Two weeks ago, the Howard government
announced a plan to reform Medicare. At
the core of its proposals was the suggestion
that doctor's visits should no longer
be free. In our view, the government is
right to try to tackle this problem. But
its prescription is flawed. The snake oil
it is selling could spell disaster for
a large number of Australians, and will
have highly counterproductive effects
on public health in general.
At the heart of the problem is that in
healthcare, as with other goods and services,
free provision leads to over-consumption.
As health researchers have shown, costless
medical care means that people go to the
doctor even when they don't need to, driving
up the cost for all of us.
But there's a better way of operating
a health system, and the change should
hardly hurt at all. As economists have
shown, the ideal model involves a small
co-payment - not enough to put a dent
in your weekly budget but enough to make
you think twice before you call the doc.
And the idea is hardly radical. Countries
with a co-paying public health system
include Austria, Belgium, Finland, France,
Germany, Greece, Iceland, Ireland, Italy,
the Netherlands, Norway, Portugal, and
So if a co-payment is a good thing, why
not applaud the government's plan? The
problem is that, as it currently stands,
the government's proposal is to allow
GPs to charge any co-payment amount. It
is therefore likely that the co-payment
amount will end up as the difference between
the current bulk-billing rate, and the
average non-bulk-billing rate: $12. In
Sydney and Melbourne, the co-payment may
be $20 or more.
The Howard government argues that the
benefit of such a scheme is that it will
help pay to raise the wages of rural doctors
- but it is unclear why urban battlers
should bear the brunt of this change.
Although pensioners are exempted, low-income
workers will be most likely to cut back
on visits to the doctor. For them, $12
is a reasonable chunk of change - about
one seventh of a day's earnings for a
minimum-wage worker. And since 71 per
cent of Australians currently go to bulk-billing
GPs, this is a drastic reduction in equity.
What is the right co-payment rate? The
key with any co-payment system is to set
it at a level that deters frivolous visits
but doesn't run down preventive healthcare.
Diagnosing diseases such as cancer and
heart disease at an early stage dramatically
improves the likelihood of survival, and
is far less costly than treating patients
when the disease has become more advanced.
The Howard government should learn from
the successes and failures of its predecessors.
In 1991, Australia introduced the perfect
co-payment system - $2.50, with exemptions
for certain groups. This scheme was widely
recognised as effective in keeping down
excess visits. Yet it was scrapped in
1992, an unlikely casualty of the Hawke-Keating
Converting the 1991-92 scheme into today's
money would be equivalent to $3.50 - substantially
less than the current Howard plan. It
would be enough to deter frivolous GP
visits, but not enough to limit genuine
preventive care. Everyone, including pensioners,
should pay it, with welfare benefits and
pensions increased to compensate for the
extra burden. Those who are chronically
ill could receive an exemption from the
Finally, the government should indeed
provide its $18,500 incentives for GPs
in regional areas. But this should be
funded by an increase in the Medicare
Levy, rather than a dangerous and unfair
cross-subsidy from battlers.
The government has correctly diagnosed
two of our health system's ailments -
the lack of a co-payment, and the lack
of incentives for doctors to move to the
bush. But the medicine it has prescribed
may do more harm than good. It's time
we asked them for a second opinion.