Opinion: $7 co-payment: is there a business case?

The budget proposal to raise a charge of $7 per visit to a GP as well as any associated pathology, X-ray or similar diagnostic tests has sparked a great deal of concern.

The reason for this relates to the question of fairness for less well-off members of our community, including senior citizens, those with disabilities, the mentally ill, the unemployed, and so on.

Quite apart from the obvious financial stress the co-payment may cause for many people - an aspect that has received a great deal of attention - we suggest this proposal also needs to be considered from an economic standpoint.

The government has sold the charge as an important contribution towards its aims of reducing the budget deficit and healthcare costs; the proposal is also said to be aimed at reducing overservicing.

In considering any such pricing issues, it is standard wisdom to consider the business case. In simple terms, this involves comparing the money raised versus the cost of collection.

There no evidence of this having been done, and the business community has been strangely silent on the issue. They will know that the cost of administration to bill and collect a fee of $7 per transaction will be very much more expensive than the present situation, where health funding is raised via the Medicare Levy raised on a standard percentage of taxable income. This levy is a very efficient mechanism.

Paying out Medicare claims is of course more costly, but at least operates on a “one size fits all” type of criteria, and is largely automated now with most patients able to lodge claims electronically from their GPs' office when they settle their accounts.

But the government's proposal will involve a further, cumbersome, process to calculate when eligible persons reach the safety net threshold; and this also requires an extensive reframing of existing software by all parties. If the co-pay is due to start on July 1, 2015, and the legislation for its implementation has not yet been passed, then the software development project is already two months behind in an area where work is rarely completed on schedule or within the budgeted cost.

In this regard, we have already heard the Treasurer, Joe Hockey, complaining that the current Department of Human Services computer system is inadequate to handle the government’s future plans.

We also have claims reported in The Australian newspaper, GP co-payment IT system 'a big ask', that industry views the current Department of Human Services system as having severe limitations in handling its present client base and the PCEHR (even with its minuscule user base to date) also having regular downtimes.

This report refers to an estimated cost of $14 per transaction to collect each $7 payment from patients on a case-by-case basis, nationwide. Our check with a leading accounting firm confirmed a general cross-industry average of $15 for each of the healthcare providers affected.

We suggest that it is appropriate to now stop and take an independent check on the business case before the proposal proceeds any further, to ensure that there is not a significant increase in the deficit rather than the benefit sought.

It is interesting that the German government introduced a very similar co-payment proposal in 2004, which was scrapped by their parliament in a unanimous vote in 2012. Studies showed that overall, the costs were in excess of revenue collected.

Such experience suggests that the local proposal should be closely examined - free of any conflict of interest, but involving the experience of all interested parties through public submissions.

Meanwhile, the recently released findings of the NBN cost-benefit analysis commissioned by Communications Minister, Malcolm Turnbull, add weight to the need for rigorous assessment of complex programs prior to implementation.

We need to do everything possible to avoid any further misuse of public funds on impractical and unproductive IT projects.

Peter Brown is the convenor of the Consumers e-Health Alliance (CeHA).

Posted in Australian eHealth

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