnesses noted that evidence to suggest that GP over-servicing occurs
Furthermore, defining what may constitute an 'unnecessary visit' is very
difficult as individuals are not in the best position to determine the nature
and seriousness of their health concern. It is difficult for individuals to
make an accurate assessment about the level of medical intervention that may be
required and the urgency. Gaining an understanding or making a judgement about
whether the 'right' patients are not accessing or delaying using services is
also very difficult to do.
Several witnesses commented that national data reporting the severity of
illnesses or symptoms individuals may have when they delay or defer visiting a
GP is not routinely collected and is unavailable.
The Pharmacy Guild of Australia (Pharmacy Guild) submitted details from
a 2008 study commissioned by the Australian Self Medication Industry which
found that 15 per cent of all GP consultations involve the treatment of minor
ailments and 7 per cent involve the treatment of minor ailments alone. The
Pharmacy Guild projected these figures nationally and suggested that this
finding equated to 25 million GP consultations annually.
Price signals in healthcare and the
effectiveness of co-payments
The committee notes that the purpose of a co-payment is to create a
price signal for consumers to encourage greater consideration of the need to
access particular health services, with a view to reduce the number of health
Professor Stephen Jan, Professor of Health Economics, The George
Institute for Global Health questioned whether such price signals are appropriate
given that healthcare is very different from other consumption goods:
When we are talking about health care, we go to the doctor.
The doctor is the provider of health care, but they are also acting as the
agent for the consumer—so they help the consumer decide on what health care,
further down the track, they will need. Consumers go into this whole—I
suppose—'transaction' as an ill-informed individual. The problem with a
co-payment is that you are preventing people from even engaging in that first
step in getting information about what health care they need.
The Department of Health submitted:
Basic economics suggests that, other things being equal,
increased prices lead to decreased demand, with the strength of this
relationship being referred to as elasticity of demand. However in real world
situations, particularly in health, other factors are not equal, and the
relationship can be quite complex. In particular, demand is also influenced by
income, and for superior goods like health, demand can be very elastic and grow
faster than incomes. Moreover, not all health interventions have the same value
and changes in aggregate demand may not impact on health outcomes if they
reflect a ‘swapping out’ of less effective interventions for more effective
The Royal Australian College of General Practitioners provided the
The federal government's proposed co-payment model is
intended to reduce unnecessary general practice health service use. However,
international studies demonstrate that, with the exception of the most
vulnerable patients, there is limited evidence that co-payments actually reduce
health service use. The economic rationale for implementing co-payments is
further confounded by evidence suggesting that healthcare costs increase due to
preventable conditions not being treated and poorer control of chronic disease
and greater hospitalisations.
The Grattan Institute acknowledged that increasing out-of-pocket costs
will succeed in its intended outcome to reduce service use. The fundamental
issue with encouraging a reduction in medical service use is that:
...the more that so-called necessary services are reduced,
alongside unnecessary ones, the worse the outcome will be. There could be
health consequences and increased long-run costs.
Impact of co-payments on consumers ability to access health care
The Department of Health advised that it is estimated that the
introduction of a GP co-payment will result in a one per cent reduction in the
rate of growth in GP consultations—the rate of growth will reduce from
approximately 4.5 per cent to approximately 3.5 per cent. If the rate of growth
is 3.5 per cent, it is estimated that there will be one million fewer GP
consultations than there would have been under current conditions.
However, evidence to the inquiry emphasised that rather than discourage 'over-servicing'
and reducing the number of 'unnecessary visits', the introduction of
co-payments would have a negative impact on consumers' ability to access necessary
primary health care services. This section will first present the evidence received
about the impact on access to particular services in the health system and then
discuss the evidence received about the impact on access to health care
overall, as well as the impact on particular communities.
The committee also notes evidence received which expressed concern that
the introduction of a co-payment will impact on the nature of visits to the GP,
by placing additional financial pressure on GPs to see more patients (resulting
in shorter consultations) or shifting the focus of the consultation to discussions
around capacity to pay rather than on important health discussions.
Access to medical services
Submitters and witnesses expressed concern that an increase in out-of
pocket costs in the form of a co-payment for GP services would result in people
delaying seeking medical treatment. It was noted that existing out-of-pocket
costs already cause people to delay seeking treatment for financial reasons and
that further increases to out-of-pockets costs would exacerbate this situation.
The RACGP noted Australian Bureau of Statistics findings that in 2010–11
approximately 1.8 million Australians indicated that they delayed or avoided
seeing their GP because of cost. The RACGP expect this number to increase if
out of pocket costs continue to rise.
In its review of healthcare in Australia, the COAG Reform Council found
that nationally, in 2012–13, 5.8 per cent of people delayed or did not see a GP
due to cost. The rate was higher outside major cities (7.2 per cent compared to
5.3 per cent in major cities) and for women (7.0 per cent compared to 4.3 per
cent for men). The rate at which people reported cost barriers to seeing a GP
was similar regardless of how socioeconomically disadvantaged the area was in
which they lived.
