AMA submission to the Senate Select Committee on Medicare - June 2003

The Senate has resolved to appoint a Select Committee to inquire into and report on the access to and affordability of general practice under Medicare.  This AMA submission comprises introductory comments, followed by more specific responses to the particular elements of the terms of reference.

BackgroundThe Senate has resolved to appoint a Select Committee to inquire into and report on the access to and affordability of general practice under Medicare. This AMA submission comprises introductory comments, followed by more specific responses to the particular elements of the terms of reference.

Introductory Comments

Australia has a world class health care system at a very modest overall cost. One of the factors in that success is the cornerstone role of Australian GPs who provide high quality primary/preventative care and act as the "gatekeepers" to the rest of the system. Policies that are simply limited to the stabilisation or restoration of bulk-billing reflect a very serious misunderstanding of the workforce and infrastructure issues that threaten the viability of general practice.

In responding to the Inquiry, the AMA is conscious of the serious situation facing general practice. There is a shortage of at least 2,000 GPs or 10% across the board [Access Economics 2002], but much higher in some areas. The participation rate is now about 64% and falling [Australian Divisions of General Practice]. Thus, to achieve one additional full-time GP in the workforce requires 1.6 trainees and this situation is worsening.

Furthermore, recent studies show that unless the downward trend in the number of hours doctors choose to work each week is taken into consideration in planning, the current medical workforce shortage will inevitably get worse. A drop in average GP time of just two hours per week is equivalent to the loss of about 1,000 GPs from the workforce. For example, two hours of red tape per week costs Australia 1,000 GPs in terms of patient time.

This has major implications for patient access to services. There is now ample evidence that the health of people in areas with doctor shortages is poorer than in those areas with an adequate level of medical services. Both Canada and the United Kingdom have recognised that greater spending on Primary Health Care results in both greater workforce participation and longevity. The Australian myth that cost minimisation in primary care is fiscally responsible must be exposed and revoked.

To ensure that all Australians have access to the full range of high quality, reliable and sustainable general practice services, the AMA recommends a 3-pronged strategy aimed at restoring financial viability and community confidence in general practice:

1. Effective workforce measures: Immediate measures to reduce the retirement and drop out rates from the existing GP workforce to cover the immediate shortfalls. Funding to allow practice nurses to work in all GP practices to augment the GP workforce and provide much needed services.

2. Remuneration measures: Avenues for better remuneration of GPs to curb the bleeding from the workforce, including reaffirming fee-for-service as the best remuneration method, realistic rebates and indexation methodologies, more appropriate GP fee relativities and universal electronic claiming and assignment of benefit at point of service.

 Safety net: A more accessible safety net to cater for the growing focus on medical care by all doctors (GPs and specialists) in a community setting, particularly the aged and chronically ill. Rather than supporting the Coalition safety net proposal, AMA recommends that the two current safety net schemes (Medicare Benefits Scheme [MBS] and Pharmaceutical Benefits Scheme) be combined to create a single, streamlined and easily accessible scheme that targets those with the greatest health needs.

Detailed Comments

(a) the impact of the current rate of the Medicare Benefits Schedule and Practice Incentive Payments on practitioner incomes and the viability of bulk-billing practices;

At current Medicare rebates, a "comprehensive quality service" GP practice will not be economically viable at 100% bulk-billing in most of Australia.. Some (mostly corporate) practices may remain viable at high rates of bulk-billing by very carefully choosing both their locations (in areas where practice costs are lower) and their service mix.

Between 1992 and 1997, the policy of "half indexation" of GP rebates resulted in a sharp fall in these rebates in real terms. From 1998 through 2001, there were some catch-up increases, but not nearly enough to make the MBS fee viable. More details are in Appendix A.

Practice Incentive Program (PIP) and similar payments have high transaction costs both for Government as payer and for GPs as the payees (the high compliance costs experienced by GP practices has been quantified by the Productivity Commission). At best, the PIP makes a marginal contribution to overall GP incomes particularly in areas of need. It diverts GPs from patient care and is exacerbating the GP workforce shortage. The funds now spent on PIP and the disease specific programs would be much more effective in ameliorating the shortage of GPs if redirected into patient rebates. Without increasing overall expenditure, it would be possible to reduce the burden of red tape and increase the productivity of the primary care workforce. GPs could better use their time in patient contact than in compliance with the administrative burden of ineffective programs. The contribution of programs such as PIP to "quality" in general practice is highly questionable. The means of benchmarking, maintaining and improving quality in general practice already exist. General practitioners are subject to legislative requirements for gaining and maintaining General Practice Vocational Registration that impose ongoing "quality" compliance on general practitioners. General practice accreditation is also a significant measure in the maintenance and delivery of quality.

