How much does it cost to COMPLETELY collect and process that $7?


A little background information for overseas readers added after receiving comments. 

The situation here is all taxpayers pay a 1.5% levy to fund Medicare. Medicare provides a rebate to the patient for medical consultations and other health related services such as blood tests and x-rays. So let’s say the GP charges $65 for a consultation, the patient can claim back $36 from Medicare.

Poor patients can be “bulk-billed” by the doctor, meaning the patient pays nothing and the doctor accepts the rebate as full payment.

The plan discussed here is that patients will pay $7 for these services as an up-front co-payment, the government will reduce the $36 rebate down to $31 and bulk-billing will no longer exist.

I could have accepted a co-payment to visit the GP provided it was straightforward and not likely to cost more than itself to process. Someone is going to make money here at the cost of our poorest and most vulnerable. The $7 is to be effectively split between the doctor and the research fund.

The Medicare  rebate IS being reduced by $5 so the medical practice only gets $2.

That $2 will get eaten up in processing costs. This is not an exhaustive list – if you can think of extra steps or costs, please let me know!

  1. Medical practice office staff now have to process collecting the $7. This may be cash or EFTPos. Let’s say the staff member is earning $20 per hour and spends 3 minutes processing the $7 that is $1.
  2. A receipt will need to be produced for the $7. Cost of a sheet of A4 (most of these things are printed on A4 these days it seems) is 4 cents.
  3. Ink for the printer – let’s allow 2 cents as most medical offices don’t have massive high volume printers.
  4. If the payments are received in cash, there is a trip to the bank. Banking is already a function and I am assuming the practice computer system will produce the banking paperwork, however the money will still have to be counted and balanced so there is an incremental time cost. I’m not quantifying that in this exercise.
  5. Additional EFTPos transaction fees or credit card merchant fees if not paid in cash.

The doctor isn’t going to see much of the $2.  I assume that is the logic behind the differential between the $5 rebate reduction and the $7 co-payment.

Let’s move to the government end.

  1. Systems and staff to calculate and reconcile the $5 amounts to be transferred to the research fund – or is this just a rough estimate type thing?
  2. Staff have to be employed to manage this fund.
  3. The above requires computer systems, phones, desks, chairs. Hopefully some can be reallocated from the 16,500 APS redundancies, but even so there will be the depreciation costs of all this. Cost per transaction? I wouldn’t even hazard a guess, frankly.
  4. Appointment of compliance officers. After all, someone will be auditing that safety net, I am sure.
  5. Computers use electricity. Lights in the offices, heating and cooling.

I’d love to see the costings. Any other accountants want to buy into estimates?

I looked at this question when the co-payment was first mooted. I thought it was ill-conceived then. It is still an ill-conceived plan. Perhaps Medicare is in financial straits and there needs to be some adjustments, but that is not the issue I see here. The government has reduced the rebate by $5 so I will now, presumably, pay $5 more* than I already pay to see a doctor – which nets out to about $28 if I am lucky and none of the kids need a weekend consultation. But, but, but….. that $5 isn’t being used to improve the financial situation of Medicare at all, it is being put into a research fund. So HOW, exactly, is this saving Medicare? (*The $28 is in a NOT bulk-billed situation – maybe I’ll pay $7 more. Unclear at this stage.)

Many experts are already warning of the health risks to the poor who will avoid consulting a doctor or getting pathology tests done, so I will not address that issue. $7 may not seem much to Joe and Tony, but if you have to decide between buying a kilo of mince ($5.99) and a packet of pasta to feed the kids and getting that cough checked by the doctor, guess what the choice is? Yes the doctors can waive the co-payment but that is merely pushing a social responsibility into the private realm. If you are unemployed and saving for a new shirt for interviews, again the health question might be sacrificed.

I’ll leave you with this thought. The objectives of the Liberal Party state:

(j) in which social provision is made for the aged, the invalid, the widowed,
the sick, the unemployed and their children;

(k) in which adequate medical services are within the reach of all;

Page 3

Veronica has written a heart-wrenching article about her personal situation. Her words certainly put the $7 in perspective.

Corrected – levy was given as 1.3% when initially published. This has been edited to 1.5%.

40 comments on “How much does it cost to COMPLETELY collect and process that $7?