The 2012–13 Patient Experience Survey conducted by the Australian Bureau
of Statistics reported similar findings. In 2012–13, 5.4 per cent of people
reported that they delayed or did not see a GP due to cost.
The National Health Performance Authority (NHPA) drew the committee's
attention to data from their report Healthy Communities: Australian's
experiences with primary health care in 2011–12. In this report, the NHPA
compared Medicare Local catchments on the basis of health status, cost barriers
and expenditure of GPs. This report found that in 2011–12, the percentage of
adults who reported they delayed or did not see a GP due to cost varied across
Medicare Local catchments, ranging from one to three per cent. The range of
adults who did not see a medical specialist due to cost across Medicare local
catchments, ranged from three to 14 per cent. 
The Consumers Health Forum of Australia (CHF) noted findings from their
national survey which found that nearly two-thirds of respondents indicated
they had at some point delayed seeing a medical practitioner. Nearly half of
the respondents cited cost as a contributing factor.
The AMA reported that 7.2 per cent of people living outside major cities
defer or do not access a GP due to cost.
The committee received evidence detailing the impact of the proposed $7
co-payment on accessing GP services.
The Victorian Aboriginal Community Controlled Health Organisation
(VACCHO) advised the committee that they have committed to absorb the
co-payment because the community they service will be unable to pay. In light
of this, it is estimated that VACCHO will lose approximately $250,000 of the
$900,000 in Medicare income they currently receive annually. This reduction
will likely result in VACCHO reducing their Aboriginal health worker staff numbers
by three. 
Mr Gordon Gregory, Executive Director, National Rural Health Alliance
told the committee:
...based on available data, our estimates are that the
introduction of a $7 co-payment would almost double the average annual
out-of-pocket costs that Australians pay for GPs. In addition, we anticipate
that a $7 co-payment will present a dilemma, especially for lone GPs in small
rural and remote towns, and that the viability of these medical practices may
be reduced, with consequences for access to health services in those towns.
Further consideration of the impact of proposed new co-payments should
therefore include their differential impact on people in rural and remote
areas. There should be modelling of the effects of such additional payments
across remoteness and SEIFA [Socio-Economic Indexes for Areas] gradients,
particularly on such things as skipped or delayed visits to GPs and other
clinicians and on potentially preventable hospitalisations’.
Access to pharmaceuticals
Submitters and witnesses expressed concern about the impact of increased
co-payments on individuals' access to pharmaceuticals with existing
out-of-pocket costs already affecting individuals’ adherence to their
The committee heard a debate over the evidence regarding the extent to
which an increased co-payment would impact individuals' decisions to fill
prescriptions. While the majority of submitters expressed concern that an
increased co-payment would impact on compliance with prescribed medication, the
Department presented evidence against this proposition.
Data from the NHPA indicates that the number of adults who reported that
they did not fill a medical prescription due to cost ranged across Medicare Local
catchments from 5 per cent to 15 per cent.
The AMA reported that 12.4 per cent of people living in the most
disadvantaged areas delayed or did not fill a prescription due to cost, twice
the rate for the least disadvantaged areas.
Mrs Helen Dowling, Chief Executive Officer, Society of Hospital
Pharmacists of Australia (SHPA) noted that she was aware of individual case
studies and anecdotal evidence but that data on what scripts are written and
subsequently filled is not collected in Australia.
A representative from the Department of Health advised that the main
source of information on this matter is the ABS patient experience survey which
asked questions about whether individuals ‘delayed’ or ‘didn’t’ fill
prescriptions. The Department was of the view that the data gleaned from these
questions is limited.
The last increase to the PBS co-payment occurred on 1 January 2005 when the
co-payment increased by 21 per cent. The Consumers Health Forum of Australia
provided evidence about the impact of the 2005 increase on individuals:
Studies have shown that, following the January 2005 increase
in PBS copayments, there was a significant decrease in dispensing volumes
observed across 12 of the 17 medicine categories, including anti-epileptic
medication, anti-Parkinson's treatments, combination asthma medicines, insulin
and osteoporosis treatments. Importantly, we also know that the copayment
increase had a particular impact at that time on medicine utilisation by
The Department of Health advised that, although the 2005 changes to PBS
co-payments saw the reduction in script volumes in some medications, there was
also a significant increase in script volumes in other disease classes. Due to
a range of factors, the Department argued that it was inappropriate to draw parallels
between the co-payment increase in 2005 and what is currently being proposed.
During the 2014–15 Budget Estimates, officials from the Department of
Health advised that they expect the increased PBS co-payment to result in
concession card holders paying, on average, an additional $13.60 per year. This
estimated impact has been calculated based on filling 17 prescriptions annually.
