Why specialists are charging higher fees for safety net patients


By David Rowley

28 May 2019

Medical specialists are charging higher fees for patients when they know they can reclaim the costs through the Extended Medicare Safety Net (EMSN), a study shows.

It found physician’s consultation fees went up by an average of 12% when they were aware that patients were close to reaching the safety net threshold beyond which Medicare covers 80% of their out-of-pocket expenses.

Researchers from the Centre for Health Economics Research and Evaluation at UTS and the UNSW Business School used data from the Sax Institute 45 And Up study to look at fees charged for non-concession card patients who were close to reaching the EMSN’S $2133 threshold.

Physicians believed patients would accept higher fees that would take them over the threshold, the researchers said. As a result, the fees increased more the closer the patients came to the EMSN threshold.

“Physicians with knowledge of a patient’s eligibility for public benefits are able to charge higher fees, knowing that these will be absorbed largely by the government instead of the patient,” they concluded.

There was no spike in consultation fees for patients unaffected by the threshold points or whose doctors didn’t know they were close to their threshold.

The researchers said their findings might explain why the EMSN had proven to be more expensive than anticipated. Governments had tried to contain cost blowouts by raising the safety net threshold and capping payments for popular items such as obstetrics and IVF, they noted

But these moves would not be effective when specialist physicians were free to increase their fees.

“Our research strongly suggests that physician behaviour must be considered in order to mitigate unintended consequences,” they wrote.

Physicians’ pricing decisions were “not compatible with a competitive market where prices are known,” they said.

“On the contrary, the market for specialist consultations is characterised by high switching costs and often high and unknown fees. The main driver of our results then is knowledge of a patient’s likelihood of reaching the EMSN threshold, that physicians can exploit because of their monopoly power.”

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