  1. […] our Medicare system that was suggested was a $7 co-payment. I thought it a ridiculous proposal and said so in no uncertain terms. The backlash seemed to have chastened the government somewhat and a slight variation with a $5 […]


  2. […] Christmas 2015 Medicare will be eradicated, saving the Australian taxpayer billions that can be better utilised by increasing tax rebates to […]


  3. […] never forget. Hurry up if you are in Australia – the rate our government is attacking the medical and science fields, these things might disappear! We can fund training for priests, but cut funding […]


  4. […] $88. I will get $48 back from Medicare. My co-payment therefore was $40. I assume this will rise to $47 if the budget gets through. Given this is the second child to the doctor this week and I’m dragging a third there on […]


  5. […] I am sure if I went to Coles and said to them I am not receiving any benefit, so I need you to reduce the cost of food for me to a similar level, I be rushed out of the store by their security guards! Where am I supposed to live? Would my landlady just happily forgo rent for six months or the bank forgo mortgage repayments? Just how, exactly, would I survive? Of course, not eating properly and having no roof over my head, I’d probably fall ill and need medical treatment. Hopefully I might see a doctor who was prepared to waive the $7 co-payment. […]


  6. Medicare levy is currently 1.5%, not 1.3%. It will go up to 2% on 1 July to fund NDIS.

    The fact that people who are counting every penny will be discouraged from vaccinating their children (in full and on time) and getting early diagnosis will hurt everyone. (Which is not to suggest that it would be acceptable if it ‘only’ hurt them!) The increased expenses will largely be shifted to (state-funded) hospital systems.

    Who is going to conduct the medical research this is going to pay for, when the CSIRO’s budget is cut? How can we undertake truly effective medical research without contributions from research in physics, chemistry, biology etc? Who will benefit from the research? (Hint: probably not people who have trouble finding $7 to visit a doctor.)


    • Thanks for the correction! 🙂 I must have missed the increase somewhere along the line, but now you mention it, I do recall something. I guess 1.3% got stuck in my head somewhere along the line.

      But is the NDIS still going ahead? I thought that was at risk as well under the new government? So many changes, I just can’t keep up!

      I am very worried about WHO will get these research funds. Much risk of dodgy deals unless managed with complete transparency. I do wonder, however, if this proposal is actually constitutional. I’ve been reading Chrys Stevenson’s article about spending authority on The King’s Tribune http://www.kingstribune.com/index.php/weekly-email/item/2007-school-chaplaincy-the-high-court-and-the-constitution and have to wonder about this research fund. As I’m not a lawyer, I have no idea, but it raises questions.


  7. “….. that $5 isn’t being used to improve the financial situation of Medicare at all, it is being put into a research fund. So HOW, exactly, is this saving Medicare? (*The $28 is in a NOT bulk-billed situation – maybe I’ll pay $7 more. Unclear at this stage.)”

    I am really confused here. Our local Medical Centre does bulk billing. So when I see a GP there, I just sign the consultation form and the Centre gets reimbursed by Medicare. The other day I had to see my surgeon for a follow-up check-up. He charged $105.00.
    This amount is taken out of my savings account. The Medicare benefit for this particular consultation was $36.55. This amount was then credited to my account by Medicare. This means whenever I have to see a specialist, I usually have to pay for the consultation a lot more than Medicare is able to reimburse.

    With these $ 7 co-payment that the government wants to introduce, is there not a simpler way to make sure it is being used for the research fund? Why not just lift the Medicare levy? How much money could be raised by just lifting it from 1.3 to 1.4%?


    • The issue, Uta, is they say Medicare is in financial trouble so reduce that $36 to $31 and say everyone has to pay the upfront fee. BUT the $5 is to go to a research fund, so there will be no change to the bottom line of Medicare. There is the 10 visit safety net and so on, but essentially that seems to be the plan.

      Doctors can waive the $7 in cases of extreme hardship, but then they foot the bill by missing out on that portion on the fee.


      • I still say all this is still very confusing for me. As far as that Medical Centre goes, we were happy with the bulk billing. Go there for visits that are not strictly necessary? No way. Just having to wait for a particular doctor for between one and two hours makes my blood pressure go way up. I rather stay home and relax.
        There is one thing I do not like and that is that all patients’ medical records do not belong to the doctors but to the company who owns the centre. I cannot understand how bulk billing is supposed to work in future. I think that patients ought to contribute to this research fund, is a bad idea. Too complicated to work out who has to pay and who is exempt. Why cannot the research fund just be funded out of a Medicare levy?
        If the GPs can ask for a co-payment for themselves, this is a different matter. Many GPs do this already as you pointed out. But they should not have to collect money for the research fund. I am against this. I hope this sort of thing wont be approved. Does it need to be approved by the senate?


