KILLER COPAYMENTS AND THE
MURDER OF MEDICARE ACOSS National Conference, Brisbane, June 2014
Edited Presentation
Tim Woodruff, vice president, Doctors Reform Society
What copayments? The recent budget proposals include a new copayment of $7 for GP, pathology, and radiology visits and a 30% increase ie $5 in prescription drug costs. The $7 does not count towards any safety net for a standard person. For a pensioner, healthcare card holder and child the copayment is not required after 10 visits in one year. Thus, there is a maximum increase of $70/ year for pensioners, card holders and children. For prescription drugs the co-payments is $5.00 for non card holders. Whilst it does contribute to the safety net, that safety net is going to be increased 10% per year for the next 4 years. For a pensioner and healthcare card holder it is .80c extra per script. It contributes to the safety net but that is going to increase by 3% per year for the next four years. On a $20,000 full pension you will pay $7/ visit. If a backbencher on $200,000 a year ie 10 times the income, were to pay an equivalent cost, it would be $70/ visit. For Treasurer Hockey on $400,000 a year the equivalent would be $140/ visit. That is not just a couple of middies. For a low paid worker on $30000, the prescription copayment will increase by $5. For the backbencher the equivalent is $35 and for Mr Hockey it is $70. These copayments are a form of very regressive taxation on illness
Imagine a 75 year old grandmother full pension $20,000 a year, some common medical issues, high blood pressure, high cholesterol, diabetes, monthly visits will cost $70 extra (limited to 10 visits, then no copayment). Prescriptions:they will cost $80 extra because those conditions require two and sometimes three medications each. Total $150 a year, 0 .75% of her pension. A permanent tax on her illnesses. Now imagine a 25 year old single earner, low paid, full time worker, no safety nets, $30,000 a year just above safety nets. Arthritis which is a condition which I treat and often need four different drugs to control things and enable them to work: $240 extra a year. Blood tests every two months because of the drugs that I prescribe: $42 extra. Asthma, two drugs: $120 extra. GP visits every two months will be $42 extra. Total $450 a year. 1.5% of income. A permanent tax on illness. Now imagine a businessman on $200,000 a year. Top 3% of earners. Same range of illnesses as that low income earner, arthritis and asthma. $450 amounts to 0.25% of his income. A permanent tax on his illness but he will hardly notice on that income.
If we have a look at who is doing the heavy lifting we find that, as a percentage of income the pensioner and low income earner are bearing the brunt whilst the businessman (or backbencher) lifts feathers.
Copayment Effects Prior to the budget Treasurer Hockey stated that “more use of co-payments should be made to encourage some moderation in demand for government-provided goods and services.� The proposed copayments give us a plain language interpretation of that statement. We should see the doctor less often, have less tests, and use less prescription drugs. From the RAND study of the 1960s and many studies since we know that copayments reduce use but the greatest impact is on those with the least discretionary income. In addition the decrease includes use for important reasons in addition to use for what some might say are trivial reasons. Inevitably the health of some individuals will suffer. Some will delay treatment until they need hospitalisation. Others will attend Emergency to avoid the copayment. Other patients dependent on Emergency care will be impacted. Some will die prematurely, entirely preventable.
But it isn’t just the effects on health we should consider. Illness frequently means a person can’t work as productively. Often family members will need to take time off work to help. They will be less productive at work. Decreased productivity cannot help the economy. This is the economy which the authors of these proposals tell us they are attempting to improve.
Bulk Billing Let’s now look at the effects on bulk billing. The copayment is not compulsory. GPs can choose to continue bulk billing, or can they? The figures suggest otherwise. For a standard visit to a GP for everybody there is a $36 rebate that goes to the GP. But in 2004 when John Howard and Tony Abbott were worried about the effect of falling bulk billing rates on their likelihood of winning the next election, they introduced incentives to bulk bill pensioners, card holders and children. But the Treasurer has proposed that if a doctor wants to bulk bill because he or she recognises a real need, the rebate will be reduced by $5 and the incentive will also be removed. Thus such a GP will have to wear a 30% decrease in gross income. Taking into account business costs which don’t change because one’s income falls, and a bulk billing GP will face a 50% decrease in net income if he wishes to continue with bulk billing. This is clearly unsustainable. Bulk billing is dead except in extraordinary circumstances.
