Specialists charging excessive fees should be stripped of federal funding, according to new report

Specialists charging too much should be named, shamed and stripped of federal funding according to a new report, which has found more than 20 per cent of Australians who visited a specialist were slapped with an exorbitant fee.

The Grattan Institute report paints a bleak picture of specialist care in Australia, where people suffer unnecessary illness and pain as they queue for care or struggle to pay for it.

It found more than one in five Australians who saw a specialist in 2023 were charged a fee deemed "extreme", defined as costs that are on average more than three times the Medicare schedule fee.

The Grattan Institute's health program director Peter Breadon said specialist fees were a problem that was only getting worse, with the report finding out-of-pocket costs had soared by almost 75 per cent in real terms since 2010.

"We found that the whole system is pretty much broken, it's been left on autopilot," he said.

"In Australia, far too many patients are left with a really difficult choice when they get a referral for a specialist doctor visit. 

"They've either got to front up for really high out-of-pocket fees in a private clinic or wait months or sometimes even years longer than recommended in a public clinic."

Outpatient clinics run by public hospitals provide just one-third of specialist care, meaning most Australians are treated by private specialists who are free to charge whatever they like in an unregulated system.

The federal government sets a Medicare Schedule Fee for different medical services, and then pays a percentage of that in the form of a rebate. But there can be huge disparities between the Medicare rebate and fees charged, leaving patients with high out-of-pocket costs.

The average cost of an initial consult with specialists who charged extreme fees was about $670 for a psychiatry appointment, the report found, and about $370 for an endocrinologist.

Mr Breadon said while only about four per cent of specialists were charging extreme fees, more should be done to punish them.

He argued the federal government should name and shame specialists who charge extreme fees and even withdraw Medicare rebates from them.

"We think those fees are far too high. There's no justification for them. There's no evidence that the doctors charging extreme fees are providing better care," he said.

"That's why we've said the government should claw back the government funding that's given to those providers, because the government shouldn't be subsidising care that most people can't afford and that there's no good reason for charging patients so much."

Cancer spreads while people wait

Specialist care is a "postcode lottery" in Australia, according to the report, with people in wealthy communities receiving about a quarter more services than those in poorer communities, despite being healthier.

It said each year almost two million people delay seeing a specialist or skip it altogether, leading to avoidable suffering while placing additional pressure on hospitals.

And it found patient conditions could deteriorate while people lingered on waiting lists, delaying crucial diagnoses and treatment.

After being diagnosed with prostate cancer in 2022, Angus Witherby had to wait six months to see a private specialist in Sydney, several hours away from his home in Moree, in regional New South Wales. 

It was another two months before he had surgery.

As he waited, the cancer spread.

"I discovered the delay had meant that the cancer had actually escaped the prostate and had gone into some of the surrounding tissues, so it turned out to be a much more significant operation, and I'm left with a 25 to 30 per cent chance of recurrence of the cancer," he said. 

Mr Witherby spent about $1,500 on initial specialist consultations and tests, and only got a couple of hundred dollars back.

"The Medicare rebates need to be real — they have not been indexed anything like according to inflation," he said.

"They need to keep up with cost of living."

The report said long waiting lists and missed care were costly for the health system, with sicker patients likely to need more intensive and expensive care down the track.

Report finds doctors increase fees with rebates

Demand for specialists is partly being driven by an ageing population and the increasing prevalence of chronic illnesses, meaning more people needed specialists than ever before.

But training places for the next generation of doctors are limited, tied to funding and teaching capacity.

The report argues that in most markets, extreme prices would fall over time as new providers enter the market and offer better value for money.

But it said problems with specialist training mean new providers can't easily enter the field and the resulting extreme fees reflect an uncompetitive market.

The report called on federal and state governments to set targets for specialist training and increase funding to train more doctors.

As well as penalising specialists charging extreme fees, it makes a raft of additional recommendations, like calling on the state and federal governments to boost funding to public specialist clinics by $500 million a year in areas with the least care.

It also called on the federal government to direct the competition watchdog to study specialists' costs and fees.

The Australian Medical Association (AMA) president, Danielle McMullen, said there were a range of factors contributing to high out-of-pocket costs for patients, including workforce shortages, a lack of investment in public specialist outpatient clinics, and Medicare rebates failing to keep pace with inflation.

"The AMA has never supported egregious fee setting, but what we do support is that balance of public and private care that makes Australia's healthcare system so unique," Dr McMullen said.

"What we need is a strong public health system so that there is a genuine choice for people who can't afford to pay for their care.

"We know that across many parts of Medicare, the cost of providing care has outstripped the growth in those Medicare rebates … so we're keen to have those discussions with the government as well."

While the Grattan report said the government should examine the rebate, it noted that raising the government's contribution is unlikely to address extreme fees for specialist appointments, because doctors tend to increase fees when they know patients will be eligible for additional benefits.

Health Minister Mark Butler said the private health sector needed to do more to protect patients from exorbitant bills.

He also pointed to the government's recent efforts to upgrade a specialist price disclosure website, and said work was underway to bolster the specialist workforce and alleviate pressures on public hospitals.

"All Australians deserve access to affordable healthcare," he said.

"Thanks to the Albanese Labor government's investments, more doctors have joined the system in the last two years than any time in the past decade."

Calls to 'rethink' the system

The report didn't specifically look at public or private surgeries, but Mr Breadon said it was clear there were "other reforms to do downstream" like surgery waiting times and out-of-pocket costs.

After Mr Witherby paid for his initial specialist consults, he then had to choose between forking out about $5,000 in out-of-pocket costs for the prostate cancer surgery or paying his tax bill.

"I sail very, very, very close to the wind with that operation and it really came down to did I pay the ATO? Would I owe them, or did I have the operation," he said.

"And if I didn't have the operation, well, the ATO wasn't getting any money. I wasn't going to be here.

"So, I had to make that decision, which was not an easy one to make at the time."

Now he's preparing for more out-of-pocket costs for an upcoming hip replacement surgery, after being told the wait in the public sector was five to eight years.

He called for more government investment into the sector.

"We're starting to understand some of the complex ways in which the systems are failing. You know, I do have the view that the medical system in Australia has fundamentally failed in that there are so many problems, so many gaps, so many shortcomings, so many people who are doing without," he said.

"It's a very expensive, difficult, complex system that's not producing good outcomes despite vast sums of money. We do need to rethink it and do it differently."