Tinkering with policies because you want to save cash is nearly always considered a terrible idea. In Policy Heaven, policy experts sit down, work out what we want to achieve, work out what that will cost, and then raise the revenue. In theory, we should be able to work out what the policy priorities of a government are through how it distributes funds. After all, there’s a reason why schools have fundraisers for infrastructure, but the military doesn’t.

Politics, being what it is, is almost the polar opposite. The amount we raise in revenue is determined, and then we work out how we’re going to spend it. Thus the current narrative about the Commission of Audit. How can we find savings? What policy measures can we deploy to save money? It feeds into the idea that policy is about the dollars rather than the purpose.

It was only a matter of time before we started hearing the mad, sad, and bad theories about how to deal with the cost of healthcare in Australia. The first to break the ice was Terry Barnes who, as well as being a public servant during the 80s and 90s, was an adviser to two Ministers for Health: Michael Wooldridge and Tony Abbott. According to news reports, Barnes provided a submission to the Commission of Audit championing a co-payment system for managing healthcare costs.

At the outset, we should note that the public knows ridiculously little about Barnes’ proposal — I had to find a copy of his report by asking him over Twitter. Last week, Esquire published an article in which Luke O’Neil describes how he recently discovered that the internet was filled with pranksters who happily befuddle hapless journalists into publishing false information. Perhaps if journalists got into the habit of providing links to the source of their material, we’d see fewer pranks. We’d also have a better chance of being able to participate in policy discussions if journalists would link to the reports for which they’re providing free PR.

The idea of co-payment for services is not a terribly new idea; Barnes himself wants to reheat the policy suggested to the Hawke Government back in 1991. Variations of the theme date back to the 1970s (based on practices prior to the introduction of Medicare) and, each time, they’ve been rejected because they solve a problem that nobody’s been able to show exists.

We don’t want to waste precious healthcare funds by squandering them on unnecessary services. Just as you always eat more at a free buffet than you do when you have to buy your lunch at the restaurant, if you have a free service, the theory is that you value it less than if you had to pay for it. If your healthcare is free, you will grab as much of it as you possibly can, even if you don’t really need it. But if it cost you $5 to see your GP, then you have to work out if seeing the doctor was worth $5 to you.

Is Australia flooded by buffet-style consumption of health services?

The Medicare Benefits Schedule (MBS) has been designed to provide policy analysts with a vast amount of data about how Australians use healthcare services (perhaps to the frustration of the medical practitioners who have to bill patients accurately). When you go to see your GP, Medicare is billed depending on what "level" of consultation you required. Two of these levels are relevant for comparison:

A Level A item will be used for obvious and straightforward cases and this should be reflected in the practitioner‘s records. A Level B item will be used for a consultation lasting less than 20 minutes for cases that are not obvious or straightforward in relation to one or more health related issues.

Using these two levels and the MBS Items Statistics Reports, we can compare the number of people who went to their GP for something that was obvious and straightforward against the number of people who went for something that wasn’t as clear cut.

In 2012-13, 2.8 million level A services were billed (item 3). Over the same period, 86.9 million level B services were billed (item 23). And this ignores the number of people who went in for higher level consultations.

Even if every single one of those 2.8 million services were trivial — the lonely people who rock up to their GP because they want a chat — it’s a tiny number in the scheme of things. Last year, Medicare as a whole cost Australian taxpayers $18.6 bn. Going after waste in the level A GP consultations is small potatoes.

Best of all, we know that a lot of those 2.8m services aren’t waste: they’re people coming in for sick certificates, reissuing of prescriptions, etc, etc. But, hey, if you charge everybody an extra $5 for services, you could find an extra $14m just from those level A services alone.

All of this hides another problem. Should you get healthcare services because you’re sick or because you’ve got $5 to spare? The assumption behind the discussion so far is that these 2.8m level A services were bulk billed and free (from the perspective of the "consumer", AKA "the patient"). Because free things don’t send a price signal to stop overconsumption, the nominal price is added to stop the "waste". In this strange policy space, delivery of healthcare services isn’t based on the health of the person, but their ability (and willingness) to stump up $5.

To use the pretentious economics jargon: the diminishing marginal utility of income says that $5 is going to be "worth" less to a person on $100k than it will be to a person who’s already living hand-to-mouth on NewStart. Thus, the signal will be greater for people who are poorer than for people who are wealthier. Do we really believe that the poor are more wasteful of healthcare services? Given that most versions of this proposal involve various kinds of exemption for people on concession cards, we had better hope that there aren’t other plans to restrict access to welfare …

So not only do we lack any evidence that there’s grand scale waste caused by gluttonous over-consumption of health services, we also know that targeting where this waste might be hiding will result in a very small reduction in said waste. Further, we know that this will affect people on the poorer end of society than it will the more affluent end.

This is not to deny that there are problems with the way we fund healthcare in Australia: the cost of the system is growing at an unsustainable rate and people are increasingly falling victim of its patchwork nature. Health economists have been waiting for more than a decade to get some attention in the policy space and, at last, their time has come. But tweaking the system to solve a problem that we can’t detect and that places greater burden on the poor isn’t a solution.

Blaming patients for wanting "too much" healthcare is a ridiculous policy, and it should be rejected yet again.