Strange things are happening in Australian politics at the moment. The Federal government appears to be shooting itself in the foot with rocket launchers, and doing everything it can to become that rarest of entities, a one-term Federal government. There are many examples of the government’s reckless desire to consign itself to the dustbin of history, but most of them are beyond my ken. However, one that touches on an issue I’m vaguely familiar with – health – stands out as a particularly egregious example of policy-making stupidity, in which the government squandered a chance to implement a potentially important policy that would have improved the budget bottom line, then doubled down on an incredibly bad policy that is guaranteed to annoy essentially everyone. In an electorate with compulsory preferential voting and consistently high electoral turnout, this really is a recipe for electoral disaster – and completely avoidable.
The policy in question is the General Practice co-payment, and although it’s a politically tricky task – better governments have floundered over it – it has a sound public policy basis and with the right political guidance a new government riding high on popularity should be able to get this sort of thing introduced. That’s what first term governments in Australia do. So what went wrong?
A brief primer on Australian health financing
Very briefly, Australia’s health system is managed primarily through General Practitioners (GPs), family doctors in the USA, who are the first port of call for health concerns. In theory every time you visit you pay the GP and present the invoice to the government-run single payer health insurer, Medicare, who reimburse you a fixed rate depending on the type of service you received (this is called a rebate). Your GP can choose to charge you more than this rebate, in which case you have to wear the difference as a co-payment. Many GPs opt to provide a service called bulk billing, in which they don’t take cash from their patients but bill the government directly for only the rebate. This makes the service essentially free at the point of care for the patient, but reduces the amount of money the GP can make; it does however reduce the overhead for the GP, since they don’t need to manage a cash system in their office. GPs in Australia are essentially private health providers, claiming fees from a government single payer, and the system is deregulated sufficiently that many large international and national healthcare providers run large, multi-doctor and very modern clinics (often with allied health services attached), all charging the patient essentially nothing. Crucially for the health financing debate in Australia, hospitals are funded by State governments, while GP rebates through Medicare are funded federally. Note that Medicare is not like the US version (only for elderly people); in Australia it is the name of the universal health coverage scheme that all legally resident Australians can access.
One big problem with Medicare is that the essentially free nature of bulk billing services (and many non-bulk billing services, if GPs don’t increase their fees) is that patients are not discouraged from attending GPs for essentially irrelevant medical problems, have no incentive to wrap their problems into one visit, and have no incentive not to visit a GP for problems (like common colds) that the GP essentially can’t treat. This can lead to over-servicing, which causes congestion and reduces the efficiency of GPs as a service. It should be noted that compared to British GPs – who essentially run a poor-quality outpatient referral service – Australian GPs provide a wide range of services up to and including medical imaging, management of chronic and potentially fatal illnesses like cancer and HIV, and even minor surgery. They genuinely are the workhorses of the system, with a lot of responsibilities, and over-servicing is a serious issue. One solution often proposed for over-servicing is a mandatory co-payment that would force all patients to pay a nominal upfront fee to discourage frivolous GP attendance.
The Abbott government’s co-payment proposal and its aftermath
Into this policy issue stepped the new, first term government, run by Tony Abbott, a conservative ideologue who is probably better described as radical than conservative (as many conservatives are). Abbott won government on a platform of trust, promising “no surprises,” and certainly didn’t promise a major health financing change that I can recall (I can find no evidence either way that isn’t blatantly political, with a quick search). Immediately after the election Tony Abbott identified the classic “Budget shortfall” (every government since Fraser, except for Gillard, has done this it seems, and Gillard only didn’t do it because she was replacing her own party leader…) and started identifying “savings” that could reduce the deficit, which was in “crisis.” One proposed measure was the GP co-payment, which would be a $7 co-payment for all patients visiting a doctor. This unannounced and unsupported policy change attracted uproar, since it would fundamentally change the way that health financing worked, and no one was expecting it. After a long period of anger and clear messages from the Senate that the measure wouldn’t pass, the government relented and reduced this co-payment to $5, apparently voluntary. That’s right, the government was going to seriously go out on a limb for a policy that would give GPs the choice to become tax collectors for the government. Would you trust your doctor if they had volunteered to collect extra tax for the government?
