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MEDICARE: A NEW HEALTH INSURANCE PROGRAMME FOR AUSTRALIA
215
Paying for Health MEDICARE: A NEW HEALTH INSURANCE PROGRAMME FOR AUSTRALIA KEVIN WOODS
Department of Clinical Epidemiology, Hospital Medical College, London El 2AD
London
ARRIVING in Australia in early January, I was tempted to agree with Henry Williams’ view that the mainland state capitals of Australia "are a bit like the city states of ancient Greece; beleaguered concentrations of civilisation against a pretty blank background, with something of the same idolatory of sport but none of the penchant for philosophy". Yet while the cricketers of Australia, Pakistan, and the West Indies competing for another Benson and Hedges cricket trophy were holding the public’s attention an important philosophical debate about the power and the role of the State was gathering momentum. Representing the State on this occasion was the Commonwealth Minister for Health, Dr Neal Blewett; the Australian Medical Association (AMA) was represented by Dr Lindsay Thompson. According to Dr Thompson, the State, in the shape of Dr Blewett (a former professor of politics), threatened clinical freedom, the quality of medical care, and doctors’ incomes. Dr Blewett is not the first Labor minister for health to be so accused. In 1975 Mr Bill Hayden was similarly charged when he introduced a health insurance scheme known as Medibank. After the dismissal of the Labor Government later in 1975, the new prime minister, Mr Malcolm Fraser, set about the destruction of Medibank. By the end of 1981, following numerous administrative changes, this had been achieved. Responsibility for paying for medical care was transferred directly to the individual (the "user pays" principle), who could purchase private medical insurance from one of the many registered health funds. The Government encouraged this practice by offering a 30% tax rebate on premiums, but there was no compulsion to purchase any medical insurance. Pensioners, the unemployed, recent migrants, and other disadvantaged groups were issued with Government health cards which exempted them from charges. Critics argued that the Fraser Government’s approach stigmatised the poor, made cost control difficult (since rising costs were pushed onto the consumer in higher premiums), and led to the proliferation of a fragmented, complex healthcare delivery system. When the present Labor Government took office in 1983, led by Mr Bob Hawke, it was pledged to reintroduce some kind of Medibank scheme. The cost of private insurance, or the risk of facing medical bills they could not pay, was said to deter 2 million (of about 15 million) Australians from seeking medical care. To that extent the purpose of Medicare is to ensure that all Australians have access to basic medical and hospital services. As the Govern-
ment’s information leaflet declared,
significantly, Medicare is much less comprehensive and gives greater scope for private practice, and medical practitioners (except those in salaried public hospital posts) are paid on a fee-for-service basis. The costs of the scheme are met by a new 1% levy on gross (taxable) incomes exceeding A$128.80 (single people) or A$214.25 (married couples) per week, the thresholds being increased by A$21.15 for each dependent child. All Australian permanent residents are enrolled and receive a plastic identification card, which is used when making claims for Medicare benefits. The principal benefits are free treatment by medical practitioners (provided the doctor sends the bill direct to Medicare) and free treatment in public hospitals. Patients treated in private hospitals and private patients treated in public hospitals are not eligible for Medicare benefits in respect of the cost of accommodation; they are, however, eligible for the payment of benefits in respect of treatment wherever it is provided. Private insurance can be bought to cover accommodation costs in private hospitals or as a private patient in a public hospital.
One of the most controversial aspects of the scheme is the level of payment to medical practitioners. The central concept is the "schedule fee", a concept inherited by Medicare, which is an arbitrator’s view of the appropriate charge for individual consultations and procedures. Doctors can, if they wish, charge higher fees, but patients only receive benefits worth up to 85% of the schedule fee. The patient is expected to pay the 15% difference and anything over the schedule fee that the doctor charges. The only exception arises when the doctor sends the patient’s bill direct to Medicare rather than to the patient. In such cases the doctor receives only 85% of the schedule fee and cannot charge the patient any more. Clearly it is in the interest of the patient to consult a doctor who is prepared to send his bill to Medicare (known as "direct billing"), but this places the doctor in something of a dilemma, for if he does bill directly he loses 15% of the schedule fee. The Government argued that direct billing does not lead to a loss in real income because practice administration costs diminish when all bills are forwarded to one client (Medicare) who promises to pay within 5 days. Many doctors are unconvinced, and it is widely believed that doctors will continue to be selective about patients on whose behalf they bill direct. Indeed, before the introduction of Medicare the AMA advised doctors on how to select patients who should be allowed to benefit from direct billing. Those patients not so chosen have to find 15% of the schedule fee and any extra the doctor may charge. Legislation prohibits the purchase of private insurance to cover this gap. To avoid hardship a maximum gap fee of A$10 has been specified. When 15% of the schedule fee exceeds A$10 (which occurs at a schedule fee ofA$67) patients pay no-more, and Medicare reimburses the doctor the full schedule fee less A$10. Even so, this assumes that doctors charge the schedule fee; in fact some charge more in accordance with AMA recommended fees. Patients remain liable for these bills. Since there is no financial incentive in direct billing, doctors are unlikely to change wholesale to direct billing, and patients will have to meet a proportion of costs (at least 15%) directly out of their own
"Only those able to contribute to the cost of
their health care will do so and no-one who can afford it will not be allowed to opt out of paying... the amount people pay will vary according to their income, so that the load will be shared in line with each person’s
ability to pay."2 British readers may but there
Service,
see
parallels with the National Health important differences. Most
are
pockets.
