Healthcare Homes ‘did damage a lot of trust’ in blended funding models, Grattan Institute health economist Peter Breadon says. His challenge now is to rebuild it.
Fairer healthcare funding for Australians starts with the end of fee-for-service as the main source of income for GPs, a new policy briefing from the Grattan Institute says.
The paper, which was published this week and authored by Grattan’s health program director Peter Breadon and associate Molly Chapman, looks at the pressures currently affecting general practice delivery.
Many GPs will agree with the central premise, which is that last year’s investment in bulk billing has exacerbated the fundamental problems with Medicare.
“It has strengthened incentives for GPs to have quick consultations with their patients, sent money to parts of Australia that didn’t need it, and left behind areas that need more funding the most,” the report reads.
Having a bulk billing incentive directed specifically at children and concession card holders, the paper said, was the “closest thing mainstream GP funding had to a needs-based adjustment”.
Expanding the incentive to all Medicare card holders removed that.
Almost immediately following the introduction of the expanded bulk billing incentive in November 2025, the share of incentive spending going to the most disadvantaged Australians decreased, while the share of funding going to wealthier areas increased.
Australia now lags behind countries like Spain, France, New Zealand and Scotland – all of which adjust funding to general practice based on patient age, level of disadvantage and disease status.
“Whereas in Australia, we don’t adjust for age, sex, disadvantage or how sick anyone is, we just adjust for remoteness,” Mr Breadon told The Medical Republic.
“It really does leave us with one of the crudest and most unfair funding models.
“I think that is really troubling, and it’s shone a light on the failure to really try and drive funding towards where it’s needed most.”
To this end, the Grattan Institute paper also concludes that the rural and remote loadings are “poorly targeted” and “seem arbitrary”.
“The levels of remoteness – such as ‘regional centre’ and ‘small town’ – lump together areas with vastly different levels of wealth, health, and access to care,” it said.
“For example, almost one in five regional centres are in the top quarter of the country for GP services per person. Some small towns have excellent access, while others are in crisis.”
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While the paper gels with what GP advocacy bodies like the AMA, RACGP and ACRRM have been saying for some time now, the paper diverges somewhat in its recommendations.
It’s not clear, Mr Breadon said, that all regional towns actually need targeted Medicare subsidies.
“We argue for a much more straightforward approach,” he said.
“Let’s actually look at what communities get, work out who’s getting too little and then intervene to close those gaps.”
Much like another recent research paper produced by the Australia Institute, the Grattan proposes that the government step in where the market has failed in rural and remote Australia.
PHNs, it said, should be empowered to deliver salaries, hub-and-spoke networks and block funding in areas with no viable GP clinic.
The other big recommendation to come from the policy briefing was that the government deliver an attractive alternative to fee-for-service funding.
“This would level the playing field for clinics caring for sicker, poorer, and older patients,” the report said.
“It would get better value for taxpayers by targeting funding where it is most needed. And it would give clinics the flexibility to invest in team-based care and longer consultations – the things fee-for-service funding blocks.”
Fee-for-service would still exist as a part of this model; it would just be smaller.
“You get a budget for looking after each patient, and that budget is based on that patient’s need,” Mr Breadon said.
“It’s higher if they’re older and sicker and more disadvantaged … that is what a lot of countries have moved towards.
“There’s so many benefits. First, it makes the system fairer. It puts more money towards treating those patients with greater needs.
“It also rewards clinics and GPs for that behind-the-scenes work. It’s not all the face time with the GP.”
Unfortunately, he admitted, the last big trial of a such a system was “poorly designed and implemented” and damaged trust in the sector.
The failure of Healthcare Homes and the decades of underfunding in the UK’s NHS have led to certain myths, according to the economist.
“People think that if some part of the budget follows the patient and their needs, that means it’s a capitated model,” Mr Breadon told TMR.
“They might associate that with the NHS – where I think a lot of the problems … are more about massive funding cuts and workforce shortages, not so much about funding model. People sort of link the two and that can make them a bit sceptical.”
What should reassure practices, he said, is that any model which is introduced will likely be opt-in and financially attractive for participating clinics.
“I think people hear these terms and ideas [and have misconceptions],” Mr Breadon said.
“I think if they could get their hands around a concrete proposal, and if they could model that out to their clinic and see how it would work, I think that might break through some of the negativity.”
