Bulk-billing is putting GPs in a Freakonomics trap

The overarching GP conversation at the RACGP’s recent Practice Owners Conference was, unsurprisingly, how to keep practices surviving amid rising overheads and stagnant Medicare rebates.

Business consultant Alex Mckenzie told GPs that general practice was in crisis. He said GPs were being penalised for treating complex patients but urged GPs to avoid tying themselves to the bulk-billing ‘drip feed’.

Here is a lightly edited version of his speech to GPs.

General practice owners carry two jobs at once.

They are clinicians who chose to know their patients — to be the doctor who notices when something is different, who stays on the phone a little longer.

And they are business owners who have to make payroll, manage staff, absorb compliance costs and make long-term capital decisions in an environment where the single biggest input into their revenue — the Medicare rebate — is set by someone in Canberra who has never sat in their consulting room.

Most businesses get to price their product. Practice owners do not.

The system has spent years making both of those jobs harder at the same time.

When you frame this as a complaint, it gets dismissed. When you frame it as an economics problem, it becomes a different conversation.

People assume economics is about money and graphs. It is not. Economics is the study of how societies allocate limited resources.

At its core, the general practice crisis is a catastrophic failure of resource allocation, driven by predictable textbook market failures that government policy is actively making worse.

General practice is not facing a workforce crisis. It is facing multiple compounding policy failures. And that distinction matters, because policy failures are fixable.

What the market gets wrong

Let me give you a simple example of what the economics misses.

A mother brings her four-year-old in for a fourth ear infection. Her regular GP — someone who knows her — notices she seems more withdrawn than usual. More exhausted than the circumstances call for.

The GP asks the right question and uncovers postnatal depression, a difficult home situation, and real safety concerns.

They arrange follow-up, safety planning and referrals. They catch a crisis early, when it is still manageable — and cheap to address.

Now imagine the same mother walks into a high-volume bulk-billing clinic.

The ear infection is treated. Efficiently. Correctly.

But nobody notices she is barely holding on.

The first GP created enormous social value that day. And the market paid them less than half of what the second clinic earned in the same time.

The first model requires more staff time, more complex documentation, longer appointments and higher overhead — yet returns less revenue per hour.

That is not a criticism of bulk-billing. It is a description of broken incentive design.

Being punished for competence

When a GP is skilled at handling complexity — domestic violence, mental health, chronic disease, social disadvantage — word gets out.

The skilled, compassionate GP becomes a magnet for the patients who need the most time, the most care, and under current Medicare rates, generate the least revenue. This is what I refer to as the ‘perverse network effect’.

The better your practice is at the hardest work, the more your costs rise and your revenue per hour falls.

You cannot fix this by being a better manager. You cannot fix it by running a tighter roster.

The payment model itself is working against you. The practices most committed to comprehensive care are the ones absorbing the greatest financial penalty for it.

What the budget tells us

The 2025/26 federal budget pledged $7.9 billion to expand the triple bulk-billing incentive to all Medicare-eligible patients, with practices that bulk-bill every patient eligible for an extra 12.5% loading on Medicare rebates. The goal is nine in 10 GP services bulk-billed by 2030.

The intention is good. The politics are understandable.

But what will it mean for practices in five years?

Since reforms commenced in November 2025, over 1400 practices that previously mixed-billed have moved to fully bulk-billing. That sounds like progress — until you ask what happens when those practices attract complex, time-intensive patients that government-funded clinics cannot serve, with no payment mechanism that reflects that complexity.

This year’s budget also commits $25.3 million to fund up to six fully bulk-billing clinics in the Hunter and Central Coast regions of NSW. Those clinics will rationally optimise for quick consultations and straightforward presentations. The complex patients will still find their way to mixed or private billing practices, which will be expected to absorb them at the same rate.

We are treating the symptom — not enough bulk-billing access — while the disease, broken payment incentives, goes untreated.

**The Freakonomics warning**

There is a famous story in the book Freakonomics. An Israeli daycare introduced a fine for parents who picked their children up late. Late pickups did not reduce — they immediately doubled.

The fine had transformed a moral obligation into a financial transaction. Suddenly, parents could simply pay to be late. And when the fine was removed, the moral obligation did not return.

That story should concern every practice owner.

Many are still running comprehensive practices partly because of a professional commitment that goes beyond the business case — a genuine belief in what continuity of care is worth.

The government’s incentive package is designed to make bulk-billing feel financially rational again. For some practices, in the short term, it will.

But if the only reason your model works is a government incentive payment tied to a political decision that can change at any election, you have not built a sustainable practice.

You have built a practice that survives on a drip feed that can be turned off.

Building a business model around a single dependency you cannot control is not a strategy. It is a risk.

The demographic wave — and your opportunity

There is a genuine business case for comprehensive general practice, and it is getting stronger.

An estimated 38% of Australians are already living with two or more chronic conditions simultaneously — nearly 10 million people. Among Australians aged 85 and over, 79% have multimorbidity.

As Australia ages, demand for exactly what well-structured general practice does best — co-ordination, continuity, and managing complexity across multiple systems — is moving in one direction.

Each additional chronic condition predicts roughly one additional GP visit per year. Across an ageing population, that means a sustained structural increase in demand for care that requires a real relationship, a proper record, and a GP who knows the patient’s history.

The practices that thrive in 10 years will not be the ones optimised for the 2025 incentive payment. They will be the ones building now — the right team, the right systems, the chronic disease management capacity, and the allied health relationships needed to serve the patients who are coming.

The demographic wave is not a threat to well-structured general practice. It is the strongest possible argument for it.

You cannot control what the government does to the rebate. You cannot control which party wins the next election. But you can make strategic decisions now that do not depend on a single policy lever.

What good policy looks like

Practice owners — the people actually running these businesses — have a voice that policymakers need to hear.

Good policy would pay for what it actually values: payment that reflects complexity and time, not just transactions, and that recognises continuity of care as the economic asset it is.

Good policy would stop making existing failures worse. More bulk-billing infrastructure under the same broken payment model does not fix anything — it just spreads the problem.

And good policy would treat trust as a policy goal in its own right. Not just a rebate increase, but the kind of long-term structural commitment that lets practice owners make a 10-year investment with some confidence it will not be undermined by the next budget.

The key debates at the moment — billing models, scope of practice, workforce — are precisely the levers where the experience of practice owners is most valuable. They are not just clinicians with an opinion. They are the people who see the business reality every day. That matters.

GPs chose their profession because they wanted a strong, ongoing relationship with their patients. Many then took on the additional responsibility of keeping a practice viable — of being the reason other GPs in their community can do the same work.

That combination of clinical commitment and business reality is exactly what makes practice owners so important. They understand both sides of the problem in a way that policymakers simply do not.

The thing the system currently undervalues is the thing the future will need most. An ageing population with complex, multiple conditions does not need six-minute medicine. It needs the kind of care that only a well-run, relationship-based practice can provide.

This is not inevitable. It is the predictable result of bad incentive design. And bad incentive design can be changed — but only if the people who understand the problem are willing to make noise about it.

Alex Mckenzie is a management consultant with a particular interest in healthcare policy and behavioural economics.