True extent of poor Medicare indexation revealed

The impacts of the Medicare freeze and low indexation on both patient access to quality healthcare, as well as the viability of running a practice, are no secret.
 
But a new analysis by the Australian Medical Association (AMA) has revealed the extent to which Medicare funding has not kept up with the real-life costs of running a medical practice.
 
Released on 16 November, the Why Medicare indexation matters report provides an analysis of indexation of the most commonly used item in general practice, Level B.
 
Using the Consumer Price Index (CPI) and Average Weekly Earnings (AWE) as an indicator for the increase in costs of running a medical practice, the findings show that the item number has been inadequately indexed from 1993 up to 2022, resulting in an $8.6 billion funding hole.
 
Aside from an increase in the rebate in 2004–2005 and 2005–2006, it has failed to stay on course with the cost of living, with the report citing a rebate increase of just 7.3% from $37.05 in 2017–2018 to $39.75 in 2022–2023.
 
This is despite the CPI increasing by 13.9%, and the AWE by 14.7%, over the same period.
 
AMA President Professor Steve Robson said it is clear that the patient rebate no longer bears any semblance to the actual cost of providing a high-quality service.
 
‘Our analysis shows that successive governments have been stripping healthcare funding from Australian taxpayers through poor indexation and shifting the cost of care onto everyday Australians,’ he said.
 
‘Inadequate indexation has put all medical practices under pressure, especially general practices, where so many patients need to be bulk billed because they cannot afford to pay an out-of-pocket cost.
 
‘What we found clearly illustrates why the state of general practice is so dire; why bulk billing is under pressure; why patients are increasingly facing higher out of pocket costs, and why so many practices are hitting a financial wall.’
 
It is not the first time an attempt has been made to quantify the ever-increasing funding discrepancy threatening patient care and general practice viability.
 
In September, newsGP reported on Queensland GP Dr Christian Allen’s efforts to raise awareness about the impact of the current indexation trend and widening gap between the costs of care, including its impact on patients.
 
‘In the same way that as soon as the interest rates rise the banks are happy to pass on the costs, we’re going to have to, as a collective, move towards that unfortunately,’ he said.
 
‘Either we have to pass on the cost, or the public needs to pass on their concerns to the Health Minister and try to rise the rebate in line with inflation at the very least.’
 
The RACGP has long been advocating for changes to indexation to reflect the rising costs of both living and those of running a general practice.
 
‘If practices are struggling to make ends meet due to Medicare rebates not keeping pace with the cost of providing high-quality care, they have little choice but to pass the cost on to patients,’ RACGP President Adjunct Professor Karen Price said in July.
 
‘This, in turn, can lead to patients delaying or avoiding consultations and potentially even ending up in a hospital bed with a health concern that should have been seen to earlier by a GP.’
 
However, despite promises to strengthen Medicare ahead of this year’s election, the Federal Government chose to only apply 1.6% indexation to items under the Medicare Benefits Schedule (MBS) for 2022–23, even though inflation is expected to reach 7.75% by the end of 2022. 
 
To combat the disparity between rising costs of care and running a practice, the AMA’s report is calling for a revised indexation tool that prioritises services where there has been a decline in bulk billing and minutes per consultation, and an increase in patient out-of-pocket costs.
 
The report estimates that improved indexation across the whole MBS could cost the government $4.98 billion over four years – just over half of the $8.6 billion that has been withheld from the Level B item number alone.
 
Professor Price has previously said that a better measure of indexation would ensure automatic price increases for patient rebates that ‘fully reflect’ the rising costs of living and medical care provision.
 
‘By boosting investment in general practice care, the Government can relieve pressure on the entire health system and significantly improve long-term patient health outcomes,’ she said.
 
As things stand, however, Professor Robson said GPs are faced with the challenge of either absorbing the cost of providing high-quality care and risking becoming unviable – or increasing out-of-pocket costs for patients.
 
‘This is not a sustainable solution,’ he said.
 
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