      • The doctors aren’t collecting the funds. They are getting $5 less from Medicare which they collect directly from the patient plus $2 I assume is to cover processing costs as outlined above.

        Medicare will transfer the “saved” funds into the research fund. Doctors are not supposed to bulk-bill any more once this comes into effect.


      • People who aten’t bulk-billed already pay about $65 for a consult and get the rebate back as you do when you see the surgeon.

        Yes it has to be approved by the senate.


      • I don’t understand why it has been approved by the senate, just like that.


      • It hasn’t been. It has to be approved before it can take affect. But it is part of the Supply Bill I believe. There will be a ruckus, I am sure. It may not get through, we shall see.


  8. […] I have in the past agreed with Joe Hockey, to a point, when he made his stance against the entitlement mentality. How on earth that got translated to the Paid Parental Leave scheme is beyond me. Thankfully the upper limit has been dramatically dropped. Then again, maybe we DO need to breed those “women of calibre” so we can get some in a Liberal cabinet! While I have no philosophical issue with people on the dole (NewStart) doing something to receive the welfare payments, I have major concerns about the practical implementation of any such scheme. I also can’t see many people being able to work until they are 70, other than some rather portly politicians and some other non-manual workers (including celebrities). I’ve also waxed lyrical about the Medicare musical money $7 co-payment. […]


  9. I don’t think the govt is introducing it to decrease costs, etc – it is part of their punish the vulnerable crusade, create a working poor to support the rich…. IE If there are no jobs available for all these people who may now HAVE to work (disabled, elderly, & the young under 30) how will these jobs be created? Gina may just get her way & have the minimum wage abolished, thus creating (slave labour) jobs!! And remember a capitalist framework always has 4% unemployment…. what will that 4% live on?


    • This doesn’t decrease costs. There is no way it decreases Medicare costs at all.

      I want t stress REAL Liberals DO NOT aim to create a working poor. That is a completely different political ideology which we may have in power at this time.

      As Malcolm Fraser has stated, creating a new party may be a damn sight easier in the long run that trying to save the current Liberal Party. I think the current Liberal Party is beyond redemption.


  10. Came here via Veronica, and I absolutely agree. For me, the despair about this budget began before they even released it. Then my worst fears were confirmed. Reading over all the ‘Winners’ and ‘Losers’ on the ABC website on Tuesday night just made me want to cry. It is going to be so bad, for so many people. The rich have been well rewarded, it seems, for being rich.

    Sigh. Where is our country going? This isn’t what we stand for, surely?


  11. I’m a student with a chronic pain problems which means I see my GP fairly regularly and I’m always bulk billed and without it I can’t afford to see my GP, between study and my two part time jobs I’m still barely able to survive adding in $30 every time I see my Doctor for a prescription, consultation or cortisone injection would push me to the point that I can’t put petrol in my car (I only drive to the station) and that I can’t afford the $6 a day 4 times a week to go to uni.


    • Natalie, I am so sorry for your situation. You are exactly the sort of person who will be so negatively impacted by this stupid policy.


    • There are many people who are furious about implementation of this charge, not because they will be personally affected but because others, such as yourself, will be. Hang in there Natalie, we will be fighting for you and every other person who won’t seek medical attention because of the cost and the spiteful ideology that which it was derived.


  12. Germany used to have a similar system to what Australia is now wanting to introduce. Patients would pay €10 per quarter (not $7 per visit) & that €10 would cover all doctors and medical procedures you had in that quarter.
    The €10 fee was removed at the beginning of this year because the entire fee was being eaten up by what it cost to process it. The entire €10, which was not refunded partially in any way like the $7 fee is, was spent processing the €10 fee.
    I don’t see how Australia actually thinks it is going to make any money off of this and to me this just smacks of the government wanting to penalise the disadvantage for actually seeking medical care.


    • The situation here is all taxpayers pay a 1.3% levy to fund Medicare. Medicare provides a rebate to the patient. So let’s say the GP charges $65 for a consultation, the patient can claim back $36 from Medicare.

      Poor patients can be “bulk-billed” by the doctor, meaning the patient pays nothing and the doctor accepts the rebate as full payment.

      The plan here is that patients will pay $7, the government will reduce the $36 down to $31 and bulk-billing will no longer exist.

