Thawing the Medicare freeze – one tiny icecube at a time


May is budget month and as usual health and specifically Medicare featured very strongly.

In particular much was made  of the treasurer undertaking to roll back the freezing of Medicare rebates that has been stuck at the same level for several years and are crippling many GP clinics.

Unfortunately, like is so often the case this was more smoke & mirrors than fact.

To understand what we are looking at we need to firstly go back and look at what Medicare is and how it works:

Firstly,  how does the Rebate work ?

  • Medicare was introduced some 40 odd years ago as a means to subsidise the cost of seeing a doctor. From day one it was always meant as a rebate/subsidy to the patient and NOT the doctor. Doctors charged their patients and the patients collected a rebate amount from Medicare in return
  • Being the shrewd operators that they are the Bureaucrats soon found clever ways in which to confuse the Media, the Public, Politicians and even Doctors about this straightforward arrangement:
    • The 1st step was allowing Doctors to start acting as de-facto Medicare offices by claiming the rebate for patients. Not only did they save a fortune in administration costs but patients became used to no money changing hands if they were bulkbilled
    • The 2nd step was to introduce the so-called bulkbilling incentives which were small payments made directly to Doctors who bulkbilled vulnerable groups such as children and concession card holders
    • A further step was the introduction of various Enhanced Care Planning claiming options. These were alternative billing options for the management of conditions such as Diabetes and while these could theoretically be privately charged the vast majority of GPs bulkbilled these service items which once again made all concerned forget that they were actually a patient rebate and not a doctor payment
    • Lastly the Government has brought in and removed, in a never ending revolving door system, various practice incentive payments for various  aspects such as afterhours care, Nursinghome visits, e-health, etc. These payments make up a confusing jumbled up mixture of direct payments and (sort of) patient rebates
    • In future we should certainly not forget the Healthcare Homes that are being introduced – this unholy alliance between Government and various Corporate entities has the risk to entirely destroy the Fee for Service system which, in it’s current design, is likely to be disastrous for Patients and GP owned clinics alike.

So what is the rebate worth ?

When the rebate was initially introduced it was very close to the estimated value GPs and their representative organisations felt a GP consultation was worth.

The AMA issued a year adjustment based on a realistic annual indexation based on the Average Weekly Earnings & CPI. This indexation was at about 3 % per annum.

One would have expected the Medicare rebates to increase at the same pace but sadly this was not to be and from the late 1980s this was indexed at an average of about 1.7%

It is therefore not rocket science to understand why the current recommended AMA fee for a standard GP consultation is $78 which is more than double the current Medicare rebate of $ 37.05 for the same service.

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So what does all of this translate to in practical terms ?

Various studies have shown that the average GP consultation lasts about 15 – 17 minutes.

Assuming we have a fulltime GP, working an eight hour day that would translate to about 30 patients a day.

It can safely be estimated that about 2/3 of these would qualify for a Bulkbilling incentive

The Income to a Practice (NOT what the Doctor ends up earning personally) for seeing 30 patients a day could be one of the following three scenarios:

  1. Everyone is charged a full private fee: $ 78 x 30 = $ 2,340 per day generated for the clinic, OR
  2. 50% is privately charged and the rest Bulkbilled – assume 2/3 qualifies for an incentive payment: ($78 x15) + ($37.05 x 5) + (($37.05 + $10.85) x 10) = $1, 834, OR
  3. Everybody is Bulkbilled: (37.05 x 10) + (($37.05 + $10.85) x 20) = $1, 329

It should be noted that Inner City areas get a lesser bulkbilling incentive of only $7.20 but for the sake of this discussion I will stick to figures as it applies to our outer suburban Practice

As noted above these are the daily incomes per fulltime GP for a typical outer suburban clinic.

So what does it cost to run such a clinic ?

– as a rough estimate based on our Clinic:

  1. Most GPs are contractors and are taking around 55-70% of their gross Billings home – let’s keep it at 65% for the sake of this discussion
  2. At our clinic other expenses, per fulltime doctor is approximately $ 690 per day

Using these numbers  our Clinic will have the following nett income per fulltime doctor once the doctor has taken their share and Clinic overheads are covered:

  1. Fully privately charged with no discount fees: $129 profit per doctor per day
  2. 50% of patients Bulkbilled: a $48 loss per day per doctor
  3. Fully Bulkbilled: a $225 loss per day per doctor

The reality off course is that these numbers are an oversimplification – there are other relatively small income streams such as the Practice Incentive Payments and various small Grants not included

On the other hand the facts are that we DO Bulkbill around 45% of our patients, it is rare for our doctors to see more than 25 patients a day and the majority of our Privately charged patients are being charged reduced Concessional or Pensioner rates so our Private income is a lot less that AMA recommended rates.

The bottomline is that small Clinics like ours are struggling to survive – along with many other similar Mom & Pop type small family businesses medical or otherwise

This brings us back to the reason for this post – things are looking up.

The Freeze is lifting !

Or is it ?

Medicare has in the last few days released the details of what exactly is meant by this “thawing” and it is not at all as rosy as the Media and Politicians, or even the AMA and the RACGP made it out to be:

July 2017:

ONLY Bulkbilling incentives resume indexation – in a fully Bulkbilled clinic this would generate an extra $ 4.34 per fulltime doctor doing an eight hour shift for the Practice. Not even the price of a cup of coffee

July 2018:

Standard GP consultations start being indexed again – once again on a fully bulkbilled full day this would generate a further extra $26.66 for the Practice

July 2020:

All the after hours and chronic disease management items will start being indexed again

Clearly the Medicare Freeze remains in place for all practical purposes and even if it had been fully lifted the rebate would remain woefully inadequate for a small GP Clinic to survive on this income stream especially when one factors in that Canberra is an extremely expensive City in which to run a business

The other reality is that the historical annual indexation of the AWE is unlikely to reach 3% again in the near future – wage growth across the country is stagnating while operational expenses keeps increasing.

Paradoxically wage growth in Canberra remains high  for various reasons which once again makes the running a successful business in the Bush Capital extraordinary difficult

As a business owner I therefore despair at the lack of a solution to the financial stressors that a Clinic such as ours face. I find myself having to work 60-80 hour workweeks simply to keep things afloat and my wife likewise works more than a full time workweek.

It is therefore mindboggling when I, and GPs like myself, see the latest bulkbilling figures as recently released by Medicare and I can only assume from it that we are extraordinary poor businesspeople or we are simply too concerned for the welfare of our patients and do not charge what we are worth.

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The Health Department must surely consider us as absolute idiots in a Business sense as they have clearly recognised themselves that we are willing to work harder and longer for less.

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The question however looms:

how much more can we take before we break ?

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