Concern among the medical profession about direct billing extends beyond purely financial issues. Doctors also see the scheme as further evidence of the Government’s desire to take greater control of their clinical practice. Much has been made of Medicare’s introduction in 1984, the scheme and the Minister, Dr Blewett, being characterised as Big Brother. An advertisement authorised by Dr Bruce- Shepherd for the
216
Australian Society of Orthopaedic Surgeons which in national newspapers warned that,
appeared
"the computer for Medicare is the biggest in the country, and appropriately it will begin operations in 1984-the year of BIG
BROTHER", and "Under Medicare, you will becomejust another number in the computer file. Medicare is not medical care-it is a doctrinaire socialist theory which has failed everywhere it has been tried."3
Much of the antagonism to Dr Blewett and his scheme from the new contracts which specialists were required to sign. Private patients in public hospitals can nominate a specialist of their choice, but these visiting specialists are not allowed to charge more than the schedule fee and in the case of diagnostic services must also pay a proportion of it to the Commonwealth Government as a "facility fee". stems
The AMA opposed the introduction of new contracts partly because it saw them as an attempt to reduce specialist (primarily diagnostic specialist) incomes and partly because the legislation gave the minister power unilaterally to vary the terms of contracts. With some justification Dr Blewett argued that total incomes would not be limited, since the charging of schedule fees applied only to work conducted in public hospitals and the facility fee was payment for the use of publicly owned hospital equipment. The AMA, however, would have none of this, and during the latter part of March became more militant in its approach, resorting in New South Wales to a number of 1-day strikes. The principle demands of
the AMA centred on Section 17 of the Health Insurance Act, which it wished to see repealed, to allow for consultation and appeal over terms of contracts. As a way out of the impasse the Minister set up an independent inquiry under the chairmanship of Professor D. G. Penington, dean of the faculty of medicine at Melbourne University. But it was only when the Minister gave way over consultation and the right of appeal that the AMA suspended industrial action and agreed to make a joint submission to the inquiry.
Inevitably the public debate about these issues became decidedly acrimonious, and the Minister’s climb-down over specialist contracts came as something of a surprise. His seen in the wider context of the Australian Prime Minister’s style of leadership, with its emphasis on consensus and harmony. To continue the public slanging-match any longer may, in Mr Hawke’s judgment, have been damaging, especially when his Government could take justifiable pride in establishing the Medicare scheme within a year of regaining office. The Australian public is less concerned with the detail of doctors’ contracts than with access to high-quality medical care at a price it can afford. Medicare achieves this. As Australia’s most popular Prime Minister ever, and with new elections in the offing, Mr Hawke may have decided to quit while he thought his Government was ahead, leaving the electorate to enjoy the benefits of Medicare and to reflect on the trade-union tactics of the AMA, which have only further diminished the public image of doctors.
action, however, needs to be
If this is Mr Hawke’s view of the public’s mood then he may be correct, for the Australian public is tired of a debate which has smouldered and periodically flared since 1975, involving them in numerous changes and confusion. In the end, people want to know the answer to three basic questions about Medicare: What does it provide? What is excluded? What does it cost?
