The Mid-Year Economic and Fiscal Outlook (MYEFO) set the cat among the pathology pigeons late last year. One of the government’s flagged changes, estimated to save around A$100 million a year, was to abolishthe bulk-billing incentive Labor introduced in 2009.
The industry mobilised, threatening to charge consumers significant out-of-pocket co-payments for pathology tests for blood, tissue and other bodily fluids. The threatened increases were well in excess of the A$1.40 to A$3.40 cut to the bulk-billing incentive, which companies received for not charging patients out-of-pocket charges.
A campaign was organised, focusing on the increased cost of pap smears. It included a petition supported by more than 200,000 people.
Health Minister Sussan Ley escalated her rhetoric, pointing out that Medicare was not designed to be a guaranteed bankable revenue for corporations, nor a taxpayer-funded payment to cross-subsidise pathology companies for other costs of doing business.
The minister noted:
… complaints from stock exchange-listed pathology companies about this MYEFO decision have revolved around impacts on ‘shareholders’ – not patients – exposing what is really motivating these criticisms.
The MYEFO-induced furore about bulk billing provides context for a wider “root and branch” review of pathology payments. As the Grattan Institute’s report, Blood Money, published today, shows, there is money to be saved in pathology. This can be done in ways that don’t affect patient access to needed tests.
Industry profit
The Blood Money report addresses several questions. First, why is bulk billing on the agenda for pathology tests at all? All out-of-hospital pathology tests should be bulk-billed.
There should be no “incentive” for pathology corporations to bulk-bill. Rather, bulk-billing should be a requirement to participate in this market.
The place of co-payments in health care is highly contested. Those who argue for co-payments say they help to reduce demand, particularly for frivolous use of health care.
But consumers almost never initiate pathology services. Professionals order tests to assist them to make a diagnosis or to track a patient’s condition. In those circumstances, there is no theoretical argument to use financial disincentives for consumers, in the form of co-payments, to limit demand.
Industry consolidation and technological advances have completely reshaped the pathology industry over recent decades. But the way governments pay for pathology services hasn’t kept up.
Fee-for-service was originally a way for individual consumers to pay their medical practitioner for professional services. Health insurance then evolved to provide insurance for those costs. Medicare, when it was introduced, followed the same model.
But what was suitable for cottage-industry medical practice is not necessarily appropriate as a payment system for big corporations. More than three in every four Medicare-billed pathology tests are analysed by one of two big corporations: Sonic Healthcare and Primary Health Care. Both companies suffered a share price drop when the MYEFO cuts were announced.