Medicare is the publicly funded universal health care system in Australia. Operated by the Department of Human Services, Medicare is the primary funder of health care in Australia, funding primary health care for Australian citizens and permanent residents including Norfolk Island. Residents are entitled to a rebate for treatment from medical practitioners, eligible midwives, nurse practitioners and allied health professionals who have been issued a Medicare provider number, and can also obtain free treatment in public hospitals. The plan was introduced in 1975 by the Whitlam Government as Medibank, and was limited to paying customers only in 1976 by the Fraser Government. Hawke reintroduced universal health care in 1984 as Medicare.
Reciprocal Health Care Agreements (RHCA) are in place with the United Kingdom, Sweden, the Netherlands, Belgium, Finland, Norway, Slovenia, Malta, Italy, Republic of Ireland and New Zealand, which entitle visitors from these countries to limited access to Medicare and entitles Australian residents to reciprocal rights while in one of these countries.
Since 1999, the public health plan has been supplemented by a Private Health Insurance Rebate, where the government funds up to 30% of any private health insurance premium covering people eligible for Medicare. Including these rebates, Medicare is the major component of the total Commonwealth health budget, taking up about 43% of the total. The program was estimated to cost $18.3 billion in 2007–08. In 2009 before means testing was introduced, the private health insurance rebate was estimated to cost $4 billion, around 20% of the total budget. The overall figure was projected to rise by almost 4% annually in real terms in 2007. In 2013/4 Medicare expenditure was $19 billion and expected to reach $23.6 billion in 2016/7.
Section 51 (xxiiiA) of the Commonwealth Constitution was inserted by a referendum of 1946, which gave the federal Parliament power, subject to the Constitution, to make laws with respect to: The provision of maternity allowances, widows’ pensions, child endowment, unemployment, pharmaceutical, sickness and hospital benefits, medical and dental services (but not so as to authorise any form of civil conscription), benefits to students and family allowances.
This empowers the Commonwealth to operate the Medicare scheme, but not the entire Australian health system. The operation of public hospitals remains within the authority of state and territory governments. In practice, state governments, as well as private doctors, act as pseudo-contractors. This is done by a provider number system controlled by the Commonwealth.
Privately run hospitals are also part of the Medicare scheme. Medicare benefits are payable for medical treatment provided to admitted patients of private hospitals as well as public hospitals. However, a patient in a private hospital (by definition, a private patient) would need private insurance coverage to help him or her meet any of the hospital charges such as accommodation costs, as well as some or all of the remainder of the doctor’s charges above the 75% Medicare benefit.
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) were uninsured, most of whom were on low incomes.
The Whitlam Labor government, elected in 1972, sought to put an end to this two-tier system by extending healthcare coverage to the entire population. 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 Medibank.
According to the second reading speech of the Health Insurance Bill 1973 delivered by Hayden (who had become Minister for Social Security) on 29 November 1973, the purpose of the new universal health insurance system, called Medibank, was to provide the ‘most equitable and efficient means of providing health insurance coverage for all Australians’. There was opposition to the system from the Liberal-Country Party Coalition-controlled Senate. The Health Insurance Bill 1973 and the accompanying bills were rejected by the Senate on three occasions (12 December 1973, 2 April 1974 and 18 July 1974). The Medibank legislation was one of the bills which resulted in a double dissolution of Parliament on 11 April 1974, and was passed at a subsequent joint sitting of Parliament on 7 August 1974. The original Medibank scheme was to be financed by a 1.35% levy (with low income exemptions) but the bills were rejected by the Senate, and so Medibank was originally funded from general revenue.
Medibank started on schedule on 1 July 1975. 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.
Medibank Mark II
After a change of government at the December 1975 election, the Fraser Coalition government established the Medibank Review Committee in January 1976. The Committee findings were not made public but the new program was announced in a Ministerial Statement to Parliament on 20 May 1976. ‘Medibank Mark II’ was launched on 1 October 1976 and included a 2.5% levy on taxable incomes, with the option of taking out private health insurance instead of paying the levy. Other changes included reducing rebates to doctors and hospitals.
On 1 October 1976, the Fraser government also passed the Medibank Private bill. This legislation allowed the Health Insurance Commission to enter the private health insurance business. This legislation led to the original Medibank closing in 1981.
