Amanda Biggs
Medicare is a major focus in this year’s Budget with a significant
package of measures announced under the name Guaranteeing Medicare. This
focus on Medicare is part of the government’s Long-Term National Health Plan,
which lists four pillars: guaranteeing Medicare and the Pharmaceutical Benefits
Scheme (PBS); supporting hospitals; prioritising mental and preventive health;
and investment in medical research.[1]
Removal of Medicare rebate indexation
freeze
As widely expected, the freeze on indexation of Medicare
rebates is being lifted—albeit in phases—at a cost of $1.0 billion over four
years.[2]
Since Medicare’s introduction in 1984, fees have been
subject to annual indexation.[3] The freeze was first
introduced by Labor in the 2013–14 Budget as a temporary measure to July 2014.
The Coalition reimposed the freeze in MYEFO 2014–15 and then extended in
subsequent budgets to July 2020.[4] It was forecast to
achieve total savings of around $3.9 billion to 2020.[5]
The reintroduction of indexation will be applied in phases:
- From 1 July 2017, bulk billing incentives for general
practitioners (GPs) will be indexed
- From 1 July 2018, standard GP consultations and specialist
attendances will be indexed
- From 1 July 2019, specialist procedures and allied health
services will be indexed
- From 1 July 2020, certain targeted diagnostic imaging services
will be indexed.
The measure follows agreements that have been reached with
the Australian Medical Association (AMA) and the Royal Australian College of
GPs (RACGP) to ensure their support for the continuation of the Medicare
Benefits Schedule (MBS) Review (see below) and the proposed national rollout of
the digital My Health Record.[6]
While the freeze was controversial, its impact on patient
access was less clear. Rates of GP bulk billing (that is, free GP services)
remained steady until recently.[7] But patients who were not
bulk billed experienced an increase in the average payment they made for the
service.[8]
Stakeholders have broadly welcomed the resumption of
indexation. The Consumers Health Forum (CHF) noted that it ‘should reduce
pressure on Australia’s high out of pocket health costs’, but warned that some
families may face increased co-payments for at least another year.[9]
Significantly, professional groups have praised the Minister for Health for his
consultative approach.[10] Maintaining positive relations
with these groups will be important for progressing other key health
initiatives. This measure will not require legislation.
Medicare Guarantee Fund
From 1 July 2017 the Government will establish the Medicare
Guarantee Fund, a special account to be credited with revenue from the Medicare
levy and personal income tax receipts, which the Government says will fund the
MBS and the Pharmaceutical Benefits Scheme (PBS).[11]
In 2017–18, some $33.8 billion will be credited to the Fund, comprising $12.1
billion from the Medicare levy and the balance from personal income tax
receipts.[12] Although revenue from
the Medicare levy in 2016–17 is estimated to be $15.6 billion, which is higher
than the figure due to be credited to the Fund, this includes $3.9 billion that
is already earmarked for the National Disability Insurance Scheme (NDIS).[13]
Together, the MBS and the PBS cost the Australian Government
nearly $34.2 billion in 2016–17.[14]
The creation of the Fund has been viewed by some as part of a
political strategy to refute Opposition claims that the Coalition is not committed
to Medicare.[15] Annual contributions to
the Fund will be updated at every budget update[16]
which the Government claims will provide greater transparency around MBS and
PBS costs.[17] Stakeholder comment on
the Fund has not been extensive, although this will likely increase when the
legislation establishing the fund is presented to Parliament.
Medicare Benefits Schedule (MBS) Review
and Medical Services Advisory Committee
Funding of $44.2 million over three years has been allocated
in the Budget to continue the work of the MBS Review Taskforce which is
reviewing the 5,700 items on the MBS for clinical appropriateness.[18]
Some $34.3 million in funding was provided over two years in the 2015–16 Budget
for the MBS review and a related measure, bringing total funding so far to
$78.5 million.[19] Stage one of the Review
process resulted in 23 Medicare items with a total annual value of $6.8 million
in Medicare payments being removed from the MBS.[20]
In total, the Taskforce has completed reviews of 600 items with another 2,500
currently under review.[21]
In addition to funding the continuation of the Review, the
Budget includes $44.5 million over four years for the ongoing operation of the
Medical Services Advisory Committee (MSAC).[22] This independent
committee advises the Health Minister on new medical services and technologies
to be funded under Medicare.
This measure appears to address stakeholder concerns over
the process of removing items from the MBS. In a submission to the Taskforce in
late 2015, the AMA expressed concern that the process of removing items was
being fast-tracked, while the process for adding new items under MSAC was ‘slow-moving’,
and warned this would result in a ‘disjointed’ MBS.[23]
As noted above, the AMA’s agreement with the Government commits it to support
the work of the MBS Review. These measures will not require legislation.
