The federal government is considering capping specialists’ fees. Is that constitutional?

Health Minister Mark Butler has said the government is considering capping specialists’ fees to reduce the gap between what Medicare covers and what specialists charge patients.

The Australian Medical Association strongly opposes the idea and is threatening legal action. Butler says the government is willing to “test the boundaries” of constitutional limits.

So what’s going on here? What does the Constitution have to do with doctors’ fees?

Doctors’ groups oppose ‘socialised’ medicine

The current fuss forms part of a long history of doctors’ lobby groups opposing key elements of Australia’s system of universal health care.

Doctors’ lobby groups have opposed:

It’s no surprise, then, that doctors’ lobby groups oppose the government’s current push to limit patients’ out of pocket costs to see a specialist. It’s also no surprise medical specialists dominate the Australian Taxation Office’s list of highest paid professions.

Some of the doctors’ opposition to health policy had constitutional implications.

The 1946 social services referendum

The Medical Society of Victoria challenged the introduction of the PBS in the High Court in the 1940s. It won because there was nothing in the Constitution giving the federal government power to set it up.

The 1946 social services referendum filled the gap in federal legislative power by adding a new provision to the Constitution. This gave the federal parliament power to make laws about

the provision of maternity allowances, widows’ pensions, child endowment, unemployment, pharmaceutical, sickness and hospital benefits, medical and dental services (but not so as to authorise any form of civil conscription), benefits to students and family allowances.

The limit on preventing civil conscription was introduced into parliament by Liberal Opposition Leader Robert Menzies. He told parliament that without those words, the new power might allow the federal government to “nationalise” health care by “making all doctors and dentists members of one government service which had a monopoly on medical and dental treatment”.

As set out in the official “yes” pamphlet during the referendum, those words “mean that doctors and dentists cannot be forced to become professional officers of the Commonwealth under a scheme of medical and dental services.”

The PBS was reintroduced after the referendum passed.

Constitutional challenges by doctors

Doctors have tried various constitutional challenges in the High Court. They have usually lost.

In 1949, the British Medical Association (as the Australian Medical Association called itself at the time) challenged rules that said prescriptions could only be written on government-supplied forms. It won. The High Court seemed to suggest civil conscription might go so far as to mean “any compulsion of law requiring that men […] perform work in a particular way.”

The High Court took a different view in later cases. In 1980, the General Practitioners Society challenged laws setting out conditions that had to be satisfied before Medicare benefits would be paid for pathology services performed by doctors. It lost.

The High Court said there was a difference between regulating the manner in which medical practice was carried out and compelling a medical practitioner to perform medical services. Only the latter would be unconstitutional civil conscription.

In the most recent challenge in 2009, doctors complained that laws making compliance with professional standards a condition of being eligible to receive Medicare subsidies were unconstitutional. They lost.

The High Court again emphasised the distinction between laws regulating how medical services are performed and laws forcing doctors to perform medical services.

So what about current laws on doctors’ fees?

Specialists’ incomes and fees are already partly regulated by federal law. The Fair Work Commission’s Medical Practitioners Award governs the wages and conditions of specialists who are employees rather than self-employed.

The Australian Competition and Consumer Commission (ACCC) administers a suite of laws putting limits on the way specialists set their fees. Nobody thinks any of this is unconstitutional.

Other professions are subject to maximum fees. For example, legislation in Victoria says that lawyers cannot charge fees that are more than “fair and reasonable”, and for some categories of legal service the law sets out maximum dollar amounts lawyers can charge their clients. Lawyers do not complain these laws conscript them to work at the behest of the government.

What’s next?

Butler says a parliamentary inquiry will explore various options for capping specialists’ fees. There will be administrative and practical pros and cons for various options.

Options the inquiry might explore include:

• simply capping fees
• making eligibility for Medicare subsidies conditional on not exceeding a maximum fee
• imposing an income tax surcharge on specialists who choose to not comply with caps
• getting the states to legislate the caps, which would avoid the constitutional question altogether.

Regulating private sector prices is different from civil conscription in the sense of compulsion to perform a professional service. So unless the government gives in to political pressure, specialists’ fees look set to be capped one way or another.