Access to dental care
Evidence provided to the inquiry suggested that out of pocket costs are
a key factor in individuals' decisions to visit the dentist.
Data from the NHPA reported that the percentage of adults who did not
see a dental professional due to cost varied across Medicare Local catchments,
ranging from 11 per cent to 34 per cent.
The Australian Dental Association (ADA) provided results from a survey
they had undertaken which indicated that 72 per cent of the population see a
dentist 'when they have a problem' with only 23 per cent reporting a regular
visiting pattern. Of the 72 per cent who only attended when there is a problem,
80 per cent had an annual household income of less than $50 000. Further to
this, the ADA submitted:
Cost of care is clearly a factor influencing attendance for
care. What remains unclear is whether cost is used as the excuse or whether it
demonstrates a failure on behalf of the community to properly prioritise their
dental care. Whatever the reason, it is clear that cost is a factor and thus it
can be predicted that the likelihood of incurring OOPs [out of pocket costs]
will be a reason for non-attendance.
COTA and National Seniors Australia provided evidence about the high
financial burden faced by older people when accessing dental care. Many older
people report suffering negative outcomes as a result of poor oral health. The
exclusion of dental services from Medicare was a key concern raised by older
Impact on different sectors of the
Several submitters and witnesses noted that the impact of co-payments is
disproportionality felt by vulnerable people across the community. In
particular, the committee received evidence about the impact on the Aboriginal
and Torres Strait Islander community, people on low and fixed incomes, older
people, people with chronic illness and people living in regional, rural and
In their submission, ACOSS referred to the Productivity Commission Report
on Government Services 2014 which noted that it is well documented that
people who experience social and economic disadvantage are at risk of negative
health outcomes. The Report also noted that higher income and wealth are
associated with better health. People with higher incomes are better able to
access health services in a timely manner and have greater access to a range of
goods and services that have health benefits.
Carers NSW submitted:
Carers report that the high costs of health care result in
decisions to go without. For some families this may mean going without family
leisure, sport and other social activities which promote physical and mental
health and wellbeing. For some this may mean making drastic and stressful
financial decisions, such as selling the family home.
For many families the cost of health care simply means going
without health care.
The National Aboriginal Community Controlled Health Organisation
On average 12 per cent of Aboriginal Australians defer GP
visits for more than a year because of costs, more than twice the rate of the
general population. Aboriginal Australians also present disproportionately high
'potentially avoidable GP-type presentations' to hospital outpatients
particular in major cities and inner regional centres.
National Seniors Australia reported that older Australians spend $350
per quarter on out-of-pocket health costs. The financial burden is magnified
for people with chronic health conditions; people with five or more chronic
conditions report spending $882 per quarter on out-of-pocket health costs.
According to COTA Australia:
I think it is important to remember that older people come
into the three groups that have been identified by other speakers; in fact,
they have the triple whammy of being vulnerable because they are older, they
are on low incomes on the whole, and they have chronic diseases. So those are
the three things that mean that copayments are going to have a negative effect
on you, and older people are going to get all three.
Evidence provided to the inquiry indicated that people living in rural
and remote areas are less able to pay out-of-pocket costs, resulting in a
greater proportion of people in rural and remote areas postponing or not making
visits to a health professional due to the costs.
GP out-of-pocket health care costs for people in regional areas are 10
to 20 per cent higher in absolute terms than in the major cities, but lower in
very remote areas due to the lesser rate at which people have access to a GP.
More specifically, the National Rural Health Alliance provided the following
evidence to the committee:
the average amount an Australian pays out-of-pocket for access to
a GP is $29.56 a year (averaged across Australia);
the average out-of-pocket costs for a person who is not
bulk-billed is $29.37 per occasion of service. This national average is
comprised of: $29.94 in major cities, $27.60 in inner regional, $28.90 in outer
regional, $32.59 in remote and $33.82 in very remote.
The AMA highlighted that the performance of the health system in
Tasmania is poorer than in many other jurisdictions. In respect to access to
general practice, the AMA stated:
Tasmania has a higher burden of chronic disease and higher
smoking rates, and we need to do more to encourage preventive health care and
chronic disease management. That is why I think the co-payment is probably
going to affect Tasmanians more than it affects people in other jurisdictions.
The Menzies Centre for Health Policy/The George Institute for Global
Health provided evidence about the household economic burden of chronic and
long-term illnesses, with out-of-pocket costs being a major component. Their
submission detailed a study of the experiences of people living with advanced
chronic obstructive pulmonary disease. The study reported that 78 per cent of
respondents experienced economic hardship from managing their illness and 27
per cent were unable to pay their medical and dental expenses. The economic
burden of chronic disease is demonstrated by the evidence that each additional
chronic disease adds 46 per cent to the likelihood of a person facing severe
financial difficulties due to health costs.
Several submitters noted that people with chronic illness incur
significant out-of-pocket costs due to the complex nature of their conditions
and the range of services and medications that may be necessary.