Once this proposal had been sufficiently ridiculed the government canned that too, and introduced a nasty and cunning administrative change that will see the rebate for a 6-10 minute doctor’s visit reduced from $37 to $17. Obviously doctor’s costs won’t change, and so for a large proportion of their consultations they will face the choice of a $20 reduction in payment, or passing on all or part of that payment to patients. This is going to represent a huge increase in cost to patients, well above the $7 co-payment. Imagine, for example, that you are seeing a decent private doctor who charges you $50 for your service. Under the old system you pay the $50 and get a $37 rebate from Medicare; you end up paying $13, a fair whack of cash but no big deal. Under the co-payment system this would have increased to $20; under the new rebate revision, unless the doctor decides to carry the extra costs, you will now only be reimbursed $17, so your new fee is $33 – a more than 100% increase! Crucially, this move doesn’t need to go through parliament, so the government can effectively charge a rebate without getting senate approval. This is a hugely unpleasant change, and without huge numbers of concessions (for e.g. the elderly and those with chronic illness) it will lead to a huge increase in GP costs. If, for example, you’re taking statins for high cholesterol, your GP is your primary source of management and your management will probably require one of these 6-10 minute sessions every three months – so your medical bills will increase by $80 a year. This is actually a lot of money to some people.
The result of this should be obvious. While the $7 co-payment would discourage needless medical visits without necessarily significantly increasing costs for patients, the huge rebate change will destroy the bulk billing system, causing many poor people to drop out of GP service and shift to Accident and Emergency (A&E) departments in hospitals. GPs will attempt not to change their cost structure, and so will double the time they spent with each patient, massively increasing waiting times – except that their poorest patients will have disappeared to the A&E. This will mean that in the end GPs will see less patients who they charge more, and A&Es will become congested with patients attending for unnecessary minor complaints. With GPs charging more per visit for less visits, total medicare revenue won’t change – but less people will be seeing their doctor on time. The budget hole will not change in the slightest, waiting times won’t change at GPs, and A&Es will see an increase in pressure.
A&Es, as I mentioned above, are funded by state governments, not the Federal government.
So the government tried to implement a potentially important but unpopular policy, and when this failed switched to implementing a completely counter productive and unpopular policy that will seriously affect everyone through increased health care costs. They showed no policy sense and no leadership. Brilliant.
What does this tell us about this government’s policy approach?
As I mentioned above, getting a co-payment through Australian politics is a tough ask, and takes political skills, but it has two major policy benefits: it raises more money for Medicare, which is generally accepted to be underfunded, and it reduces unnecessary service use, which is a major problem in free or nearly-free health systems. With Australia’s growing burden of non-communicable disease and preventable health problems it’s probably a good idea, and $5 or $7 is not horrifically punitive, though for the very poorest in Australian society it’s tough. Australians in general are wealthy though and $7 is the price of a piece of cake – it’s really not the end of the world. Nevertheless, it represents a major shift in policy approach away from the bulk billing philosophy, and steering that policy through requires a nuanced debate in which the government prepares the public, then debates with the public, then compromises. It’s also potentially the kind of policy that involves expending a lot of political capital for not much gain – the co-payment is a good idea but not necessarily the best way to solve the problems it is intended to fix, and may not be worth any government expending political capital on. Instead, this government introduced it soon after an election, in an environment where it is accused of multiple broken promises, without any preparation or debate. It even managed to anger the Australian Medical Association, historically a very pro-conservative organization (one of its ex-presidents was a Liberal leadership contender, and an ex-Liberal health minister moved on to become one of its directors, I think). But then, having angered everyone who cares, the government dropped the plan in exchange for an even more punitive and vicious policy that will obviously fail to achieve any of the stated goals of the previous policy, and probably won’t raise any extra money but will put more pressure on Australian hospitals.
Is this not the very model of political naivete? To me this is an example of a government that has no policy framework at all. They were simply looking for ways to raise money and tried to cloak them in a policy goal that they didn’t really understand or care about, and when their mistakes were pointed out to them instead of backing down and finding a better solution, they simply dropped the cloak of policy rationality and turned vindictive. And this seems to be what they have been doing for much of their policy “development” since they won office. This is no recipe for sensible government, and the GP co-payment debacle is a classic example of how mean-spirited this government is, as well as its complete lack of interest in any real policy goals.
If this is how they go about all their policy development, the sooner they become a one-term government the better.