1. Current Status of Informed Financial Consent

The lack of Informed Financial Consent (IFC)1 provided to health fund contributors by medical practitioners continues to be a significant problem in Australia. While this is acknowledged as an issue for all consumers, those with private health insurance coverage have additional concerns that, in spite of their private health insurance coverage, they can still face unexpected out-of-pocket expenses they would not have if they went into a public hospital as a public patient. Such concerns are heightened, particularly when these out-of-pocket expenses are not explained to the patient prior to treatment or prior to receipt of the bill. This paper recognises the cooperation of doctors who have already adopted ethical practice in providing IFC to consumers and seeks to address options for ensuring that all doctors respond to consumer demand by giving fund members the information necessary to enable properly informed financial consent to treatment.
The AHIA estimates2 that at least 43 per cent of hospital admissions for privately insured patients incurred a medical gap. The IPSOS/TQA report3 provides evidence of problems with lack of provision of IFC, with 40 per cent of those encountering a gap not being informed in advance, and with no improvement in provision of IFC reported over a two year period. Of those receiving cost information, 16 per cent reported that they had to ask for it, however 18 per cent of the population reported that they do not feel comfortable discussing costs with the surgeon. Significantly, 26 per cent of member attrition is impacted by gaps and resultant perceptions of poor value for money.
The National Health Act 1953 and Health Insurance Act 1973 allow health funds to pay a benefit in excess of the Medicare Benefits Schedule (MBS) fee for medical services where conditions are met through contracts or other agreements. This allows health funds to provide ‘no gap’ or ‘known gap’ in-hospital medical services to insured patients. AHIA notes that although PHIAC reports4 that the proportion of in-hospital medical services for which there was no gap was 82.7 per cent in the December 2005 quarter, this does not provide an accurate reflection of the overall impact of gap billing. Each admitted patient usually has a number of medical services provided by a number of doctors, and patients may therefore receive a number of separate medical bills, and this means that the likelihood of a patient receiving a bill with a gap is much higher than one in five.
‘Gap’ is defined as the amount payable by the patient (or out-of-pocket costs) after the Medicare Benefits and fund benefits have been paid. There is no gap payable where there is a ‘no gap agreement’ between the fund and the provider, or where there is no agreement but the provider charges no more than the MBS fee. Funds can pay benefits in excess of the mandated 25 per cent when the practitioner charges more then the MBS only where:
• the practitioner has a negotiated agreement (either directly with the fund, or with a hospital that itself has a negotiated agreement with the fund); or
• the health fund has a Ministerially approved non-contract gap cover scheme in place.
The National Health Act 1953 (Sections 73BDAA and 73BDA) requires that medical practitioners who charge a patient an additional amount above the benefit provided by the health fund under the above circumstances must inform the patient of this cost, this information must be in writing, and must be acknowledged by the patient. Where a doctor has an agreement with the fund, not providing such information to patients may be regarded as a breach of contractual terms. This legislative provision affords no protection, however, to those patients whose doctors do not participate in gap cover agreements or schemes.
As noted in a joint Discussion Paper5 on IFC by the Department of Health & Aged Care and Treasury, the present situation with federal legislation prescribing differing information requirements on doctors, “complicates enforcement, confuses communication with consumers on their rights, and is hard to rationally defend.
There is concern, especially, regarding the lack of IFC for patients admitted for surgical procedures in hospital. In particular, there is a high occurrence of medical gap payments without IFC for secondary specialists (anaesthetists, assistant surgeons and ICU specialists). Primary specialists have been reluctant to take responsibility for requiring specialists who work with them to provide IFC to their patients. TQA reports6 from their recent survey that the vast majority (74%) of those incurring a gap believe it is due to the doctor’s / specialist’s bill. Large gaps remain a problem, with the proportion of hospital episode gaps exceeding $1,000 (13%) not abating since the previous survey, and with overnight inpatients accounting for a very high proportion of all large gaps. Their average gap is $863 and 20 per cent of these claimants had a gap exceeding $1,000.