On this matter, National Seniors Australia advised:
National Seniors research reveals that overall out-of-pocket
expenditure increases steadily as the number of chronic conditions increased.
Eighty per cent of 4,500 respondents to a 2009 survey had at least one chronic
condition and 56 per cent had more than one condition. The presence and number of
chronic conditions increased with age with five or more chronic conditions
reported by twice as many (12 per cent) of those aged 75 years and over
compared with those aged between 50 and 64 years. Out-of-pocket health
expenditure was greatest for medication and medical services with cancer
expenditure significantly higher than that for arthritis and high blood
Impact on health outcomes and costs
Submitters argued that when medical treatment (such as not visiting a GP
when required or filling a prescription) is delayed due to out-of-pocket costs,
this will often lead to negative health outcomes.
As outlined above, several submitters expressed concern that an increase
in out-of-pocket costs (for example, in the form of a mandatory co-payment)
will impact disproportionally on individuals with the greatest healthcare need,
including: Aboriginal and Torres Strait Islanders, elderly people, women,
people on low or fixed incomes and people with chronic illnesses.
Evidence to the inquiry noted that people with chronic illnesses need to
access health services on a regular basis. Their capacity to visit GPs and
other service providers when required may be affected by the cost of accessing
these services. Serious negative health outcomes may occur if regular contact
with the necessary health professional is deferred.
For example, Diabetes Australia submitted information from the latest
Report on Government Services that only 25 per cent of Australians met the
annual diabetes cycle of care requirements in 2012–13. In particular, many people
with diabetes are not having their recommended six monthly check up. Diabetes
Australia is concerned that 'having people pay more for health care may worsen
access to the recommended cycle of care and the recommended 6 monthly
Hepatitis NSW expressed concern that an increase in out-of-pocket costs
will have a serious and disproportionate impact on communities affected by both
hepatitis B and hepatitis C, affecting their ability to pay for healthcare
which will result in negative long-term health outcomes.
National Seniors Australia submitted:
Respondents to a National Seniors 2009 survey stated that a
lack of affordable access to doctors / specialists and health insurance, lack
of government support for the health system, long waiting times and general
ageing contributed to the deterioration of their health during recent years. People
with five or more chronic conditions were significantly more likely to face a
moderate (18.6 per cent) or severe (30.5 per cent) financial burden than those
with fewer conditions.
Evidence was also received that if individuals delay treatment, this may
result in increased costs to the health system later on as conditions progress
Evidence provided to the committee noted the negative health outcomes
that may arise when individuals do not adhere to their prescribed medication
Mrs Helen Dowling noted that an estimated 50 per cent of patients with
chronic diseases are not taking their medications as prescribed. Approximately
10 per cent of patients visiting a GP report having experienced an adverse
medication event in the past six months. In relation to emergency department
presentations and hospital admissions, approximately two to three per cent of
all hospital admissions, 12 per cent of all medical admissions and 20 to 30 per
cent of admissions in consumer aged care for patients aged over 65 years are
Effect of co-payments on other parts of the health system
The committee notes that the intention of the $7 co-payment on GP visits
is to reduce the overall number of GP visits and thereby reduce the
Government's contribution to these services.
Submitters and witnesses emphasised the importance of quality and
accessible primary health care services (in particular, GPs). Delivery of
quality primary health services is vital not only to respond to individuals'
health needs, but to the functioning of the health system as a whole.
The AMA told the committee:
Now is not the time to strip money out of primary health
care. It is the time to invest in primary care to ensure sustainability of the
healthcare system. People need access to general practitioners to know what
their healthcare needs are. General practitioners need access to pathology and
imaging services in order to diagnose conditions early and put treatment plans
Evidence to the inquiry explained that primary health care is the most
efficient part of the health system. Witnesses emphasised that countries with
strong primary healthcare systems report the best health outcomes at the most
The RACGP observed that there is no economic benefit in dissuading
patients from seeing their GP:
In fact, there is good evidence to suggest that there is a
negative economic impact with patients using more expensive health care through
the hospital system that could be delivered by general practice at a fraction
of the cost. General practice has been, and remains, the most efficient
component of the healthcare system, with general practice costs per patient
remaining steady over the past 20 years, while hospital costs have continued to
Evidence to the inquiry indicated that increasing the cost to access a
particular section of the healthcare system would affect other services due to
the integrated nature of the health system. Submitters and witnesses argued
that co-payments may affect other parts of the health system in a number of
ways, including by:
placing increased stress on the public health system (in
particular emergency departments) as patients seek hospital treatment to avoid paying
a GP co-payment;
shifting responsibility for primary care to community pharmacies;
reducing the number of patients undertaking all required
pathology and diagnostic testing.
