Wednesday, January 08, 2014

Medicare. What would charging for a previously free visit to the doctor achieve?

There’s something odd about the plan to charge six dollars (“the price of two cups of coffee or a Big Mac with a side of fries”) for previously free bulk-billed visits to the doctor.

The Australian Centre for Health Research has told the Coalition the fee would make us “think twice about going to the doctor about minor ailments”. But it also says we could buy private health insurance to cover the fee, meaning those of us who did wouldn’t need to think twice at all.

It’s less odd when you realise the Centre was set up with a grant from a private health insurance fund, Australian Unity.

Other things are odd about the proposal as well.

At first glance it’s simple economics. If we are charged for a product we’ll want less of it than if it’s free.

But the charge would apply to all visits to the doctor, both serious and frivolous. And we are not skilled at deciding what’s frivolous. That’s why we go to the doctor. Their product is partly advice about whether we need it.

There’s no need to guess about the effect of charging for previously free medical services. It is “one of the most thoroughly discussed issues in the health economics literature,” according to a 1991 health department report. The massive Rand Corporation experiment in the United States was almost certainly the most expensive ever conducted.

Rather than compare naturally occurring different methods of charging for the doctor in different cities the Rand Corporation created them. Between 1974 and 1977 it funded visits to the doctor for 5809 Americans in six different cities at four different rates. Some were charged so-called copayments of 95 per cent of the fee, some 50 per cent, some 25 per cent and some zero, as happens in Australia with bulk billing.

It also collected data on their social status and health, not only by questionnaires but also by physical examinations. All up it accumulated 20,190 person years of data.

If found a copayment of 25 per cent cut the use of services by around 8 per cent. But the $6 fee proposed in Australia is much lower than the Rand Corporation’s 25 per cent fee and US medical charges are higher. As a result, Australia's Health Department was warned that here fewer patients would be turned away.

In the US they were as easily turned away from care for serious problems as for trivial ones...

In the words of the Rand report: “Cost sharing did not seem to have a selective effect”. And where it did have an effect it was almost entirely on first visits to the doctor, those that determine whether further visits are needed.

Nevertheless Rand concluded that on average the health of those asked for a copayment got no worse than those provided care for free. Although it noted a disturbing possibility: The health of some of those asked for co-payments might have got worse while the health of others asked for copayments might got better. Too many visits to the doctor can damage health for patients with some conditions while too few can harm health for patients with others.

The broader advice proffered to Australia’s health department was that in the real world the Rand findings wouldn’t apply. There might well be next to no impact on the number of visits to the doctor because of the actions of doctors themselves.

Rand provided health care funding for just a few thousands of Americans spread across six cities. The relatively few that were turned away from each surgery made each no less busy. But if an entire state or country switched from free medicine to fees, doctors deprived of business would respond, either by cutting their fees or providing more treatment.

Jeff Richardson is the foundation director of the Monash University Centre for Health Economics. He is the author of the 1991 health department report.

He says the technical term for what happens is “supplier-induced demand”. But he doesn’t like it.

“It conjures up wrong behaviour. I think that's probably wrong,” he says. “I suspect doctors work until they finish their working week believing with some justification the services they give are needed. Doctors can quite ethically treat patients more intensively, or for slightly longer believing it helps. It's not the same as saying they are crooks.”

Richardson’s rule of thumb puts supplier-induced demand at 50 per cent, meaning that if the Rand study showed copayments would cut visits to the doctor by 3 per cent (at Australian prices) the actual outcome might be 1.5 per cent.

And the few who are denied medical care would be overwhelmingly those on the lowest incomes. The Rand study provided free care at random. Australian doctors do not. Meliyanni Johar of the University of Technology Sydney examined the records of 2.3 million consultations between 2006 and 2009 and found that where they could doctors varied what they charged according to income. Their poorest patients were the most likely to be bulk billed.

And general practitioners are cheap compared to other forms of medicine. They account for less than 10 per cent of health spending. They act as gatekeepers, directing Australians to hospitals and more expensive specialists only when needed. They are not where costs are rising. They are among the last places costs should be cut back.

In The Canberra Times, The Sydney Morning Herald and The Age

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