Is Medicare still meant for all of us or only a privileged few? Doctor Kees van Gool, 1 February 2012 Use the hashtag #utspeaks to further the discussion on Twitter. UTSpeaks is an annual free public lecture series presented by UTS experts discussing a range of important issues confronting contemporary Australia.

1. 1
UTSpeaks: Holes in the net
Dr Kees van Gool - 1 February 2012

2. Holes in the net:
Is Medicare still meant for all of us,
or only a privileged few?
UTSPEAKS
1 February 2012
Kees van Gool
Based on joint work with Elizabeth Savage, Rosalie Viney
Meliyanni Johar, Stephanie Knox, Glenn Jones and Marion Haas

3. Outline
• Part 1: The Extended Medicare Safety Net
(EMSN) – a background
• Part 2: The impact of the EMSN on fees and out-
of-pocket costs
• Part 3: The impact of 2010 EMSN reforms
• Discussion – some observations about Medicare

4. PART 1: BACKGROUND TO
MEDICARE SAFETY NET (EMSN)
4

5. 5
Average fees, benefits and out-of-pocket (OOP) costs
per consultation
General Practice Specialist Attendances
100
100
80
80
Constant dollars
Constant dollars
60
60
40
40
20
20
0
0
1985 1990 1995 2000 2005 2010 1985 1990 1995 2000 2005 2010
Year Year
Doctor's fee
Medicare benefit
Patient OOP cost
Source: DOHA 2011; Constant 2010 dollars

6. Strengthening Medicare -2004/05
• Three main reforms:
1. An incentive for GPs to bulk-bill children and
concession cardholders (+ regional)
2. Increase Medicare benefit for GP services
3. Medicare Safety Net
6

7. Medicare Safety Net – March 2004
• Applies to all Medicare funded out-of-hospital services
• Covers 80% of OOP costs above a threshold.
• As of January 2012 the thresholds were:
– $598.80 for low/middle income families
– $1198.00 for all other families
• If registered, the family’s OOP costs count towards the
same threshold.
• Threshold changes:
– Indexed to CPI at the start of every year
– One off change in January 2006
• Works on a calendar year basis
– Threshold count starts afresh on 1 January
• An example…
7

8. 8
Safety Net example for the Smith family*
Date Service Doctor Medicare Safety OOP Cumulative
charge rebate Net benefit cost OOP cost
1-Feb GP visit 55 34 - 21 21
8-Feb Spec - 243 69 - 174 195
obst
2-Mar Ultrasound 180 60 - 120 315
2-Mar GP visit 55 34 - 21 336
2-Mar X-ray 150 56 - 94 430
8-Mar Spec 150 69 - 81 511
3-Apr Antenatal 78 34 - 44 555
attendance
4-May Antenatal 78 34 - 44 599
attendance
9-Jun Pregnancy 2000 104 1517 379 978
planning
6-Jul Antenatal 78 34 35 9 987
attendance
2-Sep GP visit 55 34 17 4 991
5-Jan GP visit 55 34 - 21 21
* The Smith family are registered and eligible for the lower threshold of $599

9. Total Medicare and Safety Net expenditure
(constant 2010 dollars)
Year Medicare rebate Safety Net Medicare benefit
(a) (b) (= a + b + OSN)
$ % $ % $ %
million change million change million change
2004 9,144 231 9,386
2005 10,270 12 322 39 10,601 13
2006 10,508 2 275 -14 10,794 2
2007 11,294 7 358 30 11,664 8
2008 11,951 6 436 22 12,400 6
2009 12,836 7 539 23 13,388 8
9

10. Individuals with out-of-pocket costs > $2000
16,000
14,000
12,000
Number of individuals
10,000
8,000
6,000
4,000
2,000
0
2000 2001 2002 2003 2004 2005 2006 2007
>$2000 >$3000 >$4000 >$5000 >$6000 >$7000
10

11. 1
.8
.6
.4
.2
0
0 1 2 3 4 5
SEIFA Category
equality line 2001 OOP
2003 OOP 2005 OOP
2007 OOP 2005 EMSN
2007 EMSN
11

