Calculating the practice benefit of universal bulk-billing

This document has now been updated, please refer to Calculating the practice benefit of universal bulk-billing - an updated model. Updated model includes MBS Service Level A and, optionally, care plans (721/723/732)

Universal bulk-billing incentive

As part of an election promise, the Australian Government as of February 2025 released a proposal to increase the incentives for private general practices (sometimes known as ‘family medicine’ or ‘primary care’ practices) to bulk-bill patients. ‘Bulk-billing’ essentially allows a patient consultation with medical clinician to be ‘free’ (no out-of-pocket expense), if-and-only-if the clinician agrees to charge the patient no more than the government-set insurance price for the consultation.

The alternative to ‘bulk-billing’ is that the clinician charges the patient a price greater than the government-set insurance price, sometimes called private billing. In this case the patient pays the full price of the consultation and the government health insurance will repay the government-set insurance price to the patient.

The proposal to encourage general practices to ‘bulk-bill’ consisted of two parts:

• Broadening the current bulk-billing incentive for individual consultations/services to all patients.
  • Previously the bulk-billing incentive payment for individual consultations was only available to people, usually with less income or assets, who are pensioners, recipients of a government-issued ‘concession card’ and children under the age of 16.
  • This bulk-billing incentive is paid with each individual consult
• If the general practice agrees to bulk-bill all patients, i.e. universal bulk-billing, the government will pay the practice an additional 12.5% over and above the government-set price for each fee-for-service item.
  • The definition of which service items need to be ‘bulk-billed’, and which service items will attract the 15% bonus is not yet fully defined. The government-provided fact sheet suggests that at least consultation items B/C/D and mental health care plans items will attract the 12.5% bonus.
  • The 12.% bonus is paid quarterly, together with the current quarterly practice incentive program (PIP) payments.

Will the proposed universal bulk-billing incentives be financially worthwhile for general practices?

The government has released case examples of practices which would all financially benefit from the universal bulk-billing incentives proposal. Not all real general practices have considered the incentives proposed to be attractive, however. The benefit to real practices may be more nuanced, depending on current private billing levels and current fees charged over the government-set price.

Modelling the benefits to individual practices

A model will be demonstrated which aims to show the potential financial benefit (or loss) of taking up the universal bulk-billing proposal.

The proposition to test is:

$$\text{Benefit}>\text{Loss}$$ Where Benefit is the benefit from universal bulk-billing and Loss is the revenue foregone from not charging a fee over and above the government-set price for the services.

Both the ‘Benefit’ and ‘Loss’ side of the equation can be broken down into several individual components.

$$\text{Loss}=\text{ Private services }\times \text{Gap fee}$$ Private services are the services which would have been privately billed before a practice agrees to universal bulk-billing. The Gap fee is the amount the clinician charges the patient over and above the government-set price for each service.

$$\begin{array}{rl}\text{Benefit }=& \text{ Total fee-for-service billing }\times \text{universal bulk-billing incentive}\\ & +\text{Private Services }\times \text{ Individual service bulk-billing incentive}\end{array}$$

Services which would have been previously privately billed are billed at the lower government-set price for the service, but now attract an individual service bulk-billing incentive, at least partly offsetting the Loss from not charging a Gap fee.

$$\begin{array}{rl}\text{Total fee-for-service billing }=& \text{ Billing for bulk-billed services}\\ & +\text{Billing for private services}\end{array}$$

If the practice agrees to universal bulk-billing, then all services which were previously ‘bulk-billed’ and previously ‘private-billed’ will benefit from the 12.5% universal bulk-billing incentive.

Services

All the ‘code’ below is fully modifiable, and can be changed to reflect individual practice circumstances! If you wish to ‘run’ the code, it is recommended that you ‘run’ the code blocks sequentially, from top to bottom. After you have ‘run’ a code block, you can modify the code and ‘run’ it again without running the previous code blocks.

If you ‘Run Code’ the code block below, a list of numbers in red will appear below the code block, showing the proportion of patients billed Medicare service items B, C, D and E.

A limitation of this model is that full details are not known regarding which service items are required to be bulk-billed under the proposal, and which services items will attract the universal bulk-billing incentive.

Released documents show that some standard fee-for-service items, particularly items ‘B’, ‘C’ and ‘D’, will attract both bulk-billing incentives (individual service and universal bulk-billing incentive) and are likely to be required to be bulk-billed under the universal bulk-billing agreement. These are the most common service items to be charged in Australian general practice, and contribute the vast majority of practice revenue. Item ‘A’, for consultations lasting less than five minutes, is also a common and standard fee-for-service item, but does not currently attract the individual high value ‘triple’ bulk-billing incentive for pensioners and healthcare-card holders etc., and is perhaps unlikely to attract that incentive in the future.

Gap fees and bulk-billing incentive

Different practices and different clinicians charge different gap fees. The same clinician or practice may charge different gap fees for different services.

The government bulk-billing incentive for individual services varies by the location of the practice. The incentive typically increasing the less urban and more remote the location of the practice.

Calculating the benefit

We can now calculate the average benefit per patient if the practice adopts universal bulk-billing.

Note that ‘Run Code’ below will not work unless the previous code blocks have already been ‘Run’!!

With the default settings of 50% of patients privately-billed and a gap fee of 50, the average loss-per-patient is 7.81. However, what happens if we change some of the parameters?

If the gap fee is set to 35, the average consult length is longer and only 20% of patients are privately-billed, the practice can expect an average gain of +6.50 for each patient seen.

Graphing the benefit

Different gap fees

We can look at the effect on profit-loss by looking at a range of different gap fees. This graph is based on the first, original, example.

The above code chunk creates a plot like this, with a dashed red line at ‘zero’ profit and a dotted blue line representing the current gap fee:

Different previous gap-billing proportion

Likewise, we can examine the effect on net benefit through a range of different proportion of patients being privately billed prior to adopting universal bulk-billing. This graph is based on the second example.

The above code block will produce a graph as below.

Reproducing the universal bulk-billing fact sheet table

(Supplement)

We can reproduce part of the table shown in the government-provided fact sheet representing the total payments received (both individual bulk-billing incentive and universal bulk-billing incentive) for each service for those practices which agree to universally bulk-bill. The original table is shown below:

Note that ‘Run Code’ below will not work unless the previous code blocks have already been ‘Run’!!

The above code block output is shown below, matching the table in the fact sheet.

Technical credits

Thanks to the quarto-webr extension, Claudiu-Cristian’s post on using webR in hugo websites and WebR itself for the ability to run modifiable R models on ‘static’ web-pages!