Principal exclusions are the costs of accommodation in private hospitals (and for private patients in public hospitals), dentistry, optical equipment, ambulances, and a variety of other private services-eg, speech therapy, dietetics. Private insurance is available for all of these. Complex calculations are required to determine whether an individual or a family will be better off under Medicare, since the detail of the new scheme is not exactly comparable with the former private insurance arrangements. People who wish to be treated in private hospitals or as private patients in public hospitals and also have comprehensive cover for ancillary services (eg,
dentistry, optometry, ambulances) by combining private insurance with Medicare will still have substantial premiums to pay. The cost of private cover for these services is, in South Australia, A$143.80 per monthsMost of the benefits have upper limits to the amount
payable, and many have member-
. ship qualifying periods. How long these arrangements will last is debatable. If the Labor Party loses power at the next elections then Medicare, like Medibank, may be doomed, and the debate about health insurance is then likely to be reopened. POSTSCRIPT
On June 28, 1984, Professor Penington’s committee published a progress report,5 which set out the major issues considered and the committee’s views on them. The concept of a schedule of fees is supported, though the committee believes the level of fees should be regularly and independently reviewed. Additionally the committee believes the structure of fees should be reviewed in order to accommodate, firstly, a "professional component", which takes account of levels of skill and "relative work values", and, secondly, a "cost component", which reflects costs beyond the control of the medical practitioner. The committee also recommends that doctors should be allowed, in some circumstances, to charge more than the schedule fee. The committee sees this as an extension of the same principle which enables doctors to waive fees or charge less than the schedule fee, but in order to safeguard the public from overcharging the committee suggests that charges above the schedule fee should be subject to audit by professional colleagues in individual hospitals. The committee supports the concept of facility charges-levied to cover the cost of using public hospital facilities-but argues for more detailed evidence on costs before charges are finalised. Finally, the committee supports the view that appointments in public hospitals should be governed by a formal agreement or contract, provided that practitioners have the right of appeal over the contract’s content. The final report of the committee and detailed recommendations will be published in August. Inevitably the committee appears to be moving towards a workable compromise which supports the basic concepts of Medicare but which gives sufficient flexibility to accommodate the major demands of the doctors on the nature of contracts, on facility charges, and on the charging and structure of schedule fees. REFERENCES 1 Williams H Australia. What is it? Sydney Seal Books, 1977: 56. 2. About Medicare I was wondering Medicare, GPO Box 9822, Adelaide. 3. Weekend Australian Jan 21-22, 1984. 4. Medibank Private for South Australian families Medibank Private, GPO Box 999,
Adelaide 5001. 5. Committee of
Inquiry
into
Prof D G Penington). Department of Health.
Rights of Private Practice in Public Hospitals (chairman Progress report, June, 1984. Canberra: Commonwealth
Paying for Health MEDICARE: A NEW HEALTH INSURANCE PROGRAMME FOR AUSTRALIA KEVIN WOODS
Department of Clinical Epidemiology, Hospital Medical College, London El 2AD
London
ARRIVING in Australia in early January, I was tempted to agree with Henry Williams’ view that the mainland state capitals of Australia "are a bit like the city states of ancient Greece; beleaguered concentrations of civilisation against a pretty blank background, with something of the same idolatory of sport but none of the penchant for philosophy". Yet while the cricketers of Australia, Pakistan, and the West Indies competing for another Benson and Hedges cricket trophy were holding the public’s attention an important philosophical debate about the power and the role of the State was gathering momentum. Representing the State on this occasion was the Commonwealth Minister for Health, Dr Neal Blewett; the Australian Medical Association (AMA) was represented by Dr Lindsay Thompson. According to Dr Thompson, the State, in the shape of Dr Blewett (a former professor of politics), threatened clinical freedom, the quality of medical care, and doctors’ incomes. Dr Blewett is not the first Labor minister for health to be so accused. In 1975 Mr Bill Hayden was similarly charged when he introduced a health insurance scheme known as Medibank. After the dismissal of the Labor Government later in 1975, the new prime minister, Mr Malcolm Fraser, set about the destruction of Medibank. By the end of 1981, following numerous administrative changes, this had been achieved. Responsibility for paying for medical care was transferred directly to the individual (the "user pays" principle), who could purchase private medical insurance from one of the many registered health funds. The Government encouraged this practice by offering a 30% tax rebate on premiums, but there was no compulsion to purchase any medical insurance. Pensioners, the unemployed, recent migrants, and other disadvantaged groups were issued with Government health cards which exempted them from charges. Critics argued that the Fraser Government’s approach stigmatised the poor, made cost control difficult (since rising costs were pushed onto the consumer in higher premiums), and led to the proliferation of a fragmented, complex healthcare delivery system. When the present Labor Government took office in 1983, led by Mr Bob Hawke, it was pledged to reintroduce some kind of Medibank scheme. The cost of private insurance, or the risk of facing medical bills they could not pay, was said to deter 2 million (of about 15 million) Australians from seeking medical care. To that extent the purpose of Medicare is to ensure that all Australians have access to basic medical and hospital services. As the Govern-
ment’s information leaflet declared,
significantly, Medicare is much less comprehensive and gives greater scope for private practice, and medical practitioners (except those in salaried public hospital posts) are paid on a fee-for-service basis. The costs of the scheme are met by a new 1% levy on gross (taxable) incomes exceeding A$128.80 (single people) or A$214.25 (married couples) per week, the thresholds being increased by A$21.15 for each dependent child. All Australian permanent residents are enrolled and receive a plastic identification card, which is used when making claims for Medicare benefits. The principal benefits are free treatment by medical practitioners (provided the doctor sends the bill direct to Medicare) and free treatment in public hospitals. Patients treated in private hospitals and private patients treated in public hospitals are not eligible for Medicare benefits in respect of the cost of accommodation; they are, however, eligible for the payment of benefits in respect of treatment wherever it is provided. Private insurance can be bought to cover accommodation costs in private hospitals or as a private patient in a public hospital.
