29 March 2022

This ‘fair fee’ is neither of those things

Comment KnowCents Medicare

Medicare is a mass of contradictions and perverse incentives that requires more than tinkering.


In a recent report by the Grattan Institute, the authors describe the Medicare schedule fee as a “fair fee”. 

“3.1 There is no limit on what doctors can charge for a service  
“Medicare subsidises the cost of providing healthcare services. It sets a schedule fee for each service – defined by the government as a fair fee. The government, through Medicare, then rebates patients either fully or partially for that schedule fee.72 

The report then makes numerous recommendations on the back of the “fair fee” statement. 

It is worth unpacking the fair fee argument because I doubt many GPs would agree that the schedule fee is fair. 

Pursuant to Section 51(xxiiiA) of the Australian Constitution and numerous High Court decisions, it is settled law in this country that the commonwealth government has no constitutional authority to set or control doctors’ fees, so it does neither.  

In practical terms, what this means is that Medicare is a patient insurance scheme, not a doctor payment scheme, and this core tenet of Medicare is expressed in the enabling legislation by references to an “eligible person”.  

Only an “eligible person” can ever be entitled to a Medicare benefit, and an eligible person is a patient, not a doctor. 

The bulk-billing law, Section 20A of the Health Insurance Act 1973 could not be clearer in demonstrating this. Here it is with relevant phrases highlighted. 

Stepping back in time for a moment, use of the word “fee” is nothing more than a historic legacy. The original schedule of benefits was derived from the AMA’s “List of the most common fees” and the word fee has endured.  

While titled the Medicare Benefits Schedule, rather than the Medicare Fees Schedule, it is true that the word fee still appears when describing the 100% benefit. Replacing the word fee with “benefit” throughout the MBS would alleviate a lot of confusion, but we are stuck with it for now. 

However, a legal definition does exist. In 1994 the High Court settled certain key definitions around Medicare benefits, characterising them as statutory gratuities. A type of welfare payment, if you like. Therefore, when a GP bulk-bills and receives the Medicare schedule fee for say, item 23, that GP is not receiving a fee but an assigned benefit.  

It’s a bit of semantic gymnastics and surprisingly complex, but further holes in the “fair fee” argument become clearer once it is understood that Medicare benefits bear little relationship to the actual costs of providing services. This is attributable to the fact that benefits are not pegged to any consistently applied, evidence based, mathematical formula, and never have been. A major project undertaken by the government between 1997 and 2000 resulted in a formula being arrived at, but unfortunately, various doctor groups ensured this excellent body of work would never be implemented. 

It is for this reason that we continue to see “unfair” fees across the MBS. My company has been coding day surgery procedures for years. This work involves reading the operating theatre reports which record “time in” and “time out” of theatre. I don’t know how anyone could possibly argue that the schedule fee is a fair fee when 10 minutes with a GP attracts a schedule fee of $39.10, but a 10-minute cataract operation attracts a schedule fee of $791.45. 

Evidence has also shown the complexity of medical fees in Australia, reporting that a single medical service can be the subject of over 30 different rebates, having vastly different dollar values depending on the payer.  

For example, the schedule fee for a common knee replacement MBS item is $1371.25, but the commonwealth government, when paying under its ComCare workers compensation scheme, reimburses the very same item at $4230.  

It makes absolutely no sense to suggest that $1371.25 is a fair fee for one group of patients, but $4230 is a fair fee for another group of patients having the exact same operation. 

This also challenges the proposal in the Grattan Report to “remove rebates for specialists who charge more than twice the Medicare schedule fee”.  

While no doubt well intentioned, it is important to always remember that the Medicare rebate is an entitlement for the patient not the doctor, so removing rebates from the doctor will likely push patient out-of-pocket costs up, which is the opposite of what the authors intend. Patients have a legal right to choose their doctors. So, if a patient chooses a specialist who charges more than twice the schedule fee and they like them and want to go ahead with treatment, they will have no option but to pay the fee charged, but will be denied their Medicare rebates. This may be particularly problematic for patients living in remote locations or in circumstances where there aren’t many specialists to choose from. It will also likely increase non-compliant billing. Specialists will want to enable Medicare benefits for their patients, so some will charge separate fees (not necessarily illegally) to get around the barrier. I can see exactly how that will happen already. 

