The watchdog responsible for policing Medicare investigates just 0.07 per cent of health professionals each year, is chronically understaffed and underfunded, and is led by bureaucrats with strong links to the powerful Australian Medical Association.
The AMA – a union that represents about a third of the country’s doctors – also holds an extraordinary veto over whom the federal government wants to run the regulator, known as the Professional Services Review (PSR).
The Albanese government has been urged to order a radical overhaul of the PSR amid concerns that its weak compliance and enforcement regime allows up to $8 billion a year to be lost through fraud, incorrect billing or overservicing.
A joint investigation by The Sydney Morning Herald, The Age and the ABC’s 7.30 program has uncovered an array of fraud, inappropriate billing and overservicing by medical professionals that was never detected by the PSR, a government agency that claims to “safeguard the Australian public from the risk and cost of inappropriate practice within Medicare”.
The agency’s performance casts doubt over whether the government knows the true extent of Medicare waste, given the minuscule number of wrongful claims being picked up each year.
The PSR examines only about 100 cases of fraud and inappropriate billing every 12 months, which represents just shy of 0.07 per cent of the 150,000 medical professionals the regulator is responsible for monitoring.
Helen Bird, a law and governance specialist at Swinburne University of Technology, said the PSR model was flawed. “I think questions need to be asked about how money inside Medicare is being spent, and there should be greater transparency over how that’s occurring,” she said.
The unique design of the PSR also raises questions about its independence. Under the Health Insurance Act, the federal health minister can only appoint the head of the regulator if the Australian Medical Association has agreed to the proposed hire.
The AMA has strong links to the regulator’s recent leadership. The acting head of the PSR, Dr Antonio Di Dio, also sits on the board of the AMA and is a recent former president of the lobby group’s ACT branch.
The previous head of the PSR, Professor Julie Quinlivan, was described in an AMA press release as a “longtime member”. Her predecessor, Bill Coote, was once the secretary general of the AMA for six years.
Dr Antonio Di Dio sits on the AMA board and is also the head of the Medicare watchdog.Credit:Yarralumla Surgery
The Herald is not suggesting any of these individuals engaged in any wrongdoing, but rather that ties to the AMA give the PSR the appearance of a body that lacks true independence.
AMA president Professor Steve Robson said: “Dr Di Dio is a well-known and widely respected member of the AMA. The PSR is an independent agency and has a demonstrated history of carrying out its functions effectively.”
A Health Department spokesperson said any relationship between Di Dio and the AMA “is a matter for the AMA”.
The joint investigation by the Herald, The Age and 7.30 sparked an uproar from the AMA and other medical lobby groups such as the Royal Australian College of General Practitioners.
As AMA president, Robson claimed the reporting was “an unjustified slur”, “plain wrong” and the figures “don’t stack up at all”.
He also told ABC radio that he had spoken about the reports with the acting head of the PSR and Di Dio had declared them “rubbish”. Robson did not tell listeners that Di Dio was also an AMA board member.
The joint investigation prompted Health Minister Mark Butler to ask his department for a report on the existing compliance system, which will cover the PSR. Butler has said he is open to ordering an independent inquiry, but he is so far resisting.
Applications for a new director are open until November 13, but the little-known clause in the Health Insurance Act means the AMA will have veto rights over Butler’s pick.
Australian Medical Association president Steve Robson.
Fraud, overservicing, errors and waste have been allowed to occur for decades despite repeated warnings to successive governments from experts including Dr Margaret Faux, who has a PhD in Medicare claiming and compliance, and the former head of the PSR, Dr Tony Webber.
Faux said the PSR should be dismantled and replaced with a more expansive, modern and effective enforcement scheme. She warned that wrongdoing was flying under the radar because the PSR was unable to detect systemic issues.
The PSR had 123 cases “on hand” in the 2020-21 financial year, of which 73 were new referrals from the Health Department. In that year, the PSR completed 105 cases, 99 of which resulted in some form of adverse finding against the medical professional.
The vast majority of cases resulted in a “negotiated agreement”, which generally involves a reprimand, repayment of some or all of the Medicare benefit wrongly received, and a partial disqualification from participating in Medicare.
The PSR has the power to ban rorters from accessing Medicare rebates for up to three years, but rarely does so for the full period.
“If you or I commit fraud, we go to jail. So why is that different for doctors?” Faux asked.
Repayment orders in the 2021-22 financial year totalled $24.6 million – about a third of which is spent running the PSR. Rorters can claim the repayment as a tax deduction by readjusting their income in the relevant year.
