Introduction to Healthcare Fee Structures

Australia’s healthcare system is generally categorised into two different systems - the public system and the private system. The public health system includes public hospitals, community-based services, and health facilities that are run by state and territory governments. Patients who are eligible for Medicare are able to access these services at low or no cost. On the other hand, the private health system includes services such as private hospitals and specialist and allied health services. Patients typically have to pay out of their pocket to access these services.

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Medicare

Medicare is Australia’s universal health insurance scheme established under the Health Insurance Act 1973, whereby Australians are entitled to access various healthcare and hospital services without having to pay a large sum of fees.

According to Department of Health and Aged Care (2022), to be eligible for Medicare, the individual must:

• be an Australian or New Zealand citizen
• be an Australian permanent resident
• have applied for permanent residency (some conditions apply)
• be a temporary resident covered by a ministerial order
• be a citizen or permanent resident of Norfolk Island, Cocos Islands, Christmas Island or Lord Howe Island.

Further, they must enrol in Medicare and obtain a Medicare card to access the full benefits. Individuals who are visiting from a Reciprocal Health Care Agreement Country may also be eligible for Medicare by enrolling in Medicare. After enrolling in Medicare, an individual will be issued with a Medicare number and Medicare card. As shown on the next page, the Medicare card is made up of three different components: 11 numbers in 2 parts that uniquely identify each person, name, and the expiry date (Services Australia, n.d.-a).

Before scheduling an appointment with a patient, it is vital you check with them whether they have Medicare and hold a Medicare card. This is because the out-of-pocket costs for the services and treatments they receive may differ, and could be an important consideration as to whether they wish to receive the services.

Some of the services costs that Medicare subsidies are:

• Hospital services: emergency care, most surgeries and procedures, medicines provided in hospital, follow-up care.
• Medical services: in-person and telehealth consultations with general practitioners, specialists, and other health practitioners. Mental health services and health checks are also subsidised by Medicare.
• Pathology services: diagnostic imaging such as MRI, ultrasounds, and x-ray scans. Other services subsidised by Medicare include pathology tests and eye tests.
• Medicines: prescription medicines that are listed in the Pharmaceutical Benefits Scheme (PBS) may be fully or substantially subsidised. We will look at PBS in detail later on.

While Medicare covers the cost of a wide range of services, there are still some services that are not covered or subsidised by it (Department of Health and Aged Care, 2023). Patients would still need to pay out-of-pocket expenses to access these services. Some examples are ambulance services, elective and cosmetic surgery, private health services, and most dental services. That said, if patients have private health insurance, depending on their policy, their private health insurance may cover some of these costs.

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Private Health Insurance

Private health insurance is an option health insurance scheme that Australians may choose to take out. This is generally done by buying a policy from a registered health insurer and paying regular premiums to remain covered by the insurer. With private health insurance, policy holders are able to be treated as private patients in hospitals and have some health service costs covered (that are not covered by Medicare).

While it is not compulsory for everyone to take out private health insurance, there are some benefits other than lowered service costs that may incentivise your patients to take out private health insurance, including (Department of Health and Aged Care, 2021):

• Paying less tax: individuals with private hospital cover do not have to pay the Medicare levy surcharge (up to 1.5% of their taxable income).
• Private health insurance rebate: individuals are able to obtain a rebate from the Australian Government if they have a private health insurance rebate and their income is below a certain limit. This rebate is obtained through lower insurance premiums or an offset in annual tax return.

Overseas student health cover

While most patients you see may have both Medicare and private health insurance, you may come across patients who are in Australia on a temporary visa, which makes them ineligible for Medicare. They are generally treated as private patients in the Australian healthcare system. For example, a student visa holder is required to take out Overseas Student Health Cover (OSHC) during their stay in Australia. OSHC helps them to cover the cost of hospital and medical treatment as well as ambulance services (Private Health Insurance, n.d.). Depending on the insurance policy they take out, other health service costs such as dental services may also be covered. It is important that you check with the patient about their level of cover. If unsure, remind your patient to check with their insurance provider.

The extract below summarises the differences between public and private health insurance:

^{(Department of Health and Aged Care, 2021)}

In Australia, the specific fees and charges associated with different healthcare services are outlined in a list or a table that is commonly known as a fee schedule. There are a few fee schedules that you need to be familiar with, so that you are aware of the costs and rebates available or the services your workplace offers. This is so that you can advise your patients accurately prior to scheduling their appointment. We will look at the two main fee schedules in Australia: Medical Benefits Schedule (MBS) and Pharmaceutical Benefits Scheme (PBS).

