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AMA ramps up campaign against crippling co-payment

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The AMA is ramping up its campaign against the Federal Government’s co-payment plan amid evidence it could force many medical practices to shut down under the weight of greater red tape, Medicare rebate cuts and increased bad debts.

Adding to the evidence that the $7 co-payment was likely to undermine access to primary health care, a report commissioned by the AMA has found bad debts and increased administration costs caused by the measure were likely to add between $1.76 and $4.21 to the cost for each service, meaning that in many instances the $2 “windfall” to be passed on to practices under the Government’s model would be completely outstripped by additional costs.

AMA President Associate Professor Brian Owler said the extra expenses, coming in addition to the planned $5 cut in the Medicare rebate, could push many practices over the financial edge and make them unviable.

“The Government’s plan would rip $3.5 billion form frontline GP, pathology and imaging services [and] create a costly red tape nightmare for medical practices,” A/Professor Owler said. “It would make many general practices unviable.”

Under the Government’s model, the Medicare rebate would be cut by $5 and all GP, pathology and diagnostic imaging patients would be charged a $7 co-payment. Doctors would retain $2. Concession card holders and children younger than 16 years would be eligible for bulk billing after their first 10 visits in a year, while practices that bulk billed any other patients, or which failed to collect the $7 co-payment, would face severe financial penalties.

The Kilham Consulting report said that in its first year of operation (2015-16), the co-payment was likely to apply to around 233 million services, including 195 million services that were previously bulk billed and that will therefore attract a higher cost to administer.

It said that, depending on staff costs and the level of automation, administering the co-payment was likely to cost between $1.41 and $1.61 per service, meaning that the total extra cost of administering the co-payment was likely to reach between $274 million and $313 million in 2015-16, and up to $331 million by 2017-18.

“This is a dead-weight cost to the economy,” the report said. “There is no efficiency gain claimed for the measure. On the contrary, there is an efficiency loss as a result of additional transaction costs.”

A/Professor Owler said this was completely inconsistent with the Government’s promise to cut down on unnecessary rules and regulations.

“The Government has committed to an agenda of deregulation and red tape reduction, but its Medicare co-payment proposal achieves the opposite,” he said.

The Kilham report shows practices will pay an even higher price if they defy the Government’s intentions and continue to bulk bill their patients.

It said the proposed arrangements would very heavily discourage bulk billing. The current bulk billing incentive ($6.15 per service in metro areas, and $9.25 in others) would be converted into a low gap incentive that would only be payable for eligible patients who were charged exactly the $7 co-payment.

For example, an urban practice that continued to bulk bill patients would lose $11.15 per service, and those in rural areas would suffer a cut of $14.25 per service.

The report warned there was likely to be blow out in bad debts, particularly for practices in low income areas.

It said it was likely practices would invoice the co-payment “even when it is clear that the patient will refuse to pay, or will not have the means to pay. This also means necessarily that there will be bad debts”.

Medical practices in low income areas with high rates of bulk billing told the report’s authors that, “they believe that patients will expect to be treated whether they pay the co-payment or not”.

It warned that for such practices bad debt costs could reach up to $2.80 per service, in addition to extra administrative costs of at least $1.41 per service.

“Bad debts are the ‘sleeper’ in the equation,” the report said. “If they turn out to be high, the unit cost of bad debts will dwarf the unit costs of administering the co-payment.”

It said the break-even point for the bad debt rate was 8.5 per cent, and “anything above that means the general practices will have to review their rates of patient billing and increase their prices in order to recover the costs of the scheme”.

A/Professor Owler said the AMA was not opposed to co-payments per se, but the report’s findings showed that the Government’s co-payment was not only unfair for disadvantaged patients, but also hurt practices, and should be scrapped.

“We are not opposed to those patients who can afford to pay a co-payment sharing in the costs of their health care,” he said. “[But] we do not support the Government’s co-payment because it is unfair, inequitable and would hurt the poor…It would also make many general practices unviable.”

He said the AMA had sought constructive discussions with the Government about modifications to its co-payment plan, including meeting its request for an alternative model.

But A/Professor Owler said an “absence of meaningful engagement” had left the AMA with no alternative but to intensify its efforts to have the Government’s co-payment proposal scrapped.

“My focus in coming weeks will be to continue highlighting the risk to our high quality health system that the Government’s model represents,” he said. “It cannot be salvaged by small changes here and there, or a last-minute deal in the Senate. It needs to be dumped.”

Adrian Rollins