Taking the pain out of patients’ hip pockets

Most consumers don’t know or care which level of government funds their health care, they just want a system which works. However, the structural reforms proposed by the Government provide a solid foundation for addressing some of the outstanding issues that do directly impact upon consumers using health care.

One of the biggest gaps in the current health reform debate is the issue of consumer co-payments. Almost one in five dollars spent on health care in Australia comes directly out of consumers’ pockets. In fact, consumer co-payments make up 17% of total health funding, which is more than double the 7% contributed by private health insurance.

Individual payments are important because they have a strong influence on how consumers access health care and which goods and services they access. Our current approach to co-payments means that many consumers cannot access the care they need and many others are steered towards less effective or more expensive treatments because they cost less at the point of care.

For example, a recent survey of people with mental illnesses, found that over half of the respondents (54%) had not been able to afford treatments recommended by their doctor, and 42% had not filled scripts for medication they had been prescribed because of the expense.

Many of the problems associated with co-payments in Australia are due to the fact that health care expenses are not predictable but typically occur unexpectedly and often coincide with reduced earning capacity. The problem many consumers face is not an overall affordability problem but a cash-flow issue.

One solution to this problem would be to issue all consumers a ‘Health Credit Card’ to pay for health care without upfront payments.  The Federal Government could assume responsibility for paying health care providers directly (ensuring they get paid promptly and in full) and simply bill consumers for the out-of-pocket costs (for example, the ‘gap’ between the Medicare rebate and the GP’s fee).

Consumers would then have the option of making one payment for the total amount of all consolidated out-of-pocket costs for the given period or paying in instalments (similar to credit card payments) with minimal or no interest. They would be required to make a minimum payment required but (unlike in the case of conventional credit cards) this would be indexed to consumers’ ability to pay (based on income and assets) rather than the amount of the debt (similar to the Higher Education Contribution Scheme – HECS – for tertiary education).  Minimum payments would be capped at a pre-determined level (for example 10% of after-tax income), so that no consumers faced financial hardship due to their health and medical bills.

This would need to occur in conjunction with the consolidation of existing health safety-nets (such as those for Medicare and the PBS) into a single comprehensive safety-net for all health-related goods and services to target consumers who have difficulty affording health care over the long term.

The Government’s proposed structural reforms to the health system are, in isolation, difficult to sell to consumers. However, their importance lies in the fact they will give the Federal Government the funding and policy levers required to address key consumer health issues, such as co-payments for health services. This needs to be the central point of the Government’s argument as it seeks community support for its reform agenda.