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Medical Benefits Schedule

The MBS is a list of Medicare professional services subsidised by the Australian Government and is updated regularly. These services generally include consultation, procedural and diagnostic services. Each service is allocated a unique item number to identify the service with a description of the service. Each service is also allocated a schedule fee, which is a fee set by the Australian Government and may differ from the provider’s actual fee. Any fee difference between the schedule fee and the actual fee charged is paid by the patient, or typically known as the out-of-pocket cost.

In addition, some services/MBS items may have explanatory notes allocated to it as the service is more complex than others. The explanatory notes usually include a more detailed explanation of the service requirements and the range of treatments and/or assessments to be performed to meet the billing requirements for that service (Services Australia, n.d.-a).

The MBS also sets out the rates of Medicare benefits, i.e., the amount of fees that is covered under Medicare. According to Medical Services Advisory Committee (2016), the rates of benefits are:

• 100 per cent of the Schedule fee for general practitioner services;
• 85 per cent of the Schedule fee for other out-of-hospital services; and
• 75 per cent of the Schedule fee for in-hospital services for private patient

It may seem daunting as the MBS is a long list, but you would most likely only need to be well-versed with the services that are provided by your workplace to facilitate scheduling and processing medical accounts. Your supervisor or practice manager would inform you of this during your induction or training. However, if you are interested in learning more or unsure, you can search for an MBS item on MBS Online here.

When advising a patient of the fee of a service, you need to inform them of the fee charged by the health professional at your workplace. If they are eligible for Medicare, you also need to inform them of the cost covered by Medicare and the out-of-pocket cost. You must clarify this with the patient and make sure they understand this prior to scheduling an appointment. For example, the health professional at your workplace charges $100 for an out-of-hospital service, and the schedule fee for that service is $60. You need to inform the client about this: “Hi Jane, thank you for your interest in making an appointment with Dr. Jack and confirming you have Medicare. Dr. Jack charges $100 for this service and after Medicare’s subsidy of $51, you need to pay an out-of-pocket fee for $49. Would this be alright with you?”

As mentioned, it is crucial you check whether the patient has Medicare, or if not, whether they have private health insurance, as the out-of-pocket costs can be a stark difference. Further, you should never assume the patient is aware that the services may incur out-of-pocket costs without clarifying with them. It is an offence under the Health Insurance Act 1973 if a service is provided to a patient without first informing them when a Medicare benefit is not payable for that particular service (Services Australia, n.d.-a).

Pharmaceutical Benefits Scheme (PBS)

The PBS started in 1948 as a scheme to provide Australians with access to a list of medicines free-of-charge. Today, it has evolved and become part of the National Medicines Policy and aims to provide individuals with affordable access medications. Similar to the MBS, patients who hold a current Medicare card are eligible for PBS, where the cost of most medications are subsidised by the government.

The PBS Schedule outlining the list of medications that are available at a subsidised price. The Schedule may also include criteria that a patient must satisfy in order to obtain the medicines under PBS. As a health administrator, if your role involves dispensing medicines, it is part of your legal responsibility to ensure that medicines are prescribed in accordance with these requirements. Indeed, you are obligated to adhere to the National Health Act 1952 and the National Health (Pharmaceutical Benefits) Regulations 2017 (Services Australia, n.d.-b). Further, your workplace will have put in place a set of workplace procedures with regards to dispensing medicines to ensure the compliance requirements are met. It is your responsibility to adhere to these legislative and workplace requirements.

While most medicines are subsidised by the government under the PBS, patients may need to make out-of-pocket costs for their medications, usually known as co-payment. This amount is set by the government and is adjusted yearly on 1 January, and is capped once the expense reaches a certain threshold (safety net threshold). Some patients who hold a valid and current concession card may be eligible for further discount (The Pharmaceutical Benefits Scheme, 2023) . Depending on your workplace and the dispensable medicines, you may need to be familiar with the fee structure of these medicines. As the fee structure under PBS is too complex, it is impossible to be covered in this Study Guide. However, your workplace supervisor should instruct you on this and it is your responsibility to become familiar with it to provide accurate advice to your patients.

