Medicare (Australia)

There was an increase in the number of Australians covered by health insurance plans following the end of the Second World War. However, a large proportion of the Australian population continued to lack coverage for health risks in the early 1970s. In 1972, 17% of Australians outside of Queensland (which had a free public health care system[1]) were uninsured, most of whom were on low incomes.

The Whitlam Labor government, elected in 1972, sought to put an end to the two-tier system by extending healthcare coverage to the entire population.[2] Before the Labor Party came to office, Bill Hayden, one of the Labor Party's front bench members of parliament, took the main responsibility for developing the preliminary plans to establish a universal health scheme.

Medibank started on schedule on 1 July 1975.[3] In nine months, the Health Insurance Commission (HIC) had increased its staff from 22 to 3500, opened 81 offices, installed 31 minicomputers, 633 terminals and 10 medium-sized computers linked by land-lines to the central computer, and issued registered health insurance cards to 90% of the Australian population.

After a change of government at the December 1975 election, the Fraser Coalition government established the Medibank Review Committee in January 1976. This lead to legislative changes, and the launch of 'Medibank Mark II' on 1 October 1976.

Also that year, the Fraser government also passed the Medibank Private bill, which allowed the HIC to enter the private health insurance business.

In 1978, bulk billing was restricted to pensioners and the socially disadvantaged. Rebates were reduced to 75% of the schedule fee. The health insurance levy was also scrapped that year.

In 1979, Medibank rebates were cut further. In 1981, access to Medibank was restricted further, and an income tax rebate was introduced for holders of private health insurance to encourage its uptake.

Finally, the original Medibank was dissolved entirely in late 1981, leaving behind Medibank Private.

On 1 February 1984, the original Medibank model was reinstated by the Hawke Labor government, but renamed Medicare to distinguish it from Medibank Private which continued to exist.

Easyclaim was launched in 2006, under which a patient would pay the medical practitioner the consultation fee and the receptionist would send a message to Medicare to release the amount of rebate due to the patient's designated bank account. The rebate amount would take into account the patient's concession status and thresholds. In effect, the patient only pays the gap.[4] In recent years, this has largely been replaced with the National Australia Bank service HICAPS (Health Insurance Claim At Point of Sale)[5]. For providers not using HICAPS, patients can make claims on-the-spot (where Medicare will pay the patient at a later date), online, through the Medicare mobile apps, or at joint Medicare-Centrelink Service Centres.

Services like these have greatly reduced the need for people to visit Medicare service centres, all of which have been merged into Centrelink or myGov shopfronts.

The Better Access Scheme extends Medicare to cover more allied health services than it did previously, especially in the area of mental health. It became available in November 2006.

A long-standing criticism of the Medicare schedule was its limited coverage of services to improve the lives of people with disability. This was addressed when the 2013 Australian federal budget (ALP) established the National Disability Insurance Scheme, which was progressively rolled out across the country between 2013 and 2020. It provides funding for health services beyond those in the Medicare schedule, and is administered by the National Disability Insurance Agency, an independent government agency.[6]

In the 2013 Australian federal budget (Australian Labour Party), a freeze on Medicare Benefits Scheme indexation was announced as a temporary measure, to run until 2017. This put pressure on the ability of doctors to provide bulk billing, which reduced access by people to free visits to a doctor. People on the lowest incomes increasingly chose to make less visits than they would have before.

In the 2016 Australian federal budget (Coalition), the indexation freeze was extended to 2020. At the 2019 federal election, the Australian Labour Party (ALP) promised that if elected, they would unfreeze GP schedules a year early, a measure enacted by the eventually elected Coalition.

Towards the end of the campaign for the 2016 Australian federal election, a text claiming to be from "Medicare" was sent to certain electorates around the nation, saying "Mr Turnbull's plans to privatise Medicare will take us down the road of no return. Time is running out to Save Medicare."[7] Leader of the Liberal Party, Malcolm Turnbull, had not announced such plans, and Services Australia (known as Department of Human Services at the time) denied sending the message. It had instead been sent by the Queensland branch of the Australian Labor Party. The furore over the text brought attention to the value of Medicare to Australians. The affair was widely dubbed "Mediscare," which in turn was used to describe fears of the Liberal National Party's alleged devolution of Medicare.[8]

Medicare is presently nominally funded by an income tax surcharge, known as the Medicare levy, which is currently 2% of a resident taxpayer's taxable income.[9] However, revenue raised by the levy falls far short of funding the entirety of Medicare expenditure, and any shortfall is paid out of general government expenditure.

