National Health Reform

A Healthier Future for all Australians - Final Report June 2009

4.3 Evolving to ‘next generation’ Medicare

Our discussion up until now has focused very much on how an integrated health and aged care system would work from the perspective of patients. That is rightly the story we should tell first. But we also need to identify and explain the ‘back of house’ changes. That is the purpose of this section, where we pull together and explain our recommendations for building the ‘next generation’ of Medicare.

4.3.1 Overview

Most Australians still think of Medicare as about paying for medical services. There is no doubt that medical services are, and must remain, the essential foundation of Medicare. We have a world-class approach to medical education and an enviably high standard of care provided by medical practitioners, including our general practitioners and specialists, working in the community, in hospitals and in other settings. We need to be clear that our reforms to Medicare in no way seek to compromise or reduce the vital and indispensable role of medical practitioners in our health system.

However, we believe that there are major opportunities to build upon the strengths of our current Medicare framework and signal the direction for how Medicare could evolve in the future. Table 4.1 provides a snapshot of how Medicare operates now and how Medicare might operate in the future as a result of our recommendations.

Table 4.1: An evolving Medicare

Medicare now	An enhanced Medicare in the future
Medical services (in the main)	Supplements medical services with a broad package of health services (allied health, nursing and other health professionals) to support complex and continuing care
Based on consultation between one patient and one medical practitioner	In addition to personal individual consultations, encourages and supports team-based and multidisciplinary care
Pays benefits to patients for services delivered by private practitioners (mainly GPs and medical specialists)	Adds to current benefits as it pays for a mix of private and publicly delivered services (expanded to cover state-funded primary health care services, public hospital outpatient specialist services and selected allied health and other health professional services)
Fee-for-service payments for each visit	Broadens the mix of payment arrangements including fee-for-service, payments for course of care or period of time, grants, outcome payments, salary. Payment depends on type and value of service and provider
Mainly focused on consultation, diagnosis and treatment, often related to specific problems or diseases	Adds greater scope to support stronger focus on prevention, health promotion, early intervention and wellbeing, including supporting people in self-management
Benefits based on who delivers the service (and whether it is safe and cost-effective)	Supports a broader range of specified services by health professionals providing care within their defined scope of practice (and whether it is safe and cost-effective) and for innovative, collaborative care models within services
Choice of GP	Choice of GP continues (now encouraged to be part of an expanded primary health care service)
People may visit many GPs, use a mix of referred and other non-referred services, including diagnostic tests, but often struggle to find the right mix of health and community support services	People with more complex health problems will have the choice of having a single ‘health care home’. By registering with a primary health care service, these people will be eligible to access additional services. The primary health care service will coordinate access to all the health care needs for individuals
People may face different co-payments for medical services and for other services outside Medicare	Development of more integrated safety net arrangements that protect people from unaffordable costs
Pays benefits for face to face services involving a patient and a medical practitioner	Also pays for different types of services – email, telephone, telehealth (e.g. video conference) – that do not involve physical presence of patient. Payment for these services may be part of episodic payment or grant payments
Pays for medical services delivered by doctors based on where they choose to practise	Also supports better distribution of services by funding primary health care services in ‘under-served’ areas – includes top-up payments for some remote and rural communities and grants to encourage establishment of Comprehensive Primary Health Care Centres or Services in under-served areas

Our rationale for proposing this evolution of Medicare is based on a range of important objectives. We want:

• to ensure that all Australians, regardless of where they live, can access primary and specialist health services (including medical and non-medical services);
• to create an integrated and comprehensive platform of primary health care services that brings together private medical services funded under the MBS with state-funded community health services;
• to promote continuity and better coordinated care across all health care professionals, particularly for people with the most complex health needs;
• to be able to respond effectively to the tsunami of chronic disease that poses new challenges for how we organise and provide health services in a way that best meets peoples’ needs;
• to encourage a greater emphasis on prevention, early intervention and self-management;
• to support evolving clinical practice and effective value-based use of all health resources (including medical, nursing, allied health and other clinical staff);
• to support new and effective ways of providing health services more responsively to people that recognise new technologies, clinical innovation and changes in the way we live our lives; and
• to improve the quality of health services including supporting health professionals in continuing education and research, the translation of research into clinical practice, and the implementation of measurable improvements in quality of care.

4.3.2 Bringing together state-funded health services and MBS services

We believe that there are major opportunities for Medicare to evolve, flowing from our recommendations that the Commonwealth Government:

• assumes policy and funding responsibility for existing state-funded primary health care services (see Section 4.2.1); and
• meets 100 per cent of the efficient cost of public hospital outpatient services using an agreed casemix classification and an agreed, capped activity budget (see Section 6.4.3).

