The federal government’s new bulk billing policies are 100 per cent in line with the Prime Minister’s publicly stated view that Medicare is an ill-conceived policy, without which Australians would be better off. Privatisation has been the government’s central aim since taking office in 1996. Medicare funding has been capped at the same time that a range of measures to promote the size and the scope of the private health sector have been introduced. The Prime Minister’s preference for a predominantly private insurance system, similar to that of the United States, is steadily being brought to fruition.

The bulk billing changes will have three main outcomes. First, the cost of going to the doctor will steadily increase for more and more people. As a result, large numbers of Australians will not seek medical care because the cost of doing so will create hardship. This is exactly the problem that Medicare was set up to avoid. Second, as bulk billing rates continue to fall, the total cost of Australian health care will rise because bulk billing, as policymakers intended, has functioned to restrain increases in medical fees. Third, the new system is administratively complex, which will not only be expensive, and unnecessarily so, but it will also create confusion about entitlements within the community, with the result that people who are eligible for additional assistance will not claim their benefits.

The new bulk billing arrangements are the latest in a long series of policy measures intended to undermine Medicare through the mechanism of privatisation. Privatisation under the present government has taken two forms. The first is the promotion of private insurance. The second is the transfer of financial responsibility away from government to Australian citizens. By allowing bulk billing to decline, citizens are paying an ever increasing proportion of medical fees instead of responsibility resting primarily with the health insurance system and the taxation system.

One of the Howard government’s first acts was to abolish the Commonwealth Dental Program. Other changes in the first year included funding cuts for sexual health and family planning services, increased user charges in the aged care area, reduced entitlements for Health Care Cards and a $2 million publicity campaign to promote private health insurance. In the following year, the budget heralded the closure of 43 Medicare offices and the introduction of a Private Health Insurance Incentives Scheme. Under this scheme, subsidies were provided for low and middle income earners who held private health insurance, a ‘carrot’ intended to increase uptake. At the same time, a ‘stick’ was introduced for high income earners who chose to rely on Medicare. These people were forced to pay a Medicare levy surcharge of 1 per cent of income, a scheme still in operation.

The impact of these measures on private insurance levels was negligible - so, clearly, more robust privatisation policies were needed. The next change took the form of the introduction of a non-means tested 30 per cent tax rebate for private health insurance holders, a policy announced during the 1998 election campaign. Although this scheme cost taxpayers $1.6 billion even in the first year, it, too, had only a minimal impact on private insurance levels.

A further privatisation measure was announced in 1999. The community rating principle, mandatory in Australia since the early 1950s, was to be modified. The purpose of community rating is to ensure that the sick, the poor and the old are not financially disadvantaged when buying private health insurance. Private health insurers had not been allowed to vary the price of insurance on grounds of age, health status, service use or any other variable. Marketed with the assistance of $8.7 million taxpayer funded campaign called ‘Run for Cover’, Lifetime Health Cover, as the new policy is known, requires private health insurers to increase premiums for people over 30 years of age by 2 per cent for every year of non-membership.

This policy finally hit the spot: by September 2000, the proportion of Australians covered by private health insurance had increased from approximately 30 per cent of the population to 45.8 per cent. Private insurance coverage has hovered around this level ever since.

Thus, taxpayer’s money is currently being used to underpin Australia’s private health sector. The beneficiaries are those Australian doctors, particularly surgeons and proceduralists, who wish to work predominantly in private practice, along with private hospitals, many owned by overseas investment interests, and the private health insurance industry. The losers are the majority of Australians who rely entirely on Medicare, who could have had their services significantly upgraded with these tax dollars, now totalling approximately $2.5 billion annually. General Australian taxpayers lose as well. The overall financing result has been to reduce the total share of private financing from 11 per cent to 6 per cent. Far from generating greater private sector contributions to the overall health system and relieving pressure on public hospitals, as the Government claimed, taxpayer dollars have been used to replace private dollars!