Health Care Homes Trial
The 2016–17 Budget included $21.3 million to trial Health
Care Homes, to provide coordinated primary care for patients with chronic
conditions.[24] These trials will
involve a number of general practices and Aboriginal Community Controlled
Health Services. While the measure was broadly welcomed at the time,
stakeholder concerns emerged around the proposed starting date (July 2017) and
funding levels.[25] The 2017–18 Budget
measure Guaranteeing Medicare—development of the Health Care Homes trial delays
the starting date for the trial; 20 Health Care Homes will commence services
from 1 October 2017, with the remaining 180 to provide services from 1 December
2017.[26] Funding of $30.0 million
is being provided to community pharmacies to incorporate medication management
programs within the trial and a further $5.0 million to fund a general practice
research pilot.[27] Initial stakeholder
reaction has been broadly positive. The CHF welcomed ‘the modest investment in
community pharmacy’ and described the staged implementation as ‘prudent’. The
Australian Healthcare and Hospitals Association (AHHA) also welcomed the
inclusion of community pharmacy in the trials.[28] Legislation is not
required.
Medicare compliance
Savings of $103.8 million over four years are expected from the
Guaranteeing Medicare—Medicare Benefits Schedule—improved compliance measure.[29]
This aims to improve compliance of medical providers with Medicare billing
rules and applies new debt recovery arrangements. Medical providers who bill
Medicare should comply with Medicare billing practices such as submitting
accurate claims and providing documentation. When an inappropriate billing
practice is identified, providers are expected to repay to the Commonwealth any
debt that is owed. Just 25 per cent agree to do so, according to a Government
Fact Sheet.[30] This measure will introduce
compulsory offsetting of future MBS payments, whereby up to 20 per cent of
future payments will be offset to recover any debts incurred by providers.
Stakeholder comment is yet to emerge, but views may become clearer when
legislation, which is likely to be required, is presented to Parliament.
Medicare Levy increase
Although not part of the Guaranteeing Medicare
package, the Government has announced that, from July 2019, the Medicare levy will
increase by 0.5 percentage points to 2.5 per cent of taxable income, to ensure
the Commonwealth’s contribution to the NDIS is fully funded.[31]
Some $8.2 billion in tax revenue is forecast from raising the levy over the
forward estimates.[32] The Medicare levy partially
funds Medicare and, since July 2014, a share has been directed to help fund the
NDIS. In 2016–17, the Medicare levy raised nearly $15.6 billion.[33]
Meanwhile, Medicare expenditure totalled nearly $22.2 billion.[34]
One-fifth of total Medicare levy revenue will be credited to the NDIS savings
fund.[35]
The Medicare levy has been raised in the past, most recently
to 2.0 per cent in July 2014, to help fund the NDIS.[36]
Initial stakeholder comment has been broadly supportive.[37]
More commentary could be expected when legislation to enact the measure is
presented to Parliament. The Opposition Leader, Bill Shorten has stated that
Labor will limit its support for an increase in the levy to those in the top
two tax brackets.[38]
The Budget also raises the Medicare levy low-income exemption
thresholds for singles, families and pensioners. Those on incomes below these
thresholds are exempt from paying the Medicare levy.[39]
This adjustment is made annually in line with movements in the Consumer Price
Index (CPI) and will require legislation.
Other Guaranteeing Medicare
measures
The Budget includes a number of other measures affecting
Medicare. This includes minor savings of $0.7 million over five years from
better aligning services provided under the 11 Reciprocal Health Care
Agreements (RHCAs) with those provided by other countries. This will result in access
to reproductive technology services and related medicines being curtailed for
visitors from RHCA countries.[40] This will not require
legislation.
This Budget also funds a number of new and amended listings
for the MBS and Veterans’ Benefits as recommended by the MSAC, at a cost of
$16.4 million over four years.[41]
This Budget also provides funding of $67.3 million to
modernise the health and aged care payments ICT systems.[42]
Two previously announced but unlegislated measures will not
proceed. Bulk billing and diagnostic imaging bulk billing incentives, which
were due to be removed under a Mid-Year Economic and Fiscal Outlook (MYEFO)
2015–16 measure, will be retained. This will cost the budget $935 million over
four years.[43] A 2014–15 Budget measure
to simplify Medicare Safety Net arrangements has also been dropped, at a cost
to the Budget of $314 million.[44]
Note: This version of the brief includes a minor revision
relating to annual indexation. The revision was made on 18/05/17 at 11.00am
AEST.
[1].
G Hunt (Minister for Health), ‘Guaranteeing
vital services for Australia's world class health system’, media release, 9 May 2017.
[2].
Australian Government, Budget measures:
budget paper no. 2: 2017–18, p. 109.
[3].
The indexation factor uses the Wage Cost Index (WCI5). The Medicare
fee is set by Government and specified in the Medicare Benefits Schedule (MBS).
Doctors are not obliged to charge this fee. The Medicare rebate is the benefit
paid by the Government to the patient. For out of hospital services the rebate
is 85% of the Medicare fee; for in-hospital services it is 75%. For GP services
the rebate is 100% of the fee. If a doctor bulk bills they accept the Medicare
rebate as full payment for the service. A Biggs, Medicare—background
brief, Parliamentary Library e-brief, 2004.
[4].
Australian Government, Mid-Year
Economic and Fiscal Outlook 2014–15, p. 166. Most recently, the 2016–17
Budget announced the freeze would apply to 30 June 2020. Australian Government,
Budget measures:
budget paper no. 2: 2016–17, p. 108.