In the following section, the effect of co-payments on the following sectors
of the health system will be explored in more detail:
the hospital system;
Effect on the hospital system
Submitters noted that increasing GP co-payments would place increased
stress on the public hospital system, especially emergency departments, as
patients seek hospital treatment to avoid the co-payment costs associated with
According to Catholic Health Australia:
High out-of-pocket charges imposed in an uncoordinated way
are more than likely already resulting in people receiving care in settings
that may not be the most effective or cost-effective. There is evidence that
some, many of who have no choice, seek to minimise costs by avoiding or
delaying seeking health services, or choosing a provider with lower costs by
utilising a hospital emergency department rather than attending a GP who
charges out-of-pocket costs.
The Grattan Institute acknowledged that there is little evidence for whether
people are more likely to go to a hospital emergency department if they face
higher co-payments at the GP, but that it seems likely. It was suggested that
any shift of patients from GPs to emergency departments will increase costs to
government because the Medicare rebate for the most common type of GP
consultation, which lasts up to 20 minutes, is $36.30. The average cost of a
non-admitted level 5 triage visit to a hospital—a likely substitute for a GP
Evidence provided to the inquiry indicated that the cost of providing
healthcare in a hospital is significantly higher than providing care in a
primary health setting. For example, the Australian Healthcare & Hospitals
Association referenced a Northern Territory study which found that costs
associated with in-patient care for renal conditions were significantly higher
than community based care.
Taking a similar view, the Doctors Reform Society submitted that
although 'studies are lacking, common sense indicates that patients who
struggle to afford visits to GPs will consider attending Emergency
Departments'. Further to this, it was noted that emergency departments are not
designed to deal with many of the problems dealt with by GPs.
The National Rural Health Alliance (NRHA) noted that one of the impacts
of missing out on primary care is a higher rate of avoidable hospitalisation.
Further to this, using data from the NHPA, the NRHA submitted:
The age-standardised rate of potentially avoidable
hospitalisations increases significantly with remoteness. For example, in 2011–12
the age-standardised rate of potentially avoidable acute and
vaccine-preventable conditions ranged from 1,135 hospitalisations per 100,000
people in Inner West Sydney to 3,125 per 100,000 people in Central and North
The importance of primary health care being delivered by GPs and not in
emergency departments was also raised in submissions. The Australian College of
Nurse Practitioners observed:
Specifically, patients who either cannot afford or who wish
to avoid the co-payment will use the ED [emergency department], as their first
point of contact, for their healthcare. The focus for EDs is to manage emergent
and episodic care, and patients see a different clinician every time they
present. If a patient uses ED for primary care services the continuity and
ongoing management of their primary healthcare conditions will become
Dr Stephen Duckett, Director, Health Program, Grattan Institute outlined
the difficulties to quantify the impact of possible redirection of GP visits to
emergency departments. Dr Duckett suggested that if one in five of the
estimated one million GP services that will not occur as a result of the new
co-payment presents to an emergency department, there will be no savings to
total government expenditure.
Co-payment charges in hospitals
The committee notes recent speculation that hospital emergency
departments will be encouraged to charge a co-payment to reduce the possibility
that individuals will present to emergency departments to avoid paying the GP co-payment.
A number of witnesses questioned the appropriateness and practicality of this
proposal. The Australian Healthcare & Hospitals Association suggested that idea
is impractical because additional staff and infrastructure would be required to
manage billing procedures.
The Department of Health advised that the introduction of patient
contributions for GP-type patients in public hospitals is a matter for states
and territories. The Department also noted that:
...public hospitals already collect payments for non-Medicare
eligible patients presenting for treatment in Emergency Departments. Therefore,
states show existing capability to levy patient contributions for certain types
Effect on pharmacies
Evidence provided to the inquiry suggested that the introduction of a GP
co-payment may shift greater responsibility of primary care to community
The Pharmacy Guild of Australia submitted that pharmacies already
provide a range of services and advice for minor health conditions and
expressed caution about the increased pressure that may be placed on these
services should a GP co-payment be introduced.
Effect on bulk billing
The committee heard evidence that the introduction of the $7 co-payment
will impact on the capacity of GPs to bulk-bill due to the increased financial
burden it will place on their practice.
Under the proposal, all patients will be required to pay $7 towards the
cost of GP consultations. For concession card holders, the $7 contribution will
be capped at 10 visits per calendar year for GP, out-of-hospital pathology and
diagnostic imaging services. If a GP decides not to charge the $7 co-payment on
existing bulk-billed services, they will receive the revised Medicare rebate of
$31.30. If the GP was to charge the $7 co-payment, they would receive between
$38.30 and $47.40 depending on the patients' concessional status and the level
of low gap incentive payment applied.
The Australian Medical Association stated:
I think the fundamental question here is really whether it is
feasible for a medical practitioner to bulk bill in those circumstances. The
problem that we have is that there is a cut to the Medicare rebate. For
non-concession patients the $5 cut to the rebate means that, if they do not
charge the co-payment, the doctor will be $5 worse off. That is out of a $36
co-payment to start with. For patients who are under a concession who would
under this plan receive what is called the low-gap incentive, not only would
they lose the $7 co-payments but they would also lose the low-gap incentive.
