Not so universal: How to reduce out-of-pocket healthcare payments

by Stephen Duckett, Anika Stobart, Linda Lin

06.03.2022 report

Hundreds of thousands of the sickest and poorest Australians are missing out on healthcare because of gaps in Medicare coverage and high fees charged by medical specialists.

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In 2020-21, nearly half a million Australians decided not to see a specialist because they could not afford it, and even more deferred or did not fill a prescription because of the cost.

Overall, Australians spend about $7 billion a year out of their own pockets on out-of-hospital medical services and on medications listed on the Pharmaceutical Benefits Scheme (PBS).

Bulk-billing rates are too low and out-of-pocket payments are too high for some services.

It’s a catch-22: the people who need the most healthcare – the poor and the chronically ill – miss out on care the most.

That is bad for those people, but it’s also bad for taxpayers, because when people skip or defer recommended treatment they often get sicker and end up in hospital.

Fees charged by medical specialists are a major cause of high out-of-pocket patient payments.

With public hospital outpatient wait times unacceptably long, many Australians have no alternative but to go to a private specialist. But the fees are unregulated, and some private specialists charge way above the Medicare schedule fee.

For example, on average about 50 per cent of initial appointments with a dermatologist, urologist, obstetrician, or ophthalmologist, are charged at more than double the $90 Medicare schedule fee.

We recommend:

  • State governments should expand outpatient services to reduce wait times, and the federal government should fund bulk-billed specialist services in private clinics, especially in poorer parts of Australia.
  • To cut the number of referrals to specialists, the federal government should pay specialists for giving GPs over-the-phone advice about patients, without actually seeing the patient.
  • To cut pharmaceutical costs, especially for people with chronic conditions, the government should lower the co-payment for people on multiple medications.
  • The government should eliminate out-of-pocket payments for diagnostic services – such as scans and blood tests – and radiotherapy services, by funding them directly through a commercial tender.

If state and federal governments invested an extra $710 million per year on these reforms, Australians could save about $1 billion in out-of-pocket payments each year, and more people would get the care they need when they need it. That’s a healthy return on investment.