New paper offers alternatives to co-payment and rebate cuts

The announcement by Health Minister Sussan Ley that she has abandoned the planned Medicare rebate cut, flagged by her predecessor Peter Dutton, and is going to “pause, listen and consult” with the health sector and cross-benchers makes both political and policy sense. 

The rebate cut was unlikely to pass the Senate and had been widely criticised by a broad spectrum of health groups, damaging the Government’s relationship with the sector.  Ley’s move gives the Government the opportunity to re-group and re-think its approach to health financing and to repair its relationship with key health groups before the next federal election.

Despite claims by the Government that its plans to cut Medicare rebates and introduce co-payments are the only options being put forward to meet the challenge of rising health care costs, there are a wealth of other ideas being proposed to improve the way in which we manage our health budget (some of which have been suggested by the Government’s own Department). 

One of the most recent contributions to this debate is a new paper by Dr Lesley Russell, from the Menzies Centre for Health Policy at the University of Sydney and myself.  This paper outlines some of the key health funding challenges facing our health system and proposes some alternatives to rebate cuts and co-payments to improve the management of health expenditure and rising out-of-pocket health care costs. The paper is intended to prompt further discussion on these important issues for the future of our health system, rather than provide definitive solutions.

An overview of the paper follows, with the full version available on Scribd.

The recent debate over the Government’s proposed GP co-payment has raised broader issues about how we manage out-of-pocket (OOP) health care costs within our health system.  Currently, individual co‐payments comprise around 17% of total health care expenditure in Australia – the largest non‐government source of funding for health goods and services.[1]  This contribution by individuals represents a higher proportion of health care funding than in most other OECD countries and equates to $1,078 per capita. Contrary to the international trend to lowering OOP health costs, OOP payments in Australia are growing at a faster rate than the broader economy, average incomes and overall household expenditure.[2] Measured in current prices, out‐of pocket expenditure on health per capita has grown by 89.0% over the decade to 2011–12. In particular, total patient out‐of‐pocket expenses for primary and specialist care have significantly increased over the past 10 years, rising from $9.7 billion in 2001–02 to $17.1 billion in 2011–12, a 76% increase.[3]  This is an issue of growing importance and, if not addressed, one which will continue to impact on the ability of Australians to access needed health care and to undermine the universality of Medicare.   The Abbott Government has pushed to introduce or increase co-payments, claiming variously that growth in health care costs is unsustainable, price signals are needed to reduce GP visits, budget deficits must be addressed and increased funding is needed for medical research. But targeting primary care for cost savings will quickly backfire. Research shows that while the number of GP visits has increased, these services are cost-effective; if the same services were performed in other areas of the health care system, they would cost considerably more.[4] There is also no evidence that the proposed co-payment will result in a reduction in overall health care costs or a more efficient allocation of resources.  In fact, there is evidence to show that it may reduce access for a number of disadvantaged groups leading to an escalation of health problems and higher costs elsewhere in the system.     This is a difficult topic – it involves a potent mix of evidence, ideology, consultation and leadership.  There is no silver bullet and effective solutions are unlikely to be found through simple ‘add ons’ to our current health funding system, developed in an age where the majority of health care was for short-term, acute problems. They are more likely to involve a multi-faceted approach and require a re-thinking of the ways in which we generate and allocate our health care resources and ensure health care funding decisions reflect our society’s underlying values. Ironically, the last time an Australian government moved to tackle out-of-pocket costs was when Tony Abbott was Minister for Health and introduced the Extended Medicare Safety Net to cover rising specialists’ fees.  This approach was recognisably flawed from the beginning; it quickly led to inappropriate fee increases by some specialists, forcing successive governments to tinker with the policy to limit cost blow-outs, and the majority of safety net benefits flow to the most well-off Australians.  This policy serves as a salutary lesson on the pitfalls of attempting to scaffold a policy solution onto an already rickety and unstable funding system. To kick-start the necessary analyses, debates and policy formulations, we have collaborated on a paper which lays out some of the issues, as we see them, and provides suggestions for areas in which partial solutions may be found.   The approach we have taken is informed by the substantial evidence supporting the benefits of increasing access to primary care. There are convincing data from a range of sources that timely and affordable access to prevention and primary care services is key to improved health outcomes and sustainable health care costs.[5]    We also argue that any proposed policies for managing OOP costs should be assessed against the following criteria:

•  Evidence-based; 
• Led by community values and priorities;
• Do not increase inequality; 
• Do not reduce quality of care; 
• Recognise the business case for providers and take into account their preferred ways of working and professional cultures; 
• Are realistic within current legislative, workforce and political constraints; 
• Do not create unexpected consequences and inefficiencies elsewhere within the health care system; 
• Target those who most need assistance; and 
• Do not undermine the sustainability of the health care system

The paper identifies gaps in the research required to provide the foundations and evidence for policy changes to address OOP costs in an effective and targeted fashion and to avoid the possibility of unintended consequences.  These include a need for greater consultation with the general public in order to find out what the community values and priorities are in this area and also improved information on who is incurring high OOP costs and what forms of care these costs are for.     Areas for consideration for policy development are discussed in some detail, including the following:

• Registration with general practice (in particular for people with chronic conditions);
• Better utilisation of the health workforce (including increasing the role of practice nurses and allied health professionals);
• Reconsidering the GP gatekeeper role (E.g. do we always need a GP to authorize repeat prescriptions or provide referrals to specialists?);
• Tackling over-testing and over-prescribing (there is evidence to suggest that a significant proportion of tests being performed are either unnecessary or duplicative);
• Establishment of community health centres with salaried staff (particularly in medically under-served and lower socio-economic status areas); 
• Increasing the value of existing health expenditure (through reducing funding for low value services, improving clinical practices and increasing generic substitution of medicines);
• Increased transparency around specialist fees (giving consumers more power to question unusually high charges); and
• Consumer payment strategies (assisting consumers manage their OOP costs over time) . 

These suggestions all highlight the growing need to focus on delivering value and quality in health care.  The US health care system demonstrates in many ways that the most expensive care is not necessarily the best care, so it is in the best interests of all the funders of health care  – governments, private health insurers and especially patients – to determine that their money is spent as wisely and as well as possible.  At the same time it is necessary to ensure that those with the greatest health care needs are protected from the cost barriers that limit their access to needed services. Failure to do this has consequences well beyond the individual, with increased acute care and disability costs and reduced productivity. In part because overall Australian health outcomes – as indicated by broad measures like life expectancy and infant mortality – are so good we have allowed ourselves to be blinded to the increasing erosion of the universality of Medicare and the subsequent widening in health disparities. Under a truly universal health care system we all pay in according to our means and take out according to our needs. We never know when or if the time will come for even the wealthiest of us to receive health care services costing well beyond any expectations. We encourage all interested in this issue to read the paper and we welcome all feedback and comments on its suggestions.  While it is a challenging issue, we strongly believe that through positive collaboration we can galvanise thought, evidence and action to develop effective solutions which do not compromise quality, efficiency or equity.