Conclusion and recommendations
This inquiry was established in March 2014 to inquire into out-of-pocket
costs in Australian healthcare. The purpose of the inquiry was to investigate
growing concerns about the extent of out-of-pocket costs in health and the
impact on individuals. Measures announced in the 2014–15 Commonwealth Budget, in
particular those relating to patient co-payments and changes to safety nets, have
highlighted these concerns further.
The Australian healthcare system is underpinned by the principle of
universal access to healthcare. The Commonwealth Government supports universal
access, through the Medicare Benefits Schedule (MBS) and the Pharmaceutical
Benefits Scheme (PBS) and other mechanisms such as safety nets, concession
cards and subsidised services.
The committee recognises the need for on-going reform to deliver
efficiencies and ensure the sustainability of Australia's health system. As
noted in Chapter 2, total health expenditure in Australia in 2011–2012 was
estimated to be $140.2 billion. Government funding provided 69.7% of total
health expenditure (42.4% Commonwealth government and 27.3% state and territory
governments). Non-government sources funded 30.3% of the estimated $140.2
billion spent in 2011–12.
The committee notes the National Commission of Audit's finding that:
Health care spending represents the Commonwealth's single
largest long-run fiscal challenge, with expenditure on all major health
programmes expected to grow strongly to 2013–24 and beyond.
Factors such as demographic trends, the increasing prevalence of chronic
health conditions and the development of new pharmaceuticals and technologies
means that it is more likely that this trend will continue.
The committee notes the Assistant Minister for Health's, Senator the Hon
Fiona Nash, statement that over the last 10 years, the cost of the MBS and PBS
has risen by 130 per cent and 80 per cent respectively, requiring decisions to
be made now to facilitate sustainability.
Evidence to this inquiry supports the view that on-going reform of the
healthcare system will deliver efficiencies and ensure the system's
As highlighted in Chapter 2, out-of-pocket expenditure by individuals
accounted for 57.2 per cent of the estimated non-government funding of health
goods and services in 2011–12. The contribution by individuals accounted for
17.3 per cent of the total health expenditure (government and non-government).
In 2011–12, individuals spent approximately $24.3 billion on out-of-pocket
Evidence provided to the inquiry suggests that individual out-of-pocket
expenditure has been increasing in real terms. Of particular note, individuals appear
to be incurring significant out-of-pocket costs for areas of healthcare where
there is limited or no relief by way of government or private health insurance
In addressing these issues, the challenge is to understand the most
appropriate way to contain growth in health spending without undermining what
is generally considered to be one of the more efficient health systems in the
The Government has said that in order to ensure the sustainability of
the healthcare system, attention should focus on two areas of the health system
that attract a significant portion of the Commonwealth's health expenditure—the
MBS and the PBS.
The committee cautions against focusing on seeking to reduce expenditure
on the MBS and the PBS in isolation. Evidence to the inquiry, though admittedly
partial and anecdotal in places, clearly identifies a need to fully interrogate
all available data to understand the full range of impacts of current
out-of-pocket expenditure on consumer behaviour before introducing broad
The committee received evidence that existing out-of-pocket health
expenses create an environment where individuals already defer medical
treatment or filling prescriptions because of financial reasons. Further,
evidence suggests that out-of-pocket costs impact disproportionately on
individuals with the greatest health needs including Aboriginal and Torres
Strait Islander people, people with chronic illnesses and people living in
rural and remote areas.
It is of concern to the committee that out-of-pocket expenses impact so
significantly on the most disadvantaged in the community. Personal accounts
about the impact of out-of-pocket costs on individuals highlighted the
difficult decisions that many in the community are already facing on a regular
basis. At the same time, existing safety nets appear not to be providing
sufficient support or financial assistance to those that need it most.
The committee notes the significant financial burden that individuals must
bear up front as they incur out-of-pocket costs before qualifying for the
safety net. In addition, the committee received evidence that individuals may
pay significant out-of-pocket health costs but fail to reach the threshold
amount due to the number of health related costs that do not contribute towards
the safety net threshold.
Co-payments and safety nets
Evidence to the committee questioned the effectiveness of using price
signals to contain expenditure on health care. The committee notes that while
measures such as co-payments will deliver revenue and may result in decreased
use of services, they are unlikely to deliver efficiencies. The committee notes
evidence regarding the indiscriminate impact of co-payments on service delivery
and the limited likelihood that the proposed co-payments will provide
incentives for greater efficiency and innovation in the delivery of services.
The committee is concerned that broad brush changes such as the proposed
introduction of a GP co-payment and adjustments to safety nets, risk
significant negative consequences for sectors of the community who are already
facing barriers to access healthcare services. These measures also risk
increased costs for governments in the longer term as costs are shifted onto
other parts of the health.