12. Safety Net expenditure, 2007 ($
millions)
Other, 16.5 GP, 26.2
Specialist, 51.3
Assisted
reproductive
services, 71.7
Radiation
oncology & Obstetrics, 99.
nuclear 7
medicine, 12.0
Diagnostic Operations &
imaging, 25.7 anaesthetics, 2
0.5
12

13. Mean safety Number of services 13
Service description
net benefit Out-of-
(Medicare item) In-hospital Total
$ hospital
Hair transplant (45560) 3,288 12 192 204
Lipectomy (30174) 2,741 386 12 398
Rhinoplasty (45638) 1,657 2,149 20 2,169
Chronic/complex
1,611 0 61 61
dental care (10977)
Reduction
1,534 229 86 315
mammaplasty (45522)
Brachytherapy
1,516 427 206 633
planning (15539)
Liposuction (45585) 1,400 123 84 207
Rhinoplasty (45641) 1,373 1,873 29 1,902
Vulvoplasty (35533) 1,241 1,036 99 1,135
Assisted reproductive
1,193 18 30,578 30,596
services (13200)

14. 14

15. PART 2: THE IMPACT OF THE
EMSN

16. Data and methods
• Quarterly data on doctor fees, Medicare
rebate, EMSN benefits, OOP costs and
services, by professional groups and in
hospital and out-of-hospital
• Estimate pre and post policy trend in:
– Doctor fees, out-of-pocket costs and services
used
– Compare against trends in
• Medicare rebate
• In hospital
16

17. Trend in average fees, benefits and OOP costs, all
professional groups (excludes GP and pathology)
120
100
$80
60
40
20
2000q3 2002q3 2004q3 2006q3 2008q3
17

18. Obstetrics Assisted reproductive services
1200
200
1000
150
800
100
600
$
$
400
50
200
0
2000q3 2002q3 2004q3 2006q3 2008q3 2000q3 2002q3 2004q3 2006q3 2008q3
Note: scale $0 to $200 Note: scale $0 to $1200
18

19. 19
Obstetrics:
in and out-of-hospital fees
Average fee by setting Total fees by setting ($ million)
1000
60
800
50
40
600
$
30$
400
20
200
10
0
2000q3 2002q3 2004q3 2006q3 2008q3 2000q3 2002q3 2004q3 2006q3 2008q3
Out of hospital In hospital

20. 20
Assisted reproductive services:
in and out-of-hospital fees
Average fee by setting Total fees by setting ($ million)
1200
60
1000
800
40
600
$
$
400
20
0
2000q3 2002q3 2004q3 2006q3 2008q3 2000q3 2002q3 2004q3 2006q3 2008q3
Out of hospital In hospital

21. Conclusion from our 2009 Review
• Change to Medicare arrangements
• Expenditure is small but with high growth
• Fewer people with very high OOP costs - but rising.
• It is a regressive policy – favours the wealthy
• Change in incentives for in and out-of hospital billing
• Significant rises in provider fees has led to ‘leakage’:
– For every $1 spend on the Safety Net
• 43¢ towards increased provider fees
• 57¢ towards reducing patients’ OOP costs.
– Inflationary effect could make things worse for those who do
not qualify for Safety Net benefits
• May reinforce the mal-distribution of specialists
– Enable wealthy to afford more specialists care
21

22. Government response: Safety Net Caps
• 2009-10 Budget Measure
– Review cited as support for the measures
• Caps apply to Safety Net Benefits payable per service for selected
MBS items from Jan 1 2010
– ART Services (11 items)
– Obstetrics (57 items)
– One type of cataract surgery
– Hair transplantation for alopecia
– One type of varicose vein removal
– Nov 2010 new items for midwifery services
• For capped items, there is a maximum Safety Net benefit that
can be claimed
• Example.....
22

23. 23
Safety Net cap example
• Item capped in 2010
• Cap is $30.00 (maximum Safety Net benefit)
• Assume that the patient has reached the Safety Net threshold.
Doctor fee Medicare Safety Net Out-of-
rebate benefit pocket cost
2003 150.00 38.00 - 112.00
2009 150.00 38.00 89.60 22.40
2010 150.00 38.00 30.00 82.00
• After caps were introduced, in this example the patient pays 100% of
any doctor fee above $75.50