One of the most controversial aspects of the scheme is the level of payment to medical practitioners. The central concept is the "schedule fee", a concept inherited by Medicare, which is an arbitrator’s view of the appropriate charge for individual consultations and procedures. Doctors can, if they wish, charge higher fees, but patients only receive benefits worth up to 85% of the schedule fee. The patient is expected to pay the 15% difference and anything over the schedule fee that the doctor charges. The only exception arises when the doctor sends the patient’s bill direct to Medicare rather than to the patient. In such cases the doctor receives only 85% of the schedule fee and cannot charge the patient any more. Clearly it is in the interest of the patient to consult a doctor who is prepared to send his bill to Medicare (known as "direct billing"), but this places the doctor in something of a dilemma, for if he does bill directly he loses 15% of the schedule fee. The Government argued that direct billing does not lead to a loss in real income because practice administration costs diminish when all bills are forwarded to one client (Medicare) who promises to pay within 5 days. Many doctors are unconvinced, and it is widely believed that doctors will continue to be selective about patients on whose behalf they bill direct. Indeed, before the introduction of Medicare the AMA advised doctors on how to select patients who should be allowed to benefit from direct billing. Those patients not so chosen have to find 15% of the schedule fee and any extra the doctor may charge. Legislation prohibits the purchase of private insurance to cover this gap. To avoid hardship a maximum gap fee of A$10 has been specified. When 15% of the schedule fee exceeds A$10 (which occurs at a schedule fee ofA$67) patients pay no-more, and Medicare reimburses the doctor the full schedule fee less A$10. Even so, this assumes that doctors charge the schedule fee; in fact some charge more in accordance with AMA recommended fees. Patients remain liable for these bills. Since there is no financial incentive in direct billing, doctors are unlikely to change wholesale to direct billing, and patients will have to meet a proportion of costs (at least 15%) directly out of their own
"Only those able to contribute to the cost of
their health care will do so and no-one who can afford it will not be allowed to opt out of paying... the amount people pay will vary according to their income, so that the load will be shared in line with each person’s
ability to pay."2 British readers may but there
Service,
see
parallels with the National Health important differences. Most
are
pockets.
Concern among the medical profession about direct billing extends beyond purely financial issues. Doctors also see the scheme as further evidence of the Government’s desire to take greater control of their clinical practice. Much has been made of Medicare’s introduction in 1984, the scheme and the Minister, Dr Blewett, being characterised as Big Brother. An advertisement authorised by Dr Bruce- Shepherd for the
216
Australian Society of Orthopaedic Surgeons which in national newspapers warned that,
appeared
"the computer for Medicare is the biggest in the country, and appropriately it will begin operations in 1984-the year of BIG
BROTHER", and "Under Medicare, you will becomejust another number in the computer file. Medicare is not medical care-it is a doctrinaire socialist theory which has failed everywhere it has been tried."3
Much of the antagonism to Dr Blewett and his scheme from the new contracts which specialists were required to sign. Private patients in public hospitals can nominate a specialist of their choice, but these visiting specialists are not allowed to charge more than the schedule fee and in the case of diagnostic services must also pay a proportion of it to the Commonwealth Government as a "facility fee". stems
The AMA opposed the introduction of new contracts partly because it saw them as an attempt to reduce specialist (primarily diagnostic specialist) incomes and partly because the legislation gave the minister power unilaterally to vary the terms of contracts. With some justification Dr Blewett argued that total incomes would not be limited, since the charging of schedule fees applied only to work conducted in public hospitals and the facility fee was payment for the use of publicly owned hospital equipment. The AMA, however, would have none of this, and during the latter part of March became more militant in its approach, resorting in New South Wales to a number of 1-day strikes. The principle demands of
the AMA centred on Section 17 of the Health Insurance Act, which it wished to see repealed, to allow for consultation and appeal over terms of contracts. As a way out of the impasse the Minister set up an independent inquiry under the chairmanship of Professor D. G. Penington, dean of the faculty of medicine at Melbourne University. But it was only when the Minister gave way over consultation and the right of appeal that the AMA suspended industrial action and agreed to make a joint submission to the inquiry.