For patients in metropolitan areas, I understand that then adds up to $13. For
patients who are in regional areas, of course, there is a $9 low-gap incentive,
so it is an extra $3, or $16.
Dr Duckett noted that in proposing the GP co-payment, the Government has
created a significant financial disincentive for doctors who wish to bulk-bill.
The current bulk-billing incentive will be replaced with a low-fee incentive.
Dr Duckett suggested that, under the proposed new arrangements, if a doctor
bulk-bills, they will be approximately 30 per cent worse off than they would
Dr Liz Marles, President, RACGP explained that GPs will receive financial
incentives to charge the co-payment:
...so you will actually get a low gap incentive if you charge
the co-payment. If I charge that $7, I will get a bonus $6 or $9, whereas if I
bulk-bill them that money is not there. We are being positively incentivised to
charge the co-payment to all patients whether they are concession card holders
or not, and that will translate into increased costs.
Officials from the Department of Health emphasised that it will be up to
individual GPs to decide how best to apply the co-payment to suit the needs of
their practice. It was acknowledged that, as is the case under the existing
system, GPs will approach the situation differently and with the necessary
business decisions to reflect their practice.
Safety nets and other offsets
There are two safety nets in the Australian healthcare system—the
Medicare Safety Net and the PBS Safety Net. The safety nets provide assistance
to individuals and families by reducing out-of-pocket costs once their Medicare
or pharmaceutical expenses have exceeded the applicable threshold amount.
This section will commence with discussing the evidence received about
safety nets generally and then discuss particular issues arising in relation to
either the Medicare safety net or the PBS safety net.
The 2014 Medicare Safety Net thresholds are shown in the following
Table 3.1: 2014 Medicare
Safety Net thresholds
Source: Department of Human Services, 2014 Medicare
Safety Net thresholds, http://www.humanservices.gov.au/customer/enablers/medicare/medicare-safety-net/medicare-safety-net-thresholds
(accessed 15 August 2014).
From 1 January 2015, the threshold for the Extended Medicare Safety Net
will be increased to $2 000.
In the 2014–15 Budget, the Government announced that from 1 January 2016
a Single Medicare Safety Net (SMSN) for out-of-hospital services will replace
the Extended Medicare Safety Net (EMSN), the Original Medicare Safety Net and
the Greatest Permissible Gap. The SMSN will have three thresholds:
$400—for singles with a concession card or families with a
$700—for singles with no concession card or families receiving
Family Tax Benefits Part A with no concession card; and
$1000—for families with no concession card.
From 1 January 2016 there will be a limit on the out-of-pocket costs
that count towards reaching the threshold. There will also be a maximum
Medicare Safety Net benefit paid per service, which is based on the Medicare
Benefits Schedule Fee for the service.
The 2014 threshold for the Pharmaceutical Benefits Scheme Safety Net is
$1 421 for general patients and $360 for concession card holders. General
patient contribution per prescription is up to $36.90 and $6 for concession
card holders. Once the threshold is reached, the cost for prescriptions is $6
for general patients and no charge for concession card holders.
In the 2014–15 Budget, the Government announced changes to the PBS
safety net to commence on 1 January 2015 estimating the following changes:
general patient contribution of $42.70 and $6.90 contribution
once the revised threshold of $1597.80 is reached.
concession card holder contribution of $6.90 and no charge once
the revised threshold of $427.80 is reached.
According to the Department of Health:
The extended Medicare safety net has undergone significant
change to ensure that it is more focused on supporting patients and less
supportive of medical inflation. This will culminate in the safety net
announced in the budget which will support more people than the current
arrangements, albeit with lower benefits.
Appropriateness of current safety nets and other offsets
Submissions to the inquiry indicated that existing safety nets do not
benefit or assist people who are most in need of support from a safety net. In
particular, attention was drawn to the challenges faced by people on low
incomes and with chronic illnesses who experience disadvantage in accessing
healthcare due to out-of-pocket costs.
Issues impacting an individuals' ability to access and benefit from
existing safety nets include:
- the high out-of-pocket costs incurred before reaching the threshold
complexity of the safety net system; and
the health expenditure that does not contribute to the safety net
The committee heard evidence from Professor Stephen Jan, The George
Institute for Global Health who noted that the current safety net limits the
annual out-of-pocket expenses of Medicare-reimbursed services. Professor Jan
explained that the limitation of the safety net is that there is still a
significant financial burden as individuals must pay for services until they
reach the safety net threshold. This financial burden acts as a deterrent to
accessing healthcare. It should also be noted that there are many out-of-pocket
costs that are incurred outside of Medicare services and therefore do not
contribute to the safety net.
