Catastrophic insurance: Impact of the Australian Medicare Safety Net on fees, service use and out-of-pocket costs, CHERE Working Paper 2006/9

Objectives: The Medicare Safety Net Policy was introduced in March 2004 to provide financial relief for those Australians who face high out-of-pocket (OOP) costs for outpatient medical services. This study evaluates the extent to which out-of-pocket costs have fallen since the introduction of the Safety Net and examines the impact of the policy on the level of service use, the amount of benefits paid by government and fees charged by medical providers. Methods: Regression modelling of time series data was used to examine whether there have been significant changes in levels of service use, fees charged and benefits paid for services provided by specialists in the two-year period following the introduction of the Safety Net. Four speciality fields were examined in this analysis: general specialists? consultations, obstetrics, pathology and diagnostic imaging. Results: The analysis indicates that the introduction of the Safety Net coincided with a substantial rise in public funding for Medicare services and a much smaller reduction in OOP costs. The policy has coincided with a small but significant change in the number of pathology and diagnostic imaging services used and in some specialty areas a substantial increase in the fees charged by providers. The net impact shows that for specialists? consultations every dollar spent on the Medicare Safety Net, $0.68 went towards higher fees and $0.32 went towards reducing OOP costs. The corresponding figures for diagnostic imaging were $0.74 and $0.26 respectively. Conclusions: The Safety Net was heralded by the government as a fundamental reform in Australia?s Medicare program. Whilst the Safety Net was introduced to help reduce out-of-pocket medical costs, this analysis shows that in its first two years of operation, there has been significant leakage of public funding towards higher provider fees. More research is needed using longer term data to assess the impact of the policy on patient and provider behaviour more widely, including examining the policy?s impact on those who did qualify for Safety Net and those who did not, as well as more disaggregated analysis of different Medicare services.