24. PART 3:THE IMPACT OF
CAPPING
24

25. 25
Data and method
– Aggregate monthly data on fees, benefits (rebate and EMSN),
OOP costs
– Observation period: Jan 2000 to Dec 2010
– Interested in what happened after:
• EMSN introduced– Jan 2004
• Caps introduced– Jan 2010
– Contrast changes over time between
• In and out-of-hospital services
• Medicare items that complement or substitute for capped
items
• Doctors that charge high fees and low fees

26. 26
Limitations
• One year observation period after caps implemented
• Medicare data retrieved March 2011
• Medicare benefits schedule revision:
– Assisted reproductive technology (ART) services (new items,
change in the definition of items, change in Medicare rebate
– Obstetrics (new item, change in Medicare rebate)

27. 27
Average Medicare and EMSN benefit per service
2009 2010
Medicare EMSN Medicare Medicare EMSN Medicare
rebate benefit rebate benefit
ART services* 475 656 1131 686 361 1047
General practice 41 0 41 41 0 41
Obstetric ultrasound* 67 11 78 68 4 72
Obstetrics* 42 106 148 55 13 68
Ophthalmology* 234 37 271 231 34 265
Plastic & recon surg* 263 53 317 263 49 312
Psychology 93 4 97 93 4 97
Radiation oncology 143 14 157 145 15 160
Specialist attendances 51 3 54 50 3 54
Vascular procedures* 121 152 273 123 66 189
* Service group with at least one capped item

28. 28
Trend in average fees, benefits and OOP costs, all professional
groups (excludes GP and pathology)
120
100
80
$
60
40
20
Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10
Average fee Predicted average fee
Average rebate Predicted average rebate
Average rebate+EMSN Predicted average rebate+EMSN
Average OOP Predicted average OOP

29. 29
Vascular procedures
• Capped item 32500, in 2010:
– Injection of sclerosant into varicose veins
– 55,000 OOH services (↓9% from 2009)
– 206 IH services (↑ 71% from 2009)
– MBS rebate for OOH = $89.85
– EMSN cap = $111.65
• Uncapped item 32504 in 2010
– Multiple excision of varicose veins
– 2754 OOH services (↑ 91% from 2009)
– MBS rebate for OOH = $218.90

30. 30
Fees for capped varicose veins item in and out hospital
In hospital Out of hospital
1,000 1,000
750 750
Provider fee $
500 500
250 250
79.25 89.85
0 0
Jan 00 Jan 04 Jan 10 Jan 00 Jan 04 Jan 10
25th percentile 50th percentile 75th percentile 90th percentile

31. 31
Fees for capped and uncapped varicose veins items
Item 32500 (Capped) Item 32504 (Uncapped)
1,000
4,000
750
3,000
Provider fee $
500 2,000
250 1,000
89.85
218.90
0 0
Jan 00 Jan 04 Jan 10 Jan 00 Jan 04 Jan 10
25th percentile 50th percentile 75th percentile 90th percentile

32. 32
Cataract surgery
• Capped item 42702, in 2010:
– Lens extraction and insertion of artificial lens
– 4,708 OOH services (↓23% from 2009)
– 125,708 IH services (↓ 7% from 2009)
– MBS rebate for OOH = $660.60
– EMSN cap = $101.50
– Cuts to MBS rebate ($102.90)
• Uncapped item 20142 in 2010
– Initiation of management for anaesthetic for lens surgery
– MBS rebate for OOH = $97.20

33. 33
Fees for capped cataract surgery in and out hospital
In hospital Out of hospital
4,000 4,000
3,000 3,000
Provider fee $
2,000 2,000
1,000 1,000
660.60
548.85
0 0
Jan 00 Jan 04 Jan 10 Jan 00 Jan 04 Jan 10
25th percentile 50th percentile 75th percentile 90th percentile

