SURGIMIENTO DE NUEVOS MOVIMIENTOS SOCIALES

From casual observation of fees posted in GPs’ surgeries, it is clear that possession of Australian Government concession cards leads to fee discounts and to greater likelihood of bulk billing. Table 2.2 shows that, overall, GPs were more likely to bulk bill people holding concession cards by around 20 percentage points in 2002.

Table 2.2: Bulk billing rates by RRMA region15 and concession cards: 2002

Bulk Billing Rates Capital cities (%) Other metro areas (%) Rural areas (%) Other rural and remote areas (%) Total (%)

Services to all patients 77.9 69.8 56.6 56.4 72.3

Services to patients with a concession card

86.9 78.1 65.8 67.5 80.7

Services to patients without a concession card

69.5 58.7 41.5 50.9 63.4

Source: Based on Submission of the Department of Health and Ageing to the Senate Select Committee on Medicare, July 2003 and answers provided to Parliamentary Questions on Notice provided to the Senate Community Affairs Committee by the Department of Health and Ageing, November 2003.

Around 51 per cent of GP services in 2002 were provided to concessional patients.16 As concession card holders comprised 35 per cent of the population (Department of Family and Community Services 2002), concessional patients on average used around 7.1 GP services each in 2002, while non-concessional patients used around 3.7 services each. This difference is likely to be driven at least in part by clinical need, as many of the patients who hold concessions cards are elderly and/or people with disabilities. There are three forms of concession cards – healthcare cards, pensioner healthcare cards and seniors healthcare cards. Approximately five million of these cards covering seven million people (including the dependent children of the cardholders) were held by Australians in 2003. In broad terms, they were available to all recipients of government pensions, to recipients of other government allowances subject to specific income tests, and to older self-funded retirees subject to income tests.17

The cards provide access to higher levels of benefits from the national Pharmaceutical Benefits Scheme and to a number of state government programs. From 2005, they were also the basis of incentives to GPs to bulk bill patients, and of access for patients to higher benefits from the Extended Medicare Safety Net. Prior to 2005, however,

15 _{RRMA is the Rural, Remote and Metropolitan Areas classification of regions, which is used in many}

health and other programs to identify rural areas.

16 _{Source: Parliamentary questions on notice, Department of Health and Ageing 2003. E03 229, p. 27}

Volume 4, November 2003.

http://www.aph.gov.au/Senate/committee/clac_ctte/estimates/bud_0304/vol4doha_nov03.pdf last accessed 8 January 2008

17 _{For details of eligibility for Commonwealth Seniors Health Card see}

http://www.centrelink.gov.au/internet/internet.nsf/payments/conc_cards_cshc.htm last accessed 16 October 2007.

For other healthcare cards see

http://www.centrelink.gov.au/internet/internet.nsf/payments/conc_cards_hcc.htm#do last accessed 16 October 2007.

concession cards played no formal role in MBS payments for GP services, and hence no formal role in the levels of fees set by GPs.

Discriminatory pricing and its application to physician behaviour

The differences in bulk billing shown in Table 2.2 could be third degree price discrimination by profit maximising GPs, could be due to GP goodwill towards low income people or could be a combination. The basic theory of third degree price discrimination (i.e. situations where the market can be fully separated) is well known under monopoly conditions (Browning & Browning 1992, p. 380), and is similarly applicable under the conditions of monopolistic competition (e.g. Carroll & Coates 1999; Borenstein 1985; Holmes 1989). The conditions to be met include: the need for the firm to have some market power; that distinct groups must be readily identifiable; the product must not resaleable; demand must be elastic within both client groups (i.e. elasticity greater than one); and elasticities of the groups must be suitably different for price discrimination to be worthwhile.

The first three requirements are clearly met. Arrow (1963) argued that there was not convincing evidence that price discrimination on the scale observed at that time in the America was profit maximising, as the available evidence was that price elasticity of demand was less than one. This was true from the patient perspective. However, the relevant elasticity from the perspective of the GP who was the decision maker in this process was the gross price elasticity. Including the Medicare rebate, the two available Australian studies give gross fee elasticities of -2.83 (Connelly 1999) and -2.18

(Richardson 2001). The situation faced by the GPs in Australia therefore was elastic.

Finally, the elasticities for the two groups (concession card holders and others) must be sufficiently different for price discrimination to apply. There is relatively little

American research on this matter, presumably because the rise of Health Maintenance Organisations has restricted physicians’ capacity to set fees. Masson & Wu (1974) argued for different elasticities based on arguments regarding the costs of searching for appropriate GPs. On the other hand, Newhouse (1970) argued that a major feature of the physician market was consumer ignorance about the price and the product.

Newhouse & Phelps (1973) used 1963 data to estimate price and income elasticities of use of physician services and found that interaction terms between price and income were not significant, which would suggest elasticities were not different. On the other hand, using Australian data Connelly (1999) found interaction terms between price and income in his demand equation were significant, with low income people more price elastic than higher income people.

Masson & Wu (1974) discussed the question of whether physicians behaved differently for low income patients due to charity rather than profit maximisation. The charity view was evidenced by the fact that prior to the wide implementation of insurance, in America (as in Australia) physicians would provide services to low income patients for free (see Department of Health and Ageing 2000, p. 6). However, they argued that charity alone could not guarantee price discrimination, and that a model which reflected both the market arguments and charity was required.

Ruffin & Leigh (1973) developed theoretical arguments regarding price discrimination in physician services, which Masson & Wu (1974) extended by including not only income in the utility function, but also leisure, the psychic return from provision of charity and bookkeeping costs needed to identify the ‘rich’ and ‘poor’ groups. The utility maximising condition derived included the standard conditions based on price elasticities, plus a charity condition whereby it was optimal to reduce prices for ‘poor’ patients if there was a utility benefit from treating them.

Appendix 2.1 provides an outline of the literature on charity in the context of physician services. Historically physicians have provided some services below the costs of production; whether this is as suggested by Arrow (1963) and Kessel (1958) to help build trust in their practices, or whether as suggested by Culler & Ohsfeldt (1986) is part of their genuine charitable contribution to the community, is still not clear.

Quality of services provided

In a related discussion, Glazer & McGuire (1993) considered the welfare implications of physician profit maximisation in the American Medicare context where physicians could choose to accept the fee offered by the insurer, or they could balance bill (charge a co-payment). As quality was assumed to be the duration of the consultation, there

was a direct cost to the physician to provide higher quality. The profit maximising optimum mix of quality, price, and numbers of balance billed and fee billed patients for the physician was derived, and balance billing was shown to be welfare enhancing.

Glazer & McGuire (1993) suggested that the optimal arrangement for a payer (such as American Medicare) was to allow balance billing, but to pay a higher fee to the GP who did not balance bill, thus improving the quality for those not charged a co-payment. This was the reform recently implemented in Australia, with an incentive paid to a GP for each service provided to a concession card holder that was bulk billed. According to Glazer & McGuire (1993), this should improve community welfare by improving quality of services.

2.4.3 Modelling of Mortality: The Health Production Function