Medicare is haemorrhaging up to $3 billion a year in waste, according to a government-commissioned review of the health system’s integrity, which warns it risks losing billions more to rorts in an overly complex and opaque bureaucracy that needs urgent reform.
An independent report into non-compliance and fraud in the $38 billion universal healthcare system by health economist Dr Pradeep Philip has found Medicare is so poorly structured and loosely scrutinised that it is no longer fit for purpose and has left “the gate wide open” to fraud.
The former head of the Victorian Health Department says the 6000 items on the Medicare Benefits Schedule are difficult to navigate, only a small portion of 500 million transactions each year are scrutinised, and the growing corporate ownership of medical clinics has weakened the relationship between doctors and patients while limiting oversight of billing.
“The legislative basis for Medicare is fast becoming out of date, unable to reflect the changing health needs and modes of health service delivery in Australia,” he said. “The vulnerabilities in the system are real and material.”
Philip flags several areas requiring urgent attention, including a continuous monitoring system that would send SMS alerts when claims are made, and simplifying the Medicare billing system with items that better cater for complex conditions, clearer language and more details of the service, such as length and location.
Other recommendations include the establishment of a new Medicare oversight committee made up of department representatives and independent experts, while the powerful Australian Medical Association (AMA) would lose its veto power over who runs the system’s regulator.
An independent review has found Medicare is so poorly structured and loosely scrutinised that it is no longer fit for purpose and has left “the gate wide open” to significant levels of fraud.Credit: Alex Ellinghausen
But Philip told Health Minister Mark Butler that change would not be easy given the complexity of the system and strong positions among stakeholders.
The health minister commissioned Philip’s review late last year after a joint investigation by The Sydney Morning Herald, The Age and the ABC’s 7.30 based on claims from researcher Margaret Faux, whose PhD found up to 30 per cent – or $8 billion – might be leaking from Medicare’s annual budget.
Her research said the waste came from medical practitioners making mistakes or charging for services that weren’t necessary or didn’t happen, with flaws in the system making it easy to rort and almost impossible to detect fraud, incorrect payments and errors.
The claims were vigorously disputed by doctors groups including the Royal Australian College of GPs (RACGP) and the AMA, with the association’s president Steve Robson describing them as staggering in their inaccuracy and an unjustified slur on the medical profession.
On Monday, Nicole Higgins from the RACGP issued a press release, based on early briefings of the review, saying doctors had been “slandered by baseless claims of ‘rorting’ for no good reason”.
“We have been vindicated and we await an apology,” she said.
Philip said most Medicare wastage stemmed from non-compliance errors rather than premeditated fraud and acknowledged that doctors had been offended by the allegations of intentional rorting.
But his report said there were structural flaws in Medicare and while it was difficult to determine precise levels of waste due to lack of available data, billions of dollars were leaking from the system each year.
“On a conservative definition of non-compliance and fraud, it is entirely feasible the value of non-compliance could exist in the range of $1.5 billion to $3 billion,” he said.
“This comes with a significant caveat, in that there is real potential for the problem to scale to the order of magnitude in Dr Faux’s analysis [$8 billion], should effective controls, systems and education not be put in place.”
He also credited Faux for “shining a light on the key issue of trust in our health system”.
Philip argued the dollar figure should not be the focus of debate and said there was no room for complacency.
“The main lesson to learn from this review is that we must focus on the structural issues and controls in the system, to build trust in Medicare,” he said.
“The current system is overly fragmented, disjointed, and lacking in contemporary tools to detect and address non-compliance and fraud.”
“Stamping out fraud and reducing non-compliance must be the focus of system reform.”
Philip also called on state governments to investigate the opaque billing arrangements of public hospitals amid claims by medical specialists that they have little or no visibility over what is billed in their name.
Faux said many of Philip’s recommendations were aligned with her PhD. “We’re essentially saying the same thing: regulation, education and digital reform are required urgently, and I agree with him on that,” she said.
“What I disagree with is his estimate ... my 30 per cent estimate has always been on three things: fraud, overservicing and errors. It was never focused on GPs, it is system-wide.”
Butler said several reviews over many years had identified that billions were being lost through Medicare each year.
He said the government was considering Philip’s recommendations and working with stakeholders to develop a response.
“Australians know that the overwhelming majority of our doctors and health professionals are honest, hardworking and comply with Medicare rules,” he said.
“But they also understand that, at a time of great pressure on household and government budgets, every dollar in Medicare is precious and must be spent directly on patient care.”
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