Fee-for service remains the best way to remunerate GPs and to provide incentives for delivery of high quality and breadth of services. Initiatives in the fee-for-service area offer the best prospects for achieving greater participation by GPs who are currently working part time and/or considering retirement. However, the current structure of the MBS schedule distorts the provision of service. A review has been completed and should be implemented without further delay.

Any pressure (mandatory or non-mandatory) on GPs to bulk bill will be a disincentive to them. The Coalition proposes an opt-in (participating) scheme, a ‘preferred provider’ system that will split general practice. It will be seen a deterrent to doctors contemplating a future in general practice. It also detracts from fee-for-service and increases complexity and red tape.

The Relative Value Study established that a fair and reasonable fee for a standard GP consultation would be $50 (in current terms). For years, the Government has expected GPs subsidise their patients’ care, particularly if they bulk bill and accept only $25.05 for a service. The slide in rates of bulk-billing illustrates that this strategy is not sustainable in the long term. Doctors have been forced to compromise on the physical features of their infrastructure and on their own health before compromising the quality of their practice. About one in six doctors under the age of 65 have stopped practicing medicine altogether.

The Medicare billing system could be made considerably more efficient for patients and providers if GPs were permitted to charge a patient contribution at the point of service in conjunction with a direct-billed service. A modest price signal can be effective in restraining demand for service without preventing access for those in need of care, especially where it is combined with an expanded safety net. This proposal will be facilitated with on-line claiming (either store/forward or in real-time).

The inadequate indexation of patient rebates for GP services – resulting from the application of the Department of Finance and Administration’s WC15 index – is one of the factors driving down the rates of bulk billing. This methodology is deeply flawed as it fails to reflect the costs of practice and very substantially overestimates the productivity gains available in face-to-face consultations.

In summary, the present level of patient rebates is not able to support high rates of bulk-billing. The PIP and other incentive programs impose high transaction costs and impair the delivery of cost-effective services. The inadequate indexation of patient rebates constantly undermines the sustainability of Medicare and the fee relativities between consultation items distort services provision to the detriment of patients and providers alike.

3. the impact of general practitioner shortages on patients’ ability to access appropriate care in a timely manner,

Modelling commissioned by the AMA indicates that, in the year 2000, there was a shortage of full-time equivalent (FTE) GPs in the range of 1,200 to 2,000. All anecdotal evidence supports the assessment that the shortage has worsened. The workforce shortage is now the most serious obstacle to equity and access to GP services. It is acute in outer-urban areas (often areas of socio-economic disadvantage) and in rural and remote areas. One upshot is that patients are queuing in hard-pressed hospital A&E departments trying to get access to medical care normally accessed in community settings: this is not seen as equivalent to comprehensive general practice care. The hospitals are experiencing their own staff shortages.

The AMA congratulates the Government and the ALP for recognising that there is a workforce problem and moving to ease it. But, it has deep concerns with the details.

Bonded Medical School Places

Bonding HECS based medical student places represents a fundamental change to the higher education system. Unlike past bonding arrangements in other professions or the bonded places offered by the military, bonded medical students will not receive a scholarship or other benefit compared to un-bonded places, they will be expected to pay HECS and they will be bonded to return of service obligations that commence many years after completing university.

The AMA does not support this proposal for a range of reasons, including, most importantly:

• It does not offer assistance to the student to meet the costs of vocational training in a specialty or general practice after graduation, despite requiring completion of this training before recognising service that discharges the bond;

• The bonded positions are subject to HECs making them highly unattractive to students. The return of service obligation provides little real tangible benefit (compared to un-bonded positions) and the Government gains revenue of only $1-2m per annum;
• The bond period is inconsistent with the length of the graduate medical degree course. The current proposal contains return of service obligations well in excess of the 4 years of university education being provided to students in the graduate medical degree program;
• The current proposal requires the student to complete an additional 3 to 8 years of postgraduate training at their own expense before recognising service in areas of need. This does not support retention in areas of need. It acts as a disincentive for young doctors to train in and establish their careers and personal relationships in areas of need;
• The Government has not provided a guarantee that Sec 19ABA of the Health Insurance Act (Medicare ban for breaching contracts) will not apply. While the current Government has indicated it does not intend to apply this legislation to the bond contracts, Sec 19ABA and the explanatory memorandum that accompanied it in 2000 clearly intends the provision be applied to a broad range of contracts. The terms of a bond contract cannot override Federal legislation, even if this was the intent of the contract. Section 19ABA should be amended to require Government programs intended to be caught by the section to be identified in the regulations to the Act;
• There has been no maximum cap placed on bonded medical school places and no strategy developed to progressively convert the bonded positions to regular HECS places based on workforce projections. This implies that a bonding strategy is not a temporary workforce measure, and;
• There is insufficient flexibility in the bond contract to accommodate emergent and unforeseen personal needs of the student.

