Issue 38 / 8 October 2013

INCREASING out-of-pocket costs is the main issue of concern for people using the health care system say consumer advocates and health economists, who have called for an urgent review of funding models.

Carol Bennett, CEO of the Consumer Health Forum of Australia (CHFA), said Australia was in danger of following the US, where people often had to choose between putting food on the table and buying vital medicines for their chronic health conditions.

“[Australians] are making those choices all the time”, Ms Bennett told MJA InSight, in response to research in the MJA which found that older Australian households were outlaying $3585 per year in out-of-pocket (OOP) health care costs, compared with $3377 in younger households. (1)

The authors said although the difference in OOP costs was not significant, older households spent 9.4% of their total household budget on OOP health costs, with non-prescription drugs the biggest item of expenditure. In comparison, younger households spent 4.7% of their budget on OOP health costs, with private health insurance premiums the biggest item.

The research analysed the OOP expenditure reported by Australian households grouped into older households (where the reference person selected by the researchers was aged 65 years or older) and younger households (reference person younger than 65 years), using statutory data collected by the Australian Bureau of Statistics.

The authors found that the OOP health care cost was $28.7 billion for the 2009–2010 study period, compared with $21.2 billion estimated by the Australian Institute of Health and Welfare for the same period.

In an accompanying editorial, Professor Jane Hall of the Centre for Health Economics Research and Evaluation at the University of Technology Sydney, warned that “no country can afford to finance all the health care that is possible for everyone”. (2)

“Universal access is no longer envisaged as unlimited access for all to everything, but rather as appropriate access to cost-effective and socially valued services”, Professor Hall wrote. “We need a policy debate about what should be included in that cost-effective and valued minimum package.”

Ms Bennett agreed that policy debate was urgently required.

“This is the number one issue for our members”, she told MJA InSight. “People are remortgaging their homes and cashing in their superannuation to pay for health care.”

Associate Professor Sue O’Malley, of the Australian School of Advanced Medicine at Macquarie University, told MJA InSight that there were problems with the current system of subsidies.

“There is not only a need to examine the OOP expenditure of those suffering chronic illnesses relative to those without a chronic illness”, she said. “There is also a need to examine the impact of the discriminatory fee policy, between concession card holders and those non-concessional patients, practised by many physicians.

“An initial consultation by a specialist physician can attract a fee of $240 for the non-concessional patient compared to $120 for the concession card holder”, Professor O’Malley said. “Working on the assumption that the physician has to earn a certain amount to run a practice and make an acceptable income, this difference in fee must result in a cross-subsidy between the non-concessional patient and the concession card holder.

“Since the [Medicare Benefits Schedule] fee is the same for both, the OOP for the non-concessional patients is inflated by this cross-subsidy.”

Ms Bennett said the costs of medicine and the price disclosure system by drug companies supplying subsidised medicines also needed review.

The CHFA website says Australia pays $1 billion more for prescription medicines than Britain pays for the same medicines. (3)

“That’s because Australia’s medicine pricing policies have failed to take advantage of the plunge in world pharmaceutical costs in recent years”, the website says.

A spokeswoman for Peter Dutton, the new federal Minister for Health, said: “Out-of-pocket expenses in health care are of concern and the government will help make inroads into these costs by support for private health insurance, investments in GPs, offering better targeted dental services and keeping the cost of pharmaceuticals low.”


1. MJA 2013; 199: 475-478
2. MJA 2013; 199: 442-443
3. Consumers Health Forum of Australia 2013; Drugged by reality – losing $2000 a minute and counting


Should the federal government review health funding to reduce out-of-pocket health costs?
  • Yes - they're too high (50%, 80 Votes)
  • Yes - with the medical profession (38%, 60 Votes)
  • No - not necessary (13%, 20 Votes)

Total Voters: 160

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14 thoughts on “Out-of-pocket health costs soar

  1. Department of Health Victoria Clinicians Health Channel says:

    Completely agree that the OOP costs are too high & need to be reviewed urgently.

  2. Peter Donahue says:

    I agree that in many cases patient gaps can be quite high. This has to be viewed in the light of the on-going refusal of the federal government to increase medicare rebates in line with inflation or other appropriate funding yardsticks. Of course the government is keen to look at restricting the amounts doctors can charge, it’s in their political interests to do so and neatly avoids the real issue of meaningful increases in medicare rebates.


  3. Brad Gordon says:

    I’m a GP in Sydney, and I agree that the OOP costs are out of control.