The committee acknowledges that this is a complex issue which requires a
sophisticated and coordinated response. It is important that there is a
comprehensive understanding of the impact of reforms, particularly on the most
vulnerable, before implementation, to reduce the risk of unintended
consequences and perverse outcomes.
While the committee notes that Australians may need to continue to
accept a reasonable level of out-of-pocket costs, the committee considers it is
essential that vulnerable and disadvantaged people are adequately protected
from the harshest consequences of such costs.
The committee recommends that the Government should not proceed with
The committee recommends that the Government undertake a comprehensive
review of the impact of existing co-payments on individuals' access to health
services and health outcomes. The review should pay particular attention to the
impact on the most vulnerable groups in the community.
The committee recommends that the Government review the impact and
effectiveness of existing safety nets to ensure that current safeguards provide
adequate protection to the most vulnerable in the community.
Pharmaceuticals price structures
The committee notes that the PBS co-payment applies to prescription medications
that a GP has assessed as being required for their patient's treatment. The
committee is concerned about the impact of co-payments on an individuals'
adherence to their prescribed medication schedule and emphasises that price
signals, such as co-payments, are not an appropriate mechanism to contain the
costs of the PBS.
The committee notes evidence to the inquiry which suggests the potential
for greater efficiencies and cost saving in the PBS through a comprehensive
review of price structures. Undertaking reforms in this area could consider a
review of the PBS to identify areas where efficiencies can be gained.
The committee notes the effectiveness of price disclosure in
pharmaceuticals and suggests that this continue to be supported as an effective
mechanism to reduce pharmaceutical costs. The committee also acknowledges the
evidence that greater savings may be possible with more regular price reviews.
The committee recommends that the Government review the Pharmaceutical
Benefits Scheme to identify areas where efficiencies can be gained, with
particular reference to the following areas:
current procurement and pricing structures, with particular
reference to examining benchmarking as a mechanism to explore the extent to
which savings could be achieved;
effective monitoring and review of GP prescribing practices to
ensure dispensed medications are cost effective and evidence based; and
evaluation of the prevalence of patient non-adherence to
prescribed medication, with particular reference to identifying reasons for
Review of primary health care delivery
The committee recognises the valuable role of primary health care in
Australia's healthcare system. Primary health care provides the first reference
point to respond to health concerns and plays an important role in providing referrals
to other areas of the health system.
Evidence to the inquiry suggests that alternative models of primary
health care delivery offer the means to secure the efficiency and innovation
necessary to achieve long term sustainability in the sector. The committee
notes evidence regarding the potential of multidisciplinary teams to achieve
cost saving and better health outcomes by focusing on prevention as well as
ongoing management of chronic conditions.
In the area of primary health care, the committee recognises
opportunities for reform in a number of areas:
- an examination of models for remuneration of GP services as an
alternative to the current fee for service model, including capitation or
performance based payments, which may have potential to encourage efficiencies
and innovation in healthcare delivery and lead to improved health outcomes;
- examination of alternative models of primary healthcare service delivery
to assess the benefit of incorporating a more prominent role for allied health
The committee notes that by encouraging an environment in which
consumers are able to access treatment appropriate to their needs from practice
teams comprised of general practitioners and a range of allied health
professionals, this may deliver greater long term efficiencies in primary
healthcare. In addition, the committee acknowledges the important role of
community pharmacies to drive further efficiencies in the system.
Importantly, such a coordinated approach will assist GPs to have greater
capacity to focus attention where it is most needed. An increased focus on
preventative health may also foster collaboration between patients and health
care professionals and build relationships to improve health literacy.
The committee recommends that the Government review existing models for
funding and delivery of primary healthcare with a view to identifying
opportunities for improved service delivery and health outcomes.
Preventive health measures, health
literacy and access to information
Evidence to the inquiry underscored the key role for preventive health
programs in delivering efficiencies in healthcare. The committee notes evidence
to the Community Affairs Legislation Committee's inquiry into the Australian
National Preventative Health Agency (Abolition) Bill 2014 that emphasised the
benefit of preventative health strategies to the overall healthcare system.
Central to an increased focus on preventative health to improve
efficiency is placing the individual at the centre of health care. Improving
education and health literacy is fundamental to adopting a patient centred
The committee notes evidence explaining the difficulties consumers face to
make informed decisions about their access to health care due to the
significant imbalance in knowledge and information on services and their
attendant costs. The committee emphasises the importance of ensuring that
consumers are well informed of the cost of treatment before it is provided and
throughout the treatment process. The committee supports the position of
several witnesses that greater emphasis should be given to increasing health
literacy across the community. The committee considers the Government can play
a role to facilitate this.
Senator Rachel Siewert
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