general practice

Jan 15, 2014

Mythbusting Co-payments


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.  


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17 thoughts on “Mythbusting Co-payments

  1. Dale Ringham

    I work in a bulk-billing medical centre as GP. Charging this amount is just plain silly. As was said in the article it will fall heavily on the one income family, and the chronically ill. And my guess is we will be seeing them without getting the co-payment. So then what happens? Frequent attenders do NOT do so for fun. Whatever is fun about sitting in a noisy waiting room with lots of sick people. Might I suggest that those who think there is ‘nothing wrong with them’ think again. It is plainly behaviour with no rational explanation.

  2. Delia

    I would like to see a single national payment system for all health related goods and services. Pathology tests, pharmacy scripts, hospital treatments, GP visits, the lot. Then compare that against national patient e-health records, date of diagnosis, date of treatment, number of follow up visits with GP etc. Only then can we fully appreciate the waste and fraud, in the public as well as private. When the AMA, business lobby groups and the Liberal party complain, tell them ‘if you don’t measure, then you can’t manage’.

  3. drmick

    Just to clarify. The 9 headed PBS monster we have today. Labours idea in 1953 was to subsidise the 7 most commonly prescribed drugs at the time, (mostly antibiotics), so that no one paid more than a set price. The government would pay the rest if the doctor ordered the medication on a script pad. No one knew how many doctors there were in australia at the time with any accuracy, and they wanted to keep it that way to frustrate planner and the tax department. Having to apply for one of these script pads would blow their anonymity, and the government would be able to work out how many there were and where they were. The British governemnt had the great idea of sending new doctors to where they were needed and the Aussie branch of the BMA, (there was no AMA at the time), were going to have none of that silly business. Just like today.

  4. drmick

    Delia I agree with you where waste an over servicing is concerned; it is my experience that at a Doctor/Nurse/ emergency department level, the auditors putting inexperienced staff into these areas to save money are not able to see the big picture and end up wasting billions. Inexperienced staff need the horrifically expensive cascade of tests to arrive at a diagnosis, then begin the ridiculous cascade of care that the tests justify.
    Experienced nursing staff can not only triage but be specific in their directions to the patient. An experienced doctor also has the confidence to treat without the fear of litigation hanging over his shoulder; something the new breed are, (mostly justifiably)over cautious about because of their inexperience. taking on teh doctors has been a problem forever. Their effort in blocking labours effort to get the PBS going for “specific” medications in the 50`s has spooked every government since. The labour government was thrown out for trying to use communist tactics to socialise medicine, (read doctors). The liberals got in, made the whole British Pharmacopoeia available on the PBS and commenced that 9 headed monster we have today.

  5. Delia

    It’s tempting to agree with drmick. However the entire health system, public and private needs structural reform. Qualified doctors waste substantial amount of time doing basic duties; paperwork, rewriting scripts, minor medical procedures. Qualified nurses also waste time doing basic jobs; paperwork, toileting, showering, giving pills from dossett boxes. Over servicing and waste is epidemic. A large proportion of pathology tests and medical procedures simply do not have any statistical advantage for the patient. We could cut out miss use of the health dollar. But it would take a politician with vision and courage. Abbott is neither.

  6. EconomicRationalist

    Co-payment is an attempt to get people to recognise the value of a service that is heavily subsidised without charging the full fee. I agree that it can be an administrative nightmare, but those of us with private insurance already experience this routinely. There is an “excess” on every claim on every type of insurance.

    For Medicare, a co-payment is simply a user-pays tax increase, if you assume that people will use the service in any case. If it is intended to change consumer behaviour, there needs to be a suitable alternative for the person to choose: stay at home and suffer until the problem gets worse, consult witch doctor or other community-based practitioner with a lower fee, or complain to local member of parliament.

    We raise the tax on tobacco to get people to stop smoking. By raising the price of GP visits, do we want people to stop going to the doctor?

    We have huge perverse incentives in the health system at the moment, encouraging people to visit their Emergency Department for fast and free service (within 4 hours!), instead of visiting the GP. These services cost the taxpayer about $500 per visit, compared to a GP visit at $50 plus visits to labs and imaging facilities.
    If the government wants to shape consumer behaviour to save money, it should charge a co-payment fee for Emergency Department visits and PAY people to visit their GP instead.

    Even better would be the Singapore system, which provides funds directly to each person in a Health Saver account, which they then use to purchase services from either public or private health care providers. Singaporeans now have a higher standard of living, longer life expectancy, and billions of dollars in their health saver accounts compared to Australians.

    We have made health care funding too much of a political bribery system to buy votes now, without considering the long-term implications of today’s decisions.

  7. Wakerley4154

    Some silly points in this article. Re Myth 1, Is there a Government subsidised cappuccino program? I seem to have missed that! Would be a great hit with the latte set, no doubt.