The 2013 budget increased the Medicare levy from 1.5% to 2% from 1 July 2014, ostensibly to fund the National Disability Insurance Scheme.[10] The 2017 budget proposed to increase the Medicare levy from 2% to 2.5%, from 1 July 2018, but this proposal was scrapped on 25 April 2018.[11]

When the levy is payable, it is calculated on the whole of an individual's taxable income, and not just the amount above the low-income threshold.

Low income earners are exempt from the Medicare levy, with different exemption thresholds applying to singles, families, seniors and pensioners, with a phasing-in range. Since 2015–16, the exemptions have applied to taxable incomes below $21,335, or $33,738 for seniors and pensioners. The phasing-in range is for taxable incomes between $21,335 and $26,668, or $33,738 and $42,172 for seniors and pensioners.

Medicare sets a schedule of fees for medical services, called the Medicare Benefits Schedule (MBS),[12] which is freely accessible online. The schedule fee is the government's standard cost of a particular medical service. The Australian Medical Association (the doctors' union) maintains a similar schedule called the AMA List of Medical Services and Fees[13] (AMA Fees List), which provides members with "costing assistance and guidance". It represents the "market rate" for services.

Service providers can charge consumers whatever fee they wish, which is often lower than the schedule fee for low income clients, and higher than the schedule fee for everyone else.[14] In 2010, an OECD study found that Australia was the only one of the 29 countries studied to give service providers this freedom.[15]

At its inception, the MBS was the same as the AMA's equivalent. However, the government has allowed a large gap to grow between the MBS fees and what is charged in the market, in part by freezing indexation of the schedule fees for specialists from 2012 to 2020, and GPs from 2014 to 2020. It has been suggested that MBS schedule fees are now approximately 45% of the AMA list fees.[16] In 2019, the AMA produced a poster suggesting that if the MBS schedule fees had increased by the same amount as their members' costs, they would more than three times what they currently were.[17]

In 2017 the AMA stated: "Indexation of the MBS and the private schedules have not kept pace with the costs of providing medical care. This is why patients may have out-of-pocket costs for medical services. The AMA List is indexed annually at a rate that takes account of the cost of providing medical services and is therefore higher than the MBS and private schedules. The AMA List guides members in setting their fees with periodic indexation."[18]

Additionally, each private health insurer has their own independently-maintained fee schedule for medical services.

The standard Medicare rebate or benefit is 100% of a general practitioner and 85% of a specialist schedule fee.[19] Where medical practitioners bill Medicare directly (called "bulk billing"), they agree with Medicare to accept 85% of the schedule fee in full payment for their services. Many medical practitioners bulk bill pensioner patients, and some bulk bill other groups or all of their patients.

For services provided in a private hospital, Medicare will rebate 75% of the schedule fee.

The growing gap between the market rate and the MBS schedule fee for services has resulted in some practitioners opting out of bulk billing,[20] with affected patients having to pay out-of-pocket costs.

Some specialties and allied health services are at least partly covered by Medicare, limited to those patients with a chronic illness whose GP has created a "general practitioner management plan" or "team care arrangements" for them. Services such as ophthalmology, physiotherapy, podiatry and audiology (especially though Hearing Australia) are covered, while others such as (most) dental services are not.[21] For Australians struggling with mental health, Medicare provides up to 10 fully covered individual and group counselling sessions per year as part of the Better Access Scheme. To access these, patients need to create a "mental health care plan" with their GP.[22] The Better Access Scheme also covers the cost of other mental health care, including from occupational therapists, social workers, general practitioners and psychiatrists.[23]

The difference between the cost of health care and the rebate is called an out-of-pocket cost or co-payment. The out-of-pocket costs for Australians are continuing to increase, as a result of increases in healthcare costs above Medicare schedule increases, and also because a Medicare benefits freeze has been imposed over the last few years. Medical practitioners choosing to cease or cut back on bulk-billing also increases out-of-pocket costs to patients.

