Jan 15, 2014
The debate about co-payments for GP and hospital emergency departments, sparked off by a paper by Terry Barnes for the Australian Centre for Health Research, has raised a number of broader issues about our health system and how we pay for it. Common to many of the arguments (on both sides of the debate) are some myths about how we should pay for health care – I’ve addressed four of these below.
Myth 1: We can’t afford our health care costs without taking some drastic action
It’s true we are spending more on health care than we did 20 or 30 years ago. This is not necessarily a problem (we are also spending more on cappuccinos but no-one seems to think this is a crisis). We are a much wealthier society than we were when Medicare was introduced and it makes sense that we would want to spend some of this increased wealth on health care. Projections of gloom and claims that we will no longer be able to afford our health care costs in the future unless we take drastic action are not based on any economic logic and are usually only made by people who are looking for reasons to justify funding cuts they want to make for other reasons.
Research by Ian McAuley of the University of Canberra has shown that even if health care expenditure were to rise from 10 per cent of GDP to 20 per cent of GDP between now and 2050, the remaining 80 per cent of GDP in 2050 would still be higher than 90 per cent of GDP in 2013 (unless economic growth is significantly lower than anyone is predicting). In other words, we could double the proportion of our national income that we spend on health care over the next 35 years and still be better off, in economic terms, than we are today.
There is also no logic in arguing that we can reduce rising health care costs by shifting costs from Government budgets to consumers, for example by increasing co-payments. In fact, shifting expenditure to consumers can actually increase overall costs if it requires a more complex system to administer or results in a less efficient allocation of resources.
Of course, regardless of the amount we spend on health care we always have an interest in maximising the value for this expenditure and ensuring that it reflects consumer and community priorities.
Myth 2: Averages matter
Reports of out-of-pocket expenses frequently cite ‘average’ out-of-pocket costs for medical and health services. These are often presented as supporting the case that co-payments are not an issue of major concern.
For example, AMA President Dr Steve Hambelton said last year ‘The average total out-of-pocket costs per person for medical fees in 2011-12 was $131’. This figure may be true but it is also largely irrelevant.
Averages matter in some areas of public policy but when it comes to health few people are ‘average’. People tend to be either sick or well, those who are mostly well spend very little on health care and those who are sick spend a lot. In statistical terms the pattern of health expenditure across the population would be described as having a ‘long tail’. In practical terms, this means that we need to focus policies on areas where the bulk of health spending occurs, not on a largely mythical ‘average’ consumer.
Co-payments which are based on ‘average’ patterns of health service utilisation and expenditure will end up with the healthy and wealthy contributing much less towards their care than the sick and the poor.
Myth 3: Primary care services are ‘free’ from bulkbilled GPs
The myth of bulkbilling is that it provides free primary care. This only occurs in the minority of cases where the GP consultation is the only service required. For most people, going to the GP is just one component of the care they need to treat their condition.
For example, the majority of GP visits result in a prescription which almost always requires a co-payment to fill. Data from the Bettering the Evaluation and Care of Health (BEACH) program shows that there 83 prescriptions issued per 100 GP ‘encounters’. There are also frequently referrals for further tests, allied health and specialist appointments. Often a return visit is required to assess progress and/or discuss the outcomes of the tests. These are not independent services occurring in isolation – they are all components of the same episode of care and their financial impact should be seen as a whole.
In addition to these costs, many people face additional direct and indirect costs when they have to access GP services. These may include: parking fees; forgone wages for taking time off work; and additional childcare expenses. Furthermore, as families with young children know, once one child gets sick the others are likely to follow – each one requiring the same health care services which thus compounds the costs.
A $5 co-payment per GP consultation needs to be seen in the context of all the other costs faced by individuals and families when accessing care.
Myth 4: A health care system without co-payments is doomed as people will always overuse ‘free’ services
People who believe that health systems cannot function without co-payments for basic services should take a trip to Canada where co-payments for GP and public hospital services are banned. Their health system, while not perfect, achieves similar health outcomes to Australia for around the same level of expenditure. This does not mean that co-payments for health care do not have a role within our health system but it does highlight that they are not an essential component of an economically sustainable health system.
In relation to the potential for over-use of health services – classic economic theory says that people will over-consume goods and services when they are priced at lower than market price. However, this theory fails to take into account that there are already a number of hidden costs and natural barriers to accessing health care. As well as the costs (outlined above) associated with additional primary care services, there are the less tangible costs of waiting for treatment and the intrinsically undesirable nature of many forms of treatment.
Also, behavioural economics has taught us to be wary of imposing simplistic economic models on complex areas of human behaviour, such as health care. There are many examples in the health sector where consumers have acted completely contrary to the predictions of economists (paying for people to donate blood, for example, which has been shown to reduce, rather than increase, the level of donations). Proponents of a co-payment for GP services should appraise themselves of the famous Israeli childcare experiment in which a childcare centre attempted to reduce the number of ‘late pick-ups’ by imposing a modest co-payment. The unexpected result from this experiment was an increase in parents arriving late as those who had previously made an effort to be on time now perceived the co-payment as setting a price for the additional care provided, thus assuaging themselves of any guilt they had previously felt about keeping staff waiting.
A similar outcome in relation to a co-payment for GP or public hospital services in Australia would be a disaster – an issue that hopefully, the Commission of Audit will carefully consider before making its recommendations to Government.