Without payroll tax, would bulk billing survive?

The RACGP says the tax will kill it, but bulk billing was heading the way of the dodo long before Thomas and Naaz became a household name.

---

The RACGP is using the death of bulk billing to scare governments into exempting practices from payroll tax, but won’t commit to advocating for more bulk billing if it gets its way.   

Bulk billing was already in a dire state, but the RACGP has written an “urgent” letter to the Prime Minister warning that his investment in bulk billing incentives will come to nought if payroll tax forces practices to close.  

The issue of payroll tax first raised its ugly head in late 2021, when the landmark decision in the Thomas and Naaz case was handed down, clarifying contractor provisions in medical centre settings as related to payroll tax.  

The RACGP and AMA began their campaign against payroll tax in earnest in mid-2022, after doctors in Queensland started to receive backdated bills reaching into the millions.  

Throughout 2023, practices across the eastern states have been audited and found noncompliant for payroll tax, with some asked to pay up to $5 million.  

An RACGP poll of practices found only 3% would be able to absorb costs if GPs were considered employees for payroll tax purposes and 78% would be forced to raise fees.  

“It … undermines the government’s recent investment and reforms, such as the tripling bulk-billing incentives that came in this week,” RACGP president Dr Nicole Higgins told The Medical Republic.  

“That’s targeted relief that will help GPs to bulk bill more patients who need it – children, pensioners, and healthcare card holders.  

“It’s a very welcome targeted measure to help GPs support our patients who are under the most pressure.” 

Bulk billing rates, after a pandemic-induced boost, have been falling sharply since 2021; in January 2022, just 12% of GP services were privately billed, but by June 2023 this had risen to 20.93%. 

While it’s impossible to pinpoint the turning point to the exact month, then-college president Adjunct Professor Karen Price made the unprecedented call for members to stop bulk billing in October 2021, almost a year before payroll tax became a widely recognised issue for the sector. 

This context is what makes Dr Higgins’ comments around payroll tax – i.e. that it has the potential to “kill off” bulk billing altogether – interesting.  

That it would hasten its extinction is plain; as Dr Higgins intimated in a letter to Prime Minister Anthony Albanese this week, there is no point in investing in Medicare if there are no GP practices. 

“While your government has taken steps to support general practice sustainability via Budget initiatives like tripling the bulk-billing incentive, disappointingly state governments are making things harder,” the letter, which was partially reproduced on newsGP, read. 

“Lack of harmonisation is causing confusion and financial distress for many general practices … it is also threatening the ability of practices to make billing decisions in line with the government’s objective to increase bulk-billing rates.” 

Here, it appears that the RACGP is using the prospect of a further dip in bulk billing – something bound to make constituents unhappy – as leverage to get the government to intervene.  

The letter, which the RACGP declined to share with TMR, went on to call for each state premier to commit to scrapping the retrospective collection of payroll tax and to adopt a consistent approach across jurisdictions.  

Queensland, for example, has released an extensive public ruling with examples of the types of structures likely to incur payroll tax, but no other jurisdiction has followed suit.  

What’s not clear is what would happen if the RACGP were to get its way.  

The problem with using bulk billing rates as leverage is that primary care is a collection of small, autonomous businesses.  

Practices that have already converted to privately billing patients are unlikely to go back, a fact that Dr Higgins does acknowledge.  

“All practices make their own decisions on billing,” she told TMR.  

“We’ve seen over 60 practice closures this year, and financial viability has been a consistent factor.  

“We expect we’ll see an increase in bulk billing for children, pensioners, and healthcare card holders, and also veterans due to the tripled Veteran Access Payment, but it’s unlikely to result in an increase in bulk billing for other types of patients.” 

Even with the tripled bulk billing incentive, the most a GP in a major city can earn when they bulk bill a patient for an item 23 is $62.05, which is still $40 less than the AMA’s newly-indexed recommended fee of $102. 

“The increased bulk billing incentive shows the federal government recognises [financial viability] is an issue and is willing to invest in the system,” Dr Higgins said.  

“It’s a start, but what’s needed is greater investment in general practice, which is a cost-effective part of our health system.” 

TMR asked the college whether it would encourage doctors to go back to bulk billing if payroll tax ceased to be a threat. 

It did not answer this directly, but Dr Higgins was clear on the fact that payroll tax is not the only issue affecting practices’ ability to bulk bill. She signalled that the way forward would likely involve further campaigning for better rebates.  

“The cost of providing health services keeps increasing and Medicare rebates alone are not indicative of the value, or cost, of healthcare,” she said.  

“GPs have had to subsidise care, but there is a limit to what practices and the workforce can absorb.”