In both cases, these changes in roles and responsibilities between governments will require matching adjustments to grants from the Commonwealth Government to states and territories. That is, the increased responsibility of the Commonwealth Government is funded through commensurate reductions in grants to the states and territories.

Among other things, these changes provide the opportunity for the Commonwealth Government:

• to ‘add’ in the services of selected other (non-medical) health professionals under Medicare through different payment arrangements rather than using only fee-for-service (which has largely been the model used to date);
• to recognise and support the valuable contribution of health promotion, early intervention and social health models in primary health care;
• to bring together the broad array of services (medical, allied health, nursing and other services) that would form the backbone of the proposed Comprehensive Primary Health Care Centres and Services;
• to better understand the models of care for the provision of multidisciplinary specialist services currently delivered through state public hospital outpatient departments as a basis for designing payment arrangements that foster multidisciplinary care under the MBS in the future;
• to aggregate data on the episodic use of health services by patients with chronic and complex conditions (including long-term users of outpatient services) to aid in designing future episodic payment arrangements for these groups; and
• to better understand existing shared care models that cross public and private medical and other services (including models operating out of public hospital outpatient services) to foster the spread of evidence-based shared care models more broadly.

While there are significant implications of our recommendation for the Commonwealth Government to fund public hospital outpatient services, we focus here on the impact of the changed responsibility for primary health care services.

Our recommendation for the Commonwealth Government to assume responsibility for state-funded primary health care (such as community health centres and family and child health services) will require the government to confront the issue of how to integrate these services with medical services now funded under the MBS. We need to be clear that ‘integration’ does not mean ‘takeover’. Nor does it mean that the Commonwealth Government would directly operate these services. We value the social health model of care that drives the provision of many state-funded primary health care services. And we are committed to the emphasis on population health and early intervention of many of these services.

We anticipate that the Commonwealth Government would need to spend some considerable time doing the equivalent of a ‘stocktake’ or a ‘due diligence’ exercise to better understand the range of primary health care services now provided by states outside of Medicare. For example, it will need to understand: the scope of services and how they differ between states; the current eligibility rules and any patient co-payments for accessing these services; and the remuneration and employment arrangements for health professionals employed in these services.

Ultimately, the Commonwealth Government will need to develop a national plan for integration of these services with existing MBS services. In doing so, it will need to make decisions about what additional primary health care services could be included as part of an expanded ‘universal service entitlement’ and the conditions under which this would operate. We are aware that state-funded primary health care services operate quite differently across jurisdictions. Many of these services are targeted to specific populations; some operate with co-payments; and there may be significant differences in access to these services across geographic regions. So, the Commonwealth Government would need to determine what service models it wanted to encourage and fund, potentially allowing for local innovation including the option of different services and service models for, say, rural communities and metropolitan suburbs. There are also some real challenges in moving to a ‘national health system’, given the existing differences across jurisdictions in the range and volume of state-funded primary health care services.

It is also unclear about the extent to which there is currently much communication, networking or cross-referral of patients between private medical practices and state-funded primary health care services. For example, it is unknown whether patients requiring access to allied health services under the Enhanced Primary Care component of the MBS ever use ‘public’ allied health services.

The Commonwealth Government would need to determine the basis on which it funds the existing state-funded primary health care services. We are not advocating that these services simply be included under the MBS on a fee-for-service basis. Paying for these services could involve a mix of salary, fee-for-service, grants, payments for performance and quality, and payments for episodes of care. While we have mainly discussed the existing state-funded primary health care services, we should be clear that we expect that the Medicare Benefits Schedule will operate much as it does now for most people visiting their general practitioner for a one-off condition. Medicare will continue to pay benefits to people to reimburse the cost of medical services under a fee-for-service schedule. As we indicated in Table 4.1, we expect that this will be complemented by other funding arrangements. We discuss our views about the evolution of funding models under the MBS later in this report (see Section 5.4.1).

We are aware that some governments are understandably cautious about the magnitude of the change in bringing existing state-funded primary health care services under the policy and funding responsibility of the Commonwealth Government. To achieve success in this endeavour will require effective collaboration and consultation between all governments and across health professions. It will require the Commonwealth Government to develop experience and knowledge across the whole spectrum of primary health care services. But these reforms must go ahead if we are to create an integrated primary health care platform for our entire health system.

4.3.3 Reviewing the scope of services under Medicare

During the lifetime of our review, we have received many submissions and spoken to many groups that argued that the MBS should be ‘opened up’ to pay for the services of other health professionals.