    If I see a mole I can’t be 100% sure about, then I get to refer my patient to a dermatologist, who will see the patient in 6 weeks for a low low cost of $250. Biopsy needed? Double that amount + follow-up.

    A child needs an ENT review? See an ENT specialist for $270, OOP costs somewhere around 3K for private hospital grommet insertion.

    Psychiatrists charge up to $300 for review, and most patients needing psych review couldn’t afford $30 let alone x10 that amount.

    We are heading towards the American system where if you aren’t wealthy you just suffer with your problems, the exception being urgent medical care which is provided by Medicare like if you have a cancer diagnosis or need emergency surgery.

  4. Ian Hargreaves says:

    Healthcare is similar to transport, where the government provides a basic level of service, which is very heavily subsidised by the general taxpayer pool. Medicare is a system whereby the wealthy/healthy taxpayers subsidise the sick.

         Back in the 1970s public hospitals had specialist outpatient clinics in fields like ENT or dermatology, where patients could be treated for free and medical students could learn. The senseless dichotomy between federal and state systems meant that the State government saved money by cost shifting back to the federal government, closing outpatients and forcing patients back into private specialists’ rooms.

         It would require courageous health ministers to insist that any hospital which provides a service must provide an outpatient clinic in that field, and to legislate the level of funding required to maintain that service.

         Those people who could afford to pay, or who had specific higher demands, e.g. the self-employed builder who wants to get back to work quickly after a sporting injury, could choose private treatment. There is no point restricting an individual’s right to buy a car, or to buy private medical treatment, because there will always be people who want more than the government can afford to provide.


  5. Joe Kosterich says:

    OMG! People are paying an average of a bit under $70 towards their health. Something must be done. Before we know it they may be spending as much for health as they do on alcohol and gambling! The problem is not that people cannot (in the main) afford the expense, it is they do not want to. They have been conditioned to expect everything for nothing and would rather spend their dollars elsewhere.

    And the  way to make best use of services is to have a price signal to the user.

  6. Dr Judith O'Malley-FOrd says:

    I totally concur with Dr Brad. It is all very well saying OOP expenses are too great, but there are many facets to this.

    1. medicare rebates for commonly used item nos have not kept pace with inflation for nearly 30 years

    2. .For GP’s in particular, BB-ing medicare rebates are unsustainable from a business point of view.

    3.  GP’s are forced to bulk bill patients because of current market forces which have resulted from the actins of governments in recent years. The government uses the BB-ing rate as a yardstick of “success” in the health system, where there is an oversupply of GP’s competing for “business”

    4. Governments do not consider the working conditions (practice expenses, staff costs etc, ) of doctors when it comes to the health system.

    5. The doctor who offers a consessional rate for card holders is effectively halving his income for that consultation. DOES ANYONE HAVE ANY IDEA THE % of  PEOPLE IN THE COMMUNITY ON HEALTH CARDS?

    If OOP expenses are to be investigated, this CANNOT be done without a fair and realistic reappraisal of the Medicare rebates for item nos as well

  7. George Hamor says:

    I agree totally with Dr Joe and Ian Hargreaves.

    The problem is Medicare itself, which is a gigantic bureaucracy costing megabucks and which is supposedly funded by the Medicare levy which of course is a nonsense.

    We then have genuinely ill people in need of care but we cannot fund the costs of this. The withdrawal of outpatient clinics in most hospitals has disadvantaged both the genuinely poor as well as medical students who no longer have such a facility to utilise for the teaching of subacute and chronic illnesses. Those hopitals still providing such services have lengthy waiting times, as do subspecialists in private practice.

    However no politician in their right mind would suggest the abolition of Medicare. It in fact suits them for patients to complain about OOP as such costs gives government a stick to beat around the greedy doctors’ heads.

    The point about the large numbers still working but having access to a Health Care Card is well made and is of course a disgrace. People have been conditioned to worry little about their health as Medicare will look after them. As Dr Joe points out, there is little concern about money spent on cigs, alcohol and gambling.

    We live in a weird society.

