Many thanks to the Conversation for allowing us to republish this by Jim Gillespie, University of Sydney

Incremental creep and massive holes in universal health coverage (think dental care) have left many Australians questioning whether there’s any such thing as “free health care”. One recent study estimated households now pay directly for almost 25% of the nation’s health costs.

Into this existing mess of user charges has stepped yet another proposal to cost shift from government to households.
The Australian Centre for Health Research (ACHR), a small “think tank” set up by the smaller private health funds, has proposed a new A$6 co-payment for access to bulk-billed general practitioner services.

Mandatory payments for GP visits

The ACHR claims to build on the abortive 1991 Hawke government attempt to impose a similar charge. Like the Hawke proposal, it aims to relieve the federal budget by shifting part of the cost of primary care to patients. Around 80% of GP services are currently bulk billed, with no upfront charge.

The ACHR claims consumers wouldn’t notice a A$6 charge as it’s “less than the price of two cups of coffee”. But at the same time it would change behaviour, sending “clear price signals to Australians that their basic health-care services are not free goods” and will be better “valued by consumers if they come with a price signal”.

The proposal recommends freezing GP rebates paid by Medicare, which would prompt GPs to charge the co-payment to maintain their incomes. Consumers would have a new incentive to think twice about going to the GP with a minor complaint. They would look after their own health and, to avoid the A$6 charge, move to more healthy lifestyles.

This would, the ACHR claims, save the federal budget up to A$750 million.

However, despite arguing for a clear and direct price signal to consumers, the ACHR suggests that private health insurers should be allowed to cover co-payments for GP services. This extension of insurance sits oddly with the ACHR claim that the co-payment would end the “moral hazard” of consumers cushioned from the real cost of services.

Co-payments paid out of insurance would quickly increase. Australia’s private insurers have a poor record of resisting fee increases and can rely on government subsidies to cover much of the rise in premiums. Medicare is likely to come under greater pressure to raise rebates as the gap widens (especially for the uninsured).

Insured co-payments would weaken bulk billing, undermining one of the major restraints on medical costs.

What does the evidence say?

This has been all been tried before. In the first term of the Howard government, GP rebates were frozen, and there was a large decline in bulk billing, as GPs made up the lost income by charging their patients. This ended in a political crisis, as consumers turned on the government.

Tony Abbott entered the health ministry in 2001 with the task of restoring bulk billing and fixing a major political sore, vowing to become “Medicare’s greatest friend”.

The ACHR relies on heroic assumptions about consumer behaviour.
The only piece of evidence cited is an experiment in the effects of different levels of co-payment carried out in the United States in the early 1970s by the RAND Corporation.

The RAND experiment found that co-payments (the lowest was at 25% of service costs) did influence demand for services across the board, without a significant impact on health outcomes. It has become the main source of justifications for increased co-payments as a budget control.

Even at the time these results were criticised. The study excluded people over 65 – a serious defect if its results are applied to the Australian context. Even in the 1970s, US health care was far more expensive and patients more heavily serviced than their Australian equivalents. A lot of fat could be cut from the American system without it affecting basic health outcomes.

So, is there evidence of unnecessary demand for Australian GP services?

The Bettering the Evaluation and Care of Health (BEACH) study, which has been collecting data on primary care services since 1998, shows there has been an increase in use of GP services. But this is explained by the increased age of patients and the growing complexity of the issues GPs handle. Both are linked to the rise in chronic illness.

Chronic illnesses such as diabetes 2 are not better managed by discouraging contact with the health system. We need to improve health literacy and self-management but there is no evidence that this will occur through the financial pain of a A$6 co-payment.

The larger private health insurance funds are now investing considerable resources in prevention as they see this as a major component of their costs. Their response has not been blunt financial penalties, but encouragement to live healthier lifestyles.

Reining in health costs

Our health system shouldn’t be immune from possible expenditure cuts. But primary care is a poor starting point.

The RAND study did offer one way forward. One consumer group was recruited into a “free” Health Management Organisation, which employed salaried doctors and tried to integrate care across the system – from primary care to hospitals.

Like groups that paid co-payments for fee-for-service care, the HMO group recorded major cost savings. But rather than an across-the-board effect, the HMOs saved money by reducing hospitalisation (a 39% fall).

The Chronic Care Model of Care, which is widely used in the US, is similarly focused on broader treatment, bringing community based primary and hospital care together and reducing unnecessary hospital admissions. “Self-management support” plays a big part in this model – but co-payments do not figure.

Australian governments and health-care providers have been making a slow journey towards integrating care across the system. The fruits are being seen in fewer hospitalisations and better care. But attempts to revive discredited models of co-payment distract from the real problems facing Australia’s health.

Jim Gillespie’s latest book Making Medicare: The Politics of Universal Health Care in Australia, co-authored with Anne-Marie Boxall, was published in September by UNSW Press.

Jim Gillespie receives research funding from the NHMRC and WentWest, Western Sydney Medicare Local.

This article was originally published at The Conversation.
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