Framing the debate about opening up the MBS to other health professionals in the context of our recommendation for integration of state-funded primary health care services and private medical practice creates a very different starting point and dynamic.

It means, among other things, that our vision challenges the prevailing orthodoxy that assumes that including other health professionals on the MBS would necessarily involve fee-for-service payments and that these services would be provided by ‘private’ practitioners. In the future, the ‘Medicare Benefits Schedule’ would not necessarily be limited to a ‘schedule’ listing ‘benefits’ for particular professional services. As we indicated in Table 4.1, it could involve very different payment arrangements for a broader range of health services provided by a mix of public and private providers. It is in this context that we now outline our recommendations about expanding the scope of services that might be ‘included’ under Medicare.

Rethinking the universal service entitlement

Our starting point is that making decisions about including services under Medicare is inherently a political decision about redefining the ‘universal service entitlement’ – that is, what health services the Commonwealth Government believes should be funded (at least, in part) from public monies. There is no single ‘right’ answer to this question.

We have recommended that the scope of the universal service entitlement (which currently covers public hospitals, medical and pharmaceutical services) should be debated over time to ensure that it is realistic, affordable and fair and will deliver the best health outcomes, while reflecting the values and priorities of the community.

One element of this community debate about the universal service entitlement is creating greater transparency and public understanding about spending on health. We currently live in a ‘magic pudding’ world.¹⁵⁷ We ‘see’ that 1.5 per cent of our taxable income goes toward the ‘Medicare Levy’, yet many people do not realise that governments spend much more than this amount on health services. Being open about how much it costs to pay for our universal service entitlement for health services – and also understanding how much individuals contribute out of their own pockets – is an important step in a community debate about health spending. This public conversation needs to incorporate a broad range of views including consumer, clinical and economic perspectives.

The concept of the universal service entitlement is closely linked to the complex issue of health system financing – who should pay and how much for what health services. Our recommendations on this issue attempt to balance a number of competing pressures:

• Australia, like most other countries, relies on a mix of public and private financing to pay for health services. Private financing provides people with greater personal health care choices, while public financing offers the advantage of equity in de-coupling the need for health care and the ability to pay for health services;
• individual households already make substantial direct co-payments for health services. In 2006–07, direct payments by individuals accounted for $16.0 billion or 17.0 per cent (one in six dollars) of all spending on health services; ¹⁵⁸ and
• but there are very different spending patterns across different types of households and for different types of health services. The highest individual co-payments are made for services that are outside the ‘universal service entitlement’ of public hospitals, medical and pharmaceutical services. (We have earlier recommended expanding the universal entitlement to include access to basic preventive and restorative dental services).

To retain the benefits of mixed public-private financing, we have recommended that the overall balance of spending through tax, private health insurance and co-payments be maintained over the next decade. However, we want to stress that this does not mean that we should not vary the mix of public and private financing for particular types of services.

We have recommended that the scope and structure of safety net arrangements be reviewed. There are currently multiple safety nets (covering, for example, the MBS (the original and extended Medicare safety nets¹⁵⁹), the PBS, and a net medical expenses tax rebate). In addition, there is a patchwork of government programs that partially meet the costs of some services (diabetes equipment, continence aids, therapeutic appliances). The purpose of reviewing safety net arrangements is to create a simpler, more family-centred approach that protects people from unaffordably high co-payments for using health services. In saying this, we are essentially acknowledging the need to recognise and tackle the high costs faced by some people for health services which fall outside our current universal service entitlement.

Hence, the ‘flip side’ of the safety net discussion is about how the Commonwealth Government decides whether and how to extend the universal service entitlement. There have already been steps towards recognising (and funding under the MBS) the complementary roles of some other health professionals. Some allied health services are now paid for under the MBS, while some general practices can receive grants towards employing a practice nurse with the ability to access a range of practice nurse specific items on the MBS. Flowing from the recent Maternity Services Review, the Commonwealth Government’s 2009–2010 Budget announced that the services of eligible midwives would be covered under the MBS for the first time to provide greater access to care provided by midwives working in collaboration with doctors. The Budget also included funding for an expansion of services provided by nurse practitioners, including access to the MBS and PBS.

4.3.4 Reshaping the Medicare Benefits Schedule

Until now, we have been discussing the broad evolution of the ‘next generation’ of Medicare, with the Commonwealth Government having policy and funding responsibility for existing state-funded primary health care services, outpatient services and private medical services under the MBS.

We turn now from this broad discussion to consideration of reshaping of the Medicare Benefits Schedule – which forms one element of the ‘next generation’ of Medicare.

