The case for fixing Medicare can no longer be ignored

A lack of political will has contributed to the poor regulation of Medicare, and the role of the powerful medical lobby raises questions over the regulator’s independence.

Built on a complex honour system that relies on medical professionals billing their patients correctly, Medicare’s integrity and future is in serious doubt. More political will is needed to overhaul the lax oversight of this essential scheme.

The Medicare watchdog detects only a tiny fraction of the billions of dollars lost each year as a result of fraud, errors and over-servicing, as our investigative series by Adele Ferguson and Chris Gillett shows.

The Professional Services Review (PSR) each year examines just 0.07 per cent of the 150,000 medical professionals the regulator is responsible for monitoring. With an annual budget of $9 million a year and 27 full-time staff to monitor Medicare billing, the PSR is critically understaffed and under-resourced to do its job.

Each year, the PSR examines only about 100 cases of potential fraud. Repayment orders in the 2021-22 financial year totalled $24.6 million – a pathetically small amount.

The regulator’s system of governance also exposes Medicare to potential political influence by vested interests, as the joint investigation by The Sydney Morning Herald, The Age and the ABC’s 7.30 program reveals.

Under the Health Insurance Act, the federal health minister must not appoint the head of the regulator unless the peak medical lobby, the Australian Medical Association, agrees to the appointment.

This is an astounding conflict of interest, considering the AMA’s strong links to the PSR’s leadership. The PSR’s current head and two predecessors have held senior positions or been long-standing members of the AMA. The Herald does not suggest that any of these individuals engaged in any wrongdoing.

The AMA’s veto power over the appointment of the PSR director is scandalous and should be stopped immediately before a new director is appointed later this year. It is unacceptable for the head of the PSR to also sit on the AMA board, as is currently the case.

Some medical practitioners believe that politics has made it difficult to reform Medicare. Viewed as a sacred cow, it is too easy for one side of politics to run a scare campaign against the other in response to the mere whiff of change.

In 2004, Deloitte Forensics reviewed the effectiveness of Medicare and concluded its approach was having no impact on preventing fraud. The report, which was buried after its completion just months before the 2004 federal election, found the amount of money being recovered by the investigative team from doctors was minuscule, representing 0.0061 per cent of the budget. This was at a time when academic studies worldwide were showing leakage and fraud of up to 10 per cent.

Flaws in the system have also meant that doctors who are not breaking the rules but who are popular because they provide more affordable rates are getting pinged inappropriately by the PSR. While the vast majority of doctors are honourable and bill their patients correctly, a small minority have abused the broken system.

Health Minister Mark Butler, who faces calls to launch an independent inquiry into Medicare, has so far agreed only to an interdepartmental inquiry. He needs to go much further and summon up the political courage to confront the AMA. The minister should not wait for a review to tell him that he has to stop the AMA’s interference in the appointment of a new PSR director, with applications due to close next month.

The AMA, which has dismissed our investigation as “an unjustified slur” on its collective reputation, has made no attempt to address the glaring system failures the reports identify.

The Herald supports full scrutiny of Medicare data and more resources for the regulator to do its job. The system is broken and the government can no longer afford to keep its failures hidden. The AMA’s influence over appointments to the PSR clearly has to end. Now. The restoration of Medicare’s integrity and efficiency depends on it.

Bevan Shields sends a newsletter to subscribers each week. Sign up to receive his Note from the Editor.