Around half of Australians have private health insurance. Most of us know that if we need to see a private specialist, we may face some out-of-pocket fees between what the doctor charges and the rebate we receive from Medicare and, if we’re having a procedure or operation, our private health fund.
But why is it so difficult to find out exactly how much it’s going to cost to have that suspicious mole removed or to be admitted to hospital for that colonoscopy or hip replacement?
Outside of public hospitals, most clinical health services are essentially private markets. The Commonwealth government, through Medicare, provides a variety of subsidies to reduce the cost burden on patients but does not regulate prices. Doctors can charge what they like – or what the market will bear.
Patients can learn their local GP’s fees relatively quickly and make informed choices about whether to switch practices. Our recent research suggests GP practices facing strong local competition were more likely to keep their prices low.
But specialist prices are more obscure. Patients often rely on their GP to make the choice of specialist for them through the referral process, with little or no discussion of prices. And patients see specialists less frequently than GPs, so they don’t have the opportunity to learn about prices through repeated use.
There is a simple way of increasing price transparency so we all know how much services cost at alternative providers: make this a requirement for all specialists and publish the data on a government website such as the My Hospitals portal.
Prices for specialists are high, with only around 30% of consultations bulk-billed and an average out-of-pocket cost of A$65.73 (for those not bulk-billed).
The size of out-of-pocket costs may be influenced by the list of recommended fees published annually by the Australian Medical Association. The AMA-listed fee for initial specialist consultations is A$166, almost twice the Medicare Benefits Schedule (MBS) fee of A$85.55.
For initial consultations with consultants, the listed fee is A$315, more than twice the MBS schedule fee of A$150.90.
Recently published research by health economists at the University of Technology Sydney confirms that many specialists practise “price discrimination” – they charge higher prices to patients who can afford to pay more. This is often seen as an indicator of a lack of competition in an industry.
Specialists are less price-competitive because of the high barriers to entry into these professions. This leads to long waiting lists for consultations as well as high prices.
Health Workforce Australia has identified psychiatry, obstetrics and gynaecology among important specialities with a current shortage that are likely to be under-supplied in the future. Causes include a lack of specialist training places, long training programs and falling working hours.
Procedures and surgery
Most patients who have private in-hospital elective procedures have health insurance that pays their hospital costs, subject to an excess on the insurance policy. But doctors’ fees are more complicated.
Doctors’ fees for such procedures are funded by Medicare with a “gap” payment, often reimbursed by private health insurance. Medicare will fund 75% of the “schedule fee”, with private health insurance usually funding the other 25%.
But Medicare data shows only 13% of anaesthetics services and 47% of operations services (mainly the surgeons’ fees) are charged at the schedule fee.
This leads to an average patient contribution of A$76 for operations and A$126 for anaesthetics. This may be funded by private health in some cases, but not all. Often this will depend on the agreements reached between private health insurance companies, doctors and private hospitals.
Patients may be left in the dark about their final out-of-pocket costs until months after any private hospital procedure. These delays are caused by the fragmentation of the billing process: an operation or procedure often involves several doctors, such as a surgeon, anaesthetist, pathologists and radiologists.
So what’s the solution?
Health insurer Bupa has introduced fixed-price surgery in the United Kingdom to reduce the “bill shock” associated with private elective procedures. Such a development would be welcome in Australia.
But the motivation is lower here due to the high take-up of private health insurance. We rely on insurance companies to do the bargaining with hospitals and doctors for us.
Price-transparency regulation has a lot of potential to reduce the hip-pocket impact on Australian patients. Specialists should be forced to publish a list of their fees online, which GPs can use, together with patients, when making referral decisions. This should put pressure on specialists to think twice about increasing their fees.
Liberal MP Angus Taylor, now assistant minister for cities and digital transformation, has called for a “My Doctor” website to provide comparative quality information about doctors. This is a good idea and a natural extension of existing policies. If it does eventuate, publishing prices should be a key component of the comparative information.
Price transparency is no panacea but should be an important component of ensuring taxpayers and patients get good value for money out of the health system.
In the meantime, if you’re seeing a specialist or undergoing a procedure, ask questions about the cost of your care, especially referrals to specialists and private hospitals. You’re paying for a service from a private company and should be able to weigh the perceived benefits against the price before making an informed purchase.
Have you paid expensive medical bills? Have you ever been shocked by out-of-pocket health expenses?