[5].
Senate
Community Affairs Committee, Answers to Questions on Notice, Health
Portfolio, Budget Estimates 2016–2017, 6 May 2016,
Question
SQ16-000356.
[6].
G Hunt (Minister for Health), ‘Guaranteeing
Medicare and improving access to medicines for Australians’, media release,
9 May 2017. More detail on this measure is available under the Budget
Review article ‘Other health measures’.
[7].
In
the December quarter 2016, the bulk billing rate
for
GP/VR GP attendances was 83.9%, which was lower than the
previous two quarters but still higher than when the freeze commenced.
Department of Health, ‘Quarterly
Medicare Statistics’, Table 1.4b–GP/VR GP services.
[8].
Ibid., Table 1.5b. In the September quarter 2014, the average patient
contribution for GP/VR GP services was $30.27; this had risen to $33.04 by the
December 2016 quarter.
[9].
Consumers Health Forum (CHF), ‘Medicare
thaws, now time to take health reforms off ice’, media release, 9 May 2017.
[10].
Australian Medical Association (AMA), Farewell
freeze – government wins back goodwill with positive health measures, media
release, 9 May 2017.
[11].
Budget
measures: budget paper no. 2: 2017–18, op. cit., p. 167.
[12].
Australian Government, Budget strategy
and outlook: budget paper no. 1: 2017–18, p. 3-8.
[13].
Ibid., p. 5-12.
[14].
Ibid., pp. 6-21–6-22.
[15].
P Coorey, ‘Tax,
spend and build to win back political trust’, The Australian Financial
Review, 10 May 2015, p. 1.
[16].
Budget
measures: budget paper no. 2: 2017–18, op. cit., p. 167.
[17].
Department of Health, Guaranteeing
Medicare—establishing the Medicare Guarantee Fund, [fact sheet, 2017].
[18].
Budget
measures: budget paper no. 2: 2017–18, op. cit., p. 110.
[19].
Australian Government, Budget
measures: budget paper no. 2: 2015–16, p. 104. Funding was also
provided to MSAC.
[20].
S Ley (Minister for Health and Minister for Aged Care), Review
of Medicare Benefits Schedule, media release, 28 December 2015.
[21].
Ibid. See also, Department of Health, Guaranteeing
Medicare—Medicare Benefits Schedule Review—continuation, [fact sheet,
2017].
[22].
Budget
measures: budget paper no. 2: 2017–18, op. cit., p. 108.
[23].
A Rollins, ‘Patients,
hospitals to carry the cost of MBS Review’, Australian Medicine, 27(10A),
3 November 2015, p. 8.
[24].
Australian Government, Budget measures:
budget paper no. 2: 2016–17, p. 105.
[25].
A Biggs, ‘Medicare’,
Budget Review 2016–17, Research paper series, 2015–16, Parliamentary
Library, Canberra, 4 May 2016.
[26].
Budget
measures: budget paper no. 2: 2017–18, op. cit., p. 108.
[27].
Department of Health, Guaranteeing
Medicare—development of the health care homes trial, [fact sheet, 2017].
[28].
M McInerney, ‘Reactions
to the 2017–18 Budget: rolling coverage’, Croakey, blog, 9 May 2017.
[29].
Budget
measures: budget paper no. 2: 2017–18, op. cit., p. 108.
[30].
Department of Health, Guaranteeing
Medicare—Medicare Benefits Schedule—improved compliance, [fact sheet,
2017].
[31].
Budget
measures: budget paper no. 2: 2017–18, op. cit., pp. 24–25.
[32].
Ibid., p. 25.
[33].
Budget
strategy and outlook: budget paper no. 1: 2017–18, op. cit., p.
5-11. Includes around $310 million in revenue derived from the Medicare levy
surcharge.
[34].
Ibid., p. 6-21.
[35].
Ibid., p. 5-12. See table 6.
[36].
A Biggs, ‘A
short history of increases to the Medicare levy’, FlagPost, Parliamentary
Library blog, 3 May 2013.
[37].
Catholic Health Australia, ‘Billion
dollar Medicare investment positive for health’, media release, 9 May 2017.
[38].
B Shorten, ‘Second
reading speech: Appropriation Bill (No. 1) 2017-2018’, House of
Representatives, Debates, 11 May 2017, p. 88.
[39].
Budget
measures: budget paper no. 2: 2017–18, op. cit., p. 25.
[40].
Ibid., p. 107.
[41].
Ibid., pp. 109–110.
[42].
Ibid., p. 110. See also Australian Government, Mid-year
economic and fiscal outlook 2016–17, p. 167.
[43].
Budget
strategy and outlook: budget paper no. 1: 2017–18, op. cit., p.
3-39.
[44].
Ibid., p. 3-38.
All online articles accessed May 2017.
For copyright reasons some linked items are only available to members of Parliament.
© Commonwealth of Australia
Creative Commons
With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.
In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.
Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.
This work has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Parliamentary Library, nor do they constitute professional legal opinion.
Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Enquiry Point for referral.