Price signals and health hazards

The Prime Minister excuses the $5 Medicare co-payment as a necessary “price signal” aimed at discouraging over-use of doctors.

Tell that to the frequent users of medical services, those with chronic illnesses like heart conditions, high blood pressure, cancer, arthritis and depression. Patients with chronic conditions not eligible for health concession cards would account for a large number of the more than 30 million GP services a year that will now attract a $5 cut in the Medicare rebate.

Unlike most other goods and services, the need for health care is not something over which the consumer can exert that much influence at the time. For them the $5 slug may be a fortnightly reality along with a variety of other health costs that come with chronic illness.  

To put the co-payment in the category of just another “price signal” in the marketplace misses the over-riding reason for a universal health scheme like Medicare: to ensure those in need of health care can seek treatment free of cost concerns.

It is now becoming clear that a significant outcome of the Government’s three-pronged measures to cut costs will be to undermine Medicare’s role as an effective national insurer of medical services. The freeze on all Medicare rebates until 2018, after years of crimping on inflation adjustments, will not only place specialists further out of reach for many patients, but also raise the cost barrier for many people needing to see their GP.

The Australian Medical Association is forecasting upfront gap costs could rise to $45 - already near-reality in many Australian suburbs and the tenor of the rising wrath of the AMA would indicate that GPs fear for their incomes.  That patients may see their doctor less often because of rising costs will not appeal to the medical profession.

The performance of Australia’s health scheme during the 30 years of Medicare shows it may not be perfect but our system scores well on life and death measures compared with most other countries.

Just how many people are going to the doctor who don’t need to? And how many of those realise they don’t need to? Given pressures of daily life, common sense would tell us that there are few people who are happy to spend the time waiting to see the doctor for no good reason. More importantly, how many people, who should be seeing a GP, aren’t currently doing so? We know, for instance, that Aboriginals and Torres Strait Islanders, and men are significant under-attenders, even when they have risk factors which require medical attention.

Do Tony Abbott and Health Minister Sussan Ley really believe that any expected savings from stopping over-users will outweigh the costs resulting from patients who fail to get timely care because of cost worries and who end up being sicker and possibly requiring expensive hospital care?

There is little evidence that the Government has considered the economic utility, if not the human benefit, of preventing  avoidable illness and suffering, which flows from Australia’s relatively low cost barriers to general practice, the essential entry point to good health care.

As it is, Australians who already get charged extra by their doctor or specialist, are paying an average of at least $50 a time and as individuals we face relatively high out-of-pocket health costs compared to many other comparable countries.

The Government argues that we need to rein in Medicare because its costs are rising unsustainably. Medicare expenditure has indeed doubled in the past decade, but so has the overall Australian economy.

Government spending on health as a percentage of GDP, 9 per cent, is moderate compared to other Western nations. Recent figures show that in 2012-13 there was a drop in Federal Government expenditure of 2.4 per cent compared to an average growth of 4.4 per cent over the previous decade.

The Consumers Health Forum commissioned research at the beginning of 2014 which drew on a significant body of international evidence showing that co-payments create barriers to access to health care for many consumers without decreasing overall health care costs. We have also published expert suggestions on how we could get better value out of the health dollar, such as by reducing avoidable hospitalisations and expensive but unjustified surgical procedures.

Australia has its health system to thank for the second lowest death rate of 16 high-income countries under a measure called “Mortality amenable to health care”, according to the Commonwealth Fund of New York which undertakes international surveys of nation-by-nation health performance.

Guess which western nation has the highest rate of deaths that could be prevented by good health care? It’s the United States, the nation afflicted with the most expensive health care on earth.

Now that’s a price signal.


About the author

Adam Stankevicius

Adam Stankevicius was Chief Executive Officer of the Consumers Health Forum of Australia.