Medicare safety net
Out-of-pocket medical expenses that contribute to the Medicare Safety
Net are automatically monitored by Medicare although the process for monitoring
payments differs slightly depending on individuals’ method of paying for
medical services. Once the relevant threshold is reached, a higher Medicare
rebate may be provided for all eligible for the rest of the calendar year.
Evidence provided to the inquiry suggested that the eligibility criteria
to qualify for the EMSN should be reviewed to better target people who have
insufficient means to pay for health services.
The Tasmanian Council of Social Service submitted:
It is evident, however, that the Safety Net does not
currently benefit people on low incomes, despite its intention to do so. The figures
in the 2009 review of the EMSN disturbingly showed that 55% of EMSN benefits
had been distributed to the top quintile of Australia’s most socioeconomically
advantaged areas, and that the bottom quintile received less than 3.5%. This is
an enormous disparity, and means that ultimately the EMSN might be simply
“helping wealthier people to afford even more high-cost services”.
Submitters did not support the EMSN threshold being increased to $2 000.
For example, National Seniors Australia submitted that the increase 'is
inequitable and hurts people who are living with chronic health conditions'.
The committee notes that the EMSN will come into effect on 1 January 2015 for a
period of 12 months when it will be replaced by the Simplified Medicare Safety
National Seniors Australia and Consumers Health Forum observed that the
Simplified Medicare Safety Net as proposed has various exclusions and caveats
that are very difficult for individuals to understand.
The Department of Health estimated that 770 000 individuals will receive
Medicare Safety Net benefits in 2015 and, following the commencement of the
Extended Medicare Safety Net in 2016, an estimated 830 000 individuals will
Pharmaceutical Benefits Scheme
In contrast to the process required to qualify for the Medicare safety
net, to qualify for the PBS safety net, individuals (or pharmacists on the
individual's behalf) must keep a record of all PBS medicines on a Prescription
Record Form. Once the safety net threshold is reached, a PBS Safety Net card is
issued which ensures access to cheaper or free PBS medicines for the rest of
the calendar year.
Several submitters expressed concern at the additional record keeping
requirements for individuals (or pharmacists on the individual's behalf)
wishing to access the PBS safety net. It was noted that many people may be
missing out on the intended benefits of this safety net.
The committee is aware that in the 2013 calendar year, there were 119 463
PBS Safety Net cards issued for general patients, noting that these cards may
apply to an individual, a couple or a family. The 119 463 cards covered 236 942
The current PBS safety net for concession patients is set at the
equivalent of 60 PBS prescriptions per year at the concessional rate. During the
Budget Estimates, officials from the Department of Health provided evidence
about the changes under the new safety net from 1 January 2015:
So, if I look to what the changes will be in January 2015,
the general safety net will increase by approximately $145.30, from $1,452.50
to $1,597.80; and the concessional safety net will go from 60 scripts to 62. In
2016, we expect that the general safety net will then be increased to $1,798;
in 2017, we expect it to be at $2,029.20; and, in 2018, we expect it to be at
$2,287.90. For the concessional safety net, it will go up to 64 scripts in
2016, 66 scripts in 2017 and 68 scripts in 2018. I would like to just put one
caveat on all of that, which is that the calculation of the safety net is
reliant on the CPI figure for the September quarter on a 12-month average, and
therefore these are very much approximates because they are completely
dependent on what the final CPI figure would be in each year.
Submitters also described challenges experienced by people on low
incomes to pay for prescriptions before they have reached the safety net
threshold. In addition, particular attention was drawn to the experience of
individuals with chronic illnesses who may be purchasing multiples
prescriptions and incurring high out-of-pocket costs.
The Healthcare Consumers Association ACT suggested that individuals with
lifelong conditions should be able to pay the discounted safety net price
immediately rather than incurring out-of-pocket costs to meet the respective
Professor Jan noted that even though the safety net is in place, the PBS
costs that people face, particularly individuals with conditions that require
multiple medications, still act as a significant barrier to people using their
prescribed medications which can lead to non-adherence and then further costs
at a later time.
Mrs Helen Dowling, Chief Executive Officer, Society of Hospital
Pharmacists of Australia advised the committee that, based on the Department of
Health's PBS budget information, in four years:
Just to highlight the significance of this, in four years the
co-payment today for each category will rise from the current general
non-concessional rate threshold of $1,421.20 to $2,287.90 in 2018. That is a 61
per cent increase in the threshold. For the concessional rate today, this
equates to $360 for 60 prescriptions at $6 each to $510 in 2018 for 68 scrips.
That is a 24 per cent increase, as highlighted. We are concerned that this will
make it almost impossible for an average family to reach the safety net
threshold, especially if the number of prescriptions needed to reach this
threshold also increases, as is stated, from 60 to 68 over the same four years.