34. 34
Fees for uncapped item 20142 -anaesthetic for lens
surgery - in and out hospital
In hospital Out of hospital
2,000 2,000
1,500 1,500
Provider fee $
1,000 1,000
500 500
85.75 97.20
0 0
Jan 00 Jan 04 Jan 10 Jan 00 Jan 04 Jan 10
25th percentile 50th percentile 75th percentile 90th percentile

35. 35
Hair transplant
• Capped item 45560, in 2010:
– Treatment of alopecia
– 100 OOH services (↓50% from 2009)
– 14 IH services (steady)
– MBS rebate for OOH = $387.35
– EMSN cap = $152.25

36. 36
Fees for capped hair transplant in and out hospital
In hospital Out of hospital
12,000 12,000
9,000 9,000
Provider fee $
6,000 6,000
3,000 3,000
341.80 387.35
0 0
Jan 00 Jan 04 Jan 10 Jan 00 Jan 04 Jan 10
25th percentile 50th percentile 75th percentile

37. 37
Data and methods for the capped groups:
ART and obstetrics
• Changes to MBS in ART and obstetrics
• Unit of analysis:
• Services
• Episodes of care
• Definition of an episodes of care:
• Obstetrics: Confinement item – 10 months of obstetric
items
• ART: planning item + 30 days of ART items
• Observation period: June and October 2003 to 2010
• Provider fees, benefits, OOP costs and services used
over time

38. 38
ASSISTED REPRODUCTIVE
TECHNOLOGIES (ART) GROUP

39. 0
39
$
Assisted reproductive technology services
1500
1000
500
0
Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10
Average fee Predicted average fee
Average rebate Predicted average rebate
Average rebate+EMSN Predicted average rebate+EMSN
Average OOP Predicted average OOP

40. 40
ART cycles (June and October) by SEIFA
SEIFA Q1 SEIFA Q2 SEIFA Q3 SEIFA Q4 SEIFA Q5
(Least (Most
Year advantaged) advantaged)
2003 438 563 967 1,900 2,700
2004 468 648 1,166 2,223 3,409
2005 449 679 1,279 2,494 3,759
2006 475 703 1,340 2,530 4,052
2007 575 786 1,562 2,819 4,544
2008 543 824 1,513 3,053 4,833
2009 666 912 1,775 3,487 5,244
2010 593 818 1,639 2,936 4,668

41. Year Average P25 P50 P75 Average P25 P50 P75 41
Fees per cycle ($) Medicare benefit per cycle ($)
2003 2,057 759 1,418 3,498 1,231 541 858 2,022
2005 2,739 1,036 1,991 4,358 2,295 812 1,955 3,777
2007 3,382 1,369 2,409 5,688 2,783 903 2,032 4,702
2009 4,414 1,859 4,388 7,083 3,645 1,527 3,419 5,897
2010 4,306 1,982 2,923 7,198 2,921 1,254 1,572 4,979
EMSN benefit per cycle ($) OOP cost per cycle ($)
2003 827 82 390 1,504
2005 1,019 45 688 1,761 444 114 333 633
2007 1,407 213 900 2,544 599 194 465 916
2009 2,168 660 1,787 3,728 769 282 846 1,073
2010 1,051 131 667 1,668 1,385 671 1,180 2,136

42. 42
Number of ART cycles (June and October)
Year Stimulated Stimulated Non- Artificial Frozen/ TOTAL
A B Stimulated insemination donated
embryo
2003 2,927 0 57 1,896 1,641 6,628
2004 3,740 0 44 2,053 1,989 7,966
2005 4,194 0 59 2,107 2,245 8,745
2006 4,422 0 47 2,218 2,369 9,150
2007 2,407 2,746 28 2,257 2,833 10,369
2008 2,420 3,298 28 2,263 2,744 10,878
2009 2,857 4,030 37 2,216 2,910 12,189
2010 2,224 3,423 13 1,641 3,407 10,802

