12 April 2022

High risk for low reward? Don’t all rush at once

KnowCents Medicare

Self-interest is only one of the reasons why the Grattan Institute proposal to reduce out-of-pocket costs can’t work.


Reducing consumer out-of-pocket medical costs (OOPs) by encouraging more non-GP specialists to bulk-bill, is laudable, and the right direction for reform initiatives.

In a recent report by the Grattan Institute, the authors suggested that to make this aspiration a reality, the government should establish grant funded bulk-billing specialist private clinics, and expand public hospital specialist outpatient services.

Both proposals rest on an untested assumption that specialists will sign up. However, the incentives and drivers for success are nowhere apparent, and the proposals seem at odds with basic economic theory and common sense.

I mean, why would any non-GP specialist increase their legal risk, and reduce their income, for doing the same work? Could you expect that of any worker?

The risks of bulk-billing

My research found that bulk-billing decisions may not be just about the money. The simple truth is that when you bulk-bill, you become a deer in the department’s headlights. So, even doctors who would prefer not to charge OOPs appear to be realising that the only way to avoid prosecution for breaches of poorly understood, mercurial rules, is not to bulk-bill, or to underbill – for example, putting item 23 on a patient receipt when the service provided was a 36, or just leaving a service off altogether. Evidence suggests that the convenience of immediate and direct payment from bulk-billing may have been overtaken by the contrasting threat of prosecution.

It is certainly less risky to direct available rebates into a patient’s bank account rather than the doctor’s, because if the government seeks to recoup payment, they will usually need to recover from the patient, which they are less likely to do.

Public outpatient clinics are closing

Following the Senate committee endorsement of the new PSR Bill, during a meeting with a senior clinician and department director at a public hospital, I was informed that the hospital will no longer permit private Medicare outpatient clinics to operate. It seems that giving more power to the PSR may have been the last straw. So, the hospital has apparently decided that all private outpatient clinics must now be located off campus. He said that public bulk-billing clinics are therefore closing, and patients are now being referred off campus to private rooms, where they may or may not be bulk-billed.

This was entirely predictable. The combined effects of some GPs refusing to name referrals, the recent failed attempt by the department to reduce the outpatient rebate from 85% to 75%, the department openly encouraging GPs to whistle blow on their specialist colleagues who refuse to see patients without a named referral, as well as the PSR threat, have made Medicare billing in public outpatient clinics just too risky.

So, the Grattan proposal to expand outpatient clinics seems unlikely to succeed, given available evidence suggest specialists and public hospital administrators are already moving in the opposite direction. The administrators are encouraging patients to be referred to see specialists in private rooms where they may be charged OOPs – not necessarily through greed, but because specialists are scared of the PSR too, and don’t want to bulk-bill for the same reasons as GPs.

It all makes perfect sense. In private rooms there is no requirement for named referrals, the rebate is 85%, and if you charge a gap, you’ll avoid PSR scrutiny. Who would do anything different?

Bulk-billing + grants = double dipping

In addition to public hospital outpatient clinics, the Grattan report proposes a trial of grant-funded bulk-billing clinics, managed by the PHNs:

“The federal government should subsidise the establishment of new co-located private specialist clinics that do not charge patients out-of-pocket. These ‘bulk-billing specialist clinics’ should be established within bulk-billing general practices …The government should contract PHNs to manage the program … GP clinics could be funded under a Health Program Grant … To attract the necessary additional workforce, PHNs may need to set salaries at competitive rates – above what they might otherwise get through solely relying on the Medicare bulk-bill fee.”

In addition to the legal risks associated with bulk-billing already discussed, the proposal to both “set salaries at competitive rates” and bulk-bill, will almost certainly fall foul of the law.

The Part IV grants in the Health Insurance Act 1973, which the authors refer to, specifically include equivalent Medicare fees for practitioner billings. In my experience, the department has always interpreted these provisions as prohibiting bulk-billing. I am working with a primary health clinic at the moment who has received written departmental advice that they are prohibited from bulk-billing certain services because they have effectively been paid for those services in the grant, and if they also bulk-bill, they would be double dipping.

The authors also appear to have misunderstood the legal mechanism that enables Medicare bulk-billing by salaried specialists in public hospital outpatient departments, suggesting a similar mechanism may underpin this proposal. Unfortunately, no such mechanism exists outside of the National Health Reform Agreement.

And then there’s the elephant in the room question of what appetite specialists would have for working side by side with GPs and being managed by PHNs, whose GP members are often hostile towards them insofar as requests for named referrals are concerned. The years long battle between GPs and public hospital specialists around Medicare billing and named referrals has left scars.

The reforms we really need

If we are serious about testing proposals like these, we first need to create enablers by attending to structural problems down in the Medicare engine room. Until we do, these types of initiatives have no chance of succeeding, and it is a waste of time to try.

There just is no point in continuing to fiddle with Medicare in the way we have for the last two decades, because the evidence makes clear we are making everything worse. It’s like continually changing the windscreen wiper blades on a car that has a burnt-out engine.

To get Medicare back on the road we need to put in place some necessary preconditions that will enable good reform ideas when they come along. To enable piloting of the Grattan proposals the bare minimum would be to: 

1. Make it a legal requirement that all referrals are named, and rigorously enforce monetary penalties for breaches; 

2. Make it a legal requirement that all referrals are arm’s length, and incentivise public hospitals to return patients to their GPs post discharge, while protecting consumers from OOPs; 

3. Remove outpatient rebates for certain procedures that are ordinarily day admissions (otherwise the sudden influx of claims from public hospitals would be ruinous); and 

4. Dismantle the PSR, end the department’s Robodebt scheme, and replace both with a modern, digitally enabled, fairer policing and enforcement system. 

This is obviously only a start, but we have to start somewhere, and points 1-3 are relatively quick and easy to implement.  

Perhaps our new federal health minister will have the courage to admit that Medicare is currently not roadworthy and lead us through an urgently needed period of structural reform. Because as it is, Medicare is heading for the ditch.  

Dr Margaret Faux is a health system administrator, lawyer and registered nurse with a PhD in Medicare compliance, and is the CEO of AIMAC, which offers courses and explainers on legally correct Medicare billing.