Why doctors should brace for a Medicare compliance crackdown


12 Apr 2023

Tip for the medical lobbyists: When you’re debating how many billions of dollars are leaking from Medicare every year, you’ve already lost the real fight.

The AMA has experienced a degree of vindication in its dispute with researcher Dr Margaret Faux (PhD), who sensationally claimed in October that $8 billion a year in MBS benefits was being lost to doctor fraud and errors – roughly 30% of Medicare’s annual budget.

The allegations were splashed across the Sydney Morning Herald and The Age, as well as on the ABC, with headlines like “Medicare is haemorrhaging: The rorts and waste costing taxpayers billions of dollars a year”.

“Medicare costs us almost $30 billion per year,” said reporter Adele Ferguson on the ABC’s 7.30.

“But we’ve discovered the system is being rorted by health professionals fabricating medical records and billing unnecessary services to boost their profits.”

Dr Margaret Faux (PhD)

Fast forward six months and the independent review ordered by Minister for Health Mark Butler has finally come out, finding no evidence to support the claim of $8 billion in annual leakage.

Authored by Deloitte health economist Dr Pradeep Philip (PhD), the report stresses there is major cause for concern (link here).

“On a conservative definition of non-compliance and fraud it is entirely feasible the value of non-compliance could exist in the range of $1.5 billion to $3 billion, not inconsistent with previous studies,” it says.

“This comes with a significant caveat, in that there is real potential for the problem to scale to the order of magnitude in Dr Faux’ analysis should effective controls, systems and education not be put in place.”

So Dr Faux’ analysis, and the sensational media reports that followed, were only out by $6 billion or so, according to the report.

Mistakes, not fraud

The review goes on to conclude the bulk of the leakage comes from errors rather than fraud, and – as both the AMA and Dr Faux agree – that Medicare is complex, confusing and fast becoming outdated to meet the changing health needs of modern Australia.

To illustrate this complexity, Dr Philip goes into a few of the numbers involved in Medicare in 2021-22:

  • 511 million transactions; with no continuous monitoring
  • Around 6,000 Medicare items
  • 176,000 practitioners who claim
  • 14 different claiming channels with different levels of risk and controls

Against this, health officials conducted less than 60 compliance projects examining claiming patterns by different cohorts of providers over the years, he says.

But as Dr Philip himself argues, the actual number of dollars being wasted may not be where the real debate lies, particularly when Mr Butler has already shown an appetite for major reform.

Releasing the report last Tuesday, Mr Butler expressed a conviction that the former government had “failed to act” to protect Medicare.

“Every dollar in Medicare is precious and must be spent directly on patient care,” he said.

“Strengthening Medicare also means safeguarding the taxpayer funds that underpin it and this Government is committed to that task.”

What now?

The upshot is that a compliance crackdown is likely, with at least some of the 23 recommendations offered up by the report likely to be taken up by the government.

Chief among these is a call to remove the veto power of the AMA over who gets to hold the title of director of the Professional Services Review (PSR) agency. The Medicare services compliance scheme is already feared by doctors – despite the fact it investigates just a few dozen cases per year – and now the watchdog is likely to get more teeth and become a whole lot scarier.

A move to continuous monitoring of all MBS claim transactions was also recommended. Driven by technology, this would in theory see checks performed before all payments are made and ensure bunk claims are immediately rejected as they come in.

More welcome to doctors would be Dr Philip’s suggestion to simplify the MBS and improve the education provided to practitioners on its use. This would go a long way towards addressing the root cause of the bulk of current ‘leakage’, which was largely due to misunderstandings and mistakes, he said.

In an email to members last week, AMA president Professor Steve Robson said he agreed the MBS and associated rules needed to be simplified and made clearer.

Nevertheless, Professor Robson also defended the AMA’s role with the PSR, which he said had “always been constructive”, adding the AMA would respond to the review’s recommendations once they had been considered .

“As always, we will continue to be guided in our discussions with the government by the principle that the vast majority of doctors are doing the right thing and delivering high-quality care with good stewardship of the system,” he said.

That vast majority – many of whom were deeply offended by the media coverage of the $8 billion fraud claim – will take some small comfort from the fact the review agrees with him.

But when the dust settles, chances are the crackdown will come for them as well.


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