Australia’s GP crisis is not a workforce failure but a predictable policy failure—the result of fundamental market failures that current government policy actively makes worse.
GPs and economists have more in common than you might think. Both want what’s best for the community, both resist the urge to say “I told you so” far too often, and both are frequently misunderstood.
Many people think economics is just about money and graphs. It’s not.
Economics is the study of how individuals, businesses, and societies allocate limited resources to satisfy unlimited wants—and it’s poor resource allocation decisions that drive the GP workforce problem.
As someone with a background in behavioural economics, I’ve watched Australian primary care policy lurch from one “reform” to another, each predicted to improve access, quality, and efficiency. Each has failed. The reason isn’t mysterious—it’s textbook market failure combined with catastrophically poor incentive design.
Two key arguments
First, general practice suffers from multiple, compounding market failures—information asymmetry, externalities, adverse selection, public goods problems, and incomplete contracts. These aren’t academic concepts; they’re economic forces actively destroying the GP workforce.
Second, current government policy doesn’t just fail to address these failures—it actively makes them worse through frozen Medicare rebates, perverse payment incentives, and excessive regulation that crowds out intrinsic motivation.
This is not a workforce crisis. It’s a policy failure.
Understanding the practice models
Australian general practice broadly operates under three different business models:
Bulk-billing corporate clinics rely entirely on Medicare rebates, operate with high patient volume and shorter consultations. Their economic model depends on transaction volume.
Traditional family practices offer mixed billing, often charge above Medicare (patients pay a gap), maintain longer-term relationships, and try to balance relationship-based care with financial viability.
Fully private practices charge well above Medicare, don’t bulk bill, and can afford longer consultations because revenue isn’t constrained by Medicare rates.
Why this matters
Bulk-billing practices face the most acute pressure—they must either see more patients in less time (six-minute medicine) or become financially unviable.
Mixed-billing practices are caught in the middle, pressured to convert to either high-volume bulk-billing or full private billing.
Fully private practices reduce access for patients who can’t afford gaps and create moral injury for GPs turning away patients.
The fact that some GPs charge high fees doesn’t refute the crisis—it reveals it. When family practices must choose between compromising care quality or compromising access, that’s policy failure.
The market is creating a two-tier system: wealthy patients get comprehensive care from private GPs; everyone else gets six-minute medicine from bulk-billing clinics – if they can find one.
The market failures
Information asymmetry (or: why you can’t shop for healthcare like you shop for shoes)
Patients cannot judge GP quality before or after treatment. This creates what economists call a “credence good” problem—you must trust the provider because you cannot verify their claims. Like taking your car to a mechanic who says you need a new timing belt. Do you? Unless you’re a mechanic, you probably have no idea.
In healthcare, information asymmetry is so severe that reputation signals become what’s known in economics as “noise”.
Online reviews measure bedside manner and wait times, not diagnostic accuracy. A doctor who appropriately withholds antibiotics might get worse reviews than one who inappropriately prescribes them.
Externalities (or: why your GP visit helps people who weren’t even there)
When your GP manages your diabetes well, society benefits beyond what you pay: reduced hospital admissions, maintained workforce participation, lower disability costs. The social value exceeds private value.
Markets with positive externalities systematically under-provide the service—people only consider personal benefits, not society’s benefits.
Conversely, poor primary care creates negative externalities: preventable ED presentations, delayed diagnoses, antibiotic resistance. When good GP practices close, communities bear costs the market never captured.
The hidden economics of continuity of care
The economic value of longitudinal, relationship-based care is invisible to transactional payment models. When we fragment care, we lose information economies of scope—the efficiency gains from one person knowing multiple aspects of a situation.
Consider a child’s fourth ear infection.
At a family practice, the regular GP notices the exhausted mother’s stress compared to normal and uncovers postnatal depression, domestic violence, housing insecurity. They arrange follow-up, safety planning, referrals—catching problems early when they’re cheaper to address.
At a corporate bulk-billing clinic, the mother sees whichever GP is available—never the same one twice. The ear infection is treated efficiently. Nobody notices the mother is barely holding together.
Related
The family GP’s knowledge creates enormous social value: earlier intervention, better prevention, reduced duplication, lower downstream costs. The market pays for each transaction but doesn’t value the relationship making those transactions effective.
Current policy actively incentivises the corporate model over family practice.
Frozen Medicare rebates make it economically rational to see more patients in less time, minimise relationship investment, and employ whichever GP is available. Meanwhile, family practices maintaining relationship-based care often charge above Medicare, creating access barriers.
