The Australian media have reported $8 billion of Medicare fraud rorts, and waste. The government’s estimate is also large and comes in at $366 to $2.2 billion.
I don’t know about you, but I don’t have much real world experience with these kinds of numbers,
How can we get some perspective, well let’s start with the Australian economy which is $1.7 trillion dollars. Australians have spent about $27 Billion on Christmas shopping this year. We spend $14 billion on cigarettes, and about $272 billion dollars on food each year and it is estimated that we put 18% of this into the garbage, which comes to $49 billion.
However, a better comparison to doctors billing Medicare is taxpayers claiming tax deductions. Like Medicare, the tax system is an honour system, and we are asked to only claim the tax deductions we are entitled to. Like Medicare, a key part of the compliance system is audits and fines. The Australian Tax Office is of the view that there is leakage in our tax system of 7% or about $33 billion dollars, and that $33 billion of leakage is consistent with a system that is “operating well”. Underpinning this view is an acknowledgement that aiming for 100% compliance in tax collection is not the desired outcome, as a more onerous compliance system is likely to have negative consequences for individuals, businesses and the whole economy.
Back to Medicare, the best estimate we have is the system leaks $2.2 billion per year (which is the upper limit of the government’s estimate) and this is about 7% of the $32 billion of the total spend. Like the tax system we could conclude that 7% leakage means the Medicare system is also “operating well”.
But I think it is fair to ask, can we do better with Medicare compliance, and the answer is yes. I was interested in the idea put forward by Margaret Faux as per an interview with Adele Ferguson that a good way to do better is to send a text message to the patient every time they are billed by their doctor. Therefore, the patient will know exactly what was billed just like a restaurant bill etc. What I like about this, is the patient, and not the regulator is being used to keep the service provider honest. It should be cheaper, fairer and more effective than increasing the number of audits and other regulatory actions.
However, I think it is unlikely we will see this idea come to fruition. Medicare has a goal of reducing fraud and error, but it also has other goals, such as optimising the system to encourage bulk billing or free medical services. One of the metrics of success for any government is a high bulk billing rate for patients.
How might text messages from Medicare undermine bulk billing? Let’s imagine we have implemented a system where all patients get a text message as to what was billed at their medical consult. I am a GP and I have finished my medical work for the day, and I am heading past reception desk on my way out. The receptionist advises me that John Smith complained that I should have bulk billed him a Standard Consult and not a Long Consult and he would like the billing changed. Let’s say the actual time I spent with the patient was 20 minutes and 30 seconds (so the billing of a Long Consult is correct as is over 20 minutes). However, John thinks the consult was 18 minutes long and this means a reduction in free from $76.95 to $39.75. Do I have the energy to argue over 150 seconds and $37, unlikely, and so I tell the receptionist to change the billing to a Standard Consult. John gets a text message advising the billing has been adjusted and this makes him happy, as this fits with his perception of the consult, and there has been no financial cost to John. That’s all fine, but these types of interactions will nudge me to privately bill more patients. This means that I now set a private fee, the patient pays me direct and the patient receives the Medicare rebate direct from the government. So, the next time I see John Smith, I spend 20 minutes and 30 seconds with him and charge him $86.95 and code a $76.95 Long Consult Medicare rebate for him (so this means that after paying the doctor and receiving his rebate from the government, John is $10 out of pocket). The incentives under a private billing model are quite different. John is now much less likely to complain about the Long Consult Medicare rebate, and if he asks for the rebate to be changed to a Standard Consult then his Medicare payment is reduced.
The issue is that it is hard to optimise a system for competing priorities. At the end of the day minimising error and fraud is just one priority for Medicare, and like the tax system, having an error and fraud rate at about 7% could mean the system is “operating well”.