Bird, the Swinburne governance expert, said the $24.6 million in recouped funds should not be taken as evidence that misuse does not widely occur. “You are only the tip of the iceberg of the problem,” she said.
Tony Lian-Lloyd, a GP in rural South Australia who plans to retire next month, said some in the medical profession were motivated by greed.
“There are excellent specialists and excellent general practitioners out there in the Australian medical workforce, but, sadly, there are a lot of people who are driven by the dollar,” he said.
“A lot of us are quite disillusioned with the way medicine is heading. I accused a bunch of anaesthetists one time that they went to the Gordon Gekko School of Medicine, where greed is good.”
With an annual budget of $9 million a year and 27 full-time staff, the PSR is responsible for the integrity of Medicare billing for 150,000 health professionals. Not all professionals with a Medicare provider number are referred to the PSR, and the PSR only investigates referrals from the Health Department.
Webber said he saw egregious misconduct and wastage in the six years he spent running the regulator before leaving in late 2011.
One included a radiotherapist who was treating terminally ill people with radiation every day for four weeks when their life span was weeks. “The patient had to attend their radiotherapy sessions for four weeks, and they’ll only live for six weeks; they could have spent that time with their family,” he said.
“It was completely inappropriate. This practitioner billed over $6000 for that service.”
After being referred a case of suspected inappropriate billing, the PSR then has a three-stage process that includes taking no further action, negotiated settlements with the practitioner or referral to a committee of peers.
If an agreement is reached, sanctions can include a reprimand, counselling, partial or full disqualification from claiming a Medicare benefit for no more than three years and repayment of any inappropriate Medicare benefits detected over the review period.
“I had to be reactive to what Medicare sent me, I didn’t have any ability to be proactive,” Webber said.
Webber said he suggested to the relevant minister at the time that the law be changed to make the PSR a proactive regulator, but it was quietly shelved. He said reforming Medicare was difficult because the system was a political football.
A Deloitte Forensics report commissioned by the federal Health Department concluded that the PSR’s reactive approach to compliance was having no impact on combatting or preventing fraud.
The 2004 report, obtained by the Herald, The Age and 7.30, said the “process does not, in our view, presently meet best practice standards”, and benchmarked against other domestic regulatory and international health agencies it was “unacceptable”.
It said fraud control was “unacceptable” and there should be a campaign to raise the awareness and profile of the investigative unit as a deterrent.
Dr Margaret Faux says Medicare is leaking billions of dollars a year.Credit:Janie Barrett
It spoke to investigators around the country and reviewed 32 case files and concluded that the process “lacked an adequate enforcement strategy”. One of the case studies included a doctor in Cardwell, Queensland, who was investigated and the “potential fraud” calculated at $415,000.
“The suspect admitted the inflated claims, indicating that in his view it was justified in supporting the financial viability of a small country practice,” the Deloitte report said.
The report said it may have been appropriate to pursue criminal charges. It also found that the amount of money being clawed back by the investigative team from doctors was minuscule, representing 0.0061 per cent of the budget. This was at a time when academic studies worldwide were showing leakage and fraud of up to 10 per cent.
The report was buried, which upset some of the inspectors.
An insider, who spoke on the condition of anonymity, said the report was completed months out from the 2004 federal election and senior executives at Medicare didn’t want it known that fraud was being manifestly underreported.
“Another obstacle to a strong prevention and enforcement policy was that the medical lobby had significant influence with the government,” the insider said.
Faux, who runs a business that processes Medicare bills for doctors, hospitals and corporate medical practices, said little had changed.
“We’ve got a hundred or so practitioners being pinged every year and the amount the PSR clawed back is roughly $20 million a year, and that’s in a good year. That’s like Hannibal’s armies coming over the hill and we are loading our pea shooters. It would be laughable if it wasn’t so serious.”
In a statement, the Department of Health and Aged Care said more than 350 staff work across four branches in the benefits integrity division to ensure the integrity of Medicare.
“This involves the assessment of external tip-offs, analysis of claiming patterns and trends, intelligence and advanced analytics.”
It said all tip-offs are individually analysed by the department, and practitioners with comparatively low levels of servicing or claiming may be referred to a compliance intervention.
It encouraged anyone with evidence of non-compliance to come forward.
But this isn’t the experience of many patients, experts, whistleblowers and GPs who have reported questionable billing to Medicare. Most argue they never hear back.
Government Services Minister Bill Shorten said last week that the “integrity” of the Medicare payments system had been “neglected” by previous governments.
“If you don’t put enough effort into payments integrity and guardianship, then you will get rorts, and it’s not just Medicare,” he said.
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