From the early 1970s onwards, John Howard has been on the public record as preferring a predominantly private health insurance system. The introduction of Medicare was a ‘cardinal mistake’, the Prime Minister told a journalist, just before the 2001 election. Private health insurance, in his view, had worked well for 90 percent of the population and special arrangements should have been made for the poor, who could not afford premiums. Instead of fine tuning the existing system,

we turned the whole thing on its head and we have never been the same since. In the process, we destroyed the honorary system and we dismantled a perfectly functioning health system. You can’t get back to it... You get a new generation with different attitudes, different values. (John Howard quoted in Sydney Morning Herald, 27 October, 2001).

Millions of Australians are probably very pleased that attitudes and values have changed. Under the honorary system, public patients in public hospitals were nominally treated by ‘honorary’ doctors at no charge. In return, ‘honorary’ doctors were given lucrative medical appointments at the large teaching hospitals and rights to treat their private patients in the private intermediate wards of public hospitals. In fact, most of the care for public patients was given by hospital doctors, the newly qualified residents and the registrars. Public patients had no choice in the doctors who treated them and were used regularly by specialists for teaching purposes.

In the huge public wards of the old teaching hospitals, people were packed in side-by-side with virtually no privacy. At regular intervals and without prior discussion or consent, the ‘honorary’ doctor would do a round of a ward, accompanied by residents, registrars and a dozen or more students, all of whom might examine the patient if considered necessary. Such a system would be an anachronism in the 21st century. The Prime Minister’s approval of the honorary system accords with a system of values that has long since lost currency. It is based on a charity model of welfare.

ALSO in keeping with a charity model of welfare is the Prime Minister’s recent claim that bulk billing was never supposed to be an integral part of Medicare. Bulk billing, in this view, can be seen as the special set arrangements that are needed to provide access for the very poor in an otherwise private system. Such systems are fraught with insurmountable problems, as Australian health policy history 1950 to 1975 clearly demonstrates. The most serious problem is the fact that user charges deter a great many people from using medical services. Other problems are that Australians cannot be divided into two neat groups, called the poor and the rest, that two tier systems are inequitable and divide the community, and that predominantly private systems are the most expensive and more likely to result in uncontrolled increases in health care costs.

Numerous overseas studies show that user charges fall most heavily on low income groups and that health outcomes are thereby adversely affected. For example, the abolition of charges in the United Kingdom and in the Canadian province of Quebec has been shown to have resulted in a redistribution of services away from high income groups towards those on low incomes. Conversely, the reintroduction of charges has been shown to have had the reverse effect, redistributing services away from lower socioeconomic groups. In Canada, in one province, the reintroduction of charges resulted in a drop of between 6 and 7 per cent in overall medical service use but a drop of 18 per cent amongst low income families (cited in Gray, 1998, p 921).

Studies have also found that user charges and decreased service use result in adverse health outcomes. The Rand experiment, a very large study in the United States designed explicitly to determine the impact of user charges, found that the sick poor, including children, suffered worse than expected mortality rates, along with higher morbidity rates, including increased hypertension, poorer vision and poorer dental health. Predictably, the use of preventive health services also fell. Summarising the international evidence, researchers have concluded that user charges appear ‘to be most detrimental to low income persons, especially those who are already in poor health...’ (Rice and Morrison, 1994, p 251).

The destruction of bulk billing, then, is seriously eroding access to care as more and more Australians face higher and higher user charges. Nor is it a solution to try to ensure that bulk billing will continue for concession cardholders. Citizens cannot be divided into two groups: those who are poor, and everyone else. Income levels range from very low to very high, with low income earners less able to pay than middle income earners and so on.

The setting of concession card holding as the income level below which doctors will be paid a little more to bulk bill is effectively introducing a means test. Means tests have widely recognised problems. People who qualify may be required to pay nothing if their doctor continues to bulk bill, whereas those who earn one dollar more than the cut-off level for a card will be required to pay the full cost. This system divide citizens into two groups: those whom doctors treat at full price and those who are treated at a discount rate - in other words, charity cases. Neither citizens nor doctors will welcome this change, and it is quite likely that concession cardholders will to be discriminated against in terms of ease of access to practitioners. Moreover, means-tested systems are administratively complex and extraordinarily and unnecessarily expensive.

