ESSA

ESSA

Get the price right when paying doctors


Edward Meehan

By

September 10th, 2019


Edward Meehan explores how the system that pays doctors creates perverse incentives for lower quality and more expensive care.


General Practitioners (GPs) are the first point of contact between Australians and the medical system. 84% of Australians attended at least one GP appointment in 2017-18, for consults running the gamut from coughs to more complex health concerns and chronic illnesses. However, in the same year, 1 in 25 patients delayed, or forewent an appointment entirely, due to high costs. A further 19.2% of patients had to wait what they felt was an unacceptably long time to see a GP [1]. How might policymakers reduce waiting times and lower the cost of this essential aspect of the healthcare system? Here we explore how revising the Medicare Benefits Schedule, the government scheme which pays GPs and other doctors for their work, might improve price, waiting times and the quality of care.

The Medicare rebate structure induces lower quality care, inefficiencies and higher costs

The existence of time interval-based Medicare rebates, which is unique to General Practice, is partly to blame for lowering the quality of care and increasing prices. Whereas the MBS pays out a set fee for consults with specialist doctors, regardless of their duration, GP consults qualify for different fees based on how long they last. These payments are referred to as “Items” in the MBS and each contains detailed criteria on when they may be claimed. Aside from very short and straightforward appointments, (e.g. when the sole purpose is to have a flu shot) which qualify for Item 3 [2], there are three time-based rebates available for GPs to claim:

Item Consultation Duration Amount GP can claim
23 <20 minutes $38.20 [3]
36 20-40 minutes $73.95 [4]
44 >40 minutes $108.85 [5]

This three-tiered system creates very sharp jumps in remuneration at 20 and 40 minutes. Such a staccato structure perversely incentivises doctors in three key ways.

Firstly, the jump in pay at 20 minutes and 40 minutes encourages GPs to rush as many patients as possible through their practice. After all, they will earn the same amount for a less informative consult lasting 15 minutes as they would for a more in-depth, 19-minute consultation.

Secondly, the jumps in remuneration can also incentivise doctors to be less efficient and unnecessarily drag out appointments. Take for instance a doctor who may find that they have done all that is necessary after 15 minutes. They are faced with the choice of sending the patient on their way or stretching the appointment out for another 5 minutes. Choosing the second option will see their pay jump a huge $35.75 but will also mean they see fewer patients in a day and increase waiting times. Consequently, the peculiarities of the 3-tier system not only rewards inferior practice of medicine, but increases inefficiencies in the system.

So far we have seen that the Medicare rebate system incentivises lower quality care and creates inefficiencies. It can also drive up costs for patients. A GP may choose to bill the cost of an appointment to Medicare directly, leaving the patient with no out of pocket cost (known as “bulk-billing”). On the other hand, they can choose to “privately bill” a patient, whereby they charge a larger amount of their choosing which the patient pays. The patient then claims the relevant Item rebate back from Medicare while covering the gap payment themselves (known as “out of pocket costs”). The decision to bulk or privately bill their patients is one made by the GP, and is influenced by several factors,but it stands to reason that the less profitable a bulk-billed consult becomes for the General Practitioner, the more likely they are to privately bill patients.

This is most apparent when considering the longer Item 36 and 44 consults, which frequently deal with patients with complex, chronic illnesses. These are amongst the least profitable for the GP. The unfortunate consequence of this is that this vulnerable patient group may be more likely to be faced with out of pocket costs under the current framework, even when we account for the fact that GPs who privately bill often make exceptions for elderly patients and those on low incomes.

A quick glance at table 1 summarises most of our discussion. The current remuneration structure encourages doctors to rush through as many patients as possible, to extend consultations in order to qualify for the higher earning item and to privately bill for the lengthiest and least profitable consultations. The MBS effectively turns healthcare into a game of maximising value per minute rather than patient outcomes.

 [6]

What is being done?

Proposals to overhaul the system have come intermittently but major changes have yet to be implemented. A suggestion mooted in 2001 by the Federal Health Minister of the time Michael Wooldridge was the creation of a five-tiered system, with different rebates at 5, 15, 25, 35 and 45 minutes [7]. In 2014, amongst a wide-ranging suite of proposed changes to Medicare, a so called “10-minute rule” nearly came into effect. This would have placed a minimum time requirement of 10 minutes on Item 23 rebates and attached consults that fell short of this threshold to Item 3 [8]. Most recently, came a 2018 report by the General Practice and Primary Care Clinical Committee (GPPCCC)- a subsidiary of the MBS Review Taskforce with the job of providing recommendations regarding changes to MBS Items. The report made two recommendations pertaining to time intervals. Firstly, a kind of “6-minute rule” which would have applied to Item 23 in the same way as the 10-minute rule and secondly, to “create a new item for consultations of 60 minutes or more” [9].