Moving to a greater focus on competency

The starting point for reshaping of the MBS is decisions by the Commonwealth Government about the scope of services that could be included under the MBS.

Flowing from such decisions, our recommendations on the MBS are grounded in a framework that defines the competency and scope of practice within which health professionals can provide certain services.

Core to our thinking of ensuring quality while expanding access to the MBS has been the better use of our diverse, skilled workforce. This involves the issue of competency and whether particular types of health professionals are competent to provide particular services. These elements are inextricably intertwined like the strands of DNA. We are not suggesting for one moment that we simply move to accept all services provided by certain health professionals as eligible for funding under the MBS. The assessment of competency is integrally tied to the ‘approved’ scope of practice for a particular set of services.

In formulating our recommendations around competency, a particular challenge is that there is a mismatch between the ten health professions that will shortly be subject to national registration and the broader set of health professions that is already included under existing MBS payment arrangements. To cut to the chase, this means that we cannot simply rely on whether particular health professionals are registered as the threshold for making decisions about competency. (This would automatically exclude the services of groups such as speech pathologists and dietitians that governments have not agreed for inclusion under national registration).

Our recommendations are therefore based on whether a health professional is registered and/or that they are ‘recognised’ and appropriately credentialled by a relevant certifying body. For example, the test currently used under the MBS for dietitians is that they must be an ‘accredited practising dietitian’ as recognised by the Dietitians Association of Australia.

The second issue relates to defining the ‘scope of practice’. While registration might be thought of as defining a baseline level of competency, credentialing is about recognising a set of specialist skills and defining an extended scope of practice (or set of services) that an individual health professional is authorised to safely undertake. For example, the Australian Nursing and Midwifery Council issues competency standards for nurse practitioners and midwives.

We have also recommended that we want this reshaping of the MBS to occur in a way that supports continuity and integration of care through collaborative team models of care involving relevant specialists, general practitioners, and other primary health care practitioners.

Ensuring fiscal sustainability

In reshaping the Medicare Benefits Schedule, we have argued that:

• the scope of services that is included under the MBS will first need to be defined by the Commonwealth Government;
• this will be supported, and given effect, by a framework that defines the competency and scope of practice within which health professionals can provide certain services; and
• any expansion of the MBS to other health professionals should also promote continuity and integration of care through collaborative team models of care.

We have recommended that the Commonwealth Government should continue to apply existing processes to ensure that the inclusion of services on the MBS is driven by a robust evidence base. This means that all ‘new’ services (whether provided by medical practitioners or other health practitioners) should be subject to the same rigorous approval processes to ensure that there is clear evidence about their safety, effectiveness and cost-effectiveness. We believe that this is vital to ensuring the financial sustainability of the MBS. A forward-looking approach would also build in regular review and evaluation of new services (say, after three years) under the MBS to ensure that they were meeting policy objectives.

We would also expect that the Commonwealth Government would seek to control the level of its spending under the MBS through a range of strategies. Some potential approaches that the Commonwealth Government might use include:

• it could control and limit the specific services that are included under Medicare for payment purposes;
• it could limit the organisations it recognises as relevant credentialing or certifying organisations for the purposes of paying for health services under the MBS. (This does not impact on the autonomy of such organisations to undertake credentialing, but relates to their recognition under the MBS for payment purposes). This could occur in a phased way with tight initial restrictions during which the impact on MBS spending is monitored; and
• at the level of individual services, the Commonwealth Government could introduce a range of controls around patient eligibility and provider eligibility.

The financial implications of reshaping the Medicare Benefits Schedule are potentially significant. While our recommendations provide a transparent framework for moving in this direction, we recognise that this must occur in a carefully regulated and phased manner.

In conclusion, we argue that this reshaping of the MBS is both required and inevitable, but it will need to occur in a phased way and be strongly driven by evidence.

---

¹⁵⁷ In Norman Lindsay’s classic children’s story, the magic pudding was unlimited in supply and could never be exhausted: ‘A peculiar thing about the Puddin’ was that, although they had all had a great many slices off him, there was no sign of the place whence the slices had been cut’.
¹⁵⁸Australian Institute of Health and Welfare (2008), Health expenditure Australia 2006-07 (Australian Institute of Health and Welfare: Canberra).
¹⁵⁹Centre for Health Economics Research and Evaluation (2009), Extended Medicare safety net review report, at: http://www.health.gov.au/internet/main/publishing.nsf/Content/Review_%20Extended_Medicare_Safety_Net/$File/ExtendedMedicareSafetyNetReview.pdf