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. The major changes introduced by the Fraser government were largely reversed, although the financing arrangements were changed. Medicare, which came into effect on 1 February 1984, followed the passage in September 1983 of the Health Legislation Amendment Act 1983, including amendments to the Health Insurance Act 1973, the National Health Act 1953 and the Health Insurance Commission Act 1973.
Funding of scheme
Medicare is presently nominally funded by an income tax surcharge, known as the Medicare levy, which is currently 2% of a person’s taxable income.
The 2013 budget increased the Medicare levy from 1.5% to 2% from 1 July 2014, to fund the National Disability Insurance Scheme. The 2017 budget proposes to increase the Medicare levy from 2% to 2.5%, from 1 July 2018. The proposed levy increase was scrapped on 25 April 2018.
The levy is calculated on the whole of an individual’s taxable income, and not just the amount above the low-income threshold.
Low income exemptions
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 levy surcharge
To encourage people on higher incomes to take out and maintain health insurance, as part of an effort to reduce demand pressure on the public Medicare system by encouraging people to use the private hospital system, the Howard Coalition government in July 1997 introduced the Medicare levy surcharge (MLS). Technically, the Medicare levy surcharge does not itself contribute to the funding of healthcare in Australia, being instead an incentive for wealthy individuals to take out private health insurance, in the form of a tax penalty for failing to do so.
Initially, MLS applied to individuals and families who did not have sufficient levels of private hospital coverage and whose taxable income was above a prescribed threshold. MLS applied to individuals with taxable income above $90,000 or $180,000 for families. The threshold is increased by $1,500 for each dependent child after the first in the family group. The Rudd Government, with effect from 1 July 2012, changed the basis of the surcharge threshold to “income for MLS purposes”. The “income for MLS purposes” includes the individual’s or family group’s taxable income, fringe benefits, and superannuation contributions less any net investment losses.
The surcharge rate was initially 1% for all individuals above the threshold without private hospital cover. In 2014, the surcharge rate was increased to 1.25% for those with MLS income over $105,000, from $97,000, and 1.5% for those on incomes over $140,000, from $130,000; and the threshold amounts are doubled for families.The MLS is calculated at the surcharge rate on the whole of an individual’s MLS income, and not just the amount above the MLS threshold. The minimum MLS amount is $900.
Medicare funding of healthcare
The funding of healthcare in Australia by Medicare is referred to as a rebate or benefit. The difference between the cost of healthcare and the rebate is called an out-of-pocket cost. 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.
Standard Medicare rebate
Medicare sets a schedule of fees, called the Medicare Benefits Schedule (MBS). The standard Medicare rebate is 100% of a general practitioner and 85% of a specialist schedule fee. Where medical practitioners bill Medicare directly (“bulk bill”), 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 all of their patients. 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.
If the practitioner does not bulk bill a particular patient, that patient is obligated to pay the bill and is reimbursed by Medicare 85% of the schedule fee and is out-of-pocket for the balance of the fee. When the safety nets cut in, the patient is reimbursed for the balance of the schedule fee (called “the gap”). 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.
The MBS is not indexed, but is reviewed from time to time. The government has imposed a Medicare benefits freeze over the last few years. This has resulted in some practitioners opting out of bulk billing, with affected patients having to pay out-of-pocket costs.
Medicare safety nets
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. There are two safety nets:
- the original Medicare safety net, and
- the extended Medicare safety net.
The thresholds for both safety nets are indexed on 1 January each year to the Consumer Price Index.
Original Medicare safety net
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 $453.20 for calendar year 2017.
Year Threshold Value 1 January 2006 $345.50 1 January 2007 $358.90 1 January 2008 $365.70 1 January 2009 $383.90 1 January 2010 $388.80 1 January 2011 $399.60 1 January 2012 $413.50 1 January 2013 $421.70 1 January 2014 $430.90 1 January 2015 $440.80 1 January 2016 $447.40 1 January 2017 $453.20
Extended Medicare safety net
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.
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. 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.