If a practitioner does not bulk bill a particular patient, that patient will receive a bill for the medical expenses and is obligated to pay the bill. The practitioner is paid the full amount of the bill. The patient is reimbursed by Medicare 85% of the schedule fee and is out-of-pocket for the balance of the bill. Medicare accumulates the gap amounts, which is the difference between the schedule fee and the 85% reimbursed by Medicare, paid by the patient, to determine when the safety net threshold is reached. After the threshold is reached, the patient is reimbursed for the balance of the schedule fee (i.e., 15%). In the three months to July 2016, 85.9% of GP visits were bulk billed, which fell to 85.4% in the three months to September 2016.[20]

Many medical practitioners charge more than the schedule fee, and the amount in excess of the schedule fee must be borne by the patient and is not counted towards the safety net threshold.

To provide additional relief to those who incur higher than usual medical costs, Medicare safety nets have been set up. These provide singles and families with an additional rebate when an annual threshold (determined on a calendar year basis) is reached for out-of-hospital Medicare services.[24] There are two safety nets:

1. the original Medicare safety net, and
2. the extended Medicare safety net.

The thresholds for both safety nets are indexed on 1 January each year to the Consumer Price Index.

Under the original Medicare safety net, once an annual threshold in gap costs has been reached, the Medicare rebate for out-of-hospital services is increased to 100% of the schedule fee (up from 85%). Gap costs refer to the difference between the standard Medicare rebate (85% of the schedule fee) and the actual fee paid, but limited to 100% of the schedule fee. The threshold applies for all Medicare cardholders and is $470.00 for calendar year 2019.[25]

The extended Medicare safety net (EMSN) was first introduced in March 2004. Once an annual threshold in out-of-pocket costs for out-of-hospital Medicare services is reached, the Medicare rebate will increase to 80% of any future out-of-pocket costs (now subject to the EMSN fee cap) for out-of-hospital Medicare services for the remainder of the calendar year. Out-of-pocket costs are the difference between the fee actually paid to the practitioner (subject to the fee cap) and the standard Medicare rebate.

When introduced, the general threshold for singles and families was $700 and $300 for singles and families that hold a Commonwealth concession card, and families that received Family Tax Benefit Part (A) (FTB(A)) and families that qualify for notional FTB(A). On 1 January 2006, the thresholds were increased to $1,000 and $500 respectively. From then the EMSN was indexed by the Consumer Price Index on 1 January each year.[38]

Since 1 January 2010, some medical fees have been subject to an EMSN fee cap, so that the out-of-pocket costs used in determining whether the threshold has been reached are limited to that cap.[39][40] The EMSN fee cap also applies for any rebate that is paid once the EMSN threshold is reached. The items subject to a cap has expanded since 2010, the latest being in November 2012.[41]

Services Australia (previously the Department of Human Services) is the statutory agency responsible for operating the Medicare scheme. Medicare Australia was the responsible agency for the scheme until it was dissolved in 2011 into the Department of Human Services.[49] Currently, Services Australia operates the scheme in consultation with the national Department of Health and other health-related agencies such as the Australian Organ Donor Register and state health services (for example, Queensland Health).

Medicare issues to eligible health professionals a unique Medicare provider number to enable them to participate in the Medicare scheme. The provider number is required to appear on the practitioners’ bills, prescriptions or service requests (referrals) that are eligible for a Medicare benefit. A practitioner may have more than one number, if, for example, they practise from more than one location.

Medicare issues each person entitled to receive benefits under the scheme with a Medicare card which has a number that must be used when making a claim. The card must be produced or the Medicare number provided if the Medicare rebate is paid directly to the doctor under the bulk billing system; and in its absence the doctor cannot bulk bill for the consultation. The doctor is permitted to keep a record of the patient's card number and use it at subsequent visits.

It is also necessary to provide a card number (although not necessarily show the card) to gain access to the public hospital system to be treated as a public patient.[50] For non-elective treatment (e.g. emergency), public hospitals will admit patients without a number or card and resolve Medicare eligibility issues after treatment.

The Medicare card will also be required when accessing medical, hospital or pharmaceutical services in a country with which Australia has a reciprocal health care agreement.

• Medicare – Background Brief
• Medibank: from conception to delivery and beyond