The lack of IFC and the receipt of unforeseen bills by contributors erodes the value of the private health insurance product and creates not only financial uncertainty for patients at a time when they are sick and vulnerable, but can cause financial hardship to contributors through the imposition of significant additional gap payments when they are under the expectation that their private health insurance coverage will cover all costs.
The Private Health Insurance Ombudsman7 notes that virtually all complaints to his office about health fund benefits for hospital treatment concern unexpected gaps in the coverage of benefits and, as a result, unexpected bills for health fund members. These complaints include the situation where IFC has not been provided to members by doctors, and the member has an unanticipated out-of-pocket payment. The Ombudsman notes that most complaints would not have arisen if the person was properly advised in advance of the likely cost of the procedure and had the opportunity to consider options to avoid that cost. The ACCC has also identified the medical gap as a major consumer concern and has noted that its existence is seriously affecting the perceived value of private health insurance.8 The ACCC has suggested that significant change is necessary to lift the level of IFC being obtained.9
The Australian Medical Association (AMA) has developed and distributed a standard form to be used by doctors in providing for a patient’s IFC. It is noted also that the AMA has issued policy statements encouraging their members to voluntarily provide information on charges to enable patients to make a fully informed choice about treatment. The AMA Code of Ethics (2004) states inter alia:
Ensure that your patient is aware of your fees where possible. Encourage open discussion of health care costs.
The main disadvantage of the existing AMA policy statements and procedures is the inadequate level of compliance by medical specialists. Not all doctors are members of the AMA, hence AMA policies do not necessarily apply to all medical practitioners. In addition, the AMA policy statement above does not cover the primary doctor’s responsibility for IFC for the full episode of care, including the charges from other providers, which would normally be expected by most consumers.
2. Proposed Strategies
The AHIA proposes a number of strategies to ensure the provision of IFC to fund members. These strategies range from regulatory measures to other measures. It is noted that the majority of these strategies would also help those without private health insurance, so that they are not surprised by unforeseen doctors’ bills.
2.1 Regulatory Options
Federal Health Legislation
• Amend the Medicare legislation so that where signed IFC has not been provided to the customer, the medical practitioner should only receive 75 per cent of the Government Schedule Fee for the service/s provided (i.e. no 25% payment by PHI or health fund gap fee payments, and no payment by customer). Alternatively (if the 75% is not possible), the next option is that they receive the 75 per cent from the Government and the fund 25 per cent payment, and nothing more.
• Amend the Medicare legislation to make payment of Medicare benefits conditional on the doctor providing IFC. In addition, the bill should not be enforceable for payment by other parties (eg, the patient or the health fund).
• Amend the Medicare legislation to make it a condition of a doctor’s participation in Medicare that they provide IFC; and charging above the set fee without doing so would result in suspension/disqualification from Medicare.
– In addition, if a doctor charges above the Medicare Benefits Schedule rate without providing IFC, this should be subject to the imposition of fines.
– For multiple offences, the fine should include loss of the Commonwealth Medicare Provider Number.
– The role of Professional Services Review (under the Medicare arrangements) could be expanded to include powers to investigate IFC breaches and to enforce a range of appropriate penalties.
• Amend the legislation to make the collection by doctors of gap fees unenforceable unless signed IFC has been given.10 There was an interesting case in the Adelaide Magistrate’s Court a few years ago which determined that where IFC was not provided, the patient was only obliged to pay the Medicare Benefits Schedule fee. Hence, some legal precedent has already been established.
• PHIO’s powers will be increased (from July this year) to include provider practices. Members of the public could be made more aware of this avenue for complaint in cases of improper IFC. Funds are required to have reference to PHIO in their brochures, websites, etc. (Perhaps specialists could be forced to have signage in their offices suggesting contact with PHIO where a patient is dissatisfied with the practitioner’s service or has not been provided with IFC.)
