Non-indexation of Medicare rebates

    The Gillard government, as part of its 2014-2015 budget froze the indexation of Medicare rebates from 1st July 2014 to 1st July 2018 (four years). It was to save $1.3 billion over four years and was initially a part of a scheme to save $3.5billion from the Medicare budget. In May 2016 the government announced that it will freeze the Medicare rebate for another 2 years, ie until 2020. This, they claim, will save the government $900 million. This is the positive spin. The negative is that this money will no longer be paid to GPs via the Medicare rebate (via bulk-billing) and not to patients via the Medicare rebate.

So what is the effect of this rebate freeze?

• Practices that primarily bulk-bill will have their incomes effectively reduced over this period. Over six years, at the current inflation rate of 2.5%pa this amounts to 13%. That means, in relative terms, that the government will have reduced income to bulk-billing GPs by 13%. With rising costs this means profit margins reduce. Most practices are currently running "close to the wind", so inevitably it means that some practices will become non-viable, ie will have to close. Their option is to start billing privately so their income per patient encounter increases and suffer the resultant drop in patient numbers as some patients will opt to go to another (bulk-billing practice). These practices should respond by ensuring a better value-for-money for their patients. However many practices cannot change to private billing because they will lose too many patients to nearby large bulk-billing clinics. The surviving bulk-billing practices are more likely to be larger (eg corporate) practices.
• Some practices will cease bulk-billing
• Practices that primarily bill privately will find that they have to increase their fees as a result of rising costs due to inflation. This means that the cost to patients will be higher. A small percentage of patient consultations will shift to bulk-billing practices. Privately billing practices will have their incomes, therefore, reduced. This threatens their viability. Patient fees may need to rise further to account for this. There is some economy in numbers (not great though), ie group practices. There may be a further shift from solo and small group practices to larger practices, including more corporate medicine.
• Therefore the net effect of not indexing the rebates will be a loss of small general practices and a shift to larger group practices, particularly corporate practices. Practices will need to see more patients, ie shorter consultation times. This does not increase the quality of medicine, the incentive being to:
  • have one problem per consult
  • have quick assessments
  • send for tests and review
  • use multiple consultations to resolve each problem
  • use technology more
  • refer all patients with complicated problems
  • see the patient often
  • always bring patients back, even for normal results
• Australia has one of the best health systems in the world. It is underpinned by a general practice workforce that sees almost every person in Australia each year and provides the most cost-effective delivery of health management in this land. The non-indexation of the Medicare rebates, apart from being an insult to GPs, threatens a system that works effectively and economically. The goal is cost reduction but at the cost changing the nature of the GP consultation. The flow on effects may in fact increase the cost of health delivery.

The Grattan Institute's health program director, Stephen Duckett, has warned previously that the Medicare rebate freeze will have a "much bigger" impact on general practitioner revenue than the $5 rebate. He said the impact of the rebate freeze up to July 2018, assuming inflation of 2 per cent, would reduce the real value of a consultation item by an average of 6.8 per cent. However the average inflation rate recently has been 2.5%, so this figure should have been 7.7%. The further two years of rebate freeze (assuming an inflation rate of 2.5%) will take this to 13% over 6 years.

A Sydney University analysis has estimated the freeze will cost the average full time GP $9600 a year from July rising to $29,500 by 2017-18. Doctors will need to charge patients an extra $2.74 to cover costs from this year rising to $8 per visit by 2017-18, the analysis showed.

How Much has Non-indexation Cost GPs So Far?

Note that governments have previously used non-indexation to save money.
See this page to view data on what we should be receiving had the governments honoured the arrangement to index the Medicare rebates since inception.
For a bulk-billing practice seeing 100 patient consultations per week.

Last year: $59,000 as the properly indexed level B rebate should be $48.85.
Since Medicare (Medibank) began: $1,464,939.59

Note

This Medicare rebate freeze is not confined to GPs. There has been no increase in the Medicare rebates for pathology and diagnostic imaging services for 15 years.

The AMA provides a number of resources for doctors to use regarding this issue. The RACGP also provides some resources.

References

Harrison, C. et al., The cost of freezing general practice, Med J Aust 2015; 202 (6): 313-316.