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There is no need for a Chicken Little response - Medicare reform is needed

By Russell Schneider - posted Friday, 9 May 2003


Whenever governments attempt to reform health policy there is invariably a flurry, if not a storm, of opposition and criticism which always reminds me of the story of Chicken Little and his claim "the sky is falling".

So we shouldn't be surprised at the current outbursts about the federal government's Medicare reform package. Nor, however, should we assume the noisy opponents of change are necessarily right or representative of either the medical profession or the community as a whole.

In fact the reforms, combined with a very generous public-hospital offer which the federal government put on the table - the only string being a requirement that the States match it and commit that they will not withdraw their own funds from the public sector - represent the strongest shoring-up of Medicare for more than a decade.

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Perhaps the fact that the initiative is coming from a Liberal government is the reason so many left-wing groups are decrying what they would like to portray as the "end of Medicare": they can't bring themselves to admit that what is being proposed makes sense. Nor can they see the absurdity of their own simplistic solution that all the government needs to do to restore universal bulk billing (a left-wing icon) is pump massive amounts of money into the system and fund it, at least in part, by withdrawing the 30-percent rebate on private health insurance.

Such a "solution" would, of course, exacerbate the problem. Simply increasing the Medicare rebate is just inflationary: it gives no guarantee of more bulk billing or lower co-payments. Logically, doctors would simply maintain their existing margins and pocket the increased Medicare rebate - unless the constitutional ban on capping doctor's fees is removed. So why don't the opponents of the current reforms demand a cap on doctor's fees?

I'm not suggesting this be done but if people argue doctors will exploit the government proposals, they must accept that doctors will exploit their own proposals. The only solution is constitutional change - why aren't they pressing for that?

Instead they want to fund a move which must, on their own logic, be inflationary, by withdrawing or reducing the 30 per cent rebate on private insurance. This would simply exacerbate existing public-sector problems, as the 2.2 million people who will go to private hospitals this year drop their cover and demand public treatment.

Despite the folklore, the fact is Medicare was never designed to provide every Australian with free (i.e., at the point of service) bulk-billed visits to every doctor. Bulk billing was intended to hold down medical incomes on the assumption that competition would encourage most doctors to bulk bill and reduce the capacity of others to charge significantly more than the fee schedule. I know, 'cause I was there.

Unfortunately, some people - particularly those loudest in opposing the changes - seem to think that a fair and equitable health system revolves around letting rich people visit the doctor (or take up space in a public hospital) without being charged a fee. If that's equity I don't want any!

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I lost my taste for communism when I went to Moscow in 1975 and saw old ladies sweeping streets in falling snow, while the wives and girlfriends of the apparatchiks swept past in their mink coats to their chauffeured limousines!!

The fact is the wealthy, the well educated and the well connected will always do better than the weak and the poor under any system. In a democratic and equitable society the role of government is to try to establish structures which minimise that situation. Universal bulk billing does not. It is simply upper-class welfare.

As I understand it, the government's proposals will go a long way to creating structures which will, for the first time, give people on lower incomes some certainty that they will be able to be bulk billed.

Nor will it automatically mean that non-healthcare-card holders will face an immediate hike in fees, for that would require a very significant change in GP business behaviour which I suspect is being overplayed.

At the moment there are four different ways in which GPs handle bulk billing. A doctor may:

  1. Bulk bill all their patients.
  2. Bulk bill their concession-card holders and charge everybody else a co-payment.
  3. Bulk bill patients selectively, at times making concession-card holders pay a fee (especially if the GP thinks they don't need as many visits as the patient thinks) and at times bulk billing people on higher incomes, especially young families.
  4. Not bulk bill anyone.

Nothing the government is proposing will stop the first group continuing to bulk bill everyone. In fact, if the practice has a large number of concession-card holders the GP will get a boost in income for them. The GP will have to make a business decision as to whether imposing a charge on the non-concession-card holders will drive them away from the practice.

The second group may get sufficient increase from higher bulk-billing rates to maintain their charges for other patients so no one is worse off. In the third case, the GP is given a real incentive to bulk bill all their concession-card holders rather than pick and choose. I would have thought this would really appeal to those concerned with social equity.

What will be different is that, for the first time, people on low incomes will be able to get a guarantee that a GP practice will bulk bill them every time they visit. And in rural areas the proposed increase in payments should encourage a return to bulk billing.

This, of course, is not recognised by the rather incompatible alliance of doctor's representatives and left-wing politicians and academics who are berating the moves. But I can't see the logic of their solution: increasing the Medicare rebate across the board.

If a doctor is so greedy as to abuse the government proposals, why wouldn't they abuse a higher rebate and simply maintain co-payments? (in addition to which, of course, payment of higher rebates because of an alleged decline in bulk-billing rates would simply encourage bad behaviour in the future).

And finally there's the offer of catastrophe insurance for those unfortunate people who become so ill that they rack up more than $1,000 in medical costs above the Medicare rebate that so antagonises the anti-health fund lobby.

At the moment those people don't have the option of covering those excessive bills: they have to pay them. What's wrong with giving them some protection if they wish to have it?

Unfortunately some people (the usual suspects) are so opposed to the concept of private health insurance that they blind themselves to the important part insurance plays in our health-care system.

Their real agenda is to transfer the 30 per cent rebate - which makes it possible for more than 2 million low-income earners to retain health insurance and therefore exercise some choice in their health-care arrangements - from health fund members using the private sector to health-care providers in the public sector.

What they ignore is that removal of the rebate would drive millions of people out of the health insurance system, forcing up prices and driving even more onto the public sector.

This would, of course, strengthen the role of public-sector unions representing doctors, nurses and everyone else in the health-care system and make it easier for them to squeeze future governments (and their taxpayers).

Is it too cynical to ask whether that's what all the fuss is really about?

Subject to any analysis, the federal government's package is a sensible and constructive one that deals in an equitable way with current and foreseeable future health system problems.

Australia, like the rest of the world, faces problems funding the health care needs not just of an ageing population but a world in which technology makes it possible to offer treatments hitherto unimaginable - but at continually escalating prices. As the recent SARS scare showed, nature is also capable of throwing up hitherto unimagined illnesses which will, of themselves, stretch the capacity of the health care system AND taxpayers to fund it.

In these circumstances a rational and compassionate society will ensure that its resources are directed to those most in need, while mobilising the capacity of the more fortunate to take some of the financial responsibility for their own care. Importantly, too, it will ensure that those on lower incomes are offered an opportunity, if they wish to use it, to access private treatment options as well as public ones. The 30 per cent rebate performs this task admirably.

The alternative is rationing public-sector treatments. We all know who will lose out then. And it won't be those who can afford to buy their way around the system. A black market in health-care services is the worst possible solution to our society's problems, and the sooner the opponents of sensible reform realise that the better.

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Article edited by Sue Cartledge.
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About the Author

Russell Schneider GAICD was CEO of the Australian Health Insurance Association from 1983 to 2006. Before that he was Canberra Bureau Chief and Political Correspondent for The Australian. He was a director of a major health insurer from 2006 until 2017.

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