Medicare system is ‘not fit for purpose’, review finds

Australia’s health funding system isn’t fit for purpose, says a review of Medicare that concludes $1.5bn-$3bn a year is likely lost mainly from billing errors.

Federal health minister Mark Butler said: “Australians know that the overwhelming majority of our doctors and health professionals are honest, hardworking and comply with Medicare rules’’.

Australia’s health funding system is “fragmented and disjointed” and in critical need of being simplified, says a review of Medicare compliance that concluded $1.5bn-$3bn a year is likely lost predominantly from billing errors rather than premeditated fraud.

The review by health economist Pradeep Philip has found the unwieldy Medicare Benefits Schedule, that contains about 6000 item numbers, is not fit for purpose and has not kept pace with modern methods of service delivery or the reality of complex multidisciplinary care.

Dr Philip finds the system is vulnerable to fraud, but that the compliance system currently often punishes doctors who are trying to do the right thing.

The report, to be released by federal Health Minister Mark Butler, did not substantiate allegations of Medicare rorting and wastage amounting to $8bn a year, which were sourced in media reports to Medicare compliance expert Margaret Faux.

Dr Philip said in his report that noncompliance and fraud could, on a conservative definition, exist in the range of $1.5bn-$3bn, not inconsistent with previous studies. “Legislation, governance, systems, processes and tools are currently not fit for purpose and without significant attention, will result in significant levels of fraud,” he said.

The review concluded that most health practitioners were well-meaning and protective of the system and their patients.

“A large part of the success and efficacy of Australia’s health system, to date, is due to this level of altruistic behaviour by health professionals,” Dr Philip said.

Pradeep Philip.

“That said, my review highlights growing vulnerabilities and forces of change which could ... result in significant leakages, including fraud, in the system.

“At present, it is my view that a significant part of the leakage in the Medicare payment system stems from noncompliance errors rather than premeditated fraud. Indeed, one could argue that there is a significant amount of ‘fear’ of the compliance regime, notwithstanding it is not as far reaching or effective as it could or should be in practice. But there is no room for complacency.”

The review found that critical to addressing the deficiencies with Medicare was recognising that it is “fast becoming out of date, unable to reflect the changing health needs and modes of health service delivery in Australia” amid greater corporatisation of the health system and growing complexity of patient care. Dr Philip noted Medicare had “grown organically over time” rather than being characterised by clear strategy, changing demography, burden of disease or emerging therapeutics and models of care and technology.

Federal health minister Mark Butler said: “Australians know that the overwhelming majority of our doctors and health professionals are honest, hardworking and comply with Medicare rules. 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.

“Strengthening Medicare also means safeguarding the taxpayer funds that underpin it ...”

The report’s recommendations include strengthening the governance overseeing Medicare and introducing an expanded governance structure to embed a Medicare Oversight Committee.

The report also recommends a restructure of the design and composition of MBS numbers, a redesign to modernise the Medicare Payments System technology, and consideration of an ongoing review of the Medicare Benefit Scheme’s enabling legislation and regulation.

Statutory penalties should also be considered to deter inappropriate billing behaviour.

It also recommended the Australian Medical Association be stripped of its veto approval power on the appointment of the Professional Services Review Scheme which is responsible for reviewing and examining possible inappropriate practice by practitioners when they provide Medicare services – a power never exercised by the AMA.

Mr Butler said he would work with health professionals, patients and peak bodies to develop a comprehensive response to Dr Philip’s recommendations.