Year Extended Concessional and
FTB Part A Threshold Value
1 January 2007 $519.50 $1039.00 1 January 2008 $529.30 $1058.70 1 January 2009 $555.70 $1111.60 1 January 2010 $562.90 $1126.00 1 January 2011 $578.60 $1157.50 1 January 2012 $598.80 $1198.00 1 January 2013 $610.70 $1,221.90 1 January 2014 $624.10 $1,248.70 1 January 2015 $638.40 $2,000.00 1 January 2016 $647.90 $2,030.00 1 January 2017 $656.30 $2,056.30
Medicare and private health insurance
Debates regarding Medicare focus on the two-tier system and the role of private health insurance. Controversial issues include:
- Whether people with means should take up private health insurance
- Whether rebates/incentives should be given in terms of private health insurance
- People with health insurance still accessing the tax-payer funded public system rather than relying on their insurance
- People with private health insurance are not required to pay the Medicare Levy Surcharge.
There are a number of incentives for people to take up private health insurance. Since 1999, the government has subsidised private health insurance premiums through the Private Health Insurance Rebate. Previously the rebate was 30%, but is now income- and age-tested, ranging between 0% and 35.722%. The rebate cuts out when a member’s “income for MLS purposes” exceeds $140,000, and double for a family. Critics argue that the rebate is an unfair subsidy to those who can afford health insurance, claiming the money would be better spent on public hospitals where it would benefit everyone. Supporters argue that people must be encouraged into the private health care system, claiming the public system is not universally sustainable for the future. Similarly, even after the introduction of the rebate, some private health insurance companies have raised their premiums most years, to an extent negating the benefit of the rebate.
As of FY2014 approximately 47.2% of Australians also retain private health insurance with some form of hospital cover, even though they are already entitled to free treatment in public hospitals.
The proportion of Australians with private health insurance was declining, but has increased again with the introduction of Lifetime Health Cover (where people who take out private hospital insurance later in life pay higher premiums than those who have held coverage since they were younger) and tax incentives to take out private cover (such as the Medicare levy surcharge).
Practitioner review programs
This is a basic overview of the practitioner review process in point form:
- Medicare Australia provide a federal framework to deliver a health system to the people of Australia.
- Delivering health care to millions relies on proper utilisation of limited resources.
- As such, to make sure the services provided under the Medicare umbrella (including medicines administered by the PBS), reviews and audits are conducted.
- To quote the Medicare website, “identification and reviews of practitioners’ practice profiles protect patients and the community from the risks and costs of inappropriate practice”.
- Inappropriate practice is defined twofold:
- “services that would be unacceptable to the general body of members”.
- includes the rendering of “80 or more professional attendances on each of 20 more days in a 12 month period”, i.e. rorting the system through false services rendered.
- When practitioner is reviewed, their data is compared with that of their peers.
- If this data is markedly different then this practitioner may be referred to the Practitioner Review Program.
- If concerns still remain at the end of the Practitioner Review Program, then a referral to the Professional Services Review (PSR) can be made.
- The PSR:
- Practitioners are always contacted by the PSR when a review concerning them is conducted.
- Practitioners covered by the PSR include all who provide services within the PBS and/or Medicare framework (this includes doctors, dentists, allied health professionals).
- The Medical Director of the PSR acts as a last-ditch arbitrator.
- The Medical Director will compare the reported case to random data.
- The outcome may be no further action, a reprimand (administered by the Determining Authority), counseling, etc.
Other health care programs
Pharmaceutical Benefits Scheme
The Pharmaceutical Benefits Scheme (PBS) subsidises certain prescribed pharmaceuticals. The PBS pre-dates Medicare, being established in 1948. It is generally considered a separate health policy to ‘Medicare’. The PBS is now administered by the Department of Human Services Insurance, with input from a range of other bodies such as the Pharmaceutical Benefits Pricing Authority.
State and Territory Governments also sometimes administer peripheral health programmes, such as free dentistry for school students and community sexual health programmes.
Dental care services
With some exceptions, such as the Teen Dental Plan, dental care is generally not covered by Medicare for all Australians, although the various States and Territories provide free or subsidised dental services to certain categories of the population, such as Health Care Card and Pensioner Concession Card holders.
For example, Victoria provides subsidized dental care to concession card holders through a network of community clinics and the Royal Dental Hospital. There is also a voucher system available for general and emergency dental care where these can not be met by the public system. Vouchers allow patients to receive $799 worth of necessary general and/or emergency dental treatment at a time. The patient co-payment in these situations is generally $27 a visit up to a maximum of 4 visits at $108.
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