For pathology and radiology it is different. They will lose $5 from their rebates and incentives, but they are competitive commercial enterprises. They may be happy with the $7 extra that comes to them from customers but the bulk billing decision for them is commercial related to competition pressures. They are not worried about whether the people can pay unless it means they have too much of a drop in volume of work.
Hospitals Hospitals are going to lose $1.8 billion of expected Federal funding over 4 years as the Federal Government abandons agreements on hospital funding worked out with the States previously. The main losers will be those totally dependent on public hospitals, pensioners, and low income workers and their families. They will do the heavy lifting. The rich will be unaffected, unless of course, they suffer an emergency and need public hospital emergency care. Money will not help then.
Medicare Locals Medicare locals are going to be changed to larger Primary Health Organisations. This year there is no loss of funds. Next year who knows? Promises clearly mean nothing so the future of this initiative to improve how care in the community is co-ordinated and delivered hangs in the ether.
Social Determinants of Health I am now going to switch tack to talk about the social determinants of health (SDOH), i.e. all of the factors outside health which impact on health outcomes. There was a senate enquiry into (SDOH) just 18 months ago which resulted in a tripartisan report. It was ignored by the government of the day and then by the current government. The budget impacts significantly on those factors. The National Centre for Social and Economic Modelling (NATSEM) modelled the effects on disposable income of this budget by 2017. It did not take into account either increased health costs or changes to access to unemployment benefits for those under 30.
It concluded that “The results clearly demonstrate that low income families with children are the main family group to be impacted by this budget. The budget impact is relatively moderate in 2014-15 but becomes more significant by 2017-18. High income families and singles and couples without children are shown to be largely unaffected by this budget either in the short or longer term”. (1) Previous work by Wilkinson and Pickett has demonstrated the strong correlation in rich countries like Australia between the general income distribution and a composite indicator of health and social problems as shown below. Australia does not fare as well as it might. But the implications of these budget changes on income inequality and therefore on health and social problems should be of deep concern.
The importance of health and social problems depends upon one’s belief systems. There are those who don’t see them as a concern. But for them, and for all of us there is also an economic issue. The International Monetary Fund is an organisation which for years has been intervening in debt laden third world economies with austerity packages which frequently increase income inequality in the country whilst keeping international investors happy. There seems to be a realisation in this organisation and others that inequality is actually bad for the economy and for growth. This is from a report from April 2014 from the IMF. “…..lower net inequality is robustly correlated with faster and more durable growth………………The combined direct and indirect effect of redistribution including the growth effects of the resulting lower inequality are on average pro growth”. (2)
This budget seems to reflect both a dismissal of health and social problems and basic principles of economic growth. It suggests that the Government is caught in a time warp, still believing that Reaganomics and Thatcherism are the basis for a healthy economy .
