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Changes to bulk billing incentives for pathology and diagnostic

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Changes to bulk billing incentives for pathology and diagnostic

imaging face resistance [revised version corrects previously

incorrect information]

Posted 17/12/2015 by Amanda Biggs

The Mid Year Economic and Fiscal Outlook (MYEFO) announced a number of savings in the

health budget. Some of the most significant of these are changes to the incentives paid to

pathology and diagnostic imaging providers to bulk bill out of hospital services. According

to the MYEFO (p. 174) this measure alone will deliver savings of $650.4 million to the

budget over four years.

From 1 July 2016, all bulk billing incentives paid to pathology providers will be

removed. Specifically, incentives paid for bulk billing designated pathology services (so-called Group P13 services, with fees ranging from $1.60 to $4.00) will be removed. Bulk

billing incentives paid to general practitioners who provide basic pathology tests in their

own practices if they are registered as a Category M laboratory (items 74990 and 74991) will

not be affected. For diagnostic imaging providers, only incentives to bulk bill children and

concession card holders will be retained, but bulk billed MRI services will attract a rebate

equal to 95% of the Schedule fee, rather than the current 100%.

Bulk billing incentives for pathology and diagnostic imaging services were introduced under

the former Labor government in 2009-10. They are an additional payment made to

providers who choose to bulk bill their patients in an out of hospital setting so that patients

do not face out of pocket costs. According to annual Medicare statistics (Table 2), in 2014-

15 some 114.3 million pathology services were provided out of hospital, almost all of these

(98.7%) were at no cost to the patient.

The Minister for Health, Sussan Ley argues that bulk billing incentives for pathology are not

needed due to the high rates of bulk billing in this sector and its competitive nature, and

these changes—aimed at providers—should not affect the majority of consumers. The

Minister argues that the 1% growth in bulk billing rates which occurred after the incentives

were introduced is the same as the ‘natural growth’ that occurred prior to their introduction.

In other words, the incentives—which have cost $1.3 billion over five years—did not

contribute to any additional growth in bulk billing rates beyond what would have occurred

naturally. However, the 1% figure cited refers to the percentage point increase in bulk billing

for both in and out of hospital services; for out of hospital services alone the increase has

been higher: around 3 percentage points, according to Medicare statistics.

Opposition health spokesperson Catherine King argues the changes to incentives will hurt

patients, and those needing intensive treatment may face higher out of pocket costs or miss

out on treatment altogether if they cannot afford the additional cost.

Doctor and patient groups are also critical of the measure. The peak group representing

pathology providers, Pathology Australia, warns that bulk billing rates will fall leaving

patients facing higher out of pocket costs, or patients deferring or declining essential tests.

In addition, they argue that some pathology collection centres may be forced to close—

including those in rural and regional areas and in hospitals—due to the high costs of

maintaining these centres. They are also critical that the changes were announced outside of

the Medicare review process currently underway.

The Consumers Health Forum is worried that consumers who previously faced no out of

pocket costs for pathology may be dissuaded from undergoing essential tests due to

concerns over cost.

The announcement to adjust bulk billing incentives before the Government’s review of

Medicare services is completed appears to have taken many in the sector by surprise, and

seems to have generated particular discontent. Notably, the announcement pre-empts the

expiration in July 2016 of the 5 year agreement between the pathology sector and

government which governs arrangements around Medicare funded pathology.

The pathology sector’s capacity to resist these changes should not be underestimated. The

2009 Budget (Budget Paper No. 2, pp. 291-294) which announced the bulk billing incentives

for pathology and diagnostic imaging also included a number of savings measures applying

to pathology, which were criticised by the sector at the time. Some pathology operators

warned that in response they would have to increase patient costs to maintain profitability.

Companies in the sector reportedly mounted a letter-writing campaign urging referring

doctors to only request a bulk billing service for those patients in genuine hardship,

prompting calls for the Australian Competition and Consumer Commission (ACCC) to

investigate. The sector denied any collusion. Quarterly Medicare statistics (Table 2) show

that bulk billing rates for pathology (out of hospital) fell from 95.6% in the March quarter

2009 to 93.4% in the December quarter that year, and only recovered after the bulk billing

incentives commenced.

The changes to bulk billing incentives will not require the passage of legislation, but can be

achieved through changes to the Health Insurance (Pathology Services Table) Regulation

2015. The regulation is, however, a designated legislative instrument and could face a

disallowance motion in the Parliament.

[Note: this revised version corrects previously incorrect information]