Federal Health Minister Sussan Ley has announced a review of Medicare that will “reform and revamp both the MBS (Medicare Benefits Schedule) and the primary care system so that they deliver better for patients”. But the reviewers will fail in their task unless they deal with the incentives to over-treat created by our fee-for-service system.

We’re going to talk about the first step in the process, the review of the Medicare Benefits Schedule (MBS), which is the list of services covered by Medicare. The list also specifies the amount of money the government will pay for each service. The schedule has changed considerably since its introduction after World War II, just as the practice of medicine has changed.

Ley says a clinician-led team will review all 5,500 items to ensure they’re both effective and provide value for money. Of course, good clinical practice should be based on the best scientific evidence. So the review sounds like a good idea. But apart from the size of the task, the review faces several tricky issues.

Some caveats

First, it’s important to note that evidence of no benefit is not the same as no evidence of benefit. The first means the case is settled; the second that there’s uncertainty. Many items on the MBS are likely to fall in the latter category, as the requirement to demonstrate effectiveness is relatively recent.

Australia’s approach to investment in new health technologies, whether a service or a medicine, is based on this principle so public funding follows evidence. New items have to wait for funding until there’s demonstrable benefit.

That means ineffective technologies are not subsidised by taxpayer largesse but also that some good technologies take longer to get listed. This approach is not popular with commercial interests and patients, as the current Senate inquiry into the availability of new cancer drugs illustrates.

But most MBS items precede stringent review requirements, though many may be well established in clinical practice. If the principle of no coverage without evidence is applied to existing services, it would mean well-established procedures and investigations lose access to Medicare funding.

The next issue is that few medical services are good or effective, or bad or harmful, in themselves. Usefulness depends on the patient and the patient’s condition. So the process of assessing the service always starts with identifying the medical condition, the target group and the alternative treatment.

Pap smears, for instance, have well-demonstrated value in terms of saving lives. But that doesn’t mean greater use of pap smears is necessarily better; it depends on targeting women at risk of cervical cancer with no recent pap smear.

Recent additions to the MBS have generally been much better in terms of specifying who should get access to what. This is an opportunity to review older items and take the same approach.

Then there are investigations – X-rays, ultrasounds, MRIs, pathology tests. Investigations provide information but they only lead to better patient outcomes if there’s an effective way to treat what’s found, and it’s applied. These present a more complex challenge as they are just one link (albeit a very costly one) in the investigation, diagnosis and treatment chain.

Further complications

What about MBS items that haven’t been shown to be ineffective, or have been shown to have some benefit in some conditions for some patients? In some cases, the benefit is trivial, so should it be funded? In others, the benefit may be large but so may be the cost.

If the MBS review is going to tackle efficiency, it will need to consider not just the value of the service but also how much should be paid for each. We cannot determine value for money if the money paid is unknown. But this could open a can of worms.

Back in 2009, the Rudd government tried to reduce the MBS fee paid to ophthalmologists for cataract surgery, on the basis that the technology had changed and the procedure took so much less time that a lower fee was warranted. But after a major media campaign against the proposal, the government backed down.

Then there’s the issue of the threshold for investigation or treatment. Take pain, for example: how much of it is serious enough to warrant an MRI? The point we’re trying to make here is that it’s rare that an indication or symptom is clear and without room for discretion.

And that leads to the elephant in the room that the reviewers have to deal with if they’re going to be successful. Our health system is based on a fee-for-service model, so every time a doctor provides a service, the government pays a fee via Medicare. This means the more services provided, the higher the provider’s income. Not surprisingly, this unintentionally encourages increasing volume but not necessarily appropriateness (the right treatment for the patient) or quality.

Of course, this doesn’t mean patients are not treated well or that doctors don’t provide good quality care. But the incentives in the system are not well aligned with delivering the most efficient care.

Ensuring that what’s good for the patient and good for the future of Medicare is also good for medical business is really the only long-term fix for a better health system. We’ve long talked about making healthy choices the easy choices for consumers, now it’s time to focus on making efficient choices easy choices for health service providers.

This review is an indication of a more considered and consultative approach to formulating health policy. But let’s not forget that it’s the incentives that matter.