Inevitably the public debate about these issues became decidedly acrimonious, and the Minister’s climb-down over specialist contracts came as something of a surprise. His seen in the wider context of the Australian Prime Minister’s style of leadership, with its emphasis on consensus and harmony. To continue the public slanging-match any longer may, in Mr Hawke’s judgment, have been damaging, especially when his Government could take justifiable pride in establishing the Medicare scheme within a year of regaining office. The Australian public is less concerned with the detail of doctors’ contracts than with access to high-quality medical care at a price it can afford. Medicare achieves this. As Australia’s most popular Prime Minister ever, and with new elections in the offing, Mr Hawke may have decided to quit while he thought his Government was ahead, leaving the electorate to enjoy the benefits of Medicare and to reflect on the trade-union tactics of the AMA, which have only further diminished the public image of doctors.
action, however, needs to be
If this is Mr Hawke’s view of the public’s mood then he may be correct, for the Australian public is tired of a debate which has smouldered and periodically flared since 1975, involving them in numerous changes and confusion. In the end, people want to know the answer to three basic questions about Medicare: What does it provide? What is excluded? What does it cost?
Principal exclusions are the costs of accommodation in private hospitals (and for private patients in public hospitals), dentistry, optical equipment, ambulances, and a variety of other private services-eg, speech therapy, dietetics. Private insurance is available for all of these. Complex calculations are required to determine whether an individual or a family will be better off under Medicare, since the detail of the new scheme is not exactly comparable with the former private insurance arrangements. People who wish to be treated in private hospitals or as private patients in public hospitals and also have comprehensive cover for ancillary services (eg,
dentistry, optometry, ambulances) by combining private insurance with Medicare will still have substantial premiums to pay. The cost of private cover for these services is, in South Australia, A$143.80 per monthsMost of the benefits have upper limits to the amount
payable, and many have member-
. ship qualifying periods. How long these arrangements will last is debatable. If the Labor Party loses power at the next elections then Medicare, like Medibank, may be doomed, and the debate about health insurance is then likely to be reopened. POSTSCRIPT
On June 28, 1984, Professor Penington’s committee published a progress report,5 which set out the major issues considered and the committee’s views on them. The concept of a schedule of fees is supported, though the committee believes the level of fees should be regularly and independently reviewed. Additionally the committee believes the structure of fees should be reviewed in order to accommodate, firstly, a "professional component", which takes account of levels of skill and "relative work values", and, secondly, a "cost component", which reflects costs beyond the control of the medical practitioner. The committee also recommends that doctors should be allowed, in some circumstances, to charge more than the schedule fee. The committee sees this as an extension of the same principle which enables doctors to waive fees or charge less than the schedule fee, but in order to safeguard the public from overcharging the committee suggests that charges above the schedule fee should be subject to audit by professional colleagues in individual hospitals. The committee supports the concept of facility charges-levied to cover the cost of using public hospital facilities-but argues for more detailed evidence on costs before charges are finalised. Finally, the committee supports the view that appointments in public hospitals should be governed by a formal agreement or contract, provided that practitioners have the right of appeal over the contract’s content. The final report of the committee and detailed recommendations will be published in August. Inevitably the committee appears to be moving towards a workable compromise which supports the basic concepts of Medicare but which gives sufficient flexibility to accommodate the major demands of the doctors on the nature of contracts, on facility charges, and on the charging and structure of schedule fees. REFERENCES 1 Williams H Australia. What is it? Sydney Seal Books, 1977: 56. 2. About Medicare I was wondering Medicare, GPO Box 9822, Adelaide. 3. Weekend Australian Jan 21-22, 1984. 4. Medibank Private for South Australian families Medibank Private, GPO Box 999,
Adelaide 5001. 5. Committee of
Inquiry
into
Prof D G Penington). Department of Health.
Rights of Private Practice in Public Hospitals (chairman Progress report, June, 1984. Canberra: Commonwealth