Medical School Intakes.

These will not augment the GP workforce for another 8 to 10 years at best, while the short term measure of 150 more GP training places p.a. will only help general practice at the expense of the hospitals and other specialties.

Australia has relied very heavily on OTDs and temporary resident doctors (TRDs) to compensate for its underproduction of medical graduates. Were it not for these doctors hospitals and areas of need would be in a much worse situation. The international market for medical practitioners is becoming more hotly contested (just as it is for nurses and other para-medical professionals such as radiographers and nuclear medicine technologists) and Australia will find this strategy more difficult, and more expensive, than in the past. AMA suggests streamlining the rules and operation of the State "Area Of Need" and Commonwealth "Workforce Shortage" programs and reviewing the transparency and appropriateness of the AMC Accreditation Program in order to ensure ongoing availability of properly trained overseas doctors.

In addition, AMA recommends the following supplementary measures to address the workforce shortage, particularly in rural/remote and outer-urban areas:

• A national program to encourage GPs to work in rural/remote and outer-urban areas for a portion of their career; sabbatical leave for rural/remote doctors; and a rural/urban GP practice partnership program.
• Reskilling programs for doctors to re-enter the GP workforce and programs to allow GP access to hospital work to encourage continuity of care and maintenance of skills.
• A support program run through the RACGP for professional, clinical, educational and personal support for GPs.

• Information management/technology systems to assist in reducing isolation and providing valuable resources to underpin clinical decision making and educational programs.

AMA also supports proposals (Coalition and ALP) to increase funding for practice nurses, but believes that funding should be more widely available to all GP practices to support the GPs in managing their patient load and, therefore, in providing more services. The practice nurse role could better enable and encompass population health activities including immunisation, delegated and supervised treatments such as wound care and coordination/integration of patient care to meet the needs of patients with complex needs.

Incentives in the Aged Care Sector

The AMA is concerned at the disincentives and barriers that currently make it difficult for GPs and other health professionals to operate in the aged care sector. Only around 16% of GPs are believed to be currently providing services in residential aged care homes.

The AMA recommends that the Federal Government urgently review the Medicare Benefits Schedule to ensure that doctors who provide medical services to residents of residential aged care facilities are not penalised.

In summary, Australia has started to tackle its medical practitioner shortage—and that’s laudable—but it still has a way to go to devise viable and long-lasting solutions.

(c) the likely impact on access, affordability and quality services for individuals, in the short- and longer-term, of the following Government-announced proposals:

(i) incentives for free care from general practitioners limited to health care card holders or those beneath an income threshold,

The proposed incentives are a fundamental change to the nature of Medicare as it applies to GP services, moving it from a universal payment system to that of a safety net system.

Under the Coalition’s proposed changes, Medicare for GP services will become more like the PBS. The cost and price drivers in the system are such that, ultimately, only some of those in the concessional categories will have free of cost access and such access will be to only a limited group of practitioners. Other patients, including the working poor who do not have health care cards, will be cross-subsidising health care card holders through their gap payments rather than through their taxes. The risk in this is that it moves the financial burden from the wealthier members of society to the sicker members of society.

Nor will it benefit concessional patients in areas already experiencing low bulk-billing rates. This is because the level of incentives will not be sufficient to induce changes in the billing systems of those GPs who have a high concessional patient profile and who are currently charging a co-payment to some or all concession card holders. Indeed, it is open to debate whether it makes sense to target health care card holders in this manner, given that some have incomes up to $80,000 p.a. and very substantial assets.

In summary, if governments judge that the electorate is not willing to pay the taxes to sustain a universal public health insurance system (a judgment for political parties to test in the electorate), then a safety net system is essential—without it, there cannot be equity. The proposed system illustrates the considerable difficulties in effectively targeting the safety net.

(ii) a change to bulk-billing arrangements to allow patient co-payment at point of services co-incidental with direct rebate reimbursement,

The case for universal electronic claiming and assignment of benefit entitlements is compelling. The proposed limitation to "opt-in" practices is inappropriate. The current system imposes needless costs on Governments (the HIC in particular which has needed budget supplementation in 2002-03), medical practices and patients. Universal electronic claiming and assignment of benefit entitlements to providers would reduce transaction costs throughout the system. It would be deflationary, not inflationary, as critics have claimed.