  8. Dr Maureen Fitzsimon says:

    It is commonplace for specialists other than GPs to charge $320 to $380 for an initial consultation- whether the person is a pensioner or not. As we GPs, who have often known the patient for decades, watch the patient borrow and scrape this fee together, we cut our fee back to the bulk billing bone, so they can afford to pay the specialist.  Category 3 Paediatric appointments  in Logan were over an 8 year wait, on last figures! Numerous other OPD clinics have well over 300 week wait lists. So there is no help on that front.  Remember that a single pensioner receives $320 a week for EVERYTHING. So many people budget to the wire to pay 100 per cent health insurance, and find it is useless, as they can’t afford gap fees. I was simply furious at the editorial of the AMA President after Tony Abbott’s election. Not a word about the biggest issue for GPs and patients- THE GAP!  Not a word about the huge disparity between CPI growth and Medicare rebates for decades. Just a lot of sucking up to the government. 


  9. C Mandel says:

    If out of pocket costs continue to rise patients will no longer be able to afford private healthcare.  Private health insurance is not cheap.  If  a patient is then thousands of dollars out of pocket for doctors’ fees he/she will not see the value in private insurance and will drop it.  A retired relative had a fracture dislocation reduced and plated: the bill from the orthopaedic surgeon and anaethetist?  about $5000 out of pocket.  This money has come out of his retirement savings and cannot be replaced.  Had he realised this would be the cost he would probably have gone public and been treated just as quickly and at no cost.  Covering costs is one thing, expecting huge unreimbursible co-payments is another.

  10. richard gordon says:

    The gap between mediare/private fund for many specialist fees – particularly proceduralists – is often too high. Many proceduralists accept no-gaps fees which seem to be, in general, a fair amount. Others who charge much more need to take a reality check as to what is a fair day’s pay for fair day’s pay. 

  11. Dr C Goodall says:

    It would be interesting to see the actual breakdown of the figures, the biggest expenditure for the older age group was for “non-prescription” drugs.  What did this include? Vitamins and Mineral preparations, Fish oil?

  12. Greg Hockings says:

    There are multiple overlapping issues in relation to out of pocket medical expenses.  Health economists often suggest that medical services which are perceived as being “free” (ie bulk-billed”) are considerably overutilized.  There are also patients who could readily afford private health insurance but will not pay a premium in addition to their Medicare levy, which they believe should “entitle” them to all necessary health care in the public system.

    I once bulk-billed pensioners, seniors and concession card holders. I soon discovered that I would have to charge a very large gap to other categories of patients if I was to have a financially viable practice. I also grew tired of hearing patients with concessional entitlements or part-pensions tell me about their frequent overseas travel.  Now I charge everyone the same fee.  No one has to see me if they can’t afford my fees, which are explained up front when they make their first appointment.  Public hospital outpatients should be available in all specialties, but should be means-tested so that appointments are limited to those who genuinely cannot afford to be seen in the private sector.

    The Relative Value Study was carried out some years ago to assess the incomes of various categories of medical practitioners against each other and also in comparison to other profesionals such as lawyers and accountants. The methodology was biased against medical practitioners – for example, GPs were only allowed to claim the cost of two weeks annual leave, and only a $20,000 vehicle if I remember correctly.  The official conclusion was that GPs and non-proceedural specialists were only receiving around 50% of what they deserved. No action was taken.

  13. sunita says:

    All very valid & important points covered above- is there any reason these arguments are not being shared with the general community? We in the medical community are only too aware of the pressures from all angles- Medicare, patients, hospitals, community expectations, specialists’ fees, practice overheads, teaching obligations & our own aspirations. If we want to change public perception & practices, the public must know what we’re facing… any advocates willing to step up to the microphone?

  14. Prof Peter brooks says:

    this issue strikes at the very heart of medical care – and it is primarily medical rather than healthcare. add to these out of pocket costs the fact that many of the procedures for which patients are having to pay significant out of pocket expenses may well be unnecessary we surely have a real problem . How can doctors justify these costs – how many of your patients  have had an arthroscopy  for osteoarthritis , a vertobroplasty , a radiology test -CT, Plain Xray or MRI for acute low back pain or a radical prostatectomy all of which are low value procedures ( ( MJA 2012:197:556-560 ). Now its one thing to charge extra for medical procedures – though surely they need to be justified ,  But it is another thing entirely to charge extra for something that has no benefit to the patient and has  the potential to cause harm .It seems to me we are becoming a greedy  profession.

    This is about how we fund medicine in this country and the current fee for service system is unsustainable . politicians need to have the strength to address this issue – but I doubt they will – if not we haev the option of engaging  a community debate on the issue of health care funding and at least attempting to find a solution -or remaining a ( major ) part of the problem . One last thought – did yiou know that the United States passed the point where there are now more doctors on salaries than on fee for service – makes you wonder how long we can keep our heads in the sand !

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