Federal Trade Practices Legislation
• Prescribe a mandatory code of conduct under the TPA to include IFC. Once a code has been prescribed as a mandatory code under the TPA, the ACCC is responsible for enforcing provisions of the code under section 51AD, which makes it an offence for a corporation to fail to comply with a prescribed code. Remedies available for offences against section 51AD do not include fines, but cover a range of court orders that would provide effective redress to consumers. The current level of IFC is problematic from a TPA perspective, with medical practitioners failing to consistently inform all patients of their fees, and there is the potential for consumers to be seriously disadvantaged during a period when they are most vulnerable – after a medical procedure has taken place and they are recovering from the physical and emotional trauma of treatment. (It is noted that this approach may prove to have a longer lead time to effective implementation and compliance may prove difficult to monitor, as consumers may not wish to take legal action under the TPA.)
State Legislation

• Amend State/Territory Medical Practice Acts to make the provision of IFC a condition of registration as a medical practitioner. If a doctor breaches IFC three times, then the doctor should be deregistered.
• Amend the State/Territory Private Hospitals Acts to the effect that all medical practitioners in those licensed hospitals must provide IFC as a condition of the hospital’s license.
2.2 Code of Conduct
• The AMA should retain IFC in its code of ethics and this should be monitored for compliance, with action taken when there is lack of compliance. (It is noted, however, that the inclusion of IFC in the AMA Code of Ethics has not proven effective to date, and that it does not address the issue of doctors who are not members of the AMA.)
2.3 Health Fund Options
• The AHIA (or individual RHBOs) should establish and publish a list of preferred suppliers of doctors who sign up to a code indicating they will provide full disclosure of fees associated with a procedure.
• The surgeon (or other principal medical practitioner) should be made the principal contractor for the procedure, and should be required to disclose all fees associated with the procedure (similarly to the way a builder has to provide a price for a house, and the builder has to work out how much the roofer, plumber, electrician, etc will charge). This could either be legislated or in a code. If the principal medical practitioner provides a patient with a total fee for services, broken down by specialist/provider, then health funds agree to provide an estimate of what they will cover. In the AHIA view, this is an essential component of making a complex system easier to navigate. The AHIA would support recognition of the surgeon’s responsibility for this task through introduction of a new MBS item to provide for payment of an appropriate fee.
3. Conclusion
The AHIA has proposed a number of strategies to address the problems with lack of provision of IFC by medical practitioners and would be pleased to discuss the issues raised in this paper.
1 ‘Informed Financial Consent’ is the consent to treatment by a medical practitioner from a patient, prior to that treatment whenever possible, when the practitioner has sufficiently explained his or her fees to the patient to enable the patient to make a fully informed decision about costs.
2 AHIA estimates are based on actual health fund claims data.
3 IPSOS. 2005. Health Care & Insurance – Australia 2005. The TQA Health Report. November.
4Australian Government Private Health Insurance Administration Council. 2006. Quarterly Gap Payment & Medical Benefit Statistics, December 2005. PHIAC: Canberra.
5 Australian Government Department of Health & Aged Care and the Australian Government Treasury. 2001. Informed Financial Consent Discussion Paper. June. P.3.
6IPSOS. 2005. Health Care & Insurance – Australia 2005. The TQA Health Report. November.
7 Australian Government Private Health Insurance Ombudman. 2005. Annual Report. PHIO: Sydney.
8Australian Government ACCC. Reports to Senate: Periods ending 31 Dec 1999 and 30 June 2000. ACCC: Canberra
9 See reference 5 above, p. 15.
10Federal legislation would need to override state legislation. For example, the NSW Medical Practice Act states inter alia in Part 7, section 101 that ‘Any charge or remuneration for any medical or surgical advice, service, attendance, or operation rendered or performed by a registered medical practitioner can be recovered by being sued for in any court of competent jurisdiction.’ However, in contrast, a 1994 case No. 93/17705 in the Adelaide Magistrate’s Court determined that where IFC was not provided, ‘the law should imply that the Medicare scheduled fee is a reasonable fee. It is the fee that the law will imply into the contract unless there is some agreement to the contrary.’ The patient was only obliged to pay the Medicare Benefits Schedule fee.