Adverse selection – the killer
As other providers cherry-pick straightforward cases—pharmacists taking UTIs, nurse practitioners taking simple cases, corporate clinics optimising for brief consultations—comprehensive GPs face progressively more complex case mixes.
Patients remaining with comprehensive GPs tend to be medically complex, socially disadvantaged, diagnostically challenging, time-intensive, and unprofitable under current payment structures.
The perverse network effect
Here’s the cruel twist: good GPs get punished economically.
A GP who listens empathetically to a domestic violence patient provides excellent care. That patient tells their friend experiencing similar trauma. The “good GP” develops a reputation for handling complex social circumstances.
This is word-of-mouth working exactly as markets should—except it destroys the GP’s practice economically.
People experiencing trauma are connected to others with similar challenges. The skilled, compassionate GP becomes a magnet for complex, time-intensive, unprofitable cases. Their reputation for taking time means they accumulate the patient population making practice financially unsustainable.
It’s being punished for competence. The better you manage complexity, the more complex patients you attract, the more money you lose, the faster you burn out.
Meanwhile, the brusque GP rushing consultations maintains a “healthier”, less complex, more profitable patient mix.
The system drives out the GPs we most need.
Government intervention worsening adverse selection
Recently, the federal health minister announced $24.3 million to establish three new bulk-billing practices in the ACT, with replication planned for Newcastle and the Hunter Valley.
While government intervention is necessary, this particular intervention worsens adverse selection. New bulk-billing practices will rationally optimise for quick consultations, simple presentations, and high-volume medicine. Meanwhile, existing comprehensive GPs managing complex patients face worse economics—they can’t compete on price with government-funded clinics while still attracting complex patients needing longer consultations.
The intervention addresses the symptom (insufficient bulk-billing access) rather than the cause (broken payment incentives).
Creating more practices under the same broken structure spreads the disease rather than curing it. Like opening more hospital wards during an infection outbreak—without fixing hygiene protocols.
The Medicare payment reality
Current Medicare rebates are Level B (6-20 minutes) $41.40–$43.90; long consultation (over 20 minutes) $79.70–$84.90; extended consultation (over 40 minutes) $117.40.
A GP spending 45 minutes with a domestic violence patient—building trust, safety planning, comprehensive care—earns $117.40.
A GP seeing six patients for six minutes each earns approximately $250 in the same time.
The GP providing comprehensive care earns less than half, with higher overhead costs: more emotional labour, complex documentation, follow-up coordination, burnout risk.
Government denial
Health minister Mark Butler recently rejected concerns about six-minute medicine:
“I know there’s this thing going around that this is going to create six-minute medicine, that is a red herring. We’ve based all of our calculations on exactly what GPs are doing right now.”
This reveals a fundamental misunderstanding.
What GPs do now is already distorted by broken incentives. Many are already practicing six-minute medicine to survive, subsidising comprehensive care through gaps or personal sacrifice, or burning out from the contradiction between financial necessity and professional values.
Claiming incentives are “based on what GPs do now” codifies a broken system. Like measuring a tree that the wind has caused to bend, then designing supports to keep it bent.
When government calculates policy based on distorted behaviour, it demonstrates profound failure to grasp how incentives shape practice.
Public goods problem
A key concept in economics is public goods. These are goods that are non-excludable and non-rival—you can’t prevent people from benefiting, and one person using it doesn’t reduce availability.
GP practices provide public goods: pandemic surveillance, population health intelligence, continuity reducing system costs, institutional knowledge about vulnerable patients.
When practices close, we lose this. The market can’t value it, doesn’t pay for it, so it disappears. Corporate bulk-billing clinics on thin margins can’t provide these public goods. Family practices try but aren’t compensated.
The incomplete contract problem
The federal government’s Medicare contract with GPs is necessarily incomplete. You cannot specify what diagnostic reasoning requires, when compassion matters, how much time complex consultations need, what continuity is worth, or how to value clinical judgement.
Policymakers who’ve never sat in a GP consulting room cannot understand the complexity—rapid pattern recognition, balancing multiple problems, social complexity intersecting with medical complexity, judgement calls that can’t be protocolised.
Historically, professional norms filled these gaps.
GPs donated discretionary effort—staying late, squeezing in urgent cases, worrying after hours, maintaining decades-long relationships—because they felt fairly treated and intrinsically motivated.
The crowding-out catastrophe
Bruno Frey and Reto Jegen’s work explains what’s happening: when you try controlling intrinsically motivated professionals with heavy external incentives and regulation, you don’t just fail—you actively destroy existing motivation.
Imagine a friend who always helped you move house out of friendship. Then you offer $20. The relationship changes.
They think: “Is my time only worth $20? Are we friends or cheap labour?”