Nor is there any guarantee that the new set arrangements will result in even concession cardholders being bulk billed. The Howard government has allowed the rebate for medical services to drop significantly and the bonuses being offered to induce doctors to bulk bill cardholders are very small - negligible in the case of the one dollar bonus for city practitioners. It is quite likely, then, that many concession cardholders (as well as a great many other low income Australians) will be required to a level of charges which they simply cannot afford. This takes us back to the situation of the 1950s, 1960s and early 1970s where citizens went without medical services because they were unable to pay, the very situation which Medicare was set up to avoid.

THE main reason that bulk billing was introduced was to ensure access. But policymakers had a secondary aim: bulk billing was a mechanism that they hoped would keep downward pressure on medical fee increases. Uncontrolled medical fee increases had been a serious problem for governments under the private health insurance system which preceded the introduction of Medibank in 1975. At a more general level, rapidly rising health care costs have been a problem for all OECD countries in recent decades. However, those countries where public control of the health system is strong, including Australia under Medicare, have been successful in cost containment whereas those countries with the largest private sectors, in particular the United States and Switzerland, have been less successful in controlling costs. Publicly administered and controlled health systems are in a position to place various kinds of caps on health expenditures. In contrast, private insurance systems are open-ended reimbursement systems. Private insurance funds reimburse whatever costs a health system happens to generate.

The Howard government’s position completely ignores the lessons of Australian health policy history. Under the private health insurance system, approximately 20 per cent of people could not afford private insurance and insurance costs and health care costs created hardship for additional groups of citizens. Moreover, because the cost of premiums was high, many people were grossly underinsured. These were the findings of the Nimmo Committee of Inquiry into the Health Care System, set up by Prime Minister Gorton in 1969, in response to public controversy over the system.

A decline in bulk billing rates across Canada in the early 1980s resulted in a similar public outcry, due - at least in part - to awareness of inequalities in access to care in the United States. The result was the passage of the Canada Health Act in 1984 and, since that time, Canadians have been able to prepay their health care costs through premiums paid to provincial insurance funds and through the tax system. Canadians want to ensure that citizens are not deterred from seeking care due to charges levied at the time of service.

Unlike Canada, Australia has always had a two-tier health system, even under Medicare. But, prior to 1996 citizens were gradually choosing to drop private insurance and put their trust in Medicare. Bulk billing levels were high, hovering around 80 per cent of all services, ensuring access for most if not all Australians. The changes introduced by the Howard government have reversed this trend and have deeply entrenched the two-tier system. Under the present divided system, those able to afford private insurance not only get a 30 per cent donation from general taxpayers but also enjoy shorter waiting times, more convenience and, in many cases, luxury amenities. In contrast, those (generally poorer people) who rely on Medicare often face substantial waiting times and significant user charges. Moreover, it is increasingly likely that even concession cardholders will soon be asked to pay user charges.

In refusing to increase the rebate for medical services and focusing instead on trying to induce doctors to bulk bill concession cardholders, the Howard government has given a green light for the abandonment of bulk billing. This will not happen overnight but, steadily, the trend of the last two years will gather pace. In the near future, bulk billing will be relegated to history. As doctors’ fees rise and the rebate becomes a smaller and smaller proportion of the cost of a service, the medical side of Medicare will have been virtually abolished. The Prime Minister’s vision of a predominantly private system, with high charges for low and middle income earners who cannot afford it and with charity elements for the poor, will be close to realisation.

References:

Gray, Gwen (1998) ‘Access to Medical Care under Strain: New Pressures in Canada and Australia’, Journal of Health Politics, Policy and Law, volume 23, number 6, December.

Rice, T. and Morrison K. (1994) ‘Patient Cost Sharing for Medical Services: A Review of Literature and Implications for Healthcare Reform’, Medical Care Review, volume 51, number 3, pp 235-287