Doctors are currently free to set their own fees and many have rapidly increased them over the past 15 years. The average out-of-pocket cost for a non-bulk billed specialist consultation increased from A$46 in 2009–10 to $126 in 2024–25, or 11.9% per year. These are averages, so actual fees can be much higher and vary by specialty.
As a result, non-GP specialists have the highest incomes in the country and run the most profitable businesses.
So what has the government done so far to get specialist fees under control? And what options are left for reform?
Starting the reform process
This year the government introduced legislation to enable the publication of fees for individual specialists. The Medical Cost Finder website will show what individual specialists charge, rather than regional averages. This will better facilitate choice of doctor.
A Senate committee has also been set up to investigate access to and affordability of medical specialists which will report in late 2026.
The committee is likely to hear that high fees, and uncertainty about what fee will be charged, means people are less likely to attend appointments. This can mean a choice between poor health and potential financial hardship.
Each year, almost 1 million people report avoiding seeing specialists because of the cost.
High fees also skew incentives for doctors who may prefer to work in high-fee specialties rather than in specialties where population needs are higher, further reducing access for populations in greatest need.
Can’t we just increase competition?
Economists argue more competition in the market can help reduce market power and reduce fees.
However, our research has shown more competition (measured by more specialists of the same specialty in an area) has no impact on fees.
Increasing the supply of specialists might increase competition. But this already occurred in the 2000s when the number of medical graduates doubled and the number of specialists increased exponentially.
However, fees continued to rise higher and faster than inflation.
Competition can also be increased through more consumer information and choice, the focus of the current legislation.
However, our research and review of previous studies suggests fee transparency through the government’s existing Medical Cost Finder may not work, unless GPs have this information available during consultations when referring patients. Even then, patients have no objective information on quality.
Patients don’t have the same information or knowledge as doctors about diagnosis or which treatments provide most value. More information for patients won’t necessarily address this, as patients don’t have medical degrees to interpret it.
Patients may also be vulnerable, and motivated by fear and hope, and not in a position to make clear and rational decisions.
Four options for reining in fees
If increasing competition can’t bring fees down, the only options are direct fee regulation, additional government spending, or both. This could involve:
1. Legally enforceable price caps
Doctors have traditionally relied on a clause in the constitution to argue against direct regulation of fees. But the minister seems willing to legally test this. And doctors have lost previous legal tests of this clause.
Direct fee controls could make it illegal to charge above a certain amount, and caps could vary by individual Medicare items or by episode of care.
An independent body could be established to set these caps and Medicare rebates, based on submitted evidence on how costs vary across regions and patients’ needs. However, doctors with fees below the caps could increase them.
2. Pay Medicare rebates only if fees are below a certain cap
An alternative to testing the constitution is to make the payment of Medicare rebates conditional on doctors charging a fee below a certain cap.
If doctors charged above the cap, this would remove the Medicare rebate for patients so could potentially increase out-of-pocket costs for patients.
Since some patients regard higher fees as an indicator of high quality, this increased out-of-pocket cost might not reduce demand for everyone.
Some very high-fee doctors would not change their fees at all and the services they provide would become fully private. Skewed incentives would remain.
3. Increase Medicare rebates
Doctors groups argue that Medicare rebates should be increased, as this would lower fees charged.
However, previous experience with the Medicare Safety Net found strong evidence doctors may not reduce fees but, rather, take the extra rebate, or a proportion of it, as extra income.
This could reduce the growth of fees but discretion remains with the doctor on what to charge and the out-of-pocket cost.
This could be combined with fee caps or rules that prevent doctors from increasing fees if they accept the higher rebate. This would guarantee that the rebate increase would reduce out-of-pocket costs.
4. Standardising gap cover arrangements across health insurers
For services provided in private hospitals (and to private patients in public hospitals), health insurers use gap cover arrangements to help keep out-of-pocket costs down.
Doctors who choose to have an agreement with a health insurer can then choose whether a patient pays any out-of-pocket costs if their fee is equal to or less than the fee schedule determined by health insurers.
Patients can pay no out-of-pocket cost (“no gap” cover) or a known out-of-pocket cost (“known gap” cover) or pay the full out-of-pocket cost if the fee is above the known gap amount. Each insurer uses a different fee schedule which adds to the variation in out-of-pocket costs.
This scheme could be strengthened and fee variations reduced by requiring all insurers to use the same fee schedule.
It could also be mandated that all doctors accept the insurers’ fee as full payment.
Where to next?
These options require careful thought to determine which might be more effective in reducing fees and out-of-pocket costs. Some involve further government spending or impose costs on health insurers, while others involve changes in legislation and rules.
Some combination of both is likely to make this work. But reducing out-of-pocket costs while maintaining doctors’ earnings is likely to be expensive.
Anthony Scott is the Professor of Health Economics and Director, Centre for Health Economics, Monash Business School at Monash University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
