Medicare covers fewer specialist visits. But above all, why are doctors’ fees so high?

Fees for specialist doctors are rising faster than Discounts on medical careleading to greater payment disparities for patients.

Latest data from Australian Institute of Health and Welfare shows that in the first quarter of this year, Medicare rebates covered just over half (52%) of total payments. This is down from 72% two decades ago and is the lowest percentage in history.

Doctors can charge whatever they like while the government sets the Medicare rebate. The difference between them or the gap affects patients. In the case of GPs, the government provides incentives for doctors omnibus accountbut there is no such incentive for other specialists.

Doctors blame too low rebates for vast payment gaps, and they’re partly right. After accounting for inflation and rising demand, the average dollar amount one person receives annually in Medicare rebates has fallen. AU$349 to AU$341 over the last decade.

But that’s only part of the problem. When many people cannot afford hundreds (if not thousands) of dollars for necessary specialty care, we need to look at why fees are so high.

How do professionals determine their remuneration?

Although general practice is technically a specialization, when we talk about medical specialists in this article, we mean specialists who are not general practitioners. These may include pediatricians, oncologists, psychiatrists and dermatologists.

When determining fees, professionals consider a combination of factors at the patient level, at the physician level, and at the system level.

Patient characteristics, such as the complexity of their condition, may escalate the price. This is because more elaborate patients may require more time and resources.

Professionals, based on their experience, perceived skill level, or ethical considerations, may charge more or less. For example, some specialists say they offer discounts for specific groups, e.g. children or retirees.

System-level factors, including the costs of running a practice (such as hiring staff) and the location of the practice, also play a role.

Problems arise when prices vary significantly, which often signals narrow competition or excessive market power. This applies to medical services where patients have little control over prices and rely heavily on doctors’ recommendations.

IN recent researchmy colleagues and I discovered that the salaries of professionals in the same field vary significantly. In some cases, the most pricey specialist charged more than twice as much as the cheapest.

Physician characteristics influence fee setting

Me and my colleagues recently analyzed millions of compensation claims from private hospitals in Australia between 2012 and 2019. We found that the wide variation in fees is largely due to differences between individual physicians, rather than factors such as patient complexity or the differences we would expect between specialties.

Up to 65% of the variation in total fees and 72% in out-of-pocket payments can be attributed to differences between physicians in the same field.

To understand what physician-level factors result in high fees, we watched data from a representative survey of specialists. We found that senior professionals have lower fees and higher aggregate fee rates. Practice owners typically charged higher fees.

We also found that physicians’ personality affects how much they charge and how often they bill patients collectively. Physicians who scored higher on the personality trait of agreeableness were more likely to bill patients in bulk, while those who scored higher on neuroticism tended to overcharge patients.

We could not show any evidence that the fees were related to competition.

Impact on patients

This is not a competitive market. On the contrary, it has high entry restrictions (long training requirements) and a narrow supply of specialists, especially in rural and remote areas. Meanwhile, patient access is controlled by the need to have referrals, which usually expire after a year.

Patients are often unable to shop or make informed decisions about their care due to a lack of information about the true costs and quality of services.

For private hospital services, the fee structure is complicated by the fact that several providers (e.g., surgeon, anesthesiologist, surgical assistant) bill separately, making it complex for patients to know the total cost in advance.

Despite efforts to introduce price transparency in recent years, including through the government Treatment cost search engine website, the system remains unclear. Reporting is voluntary and the evidence is mixed on whether these tools are effective in lowering prices or increasing competition.

All of this contributes to high and unpredictable out-of-pocket costs, which can lead to financial burdens for patients. ABOUT 10.5% of Australians the reported cost was the reason for delaying or avoiding a specialist visit in 2022–2023.

This raises critical questions about the fairness and sustainability of Australia’s universal health care system, which is based on the principle of equal access to care for all citizens.

What can be done?

Patients can take steps to minimize their costs by actively seeking information. This includes asking your GP for a range of options after referral to a specialist. Please remember that a referral from your family doctor can be used with any other doctor of the same specialization.

Similarly, ask your specialist receptionist what the fee and discount will be before or after making an appointment detailed quote before going to hospital. Look around if it’s too high.

But the responsibility does not rest solely with patients. For example, the government could try to address this problem by increasing investment in outpatient care in public hospitals, which could escalate competition for specialists. It could also publish a fee range compared to a rebate for all consultations paid for by Medicare, rather than relying on doctors’ voluntary reports.

Price transparency alone is not enough. Patients also need high-quality information and better guidance to navigate the health care system. That’s why continued investment in improving health literacy and care coordination is critical.

If the situation does not change, the financial burden on patients will likely continue to escalate, undermining both individual health outcomes and the broader goals of equal access to health care.