The impact of value-based payment reform on medical expenditures, fees and volume of services. Early evidence from a large-scale fee schedule reform in Australia

Melbourne Institute Working Paper No. 04/22

Date: February 2022


Dajung Jun
Anthony Scott


Value-based payment reform helps ensure that payments from governments and insurers provide incentives to support the provision of high value healthcare. This research evaluates the early effects of the first major review of the Australian Medicare Benefits Schedule (MBS), the MBS Review, that subsidises medical services provided by general practitioners (GPs) and non-GP specialists in private practice. A key objective of the MBS Review was to increase the provision of value-based health care. We evaluate the overall impact of changes implemented in the first three and a half years of the review (2016 to 2019) on total medical expenditures, volume of services, and fees. We use data from 2,216 doctors who responded to the Medicine in Australia: Balancing Employment and Life (MABEL) panel survey and consented to have their MABEL data linked to MBS claims between 2011 and 2019. Between 2016 and June 2019, 8.5% of all unique MBS items had been changed by the Department of Health. Of the 488 items affected, 183 items (37.5%) were removed, 122 (25%) were added, and 183 were amended (37.5%). We use recently developed difference-in-difference methods accounting for staggered adoption and heterogeneous treatment effects. We find no statistically significant effects on medical expenditures, the volume of care, or average fees charged. The exception is for GPs, where we found evidence of a 10% increase in average fees that can be sourced to an increase in the fee for spirometry diagnosis in 2018 to encourage the provision of more appropriate care for respiratory diseases. The scale of the MBS Review was substantial, and the net overall effect was cost neutral. Further research needs to examine the longer-term effects of the MBS Review.

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  • Physicians, fee-for-service, healthcare costs, health insurance