Intrinsic motivation (friendship) gets crowded out by insulting extrinsic motivation (token payment). Next time, they’re suddenly busy. Forever busy.
The mechanism
Step 1: The gift economy.
GPs historically operated partly in a “gift economy”, donating effort beyond contracted requirements because they felt respected, adequately compensated, and trusted.
Step 2: The violation.
Policymakers increased regulation, froze rebates, introduced compliance burdens, signaling distrust: “We don’t trust you to do the right thing, so we’ll control you.”
Step 3: Reciprocity collapse.
Humans are conditional cooperators—we reciprocate fairness but punish unfairness. GPs experienced increased control without increased compensation. They either withdrew discretionary effort or continued and burned out.
Step 4: The vicious cycle.
Less discretionary effort and shrinking workforce led to poorer outcomes, prompting more regulation, further crowding out motivation, leading to more exits. We’re in a doom loop.
Trust as the core issue
RACGP president Dr Michael Wright captured this perfectly recently:
“For these GPs, this decision is fundamentally a trust issue, not just a financial one.”
After years of frozen rebates and broken promises, GPs are “nervous about switching back to a system that once again makes them 100% reliant on government funding decisions”.
As Dr Wright notes: “while the current government has shown its commitment to Medicare, there is no guarantee a future government will do the same”.
This is conditional cooperation withdrawing in response to repeated unfairness. Once trust is destroyed, it can’t be rebuilt with policy documents and payment increases alone.
Dr Wright’s call for “long-term certainty” identifies what behavioural economics predicts: professionals won’t donate discretionary effort to systems they don’t trust.
Years of frozen rebates haven’t just created financial pressure—they’ve destroyed the psychological contract making general practice sustainable.
Behavioural economics demonstrates that motivation thrives on three foundations: autonomy (having control over your work), mastery (being able to develop your skills), and purpose (doing something meaningful).
Current policy systematically violates all three.
Frozen pay and perverse incentives undermine autonomy. Rushed consultations prevent mastery. Motivational crowding out destroys purpose. Reform must restore these foundations — or the profession will continue its predictable unravelling.
The payment model disaster
Current GP payment is spectacularly poorly designed.
For bulk-billing practices, time-based billing incentivises shorter consultations regardless of value, supplier-induced demand, and avoiding complex patients. For practices charging above Medicare: maximising gaps, selecting affluent patients, still facing volume pressure.
Most GPs resist these incentives because of professional norms—meaning they’re effectively donating time and expertise. Which is unsustainable.
We’ve created a payment model punishing thoroughness. But simply moving to “outcomes-based” funding risks worse problems: optimise measured outcomes while ignoring unmeasured ones, avoid complex patients, code patients as healthier than they are.
You get what you measure, and measuring wrong things gets wrong outcomes.
Why healthcare isn’t like buying a sofa
The perception that people complain about GP costs but not about paying for a plumber or paying for a sofa misses three key realities:
Information asymmetry makes valuation impossible.
With a sofa, you judge quality. With healthcare, you often can’t judge if you needed the service, if it was done well, or if it made a difference.
Avoiding primary care is false economy.
Someone avoiding a $125 GP visit often faces more expensive ED presentations, delayed diagnoses, lost work, preventable progression. A $125 visit preventing a $2000 admission is an extraordinary bargain—but our brains aren’t wired to see it.
Healthcare spending competes with survival needs.
For many Australians, that $125 competes with groceries, rent, utilities—not luxury sofas.
The question isn’t “Why complain about GP costs but not plumber costs?”
It’s, “Why have we designed a system forcing people to make impossible economic calculations about services they cannot value, with consequences they cannot foresee, using money they often don’t have?”
Conclusion
Australia’s GP workforce crisis is a predictable result of compounding market failures: information asymmetry, uncompensated positive externalities, the invisible value of continuity, adverse selection spirals, payment structures favouring six-minute medicine, uncompensated public goods, incomplete contracts, and destroyed intrinsic motivation.
Current government policy doesn’t just fail to address these failures—it actively makes them worse.
When policymakers deny the incentive problems that economic theory clearly predicts, while implementing interventions that intensify the very market failures they’re meant to solve, it reveals a fundamental disconnect between policy design and reality.
This is not a workforce crisis. It’s a policy failure. And it’s fixable—if we’re willing to face the economics honestly.
Alex McKenzie is a management consultant with experience across the private, government, and not-for-profit sectors. He has worked at Treasury and the Department of Prime Minister and Cabinet’s Behavioural Economics Team (BETA), and previously served as CEO of a not-for-profit. He has a particular interest in health policy and behavioural economics.