      I think our 1.3% levy is similar to your 10 euro fee.

      Bottom line – this is really a plan to eradicate Medicare and therefore our national medical scheme. The $7 co-payment will be introduced for all the other services currently bulk-billed, such as pathology and some imaging. But it will simple become a money carousel and the the carousel will cost money to roll around. Likely, as you say, more than the $7 collected. It is smoke and mirrors to hide the “next steps”.


  13. It sounds like this govt. is getting ready to sell off Medicare along with anything else they can make some more money with. What a sad a sorry place we live in.


    • If the plan is to sell off Medicare, will the current 1.5% levy be rolled into general revenue or dropped?

      Definitely see this move as a smoke screen for some future “objective”.


      • I think the objective is simple. First you have to introduce a fee on a service that does not have a fee. The fee can be small or insignificant but getting the fee in place is the first step.

        Then it is a really simple matter of slowly increasing the fee and decreasing the subsidy. Eventually the subsidy is withdrawn completely and the user is paying the full price. End of medicare.

        Look at the current Uni proposals – HECS started out in 1989 at something like $1800 for a degree, the interest rate was virtually nil and the bonus for paying upfront was 20% (or something). In this most recent budget that want to remove the cap on Uni fees and decrease the government contribution by 20%. Very soon the government will not contribute at all to Universities and the free market will rule.

        I GUARANTEE (in the unlikely event that the Liberals will be in power for say 15-20 years, there will be on co-payment. You will just be paying the full consultation fee.


      • Douglas, I rather think you are on the money, sadly. I’ve always been rather proud of our health system when compared to other countries, like the USA, but it seems there is a drive to turn us into a Tea Party state.


  14. The blame shifting game will be back, bigger and stronger than ever. Make a nasty decision on health (or education) and blame the states or, if it is a state government, the federal incumbents. No, it’s the states …. ad nauseam. To give credit to the previous government, some of their policies were attempting to curtail this.

    As to the administration costs I expect the government, with their simplistic view and if they considered this at all, believe it will be as simple as number of patients for that (probably BAS) period multiplied by the $5 fee. Laughable, if it wasn’t so sad. For this new piece of red tape, software will have to be upgraded, never an inexpensive option especially for bespoke programs as often used by the medical profession.

    I worked on a project, quite recently, to assist a large company to reduce it’s administration costs. The calculation is complex but it’s not unusual for financial processing costs to be between one and two dollars, every time an account is handled so you’re not far from the mark.

    This new charge is not going to put any pressure on my personal budget but I well remember the conflict I felt every time one of my children was ill. In my case it was, do we drive the two and a half hour return trip to the doctor? it is almost always difficult to gauge the seriousness of lethargy, a slightly raised temperature, a small rash … and this new charge will increase the likelihood that some parent, with an empty wallet, will choose incorrectly.

    As for the ‘logic’ behind this new charge. Has anyone seen any peer reviewed statistics that this fee will reduce over servicing? Preventative health measures are the most effective in reducing medical costs, according to the experts. Can anyone else see the illogic?


    • To start with your last point first, have we even proven there is a problem with over servicing?

      In relation to the costs of transactions don’t forget large companies have to benefit of economies of scale when processing – small medical practices do not, so the transaction costs are probably higher.

      I don’t see much software upgrade requirements. They simply reduce the rebate from Medicare per service. Medicare already has Safety Net functionality which can most likely be configured with this new 10 visit limit.

      What I am wondering about it the calculation of the magnitude of the funds to be “transferred” from Medicare to the research fund. It isn’t as simple as the number of services times $5 as it is only the services that attracted the reduced rebate. Not everyone has a Safety Net of 10 visits is the way I read it, but that really isn’t clear yet. But all that is a cost at Medicare, not in the medical practice.

      While I didn’t love Labor, I certainly supported their social policies in relation to disability and education. This co-payment is just a way to move money around the economy and see it eaten up in transactions costs.


  15. Nice work Robyn! I had a similar thought about the cost of administration and came to the conclusion that this was a softening up exercise and that the rate will increase very quickly to the $15 first mooted. It sounded a lot like his “buy back the boats” scheme to me – spend lots to spend more. I wonder if Mathias Cormann does the maths on all this??


    • Thanks Kaye.

      It is the pretext that bothers me. Oh woe, Medicare is broke! But the “savings” are being put to another purpose altogether.

      As for the maths, given we are ripping our education system to bits I don’t expect the maths to improve any time in the next 50 years!


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