Are out-of-pocket medical costs out of control?


The following article was originally published in the MJA InSight on 11 June 2018

DOCTORS’ fees have once again been in the news, following a recent Four Corners report that put a brutal spotlight on the huge out-of-pocket medical expenses some patients pay.


Take, for example, the case of John Dunn, a privately insured patient in need of surgery after a diagnosis of aggressive prostate cancer. John wound up with a bill of $25 000, an eye-watering $18 000 of which was out-of-pocket expenses, after Medicare and private health fund rebates. Most of this went to his GP-referred surgeon, who charged $16 000. But there were also fees for the anaesthetist (over $3000), the biopsy ($1600), the magnetic resonance imaging ($450) and sundry other expenses.


“It shocks you,” Mr Dunn told Four Corners. “You live in this world where you have Medicare, a universal health fund, and you’ve got a private health fund, you’re paying in substantial fees, and lo and behold, you’re 18 grand out of pocket when you have one operation.”


Reports of egregious out-of-pocket expenses tend to be anecdotal, and it’s hard to get a clear picture of what is happening across the board. But a new Research Letter published in the MJA goes some way towards this. It looks at the Medicare data of a population-based cohort of 452 Queensland patients diagnosed with one of the five major cancers (breast, prostate, colon/rectum, melanoma, lung), identifying all billed services for consultations, tests, imaging, procedures and medication.


The study authors, led by Associate Professor Louisa Gordon of the QIMR Berghofer Medical Research Institute, found that median out-of-pocket expenses were highest for patients with breast and prostate cancer ($4192 and $3175, respectively) and lowest for patients with lung cancer ($1078). The median proportion of fees covered by Medicare was 63%. Around a quarter of cancer survivors paid upfront doctors’ fees of more than $20 000 over 2 years.


Professor Gordon says that the study showed a huge variation in out-of-pocket expenses, from $23,000 over 2 years at the extreme high end, to just a few hundred dollars for some patients.


“It’s certainly difficult to predict what the costs might be,” she told MJA InSIght in an exclusive podcast. “Patients have to have conversations with all their health care providers and that’s the challenge. They may not meet the anaesthetist or the assistant surgeon during their visits and they may not know what they’re going to need after surgery. It’s quite a complex pathway to navigate.”


Professor Gordon says that a broader problem in her view is that the private health insurance market is failing people.


“People are not getting good value for care and the government is continuing to prop up the private health system with subsidies. I think the government needs to face the fact that it’s a costly system and maybe we should think about shrinking the private health insurance market and putting that money back into the public system.”


Leanne Wells, CEO of the Consumers Health Forum of Australia, says that the new research clearly shows that for many patients, costs pose “a very heavy burden” and call into question equity of access in Australia’s private–public health system.


She says that there are two immediate steps that should be taken. The first is greater clarity and transparency on medical fees, including the provision of a single bill to patients giving the overall cost of a course of treatment and an authoritative website listing the fee scales of individual specialists.


The second step would be a Productivity Commission inquiry into government assistance to private health insurance.

“A fundamental problem right now is a dearth of solid data about the private health market, supply and demand of services and specialists and measurement of cost effectiveness in health care,” she says.


“We think the question of subsidies for private insurance does require scrutiny and that is why we recommend a Productivity Commission inquiry to explore questions such as the impact of health insurance subsidies on the overall operation of the health system.”


Dr Tony Bartone, newly elected to the presidency of the Australian Medical Association (AMA), says that the problem of out-of-pocket expenses is multifactorial, and doctors certainly shouldn’t cop all the blame.


“Funding is a key component. Gaps exist because of the longstanding lack of funding, leading to a divergence between the provision of good quality of service and the rebate, whether it’s the Medicare Benefits Schedule rebate or the matching private health service rebate.”


But he says that the other issue is the need for a full and frank discussion with the patient about the financial implications of treatment.


“Informed financial consent needs to be understood as a requirement in this area,” he told MJA InSight. “Most doctors practise that, and patients should be aware that it underpins good ethical and transparent care. I do believe the majority of doctors are doing the right thing by patients.”


He points to data from the Australian Prudential Regulation Authority which show that 89% of all private hospital procedures are performed with no gap fees, and a further 6% are performed with a known gap, usually capped at no more than $500.


Dr Bartone adds that the AMA has vigorously condemned the overbilling that he says is practised by only a small minority of doctors.


“We cannot support or endorse egregious billing. At our recent conference, our members almost unanimously called out egregious billing as abhorrent, and we’ll speak loudly against it whenever we get the opportunity.”