Renewed push for overhaul of GP funding model

Australia’s general practice funding model is back in the spotlight as the Grattan Institute doubles down on its calls for Medicare reform, arguing for the adoption of a blended funding model for general practice.
 
In a new policy brief released on Friday, the institute investigates the fee-for-service model, capitation, and how much funding should be flexible.
 
It says a redesign of GP funding could better support prevention, continuity of care and multidisciplinary practice, but warns the balance between flexible and fee-for-service payments will be crucial.
 
While the brief weighs up the pros, cons and risks of each model, ultimately, it says general practice funding must reform.
 
‘Government funding is more than 90% fee for service. This rewards episodic, high-turnover care, and does little to reward prevention, continuity of care, or the multidisciplinary care that complex patients need,’ it said.
 
‘It also does little to steer money towards the patients and communities that need it most: Australia’s funding does less to adjust for needs than any comparable country.
 
‘Almost all fee-for-service funding pays GPs for each service they personally deliver, so delegating care means giving up income.’
 
The brief explores each scenario in detail, providing a direct comparison of the two models for policymakers and GPs to consider.
 
‘Each way of funding care has benefits and drawbacks. Blended models are designed to balance them to get the best result,’ the Grattan Institute says.
 
‘Making it work requires the right design, and one choice matters more than any other: how much funding is flexible, and how much remains fee-for-service.
 
‘Whether it pays to switch comes down to the level of flexible funding … it essentially boils down to a simple rule: the share of flexible funding must be at least the ratio of multidisciplinary team cost to GP cost.’
 
The RACGP position is for ‘fee-for-service to remain the foundation of general practice funding, supplemented by innovative, blended funding models to better manage chronic disease in the community’.
 
‘Multiple reviews have said that fee-for-service is what Australian general practice is based on, and that’s given us world leading health outcomes,’ RACGP President Dr Michael Wright told newsGP.
 
‘The college has been supportive of the idea of additional blended funding that does allow practices to provide the more comprehensive care that patients need.
 
‘Less and less of the health budget is going to general practice and comprehensive care, so increasingly, it’s not just about how it is funded, it’s the quantity of funding that’s the problem.
 
‘That’s one of the reasons why we’re calling for an independent pricing authority to look at the costs of general practice care and to call for Medicare funding to cover the costs of care.’
 
The RACGP has long advocated for the establishment of such an authority, urging governments to ‘set rebates based on evidence, not politics’.
 
That case was bolstered following May’s announcement that the Medicare Benefits Schedule indexation factor for 1 July 2026 was just 2.6% – a rise the RACGP labelled ‘inadequate‘. 
 
Recent research, conducted by Dr Wright and published in the Medical Journal of Australia, explored two decades of Australian primary healthcare expenditure from 2002–03 to 2022–23.
 
It found the percentage of healthcare funding going to general practice has dropped from 8% 20 years ago to 5.5% in the most recent data.
 
The analysis shows a persistent decline in primary healthcare’s share of total health expenditure, a decline in GPs and other direct primary health services’ share, and a stagnant share for enhanced primary care services.
 
As one author of the new policy brief, Dr Peter Breadon, said, just ‘pumping in more funding’ will not solve the current funding problems facing general practice.
 
‘But blended funding can be designed in many ways, and it is time to move from debating whether real funding reform is needed to debating what it should look like,’ he said.
 
‘Discussing specific reform options could help overcome uncertainty and distrust in the sector, and build momentum for an important reform that is decades overdue.’
 
The Grattan Institute concluded that while there is ‘no single right level of flexible funding’, there is a reasonable range.
 
‘The floor is set by clinic participation. Flexible funding much below the break-even level will not cover switching costs, even taking into account profits from cutting low-value care, and too few clinics will move,’ it says.
 
‘The ceiling is set by risks. Close to full capitation, the incentive for GPs to provide direct care weakens, which could result in too little GP care.’
 
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