Let us break it down for you: How changes to Medicare could mean your pap smear costs more.

Changes to bulk billing incentives announced before Christmas have sparked fierce debate about increased costs for patients.

Cutting the incentives for pathology and imaging services, worth $650 million over four years, has led to claims by pathology and imaging companies that they will introduce a “co-payment” to make up the shortfall.

Under these plans, pap smears are projected to cost patients $30.

But the government has strenuously denied the claims, and say the cut will be between $1 and $3 per procedure, so a $30 cost to patients is unlikely.

Confused? That’s understandable.

Don’t worry – we’ve asked three experts to help decipher it.

What will happen when the bulk billing incentive is removed in July 2016? 

“If the incentive to bulk bill pap tests is removed, the pathology provider must either accept less funding for each pap test, or recoup the cost via a patient contribution, a ‘gap’ payment,” Frank Jones, the president of the Royal Australian College of General Practitioners, explains.

So if the pathology lab that runs your swab decides it doesn’t want to absorb the drop in what the government pays them, they will stop offering bulk billed procedures, and patients will have to pay the full price. They will then be able to claim back a set amount from Medicare.

“If the patient is charged a contribution, it is difficult to charge just $3.20 to cover the lost funding (this is due to a range of complicated Medicare rules). Instead, the pathology company would need to charge the patient for the full cost up-front – $26.75. The patient could then recoup $23.55 by claiming the patient rebate through Medicare,” Jones says.

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Dr Frank Jones. (Image: Supplied)

Bulk billing expert, Margaret Faux told Mamamia that cutting the incentive payment was in essence cutting the rebate paid to pathologists to provide these services.

“What is happening in the pap smear debate is that the government is basically taking away a part of the pathologists rebate,” she said.

“To be honest, it doesn’t matter which part and whether it is the incentive or another part (there are 3 parts to pathology pap smear claims), that is all just smoke and mirrors.”

Pathology Australia chief executive Liesel Wett says the cut to incentives will cost more than the dollar value of the incentive, which will also put pressure on labs to charge patients up front.

“The pathology labs will need to administer the entire process – new billing systems, more administration that is added on to the cost of the test,” she says.

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Liesel Wett. (Image: Supplied)

“Pathology tests rebates have not been indexed for 20 years. In fact, the rebates have been cut over many years. We’ve improved productivity dramatically – but we can’t keep absorbing the cuts forever.

“If providers are forced to bill patients privately they will have to cover all their costs.”

Pap smears, and the five-yearly test that will replace them, are on the Medicare Benefits Schedule (MBS) so doesn’t that mean they are free? 

“The MBS is an insurance arrangement between the government and patients. MBS items are in effect ‘patient rebates’,” Jones says.


“The patient rebate, which is set by the federal government, may or may not cover the full cost of the service provided to the patient. Therefore, what a medical practitioner charges is not determined by an MBS item.”

So this is where the bulk billing incentives come in. They top up the rebate to make it more attractive to the practitioner.

“If a medical practitioner chooses to accept the rebate as full payment for the service, then the service is ‘bulk billed’ and the medical practitioner cannot charge the patient any more for the service,” Jones says.

But, if the rebate isn’t covering costs a doctor or pathologist (or both) might decide to ditch bulk billing altogether.

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Margaret Faux. (Image: Supplied)

“If pathologists decide that they simply cannot provide the service for $3 less as they are saying, then the only legal and viable option open to them is to make you pay the entire amount up front (where before you paid $0 because you were bulk billed). Then you would get back what the government has determined it will pay as a rebate,” Faux explains.

“It is illegal for the doctor to do it the other way and ask you to pay $3 – that would represent an illegal co-payment. It is also important to remember that the pathologist fee is separate to the GP fee and you can be charged for both.”

But could that really happen? 

Pathologists say yes, that’s what will happen.

“What the government has done now  is remove the incentive for labs to bulk bill. These cuts, backed on from cuts to pathology in 2014, mean that pathology labs now need to charge patients,” Wett says.


Frank Jones says doctors are also concerned about the change, but that the vast majority of pathology services are bulk billed.

“There is the concern these changes may result in increased barriers to pathology and diagnostic imaging for some patients.

He said before the bulk billing incentive was introduced, over 95 per cent of pathology was bulk billed. For out-of-hospital pathology that number is now 98.7 per cent.

And while he says there will not be a “co-payment” for pap smears, Jones is concerned that companies may move away from bulk billing.

“It is important to clarify first and foremost that this is not a co-payment – we’re talking about the withdrawal of a bulk billing incentive payment for providers of pathology,” Jones says.

“It is possible that pathology companies will change their billing policies following the removal of bulk billing incentives, in which case some patients may be charged a fee up front.”

And he’s worried about what a drop in bulk billing could mean.

“If less patients are able to access pathology because of cost barriers, doctors will have less information to inform diagnosis, which could result in delayed or miss-diagnosis of conditions.”

Ok, so is there a better way?

Probably not a simple one, Margaret Faux says.

“Not without completely changing the underlying structure of Medicare,” she says.

“Overall health spending in Australia is still only about 9.5 per cent of GDP which compares very favourably with other [developed] countries and is about half the health spend of the USA.”

She says for now the best thing for the government to do would be to leave funding as is until a new system is devised.

“Given there is no health funding crisis, if we left pap smear funding at current levels until we come up with a better alternative that might be a good start.”

Liesel Wett agrees. She says the government is jumping the gun by cutting bulk billing incentives while a review of the MBS is under way.

“We want to work with government on ensuring the MBS schedule is contemporary and provides for a sustainable health care system with access and equity for all Australians – that’s what Medicare is all about.

“It’s a bit rich when the cuts are announced outside of this process.”