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Depending on your role and responsibility at your workplace, you may be tasked with providing advice to patients about services and fees and scheduling an appointment for the services required. You are legally obligated to provide accurate information about the services and its associated fees to the patient. Essentially, you need to be transparent and ensure the patient is fully informed about the services they intend to receive and the associated fees prior to scheduling an appointment.

Case Study

We will look at this process by using an example scenario: Jared, the new patient, and Karen, the worker at a health service centre.

Jared phoned the health service centre and enquired about a health service that he is interested in receiving. Karen first clarified with Jared the service required and the practitioner that he is interested in working with. Karen then informed Jared about the fees charged by the practitioner, “The fees for this service is $80, would that be alright, Jared? If you have a Medicare card, there will be a rebate of $47.50 and you have to pay $32.50 out of your pocket.”. Note that Karen also informed Jared of the Medicare rebate and the out-of-pocket cost. Karen then proceeded to ask, “Does this sound alright with you, Jared? If you’re happy with that, would you like to schedule an appointment for next week?” After Jared provides his consent, Karen scheduled an appointment with Jared according to her workplace’s appointment scheduling workflow.

Patients without Medicare

For patients without Medicare, their private health insurance may cover part or all of the service cost. However, you are still obligated to inform the patient of the full fees they need to pay out of their pocket. While some health service providers have an agreement with some private health insurance providers such that eligible policyholders can directly make a claim and receive rebates on the spot, some do not. In this case, most health service providers would offer patients a copy of the invoice or receipt after full payment, and the patients will file for claims with their insurer directly. Therefore, you need to familiarise yourself with your workplace’s policy and procedures regarding this matter before you could provide the appropriate information to your patient. Remember, you should never schedule an appointment before clarifying the patient’s understanding.

In some cases, the patient may be eligible for Medicare but do not have a Medicare card. As some services and benefits are only available to those who hold a valid Medicare card, you may refer the patient to Services Australia to apply for a Medicare card to receive full Medicare benefits.

After confirming the patient is happy to proceed, you will need to schedule an appointment for them to receive the required services and/or treatments. You should adhere to your workplace’s appointment scheduling procedure, including using the appropriate booking and account systems. Below is an example of how to schedule a new appointment with a patient using Halaxy, a patient record management system.

The system you use will depend on your workplace - some service provider uses separate booking and account systems while some combine the two. Depending on how your workplace operates, i.e., whether they bulk bill, the account systems used may be different as well. We will be looking at this in the next section of this module.

Depending on the range of services your workplace provides, your role may involve processing referrals. Referrals are letters or notes to a specialist or consultant physician to ask them to further investigate or provide an opinion about a patient’s condition or to perform specific examinations or procedures. While referrals are generally accepted by many specialists, the referral needs to be valid to receive the Medicare benefits. Therefore, the first crucial step when you are processing referrals is to check the validity of the referrals received.

According to Services Australia, a valid referral must be made to (Services Australia, n.d.-a):

• A specialist by:
  • Another medical practitioner
  • A registered dental practitioner (if arising from a dental service)
  • A registered optometrist (if referring to an ophthalmologist)
  • A nurse practitioner
  • A midwife
• A consultant physician by:
  • Another medical practitioner
  • An approved dental practitioner (if arising from a dental service)
  • A nurse practitioner
  • A midwife

You must also check that the referral is current. If the referral is made by a medical practitioner, it has a 12-month validity period, unless stated otherwise. Note that the referral starts from the date the specialist first attends the patient, not the date issued. If there is a new or unrelated condition, a new referral must be issued for that condition. If the referral is made by a specialist, the referral is valid for three months unless the patient is an admitted patient. See the extract below for an example provided by Services Australia (n.d.-a):

You refer your patient to a specialist on the 1 April 2021 for a period of 12 months. The patient’s first appointment with the specialist occurs on 15 April 2021. For Medicare purposes the 12-month referral becomes active on 15 April 2021 and will remain valid for 12 months. Until 14 April 2022. When issuing the account, the specialist must record the date the referral was actually written. In the above example, the date of referral is 1 April 2021.

It is vital to check whether the referral is valid and current, as this will affect whether the patient can receive the relevant Medicare benefits.

Referral Procedures

Your workplace will have a set of procedures on how to process referrals received and you need to follow these guidelines. This is to ensure that the patient receives the appropriate services and are entitled to receive the relevant Medicare benefits, especially when you are processing the medical accounts. As this set of procedures will depend on your workplace and the services provided, we will provide a general overview of processing referrals.