On the matter of the number of filled prescriptions required to reach
the safety net threshold, Mrs Dowling advised that:
Today this represents 38 script items at a price of $36.90;
in 2018 if the script fee is increased at the same rate as the threshold, then
the number of scripts would be anticipated to be the same for general patients.
In addition to the two safety nets, other measures such as health care
cards and the medical expenses tax offset are available to provide some
reduction in out-of-pocket health costs. Individuals with health care
concession cards are eligible to no or low cost medical treatment and
prescriptions. Safety net thresholds are significantly lower for health care
The net medical expenses tax offset allowed individuals to claim 20
per cent of the amount of net medical expenses (total medical expenses
minus Medicare and private health insurance rebates) above $2 060 as a
deductible expense. Commencing in July 2013, the net medical expenses tax
offset will be phased out. To be eligible to claim in 2014–15, individuals must
have received the offset in their 2013–14 income tax assessment. 2014–15 is the
final year patients can claim the tax offset unless they have medical expenses
relating to disability aids, attendant care or aged care, in which case the tax
offset can be claimed for these items up to the income tax year.
The Healthcare Consumers’ Association ACT noted consumers concerns about
tax offsets and the use of healthcare cards for those whose partners and/or
carers earn just above, or above the threshold. It was observed that many
consumers stated that managing chronic conditions without a health care card
meant high costs for pharmaceuticals and medical supplies.
Evidence received from the Breast Cancer Network Australia expressed
disappointment that, following the 2013–14 Budget, the net medical expenses tax
offset is being phased out. It was noted that the offset provided some respite
to Australians with high medical costs, including those living with cancer.
Recommended changes to the safety nets
Several witnesses advocated for changes to the Medicare and PBS Safety
Nets. While there was some discussion about the optimal level of the safety net
threshold, the majority of evidence provided to the inquiry argued for more
structural changes to the safety net and transition to a more simplified and
Submitters and witnesses noted the importance of ensuring that the
safety net is patient focused and facilitates improved health outcomes.
Mr Patrick Tobin, Director, Policy, Catholic Health Australia told the
committee that the safety net needs to be designed around the consumer:
At the moment, the safety nets have been designed by
different parts of our siloed system and so, as well as being difficult to understand,
if people have to separately qualify for different aspects of a particular
safety net then that just makes it much harder.
The Consumers Health Forum argued that safety nets should be more
integrated and encompass a range of health services:
One of the biggest issues we have is that, at the moment,
safety nets are designed to address one-off, acute interactions with the
healthcare system, so it is annual expenditure. But we are seeing the burden of
disease shift to more chronic disease management, so it is ongoing expenditure.
For consumers to have to deal with the Medicare safety net only after the
expenditure has been incurred puts a heavy burden on people, especially those
with conditions like asthma and diabetes, who need the assistance as and when
Carers Queensland recommended the implementation of a robust safety net
which is clearly defined and crosses all forms of treatment.
This approach was supported by several submitters and witnesses. Evidence
suggested that the Medicare Safety Net should be looked at more holistically to
include allied health services such as occupational therapy, physiotherapy and
healthcare provided by nurse practitioners.
This holistic approach to patient care will likely become more important as the
population ages and the number of people with multiple conditions increases,
placing increasing pressure on the healthcare system.
The committee notes that the purpose of a co-payment is to create a
price signal for consumers as a means of reducing unnecessary visits to general
practitioners and the use of pathology and diagnostic services.
Evidence provided to the inquiry suggested that there was limited
evidence to suggest there is over-servicing in primary healthcare. In fact,
there is evidence to suggest that in some areas and communities there is
The current level of out-of-pocket costs in healthcare is already
impacting on an individuals' access to healthcare. The available data indicates
that many Australians are delaying visits to their GP and dental service or not
filling all of their required prescriptions. The committee heard evidence that
the impact of co-payments is disproportionality felt by vulnerable people
across the community.
The committee is concerned that imposing an additional co-payment will
make it even harder for individuals, particularly vulnerable groups, to access
primary health care.
Deferring seeking medical treatment may impact not only on an individuals'
health but may also affect other parts of the health system whereby primary
health visits are redirected into the public hospital system.
The committee is concerned that existing safety nets do not benefit or
assist people who are most in need of support from a safety net. Often individuals
will incur significant out-of-pocket costs before they reach the respective
threshold amount. As outlined throughout the inquiry, out-of-pocket costs can
be barriers to access healthcare.
The committee notes that the safety nets are complex and many people
report difficulty understanding the requirements and thresholds that must be
met to qualify. This is particularly relevant for the PBS Safety Net as
individuals are required to keep their own record of prescription medications.
In this situation, there is a risk that people will not maintain the correct
records and fail to qualify for the safety net.
The committee notes that the health costs that may contribute towards
the safety net are limited. The committee believes a single, integrated safety
net should be developed but notes that careful consideration would need to be
given to what services and costs are eligible to contribute to the safety net.
Navigation: Previous Page | Contents | Next Page