Copayments: Why? What then, is the justification for these copayments and associated policies? The first is that patients are seeing doctors too often and having too many tests. The claim has been that patients are seeing doctors on average 11 visits/ year. But the Government statistics show that since 1996 the number of GP visits per capita is 5.6 and rock steady (3). There has been an increase in pathology and radiology but much of that might be due to increased privatisation of public hospital services as State Governments cost shift to the Federal Government. No evidence has been provided that patients are seeing doctors too often. Indeed many patients we see we puzzle over, wondering why they haven’t come earlier with symptoms which suggest a serious yet treatable disease. There is another reason put forward. Pay if you can afford. So if people can afford they should be paying but the issue is that these copayments are tiny and irrelevant for the rich even though they can deter the most disadvantaged. This suggestion ‘pay if you can afford’ also rings hollow when one realises that almost everyone has already paid once through taxes, and the rich have paid more because they can afford it. Copayments ask patients to pay twice, once through standard taxes, and then through this special tax on illness, this punishment for being ill. Would we expect the same payment scheme for other service? I’m about to be mugged but I see a policeman and call for help. Does anyone expect me to pay a copayment for his help? Of course not. I’ve already paid for his services through taxes. People need to take responsibility for their health. Making them pay makes them more responsible. Does anyone really think a $7 copayment will make Joe Hockey more responsible for his health? It wouldn’t pay for the wrapping around his cancer causing cigar. Why is it that low income earners for whom $7 is an impost are the ones who need to be responsible for their own health? It doesn’t make sense. Health system costs are rising too fast and are unsustainable. Compared to other similar countries the proportion of our GDP we spend on health is about average, and about half that of the USA. We can however, make the health system more efficient. Research from around the world demonstrates that one of the most efficient and equitable ways to spend money in the health system is in primary health care, care in the community through GPs and others, encouraging prevention, integrating care. These budget measures are aimed at the exact opposite. Suggestions abound as to how else we can make the system more efficient eg paying world market prices for pharmaceuticals, addressing inter-hospital variation in costs, revising the outdated Medicare rebate system, minimising unnecessary procedures, removing the PHI rebate, addressing the social determinants of health, and tackling the blame game and cost shifting of state federal relationships. These suggestions have largely been ignored despite many of them having the potential to improve equity as well as efficiency. None of the justifications put forward survive critical analysis. There is a very simple reason for this. The justification for this budget does not reside in facts or evidence. It is ideological. It is the rich and the rest. A return to class warfare. Joe Hockey complained that criticism of his budget was a return to class warfare. He has fired the first shot, a WMD, intended to wipe out bulk billing and destroy Medicare as we know it.
Where to from here?
But to understand where we are heading we should remember the history of the Coalition attitude to Medicare. “Introducing Medibank was a cardinal mistake. Before Medibank we had a perfectly functioning health system”. So said John Howard just before the 2001 election. Under his guidance and later on with Tony Abbott’s help, two major changes occurred in the health system. First, the private health insurance and private health system was promoted and Federal funding for public hospitals fell profoundly relative to State funding. This expanded the pre-existing mildly two tiered access to elective surgery. The second step was to encourage the demise of GP bulk billing by letting the value of the rebate decline. The rate dropped from 80% to 68%. They smelt success and then danger. The backlash from marginal electorates threatened to bring the Government down at the 2004 election. A mad policy scramble and backflip lead to a 20% increase in the rebate and the addition of bulk billing incentives I mentioned earlier. Two steps forward and one step back. But the process of the murder of Medicare is on again. We are seeing the first step. Killer copayments. The second step. PHI in primary health care. Not high on the agenda yet but already a trial by Medibank Private has the approval of the Health Minister. Improved access to the GP if you have PHI. That’s what the trial is about.
Copayments
Public hospital decline
PHI for primary care
Primary care two tiered
Non elective admissions two tiered
The concept of Medicare as public health insurance for all is in mortal danger. The intention is to replace it with private health insurance for those who can afford it, and an underfunded public system safety net called Medicare, although more appropriately retitled MedicareLess. Even the richest amongst us will suffer but they can’t see it. A divided society leads to insecurity and ill health across the full gradient of class. A divided Australia, a less healthy Australia, a poorer Australia, economically, socially, culturally. We have a challenge.
1 NATSEM Budget 2014-15 Analysis May 26 2014 http://www.natsem.canberra.edu.au/storage/2014-15%20Budget%20Research%20Note.pdf 2 INTERNATIONAL MONETARY FUND Research Department Redistribution, Inequality, and Growth Prepared by Jonathan D. Ostry, Andrew Berg, Charalambos G. Tsangarides 1 April 2014 3 http://health.gov.au/internet/main/publishing.nsf/Content/medstat-jun12-tables-ba