1. Review the referral and check for essential information such as the patient’s demographics and the referring provider details. You also need to check the validity of the referral upon receiving it. If you are unsure or require further clarification, contact the referring practitioner or provider.
2. Review and assess the referral reason. You need to ensure that the referring reason aligns with the services and/or treatments provided by your workplace. If you are unsure, clarify the referring reason with your supervisor or the referring provider. You should never accept a referral if your workplace does not provide the services required by the patient.
3. Depending on your workplace and services provided, the referrals received may have different levels of urgency. You would then need to follow the guidelines by your workplace on how to process and prioritise these referral requests. For example, if you work in a pathology clinic, you may receive referrals of patients that require urgent blood tests to be done.
4. After confirming the validity and suitability of the referral, you would contact the patient to provide advice about the fees involved. If the patient is happy to proceed, you will then schedule an appointment for them in accordance with your workplace guideline.

Storing Referral Letters

After scheduling the appointment, you will have to store the patient’s referral letter in accordance with the legislative and workplace requirements. Other than to ensure the efficient retrieval during audit, you also need to ensure the privacy and confidentiality of patient information is respected and valued.

To help regulate this, the Privacy Act 1988 (Cth) is established to regulate how private sector organisations, including health services, use, collect, store, and disclose sensitive personal information including referral letters. Therefore, it is crucial that you familiarise yourself with the Privacy Act 1988 and abide by it to avoid any legal implications. This includes storing patient’s referral letters in a secured and safe location, and ensuring only authorised personnel has access to it. To abide by this legislative requirement, your workplace will have its own policy and procedure on storing referral letters. It is your responsibility to understand the procedure and act accordingly. For example, you should not leave the referral letter unattended whereby other patients or unauthorised staff can access that patient’s health information.

Further, your workplace may have a filling system to facilitate easy retrieval of a patient’s referral record. You must become familiar with this standardised procedure and abide by it, so that other workers can also retrieve the relevant information in an efficient manner.

The same principle applies for electronic referrals. You will also need to respect the patient’s privacy by ensuring referrals are handled in accordance with the Electronic Transactions Act 1999 such that these transfers are done in a safe and secured manner. Other than that, you also need to ensure that these electronic referrals are saved and stored in a manner that can be easily retrieved unaltered. This will be helpful in the event of an audit or medical dispute (Services Australia, n.d.-a).

In this section, you learned about the public and private health insurance system and their differences. You also learned about the two main fee schedules used in Australia’s healthcare system: the Medical Benefits Schedule and the Pharmaceutical Benefits Scheme. With this information, you also learn how to provide advice to patients when they wish to schedule an appointment. Lastly, we looked at how to process referrals to specialist practitioners and how to store them in accordance with the legislative requirements. It is important to note that these procedures are only general guidelines, you are required to familiarise yourself with the policy and procedures developed by your workplace.

Department of Health and Aged Care. (2021, August 18). About private health insurance. https://www.health.gov.au/topics/private-health-insurance/about-private-health-insurance?language=en

Department of Health and Aged Care. (2022, December 20). About Medicare. https://www.health.gov.au/topics/medicare/about?language=en

Department of Health and Aged Care. (2023, April 12). What Medicare covers. https://www.health.gov.au/topics/medicare/about/what-medicare-covers?language=en

Formstack. (2017). [Photograph of a doctor handing someone a piece of paper]. https://www.formstack.com/blog/improve-patient-referral-process

Medical Services Advisory Committee. (2016, July 20). What is the MBS and Medicare? http://www.msac.gov.au/internet/msac/publishing.nsf/Content/Factsheet-03

The Pharmaceutical Benefits Scheme (2023, January 1). About the PBS. https://www.pbs.gov.au/info/about-the-pbs

Private Health Insurance. (n.d.). Overseas student health cover. https://www.privatehealth.gov.au/health_insurance/overseas/overseas_student_health_cover.htm

Services Australia. (n.d.-a). Medicare Benefits Schedule (MBS). https://hpe.servicesaustralia.gov.au/medicare-benefits-schedule.html

Services Australia. (n.d.-b). Pharmaceutical Benefits Scheme (PBS). https://hpe.servicesaustralia.gov.au/pharmaceutical-benefits-scheme.html.