Medicare problems point to systematic underfunding, corporatisation

October 31, 2022
Photo: Pranidchakan Boonrom/Pexels

A controversy has erupted over a recent joint investigation by the ABC and Fairfax media into alleged fraud in the Medicare system.

The investigation claimed that doctors are “rorting” up to $8 billion from Medicare each year, including by “billing dead people and falsifying patient records to boost profits”.

Another 20 Sydney Morning Herald and Age articles, plus multiple ABC 7.30 stories, amplified the claims.

The joint investigation suggested that “ambulances ramping, public hospitals not cop[ing] and general practices in tatters” are “all part of the same problem”: doctors defrauding Medicare.

At the centre of the claim is evidence presented in Margaret Faux’s PhD thesis. Faux is a lawyer and head of a company that handles Medicare claims on behalf of doctors.

A number of doctors’ representatives, including Australian Medical Association president Steve Robson, have challenged the accusations, claiming they are “an unjustified slur” on the medical profession, while admitting he had not read Faux’s thesis.

An analysis by medical researchers Eddie Cliff and Tori Berquist published in the medical newsletter Insight on October 25 stated that they “found no evidence” in her thesis to support the $8 billion fraud estimate. “We think that number is likely to be much lower.”

However, the authors admit Faux is correct that the research shows the main cause of non-compliant Medicare billing is “system issues, rather than deliberate abuse by medical practitioners”.

“Medical practitioners have no choice but to try and comply with a complex system they cannot avoid, do not understand, and feel powerless to change,” Cliff and Berquist said.

They said that Medicare fraud “certainly exists” and pointed to the National Audit Office’s 2020 report’s estimate that fraud and inappropriate practice represent less than 1% of health providers, that 95% of providers are compliant and that 2–4% of providers have only “occasional or inadvertent non-compliance”.

“It estimates non-compliance (a much broader concept than fraud) costs between $366 million and $2.2 billion, estimates generated by management consultants and Department of Health analysts. International benchmarks seem to corroborate a ~1% fraud rate.”

The estimate of $8 billion fraud would represent around a quarter of the total Medicare annual budget of $31.4 billion — an unlikely scenario.

However, evidence of systemic problems exists.

Terry Hannan, a consultant physician and fellow at the Centre for Health Informatics at Macquarie University, told the ABC on October 23 that focusing on doctors misusing the Medicare system overlooks the bigger, systemic problem.

“When you look at routine day-to-day care, the amount of wastage, overuse and underuse of resources and inappropriate care which leads to poor patient outcomes, that is 10 times bigger than the cost of fraud,” he said.

Patients really want better and more equitable access to health services, Elizabeth Deveny, chief executive of the Consumers Health Forum, told the ABC.

“Patients love the idea of Medicare, but they don’t love the rising costs of co-payments as it impacts their access to healthcare and its equitable distribution.

“When the system was designed, it was geared for acute care, but we have a burden of chronic disease and we need a system to manage that.”

As we emerge from the COVID-19 pandemic, Medicare’s challenges, particularly its budget, are under close scrutiny. Frontline workers say the system is in crisis precisely because it is underfunded.

It is therefore critical to defend and extend Medicare as a central element of a universal public health-care system. 

Charles Maskell-Knight argued in Pearls and Irritations that as medicine is becoming more corporatised, the focus is shifting to maximising Medicare billings over the quality of the care provided. 

As Crikey observed on October 21: “Medicare in this context is not the healthcare system. It’s an itemised fee schedule for services provided by specialist doctors in private practice.

“It doesn’t cover public hospitals, where most of our health dollars are spent, and whose staff (doctors as well as nurses) have borne the brunt of COVID-19.

“Public hospitals are funded through a different stream, and their medical staff are paid a salary, not per intervention.”

The creeping privatisation of Medicare, over several decades, is undermining the universal public medical system. Bulk-billing rates have decreased markedly in recent years. The fee-for-service model, with rising patient co-payments, could cripple Medicare as the public health system it started out as.

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