If GPs pass on cost from rebate freeze, poorer, sicker patients will be hardest hit

Not even a fortnight in the job and the newly appointed health minister, Greg Hunt, is already facing pressure from medical organisations to scrap the controversial freeze on Medicare rebate indexation.

Most Australians will remember the series of ill-fated co-payment policies proposed by the Abbott government. The “$7 co-payment” and its short-lived successors were abandoned in the face of sustained public backlash. Though Abbott eventually declared the policy “dead, buried and cremated”, the Medicare rebate freeze has been labelled a GP co-payment “by stealth”.

The freeze, first implemented by Labor and twice extended by the Coalition, means bulk-billing doctors will receive the same reimbursement for a consultation in 2020 as they did in 2014, despite the increasing year-on-year cost of delivering services.

The freeze means many more Australians may soon be charged out-of-pocket co-payments to consult their GP, as bulk-billing practices struggle to absorb the widening gap between income generated by the frozen rebate (A$37.05 for a standard consultation) and the rising cost of running a practice. Widespread co-payments would hit hardest for people with the poorest health, greatest need for primary healthcare and least capacity to absorb the increased cost of GP co-payments.

How will the freeze affect everyday Australians?

If many more GPs start charging a co-payment, how might it affect Australians with different health and income characteristics? This is one of the key questions we should ask when we think about the viability and fairness of a policy like the Medicare indexation freeze.

Policies that cause “regressive” outcomes – that is, policies that disproportionately burden poorer compared to wealthier households — can have damaging long-term consequences.

One major concern is that GP co-payments may force low-income households in particular to cut back on their healthcare use. This means they could miss out on important preventive or early care. They could end up in hospital needing more intensive and expensive treatment down the track.

We have recently explored these issues using data from the nationally representative Household, Income and Labour Dynamics in Australia Survey (HILDA).

Ill health is not distributed evenly among income groups, and neither is the need for primary healthcare services.

No matter what age group you look at, people in lower income groups report a higher rate of chronic illness compared to people in higher income groups. For example, 28% of 30-to-49-year-olds in the wealthiest quarter of our sample report a chronic illness, compared to 47% in the poorest quarter. This well-known pattern, called the socioeconomic health gradient, has been extensively documented in Australia and across the world.

Unsurprisingly, then, people in lower income groups also go to the doctor more often (again, no matter what age group you look at). This pattern could be called the “socioeconomic gradient in demand for health services”. For example, on average, 30-to-49-year-olds in the wealthiest quarter of our sample reported almost half as many GP visits (around 3.4 in a year) as the poorest quarter (around 6.3 visits in a year).

A regressive policy

We don’t know how much the average co-payment will be once doctors — particularly those who bulk-bill most or all of their patients — have adjusted their billing practices in response to the freeze.

Some GPs may increase or introduce co-payments for general patients while continuing to bulk-bill concessional patients. Others may start charging fees to all of their patients. GPs who do introduce concessional co-payments are likely to charge these patients a lower rate or cap the number of visits for which they must pay.

We have explored a variety of hypothetical co-payment “scenarios” in a soon-to-be-published article for Health Policy to estimate the cost burden people from different income groups and with different health characteristics might face. Cost burden is the percentage of household income a previously bulk-billed patient would need to absorb to go to the doctor the same number of times in a year, if their doctor starts charging them a co-payment.

If many more GPs start charging co-payments to both general and concessional patients, we are likely to see severely regressive outcomes. Even if concessional patients are charged fees a third or a quarter of the general rate, people in the bottom income quartile would need to absorb an average cost burden around three to five times that of the top quartile.

No matter what income quartile you look at, a co-payment will disproportionately burden women compared to men. This is because, on average, women visit the GP more often than men (in our sample, the average woman saw a GP just under six times, while the average man went four times); they also earn lower wages on average.

Co-payments are also likely to leave the chronically ill considerably worse off than their healthier counterparts.

Consider a scenario where general patients are charged a A$40 co-payment (that is, the approximate gap between the Australian Medical Association’s recommended standard fee of A$78 and the frozen rebate amount) while concessional patients are charged a A$10 co-payment. If we look within each income quartile and compare the cost burden of people with and without a chronic illness, we find those with a chronic illness will need to absorb a considerably larger cost burden.

In the bottom quartile, the average person with a chronic illness would need to absorb a cost burden a little under twice that of a healthy person (0.59% v 0.34%). In the top quartile, the average cost burden estimates are much smaller but the disparity is still evident (0.19% v 0.12%).

These socioeconomic disparities are equally apparent when we look at households rather than individuals. This is of particular concern in the case of lower-income families with children. They will need to absorb a disproportionately large cost burden to maintain their primary healthcare use.

When we instead model the consequences of a co-payment scenario where only non-concessional patients are charged co-payments, our cost burden estimates are considerably less regressive. However, it is not as simple as encouraging GPs to maintain concessional bulk-billing. For many GPs servicing disadvantaged areas, this is unlikely to be economically feasible. For example, they may not be able to charge a co-payment to enough of their patients to cover the losses generated by the Medicare rebate freeze.