It is impossible for any government to claim that it is a responsible custodian and administrator of taxpayers’ money while it continues to waste public money on a highly inefficient and costly billing system.

(iii) a new safety net for concession cardholders only and its interaction with existing safety nets, and

Two huge, and sometimes conflicting, issues shape health financing system design:

• a fundamental objective of any health insurance system is to allow the population to share the financial risk of poor health; while
• a fundamental issue for public health financing is to ensure that all citizens have reasonable access to health care regardless of their means.

The proposed dual safety net scheme is complex. The population will find it hard to negotiate. AMA advocates a safety net scheme which approaches from the patient’s point of view and which provides support to those with poor health status (more often than not, those with a poor socio-economic status). This could well indicate a single safety net spanning both Medicare and the PBS. Access to the safety net should be at three levels: pensioner, health-care-card holder and non-concessional.

(iv) private health insurance for out-of-hospital out-of-pocket medical expenses; and

In an ideal world, an efficient health insurance system would not have multiple insurers covering elements of the same services. Medicare, however, is a "first dollar" insurance system. It pays a rebate determined by administrative fiat—often with splendid disregard of the costs of producing the service—and it is a very long-standing strategy (introduced by Dr Blewett in 1985) to cost-shift some of the financial risk to households through private health insurance. That process was taken further by Dr Blewett in 1987, and subsequently much further again by both Dr Lawrence and Dr Wooldridge. In short, it is a strategy that has attracted bipartisan political support.

This proposal for private health insurance for out-of-hospital out-of-pocket medical expenses is a further implementation of the Government’s implicit strategy of progressively shifting more of the burden of medical costs from Medicare to private health insurance.

The potential risks to the clinical independence of practitioners and their capacity to deliver clinically appropriate and high quality health care ensures that there is little support for this proposal. The AMA remains opposed to any measure that might encourage managed care to become a feature of the Australian health system. This proposal has that potential. In particular it contains no safeguards around the clinical independence of the general practitioner and does not restrict private health insurers from getting into the business of delivering primary health care services. The AMA believes such safeguards should be guaranteed by legislation.

(d) alternatives in the Australian context that could improve the Medicare principles of access and affordability, within an economically sustainable system of primary care, in particular:

(i) the implications of reallocating expenditure from changes to the private health insurance rebate, and

As noted above, for many years private health insurance has been a political football, whereas the population at large is primarily concerned that their insurance scheme works well and allows them to share the financial risks of ill-health. The underlying rationale for the private health insurance rebate is that it engages the community at large in sharing the cost of health care. Put crudely, it is cheaper for governments to subsidise private care than to pay the full cost of public care. The community may pay less in taxes, but they will pay more in total for private health insurance (because more people are covered). The PHI rebate strikes a bargain whereby the individual may pay more in return for choice—choice of doctor, choice of hospital and more choice as to when service is obtained. If the population sees that a fair bargain has been struck, coverage will be stable and hospital Medicare will likewise be stable because a significant proportion of the population volunteer to help pay their own way instead of demanding their rights to free hospital care under Medicare.

PHI offers choice and access and a balance to the health system. If the bargain offered by Government is not seen as fair, PHI will again collapse and public hospital costs and pressures will again surge through the roof.

There are also issues of spending priorities wrapped up in this question. For example, does the application of the PHI rebate to ancillaries (including some discretionary items of expenditure) justify a higher priority than, say, solving the medical workforce shortage, appropriately funding medical services, funding much needed nursing homes or improving access to effective medicines? These are issues that should be the subject of an open and informed debate involving the whole community.

(ii) alternative remuneration models that would satisfy medical practitioners but would not compromise the principle of universality which underlies Medicare.

The fee-for-service model for remunerating medical practitioners, supported by appropriate levels of rebates so that all Australians get access to primary health care services, remains the best remuneration model by a very wide margin, as it provides the right incentives for the workforce to be productive and patient-focussed. Most of the other models tried overseas (and in many cases, abandoned within a relatively short period of time) are systems designed primarily to cap spending and to ration care.

Australia has, and will continue to, learn a great deal from studying systems tried overseas, especially to ascertain what does not work and why it did not work.

To build on the existing high quality of its health care system, Australia needs to keep a clear view of the cornerstone role played by the GP—as the gatekeeper to the system—and to make the right sorts of investments in training, both to remedy the workforce shortage and to further lift the skills of GPs.

¹ Australian Bureau of Statistics, Australian Social Trends 2003

See attachment Appendix A: Illustrations of the trends in GP MBS fees - for an illustration of Level B fee as a percentage of Average Weekly Ordinary Time Earnings.