Additionally, given double the schedule fee for a common knee replacement is $2742.50, if the Grattan proposal were to be introduced, it would create a perverse incentive for orthopaedic surgeons to stop providing services to the general public, and instead focus on workers compensation patients. There’s plenty of work, and the surgeons will receive more than three times the schedule fee from the same payer – the commonwealth government – for doing the same operation, and they won’t be accused of egregious billing. 

Medical fee and rebate setting is a complex business, and everyone wants solutions to consumer OOPs. But complex problems always require multi-pronged, evidence-based solutions, and it therefore gives me no joy to agree with the statement in the Grattan report that “The government should not increase Medicare rebates to reduce out-of-pocket payments…”  

The evidence we have suggests Medicare leakage is higher than all previous estimates, and may now be in the vicinity of $7-$8 billion per annum, with non-compliant billing out of control. So it would be irresponsible to increase rebates in the short term. 

The starting point is to stop tinkering with Medicare and get to work on critically important structural reform.   

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.

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8 Comments on "This ‘fair fee’ is neither of those things"

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ABDUL AHAD KHAN
Guest
4 months 10 days ago

Dear Editor,
Please correct it to :

GPs only constitute lass than 1 % of our Total Populace.
Our Patients constitute more than 99 % of our Total Populace.

So, NO Political Party will care a damn about us GPs begging & pleading.
But Politicians of all Parties will 100% listen to the Voice of our Patients ( the other > 99% of the Populace ), when they demand an increase in the Medicare Rebates.

ABDUL AHAD KHAN
Guest
4 months 11 days ago

Dear Editor,
You have edited my Draft INCORRECTLY.

I had written : ” GPs constitute 99% of the Populace.

So, NO Political Party will care a damn about us GPs begging & pleading.
But Politicians of all Parties will 100% listen to the Voice of our Patients ( the other > 99% of the Populace, when they demand an increase in the Medicare Rebates.

Kindly correct it.

with regards,
Dr. Ahad Khan

Penny Durham
Admin
4 months 11 days ago

Dr Khan, your comment was not edited at all!

ABDUL AHAD KHAN
Guest
4 months 11 days ago
There are some very very BASIC REALITIES that GPs need to understand. 1. The Medicare Rebate is only a Subsidy from the Govt. for our Patients. 2. GPs are free to charge a Fee which they deem as a ‘FAIR FEE ‘ . 3. GPs are NOT Govt. Servants & as such, why are we on our Hands & Knees, begging & pleading with the Govt. of the day, for a ‘ PAY RISE ‘ ????? GPs constitute 99% of the Voting Populace. It is high time that GPs get up from their Begging Posture & stand up with Dignity… Read more »
Stephen Duckett
Guest
Stephen Duckett
4 months 12 days ago

Importantly, we didn’t say what we think a fair fee is, but by inference you can deduce we think it is less than twice the schedule fee

Chris Lawson
Guest
4 months 10 days ago
Dr Duckett, I’m not sure what purpose is served by defining a published scheduled payment as a “fair fee” while at the same time refusing to state the actual value of that “fair fee” and asking providers to deduce that the true value of the ‘”fair fee” is somewhere between the scheduled amount and twice the scheduled amount. The MBS is desperately in need of clarity rather than strategic obscurity, especially given the consequences for providers, consumers, and the health budget. And also, this suggests that the scheduled payment is well below what the MBS really believes a “fair fee”… Read more »
Mary
Guest
Mary
4 months 12 days ago
-So easy for a Grattan ( Labor ++++) writer to say it is a “fair fee” It is actually a “Fair Fee” ie .a name not a descriptor. -Medicare only ever pay 75 or 85% of their FF anyhow. As for indexing!!!!..give me the pension index rate any day. -It is a refund from the govt to the patient. It is not doctor pay and certainly not doctors right ( try to get a patient to hand over money when they bank their medicare chq) -It is what the govt decides the patient is worth…after that they are on their… Read more »
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