Out of pocket: Rethinking health copayments



Out of pocket is a discussion paper from the Centre for Policy Development’s Effective Government Program.

The National Health & Hospital Reform Commission has delivered its plan for what’s been described as the ‘biggest health shake-up in decades‘. But there’s one issue that’s barely on the radar – the growing proportion of health funding that is coming out of patients’ own pockets.

Out of pocket by Jennifer Doggett proposes radical but practical ideas to deal with Australia’s complex, unfair and inefficient system of health copayments:

* Health Credit Cards would allow Australians to put out-of-pocket health expenses on the government’s tab – with minimum monthly repayments capped according to income

* A single safety-net would combine the PBS and Medicare safety-nets, the Medicare tax off-set, and various other forms of special assistance under the one safety-net

* Greater flexibility within the copayments system would give people the option, for example, of paying copayments for currently free public hospital services in return for higher GP rebates. It might also tie rebates to services rather than providers, so that people can opt to receive the same services from alternate providers

Download Out of pocket

Consumer co-payments are the “out of pocket” payments that consumers make directly for health and medical care which are not rebated by Medicare, private health insurance or other sources.
Co-payments comprise the third largest source of health funding in Australia, after Federal and State/Territory Governments. They contribute over $15 billion a year to the health system, which is more than double the $6.3 billion paid via private health insurance (2005-06 figures).

The trouble with copayments

  • More than one dollar in six spent on health care is paid directly by consumers – more than double the amount covered by private health insurance.
  • Individual payments are the third largest source of health funding (after Federal and State/Territory Governments) and make up a higher proportion of health funding in Australia than in most comparable OECD countries, including the UK, Canada, New Zealand, Ireland, Japan and France, and even the US.

Not only are our copayments high, but the way we manage them is complex, unfair and inefficient. This is causing serious problems:

  • An international survey of seven OECD countries found that more Australians have problems affording health care than citizens of any country, apart from the US. 17% of Australians had skipped treatments, tests or follow-ups because of cost.
  • A survey of chronically ill adults found that over a third of Australians with chronic conditions reported problems with accessing health care due to cost.
Out of pocket

Ross Gittins sums up the problem in his column on Out of Pocket:

“..when it comes to out-of-pocket payments, the sick pay more than the healthy, and the poor pay a higher proportion of their income than the well-off. And sicker people tend to be poorer than average. In other words, out-of-pocket payments run contrary to, and thus undermine, the whole basis for sharing the cost of health care. They work to shift the cost burden from the affluent and healthy to the sick and poor.”

and he likes Doggett’s solution:

“Such a scheme would have many advantages. For providers it would reduce administration costs and guarantee prompt payment. For consumers it would remove the upfront cost barrier, greatly reduce the work they had to do to claim rebates and allow them to spread payments over time, while retaining an out-of-pocket cost to discourage unnecessary use.”

Would a government-provided health credit card help you manage your health costs?