4 Corners on Medicare an economics-free zone

On 28 September ABC Television screened an episode of its 4 Corners program, hosted by Dr Norman Swan, described as a special report “on the unnecessary testing and treatments choking the health system“. No doubt this was interpreted as a timely contribution to debate on the design of the Medicare Benefits Schedule in light of the Medicare Benefits Schedule Review Taskforce review announced by the Commonwealth Minister for Health in April 2015 to assess the effectiveness and value for money of services listed on the Schedule.

4 Corners interviewed a variety of clinicians, notably nominees of the Taskforce, including the co-author of a paper published in the Medical Journal of Australia in 2012 that identified a list of 156 ‘low value’ health care practices for which there are items on the MBS that are “potentially unsafe, ineffective or inappropriate in certain circumstances“.

By exposing patients to the risk of poor quality, unnecessary care or medical over servicing, 4 Corners argued that some services listed on the Schedule could represent a burden to Medicare and would be unlikely to contribute to health gain. This is neither a surprising or novel proposition. Over servicing has been a recurring theme in publicly-funded medicine in Australia since the early 1980s when the AMA and Royal Colleges accepted (on the basis of a rather dubious sampling model devised by the officers in the Commonwealth Department of Health) that doctors were costing the public purse some $100 million a year in fraud and over servicing-about 13% of all medical benefits then payable.

What was amazing about the recent 4 Corners program, however, was that it failed to interview a health economist or to acknowledge the interplay between medicine and economics. The existence of over servicing was evidently attributable simply to the existence of MBS item numbers that are available to doctors.

Of course, if one ignores the influence of price, supply exclusively or heavily dependent on public funding indeed creates its own demand. From this follows the policy prescription of regulating demand simply through the design of the Schedule-analogous to fruitlessly restricting hospital bed capacity in the 1980s, or to constraining doctor supply in the 1990s, in an attempt to control the cost of Medicare.

Without reference to effective pricing at the point of consumption that engenders rational decisions about service use in the doctor-patient relationship, the potential for efficiency gain in the supply of medical services through effective design of the Schedule will remain elusive and susceptible to being frittered away in over servicing-and so continue as a spur to costly and inferior work practices even if the care is otherwise unexceptionable. The way the argument about poor Schedule design and over servicing is being couched is one-sided, old-fashioned and misleading.