  8. CML

    No Steve777, it is a very bad idea. Universal health care in this country is one of the best schemes in the world. What is it with these conservative governments that they want to meddle with, even dismantle, Medicare? Do we want to end up like the USA, where despite the recent ‘Obamacare’, millions of people, mostly the poor and disadvantaged, have no health cover at all.
    I think Jennifer is correct about what she says in this article, and the “Myths” are just that, myths. I have some knowledge of the Canadian system, and as I understand it, private health insurance and private hospitals are also banned in their system. Think you may be able to insure for ‘extras’, but not sure about that. All my Canadian friends think their system is fantastic, and I have to admit from the stories I hear, it is much better in some ways than our scheme in Oz. If we stopped funding the private sector and put all those billions of dollars into public health care, we could dramatically improve the system.
    Any government that wants to radically change Medicare on economic grounds, should conduct a plebiscite at the next election. Voters should be asked if they want ‘user pays’ or an increase in the Medicare levy to continue universal cover and access for all.
    Frankly, the arguments for changing Medicare are just so much spin and nonsense. When it ain’t broke, DON’T fix it!!

  9. Bronwyn

    I doubt many people can afford to go to the doctor unnecessarily as there aren’t that many medical practices that bulk bill with no further payment required. Most GPs in Perth that I have gone to already charge extra, or you pay up front and get the Medicare benefit that doesn’t seem to have increased in a decade paid into your bank account automatically.

  10. Steve777

    The justification given for the copayment is to curb unnecessary trips to the Doctor. That some people go to the Doctor to socialise. That’s a furphy. There are hypochondriacs and they have a people that won’t be fixed by nobbling bulk billing. For the rest of us, a visit to the Doctor is hardly among our favorite ways to spend a couple of hours. Go into town, find a parking spot, read old magazines in the waiting room and a brief consultation. Hardly a memorable social experience.

    The Government wants to wind back bulk billing as a first step to dismantle Medicare. They should try to convince us that this is a good idea if they can.

  11. bushby jane

    It would be interesting to see what happened if the public hospital emergency wards were to charge the $5, but not GPs. I have been told that emergency wards are regularly being used by people who do not need emergency treatment, however I suppose some of this may be because there isn’t a bulk-billing GP available.

  12. Delia

    Good article. A number of newspapers have reported patients with private insurance who went private for cancer treatment, and ended up $20,000 out of pocket. Private doctors who over service is a serious problem, with rates of pathology tests and some medical procedures like caesarean procedures ordered for private patients at a far higher rate than public patients with the same condition. The clinical standards patients receive in many private hospitals is way below than that of care delivered by large public hospitals. Private patients can end up receiving far less nursing care (private hospitals usually run casual-only nursing staff, with high nurse to patient ratio’s), no out of hours/weekend medical care (there are frequently no doctors permanently available on the hospital premises), no allied health services (private health care is very ‘doctor centric’ and the ‘health team’ approach is resisted strongly) and there are very few follow up supports (discharge planning is expensive and unglamorous). Reports like the one Dr Armatige, CEO of private hospitals Australia commissioned on overpriced, substandard private hospitals has been kept hidden from public view. Basically the private health system cannot control costs and cannot deliver acceptable standards of care. Get rid of it.

  13. Deipnosoph

    Jennifer presents the ‘no’ case. I think however that the main reason for a copay is to reduce use of “free” services. Myth 4 above does this area a disservice.

    Charging a little extra will just make frequent GP-attenders think twice.

    The Israeli kindy is a furphy – that was making something that everyone knew was wrong into something that is perhaps okay. With visits to the doctor, we are starting with something that everyone thinks is okay – that is, that it’s fine to go to the doctor when you are sick. The actual problem is exactly the opposite – there are plenty of people out there who should be going to the doctor, but for whatever reason they don’t want to. And an extra $6 will just add to this.)

    I am assuming that what I’ve heard is correct – that there are a sizeable number of patients that unnecessarily take up GPs’ time. What we need are these statistics.

    I don’t agree with a universal copay. Obvious groups that should not have to pay are the poor, and those who must see a GP on a regular basis (eg those on a medication for life, who need to get prescriptions).

  14. grubbidok

    Even bulk-billing of the consults is rarely ‘free’. In Sydney it is more than common for GPs to bulk-bill and charge a ‘reduced gap’. The patients are happier as the co-payment is ‘reduced’ and the GP manager is happy as they still get to claim as a bulk-billing practice.
    Unfortunately it meddles with the statistics.

  15. Jennifer Doggett

    Fiddling with it at the moment to try and increase the font size!

  16. paddy

    Excellent piece that sums up the situation very well.

    Note: It maybe the pesky heatwave conditions causing the Crikey hamsters to fail at their task, but could someone give them a drink and get the font size increased on this fine article?

  17. drmick

    It is pretty simple really. Stop giving money away to the private system and spend it on the public system where it belongs.
    The public system has been whiteanted and the state level by successive governments, and now the ideologues federally will be able to put the sword in and watch it bleed to death.
    Tnink about that. The private system takes and does not give; in any way shape orform
    All private hospital staff including doctors nurses radiographers, pathologists, are Public Hospital trained. Private hospitals train no one.
    All private hospital patients are covered by medicare. They pay twice and we pay twice.
    Private hospitals pay out a dividend to their shareholders. This is a disgrace when it includes the 30% rebate

    Anyone wealthy enough, who wants to donate another $5 dollars to their doctor is free to do so. In a town where no doctors bulk bill, having to find the $105 cash to get your prescription for your chronic illness is a disgrace. They called this highway robbery in the old days and it was outlawed and made a criminal offence; yet these new age robbers still wear masks and carry stethoscopes instead of guns.

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