43. 43
Cumulative distribution of provider fees
Stimulated A Stimulated B Non-stimulated
1
0.90
0.75
0.50
0.25
0
0 2,500 5,000 7,50010,000 0 2,500 5,000 7,50010,000 0 2,500 5,000 7,50010,000
Artificial insemination Frozen/donated embryo
1
0.90
0.75
0.50
0.25
0
0 2,500 5,000 7,50010,000 0 2,500 5,000 7,50010,000
Provider fee $
2004 2009 2010

44. 44
OBSTETRICS

45. 45
Obstetrics
300
200
100
0
$
Assisted reproductive technology services
1500

46. 46
Private confinement (MBS item 16519)
2000
1800
1600
1400
1200
1000
800
600
400
200
0
$
Private confinement (MBS item 16522)
2000
1800
1600

47. 47
Number of private confinements by SEIFA
SEIFA Q1 SEIFA Q2 SEIFA Q3 SEIFA Q4 SEIFA Q5
(Least (Most
advantaged) advantaged)
Year
2007 643 1,075 2,225 4,074 6,563
2008 640 1,137 2,247 4,147 6,553
2009 634 1,214 2,360 4,292 6,660
2010 546 1,010 2,178 3,947 6,156

48. 48
Number of private confinements
June births October births
Year Normal Complex TOTAL Normal Complex TOTAL
2007 4,179 2,177 6,356 4,628 2,268 6,896
2008 4,119 2,110 6,229 4,782 2,408 7,190
2009 4,194 2,438 6,632 4,620 2,589 7,209
2010 4,023 2,517 6,540 3,870 2,295 6,165

49. 49
Cumulative distribution of provider fees
June, Normal June, Complex
1
0.90
0.75
0.50
0.25
0
0 2,000 4,000 6,000 8,000 0 2,000 4,000 6,000 8,000
October, Normal October, Complex
1
0.90
0.75
0.50
0.25
0
0 2,000 4,000 6,000 8,000 0 2,000 4,000 6,000 8,000
Total provider fees $
2007 2008 2009 2010

50. 50
Conclusions EMSN Caps
• Government EMSN spending down
– 29% on 2008
– 42% on 2009
• Caps give Government a policy lever to reduce
their exposure to provider fees.
• But
– Remains exposed to demand side risk
– Thresholds indexed by CPI
– Caps require parliamentary approval

51. 51
Conclusions EMSN Caps
• Following introduction of caps, fees have fallen
for some items/services.
• But OOP costs have increased and service use
fallen.
• Unintended consequences:
– Shifts care setting/billing
– Substitute billing to non-capped items
– Complementary services fee changes
• Results are preliminary
– Early days - one year follow-up only
– Other changes to MBS.

52. 52
Discussion
• Out-of-pocket costs seen as price signals to improve efficiency, but is
a very blunt policy tool
• Leads inequity and worse health outcomes
• Lack of clarity about doctor fees and Medicare benefits
• High OOP costs for specialist type services, not GPs.
– Have we got this the wrong way around?
– Specialist services are referred services (GP’s recommendation – what is
the role of price signals?)
• High OOP costs for specialist services are an artifact of Medicare
rebate not keeping pace with doctor fees.
– Concern of government expenditure
– Doctor control over fees
– Subsidising the wealthy - Safety Net amplifies this
• Government’s Safety Net dilemma when setting MBS rebates

53. 53
Discussion
• What do we want from Medicare?
• Scotton and Deeble wrote in 1968:
• Health care should be available without regard to income, age, length or
type of illness, and that the cost of providing this care should be equitably
distributed.
• That the system should promote the most efficient use of resources in
the health care industry.
• Greater transparency in doctor fees, setting Medicare rebate and
caps.
• Patients need to know what their OOP costs will be.
• Government needs to think beyond its own budget line.
• Rethink on how we pay doctors:
• Potential use of financial incentives to encourage lower doctor
fees for target groups.
• Research agenda on provider and patient behaviour in response to
incentives

54. 54
Acknowledgements:
Australian Government Department of Health and
Ageing Medicare Benefits Branch and the
Medicare Financing and Analysis Branch
If you haven’t registered your family for the
Medicare Safety Net but would like to:
www.medicareaustralia.gov.au/public/services/msn/
register.jsp