In the May budget, the Commonwealth government proposed a A$7 co-payment for GP services and tests done outside a hospital. After seven months of fierce criticism, the government yesterday abandoned those plans. The budget proposals have been replaced by three separate initiatives which will reduce Medicare direct spending by roughly the same amount as the budget initiative.

As with the A$7 co-payment proposal, these savings will initially be directed into the Medical Research Future Fund.

The first change has grabbed all the headlines. It is to reduce by A$5 the rebate for general practice visits for most people. This excludes pensioners, concession card holders and people under 16. The government is encouraging GPs to recoup the A$5 rebate cut from patients.

The second change is to freeze the indexation of rebates for all medical practitioners. As the rebate drifts further away from the cost that GPs incur in running their practice, GPs are likely to increase their charges to cover their costs.

As a result, all patients (including pensioners and health care card holders) are likely to face increased out-of-pocket costs. The problem is likely to be worst in areas where access to care is lowest, where patients are already more likely to pay out of pocket costs.

The third change is to the funding rules for GP consultations. Currently there are four levels of rebates for GP consultations:

Medicare Benefits Schedule

The vast bulk of consultations are level B, up to 20 minutes. Under the rules announced yesterday there is a new minimum length for level B consultations of 10 minutes, shorter consultations will now be considered level As.

This change will dramatically reduce the rebate for those shorter consultations, from A$37.05 to A$11.95 for concession card holders and A$16.95 for general patients. Again it is highly likely that GPs will pass on A$20+ gap to patients. The A$5 co-payment has quickly morphed into a A$25 one.

Higher patient payments

At first blush it may seem that the government has listened to complaints and fixed the problems that torpedoed its initial proposal. Originally, the co-payments applied to all patients, including concession-card holders, such as pensioners and people without a job. GPs would be forced to collect the A$7, which seemed unworkable.

But the comparison shouldn’t be with what the budget suggested. Instead, the watered-down co-pay plan should be judged by the impact it will have on patients, on GPs, and on the budget bottom line.

At budget time every year, the temptation has been to increase patient co-payments a little bit to reduce spending. This obscures the fact that for many people health care fees are already too high. The fees have crept up continually under successive governments. Partly as a result, Australia relies more on direct fees to pay for health care than most similar countries.

There is strong evidence from around the world that co-payments stop people from getting health care. That means less spending immediately, but those gains are offset when people skip visits they need. It costs patients, the health system and the broader economy much more if people get sicker.

The consequences are serious. Already 5% of people report that they avoid doctor visits because of the cost, these changes will exacerbate that.

Longer appointments

The current payment scales encourage shorter consultations in each payment band.Grattan Institute/Medicare Benefits Schedule 2014

Currently, shorter level B consultations can lead to GP revenue of up to A$9 a minute (see the notes under the chart for more detail on these figures). The government pays around A$2 a minute for a level B visit that lasts 20 minutes.

With the new minimum length for level B visits, the potential hourly rates for the different types of consultations are much more even, essentially reducing the incentive for “6-minute medicine”.

The reality is that most consultations take much longer than that – the average is closer to 15 minutes and the median only a few minutes shorter – so this policy initiative may be “solving” a problem which isn’t there.

Discouraging turnstile medicine has previously been seen as a good policy. With increasing complexity of patients and more patients having multiple chronic conditions, longer consultations are probably appropriate to ensure more thorough assessments and management by GPs.

But yesterday’s changes transformed a good idea into a bad one.

Previously, implementation of policies to encourage longer consultations was proposed on a cost-neutral basis. Now it is as a budget savings measure, much of the cost of will be borne by patients. What might have been able to be promoted as quality-enhancing will now almost certainly be access-reducing and probably quality-reducing as well if patients miss out on needed care.

The changes announced yesterday are much more complex than the simple A$5 headline number. They save the Commonwealth government roughly the same amount as the budget proposals. This means that collectively, consumers, GPs, or both, will be out of pocket to the same extent as was proposed in the budget.

The distribution, though, will be different. Assuming GPs pass on the cuts, the big losers will be ordinary patients. Pensioners and concession card holders are protected from only one of the three changes, so they may face increased costs because of the indexation pause and the level B definition changes.

The rebate reductions are due to come into effect on July 1 2015. But the level B definition changes are to be snuck in by regulation to apply from January 1 2015. Because the Senate can disallow regulations, the government delayed the changes until a few days after the Senate rose for its Christmas break.

The big question is whether these changes will survive the Senate when it resumes on 9 February. It will be an interesting Summer.

The authors do not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article. They also have no relevant affiliations.