Preliminary bulk billing data released this week shows a 2.1% rise in bulk billing as much as March. This comes after the federal government tripled the motivation payment for GPs to bulk bill concession-card holders and kids under 16 for many consultations.
The latest data confirms the December-quarter data, which shows the increased bulk billing incentive, announced within the 2023 budget, arrested the decline in bulk billing brought on by the just about decade-long freeze in rebates under the previous government.
The decline in bulk billing rates was affecting access to care. About 1.2 million people missed out on or delayed seeing a GP in 2022–23about double the speed in 2021–22. This negates the promise of Medicare: that Australians shouldn’t face financial barriers to accessing care.
But progress on bulk billing rates is being undermined by changes to state government tax rules.
About one-quarter of state government tax revenue comes from payroll tax. States have been looking around to extend tax revenue from any source and have tightened their payroll tax rules.
An increase in a practice’s payroll tax reduces its profits. Clinics will seek to make up the shortfall in revenue by other means – and this might include reducing the variety of patients they bulk bill.
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What’s the change to state payroll taxes?
Payroll tax law is complex but essentially it says anything that appears or smells like an worker payment is subject to payroll tax.
But what if the connection between the practice and the GP is a contractual one? What if the GP is a “contractor” and pays the clinic a share of fees but is just not really an worker? It was thought such cases were exempt from payroll tax.
But in March 2023, this perception was shown to be a misunderstanding of the law. The New South Wales Court of Appeal ruled that where a practice has a “fee-sharing arrangement”, payments to those GPs are chargeable for payroll tax.
In the NSW case, this meant the practice billed the patient on a GP’s behalf. The practice paid 70% of the fee to the GP and retained 30%. Tax was payable on the 70%. GPs in the identical practice who billed patients directly and paid 30% to the practice weren’t throughout the scope of the case.
To date, general practices had assumed contractual payments weren’t liable to payroll tax and so at the moment are facing latest ongoing costs and, in lots of cases, large back payments as well.
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Some states have indicated they may make clear the law in the final practices’ favour, specifying what contractual arrangements may escape any payroll tax obligation. Some state revenue officesakin to Queensland, have issued public rulings to make clear obligations. However, this is just not happening in every state, leaving practices uncertain about their obligations.
Even within the case of the Queensland rulingpractices may begin to disintegrate. They may stop sharing common services and quality-improvement activities (akin to working together to improve monitoring of diabetes within the practice) to make it clearer that GPs are more like tenants and fewer like employees, to avoid being captured by the payroll tax obligation.
What’s this got to do with bulk billing?
General practice owners, who’re increasingly big corporations and private equity investorsargue that in the event that they must pay payroll tax, they may need to extend patient out-of-pocket fees to cover the fee.
This runs up against recent Commonwealth health policy and budget initiatives to encourage an increase in bulk billing.
So the advantages of the Commonwealth investment in bulk billing is likely to be worn out by state motion, as bulk-billing rates begin to fall again.
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States vs the Commonwealth
The Commonwealth government recently announced a significant injection of funds into state public hospital systems, as a part of a brand new five-year National Health Reform Agreement.
However states are reportedly not willing to recognise this as a trade-off against pursuing payroll tax on GPs’ contractual relationships.
The change in tax administration – of beginning to chase payroll tax obligations of general practices – is a recent one with relatively small amounts of tax being raised at present.
So, the standoff is that a comparatively latest and expensive Commonwealth policy to spice up bulk billing is being undermined by a comparatively recent change in payroll tax policy by states.
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What could the Commonwealth do?
The Commonwealth could possibly be tougher on the states. The Constitution gives the Commonwealth power to make laws about “medical advantages”. Those laws would override state laws due to section 109 of the Constitution.
Of course, state governments might argue it is a law about taxation somewhat than about medical advantages, and so it is just not a legitimate exercise of the Commonwealth’s power. However, past experiences show that rigorously crafted Commonwealth tax laws which effectively overrides state tax powers can survive a Constitutional challenge.
The Commonwealth’s position is likely to be further strengthened if the law is specifically about bulk-billing payments, that are entirely Commonwealth payments and don’t have any patient contribution.
The Commonwealth should use its constitutional powers to insist that, where a percentage of a bulk-billing payment passes through a general practice to a GP, that transaction is just not subject to state payroll tax. This would cut back the quantity of payroll tax a practice pays, as long as it bulk bills.
Such a law wouldn’t cost state governments much, since the payroll tax administration changes are only recent. But it will protect the Commonwealth policy of encouraging a rise in bulk-billing to support access to primary health care.
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