 Despite a seeming consensus that changes to the current time intervals are warranted, all these proposals have faced opposition on various counts, indicating the many complex factors involved. All plans to alter the Medicare rebate schedule must be balanced against the reality that doctors ultimately retain total freedom to switch from bulk billing to private billing at any time. Any changes to the system alter the incentives to do so and hence have the potential to hit or help the hip pocket of both the doctor and the patient, a hit both these groups naturally wish to avoid. The 10-minute rule was opposed by the Australian Medical Association (AMA) on the grounds that the lower pay would make bulk billed consults under 10 minutes unprofitable, leading doctors to privately bill patients to make the appointments worth their while [10]. The Royal Australian College of General Practitioners opposed the GPPCCC’s suggested 6-minute rule along similar lines, warning of that it would discourage efficient practice. And while the RACGP agreed with the proposal for a new Item for 60-minute consults, they warned that such a move, without broader changes to the “poor weighting…. and overly long time-intervals”, would not be enough to fix current issues.

In 2001, Health Minister Michael Woolbridge suggested that the three-tiered GP rebate scheme was “universally felt to have outlived its usefulness” He went on to make a fateful boast: “if I can reach some sort of consensus…. I pretty much have carte blanche” [11]. While his first statement remains true today, any semblance of consensus on this issue has proved troublingly elusive.


[1]  4839.0 – Patient Experiences in Australia: Summary of Findings, 2017-18. (2019). Retrieved 7 September 2019, from https://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/4839.02017-18

[2] Item 3 | Medicare Benefits Schedule. (2019). Retrieved 7 September 2019, from http://www9.health.gov.au/mbs/fullDisplay.cfm?type=item&qt=ItemID&q=3

[3] Item 23 | Medicare Benefits Schedule. (2019). Retrieved 7 September 2019, from http://www9.health.gov.au/mbs/fullDisplay.cfm?type=item&q=23&qt=ItemID

[4] Item 36 | Medicare Benefits Schedule. (2019). Retrieved 7 September 2019, from http://www9.health.gov.au/mbs/fullDisplay.cfm?type=item&q=36&qt=ItemID

[5] Item 44 | Medicare Benefits Schedule. (2019). Retrieved 7 September 2019, from http://www9.health.gov.au/mbs/fullDisplay.cfm?type=item&q=44&qt=ItemID

[6] RACGP Submission: Report from the Medicare Benefits Schedule (MBS) Review’s General Practice and Primary Care Clinical Committee. (2019). Retrieved 7 September 2019, from https://www.racgp.org.au/FSDEDEV/media/documents/RACGP/Reports%20and%20submissions/2019/RACGP-MBS-Review-GPPCCC.pdf

[7] Illawarra Mercury. (2001). Medicare revamp boost to doctors. Retrieved from https://search-proquest-com.ezproxy.lib.monash.edu.au/docview/364469008/F65D2BCFD8D64570PQ/3?accountid=12528

[8] Medew, J. (2015). Patients face new $20 fee for seeing their GP. The Sydney Morning Herald. Retrieved from https://www.smh.com.au/politics/federal/patients-face-new-20-fee-for-seeing-their-gp-20150112-12mpag.html

[9] Report from the General Practice and Primary Care Clinical Committee: Phase 2. (2018). Retrieved 7 September 2019, from https://www1.health.gov.au/internet/main/publishing.nsf/Content/mbs-review-2018-taskforce-reports-cp/%24File/General-Practice-and-Primary-Care-Clinical-Committee-Phase-2-Report.pdf

[10] Medew, J. (2015). Patients face new $20 fee for seeing their GP. The Sydney Morning Herald. Retrieved from https://www.smh.com.au/politics/federal/patients-face-new-20-fee-for-seeing-their-gp-20150112-12mpag.html

[11] Illawarra Mercury. (2001). Medicare revamp boost to doctors. Retrieved from https://search-proquest-com.ezproxy.lib.monash.edu.au/docview/364469008/F65D2BCFD8D64570PQ/3?accountid=12528

The views expressed within this article are those of the author and do not represent the views of the ESSA Committee or the Society's sponsors. Use of any content from this article should clearly attribute the work to the author and not to ESSA or its sponsors.

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