Medical rebate overhaul could recoup lost savings from ditched co-payment

 The Abbott government is considering a major overhaul of the rebates it pays doctors for each medical treatment as a means of winning back budget savings lost when it ditched the Medicare co-payment.

Guardian Australia understands health minister Sussan Ley is likely to announce a comprehensive audit of the fees the government pays for each medical service under the medical benefits schedule.

The move could again put the government on a collision course with doctors. It is unlikely to be completed in time for this year’s budget, but estimates of savings from scaling back on unnecessary tests and low value services run to hundreds of millions of dollars a year.

The existing medical benefits advisory committee regularly reviews new items proposed for the Medicare schedule, and on occasion existing items. For example it recommended restrictions on rebates for vitamin D testing last year after a spike in the number of tests ordered.

But the proposed audit of existing payments to doctors is far broader than the advisory committee’s work.

The medical profession is leading some efforts to reduce unnecessary tests and procedures, but has in the past reacted angrily to reductions in rebates imposed by government.

The former Labor government was forced to back down on a plan to halve the Medicare fee paid for cataract surgery after an angry backlash by ophthalmologists in 2009.

The then health minister Nicola Roxon argued new technology had made the popular operation cheaper and more efficient, and doctors could be paid less, at the same time it reaped nearly $150m in savings from the Medicare benefits scheme over four years.

But the then Coalition opposition and the Australian Medical Association (at the time led by Dr Bill Glasson, who went on to become the Liberal candidate against Kevin Rudd) vehemently opposed the move.

The Coalition, the Greens and independent senators disallowed regulations imposing the move.

The Abbott government also remains committed to a four-year freeze on Medicare rebates that doctors claim will force them to abandon bulk billing over time.

Ley abandoned the GP co-payment and a proposal to cut the Medicare rebate in January, but said the government would proceed with freeze on the rebate’s normal annual inflation-linked increase, a policy which reaps $1.3bn of the $3.5bn in savings booked over the next four years in last year’s budget.

The Australian Medical Association says the freeze would mean doctors were eventually forced to abandon bulk billing and charge their patients.

The ditching of the rebate was the fourth Medicare policy position for the Abbott government. In last year’s budget it announced a $7 co-payment but last December it changed to a $5 rebate cut which it called a “voluntary co-payment”.

As the medical profession went to war against that policy in January in the lead-up to the Queensland state election, newly-installed health minister Ley said it was “shelved”. Then she said it was abandoned entirely, with a new policy still under consultation with the medical profession.

Treasurer Joe Hockey has said he is looking for equivalent savings in each portfolio to those outlined in last year’s budget, but it understood Ley does not have to find savings equivalent to those lost when the government abandoned the co-payment.