15. Economics of keratinocyte cancer
Keratinocyte cancers (KCs) are the most common malignant neoplasms in Australia and consequently they exert a large burden on the Australian health system. Although keratinocyte cancer is not notifiable to cancer registries and the precise incidence is unknown, incidence is estimated at 1531 per 100,000 person-years, based on data from recent national Medicare claims.
Since 7% of Australian adults can be expected to have at least one skin cancer excised during a 3-year period, the burden on health services is substantial. Keratinocyte cancers are likely to have the highest costs of all cancers in Australia due to their high incidence rather than high cost per case. As most KCs are treated in general practice and have low mortality potential, they are sometimes viewed as inconsequential. However, overall morbidity of KCs is considerable. Many individuals have multiple KCs and there were 115,237 hospital separations for keratinocyte cancers recorded in 2016–2017.
Although virtually all KCs are amenable to cure, 642 deaths due to KC were recorded in 2015. Keratinocyte cancers accounted for 2.8% of non-fatal cancer burden as measured by years lived with disability. In addition to the burden on the health system, KCs are also associated with costs for patients, including out-of-pocket medical expenses and the costs of prevention.
Through Medicare, the Australian Government pays for a large majority of services and medicines listed on the Medicare Benefits Schedule (MBS) and Pharmaceutical Benefits Schedule (PBS). Skin cancer treatments undertaken in public hospital as inpatient or outpatient care are paid by state governments at no cost to public patients. For skin cancer diagnosis and treatment in Australia, most services and medications are provided through Medicare (Table 10.1) either by general practitioners (GPs) in primary care or by specialists (i.e., dermatologists, plastic surgeons) in private practices.
Just as the incidence data for KCs are not routinely collected, their associated costs are not routinely recorded and are difficult to estimate.
Table 10.1. Medicare reimbursement for keratinocyte cancer services
|Medical service||MBS item number or PBS code#||Medicare
item fee (AUD)
|Approximate % lesions by
|First visit GP (up to 20 minutes)||23||$37.60||-|
|First visit specialist||104||$86.85||-|
|Pathology – level 3 complexity||72816-72817||$86.35–96.80|
|Excision – BCCc/SCC||31356-31369||$221.35–330.15||78–83%|
|Curettage or diathermy||30196||$126.30||9–10%|
- Imiquimod 5% (sachets or pump)a
|PBS 2546B, 2637T, 4134N, 4559Y||$86.86 to $91.41||1.2%|
|- 5-Fluorouracil (20g) Efudixb||PBS 4222F||$65.52||1.2%|
|Radiotherapy – 1 field||15000||$42.55||0.25–0.63%|
|- 2 or more fields up to 5||15003 (fee for each additional field)||$17.10|
|Flap repairs||45200-45203, 45206||$284.35–413.95||0.01–1.63%|
|Mohs micrographic surgery||31000-31002||$580.90–871.30||0.8%|
|Follow-up visits GP||23||$37.60||-|
|Follow-up visits specialist||105||$43.65||-|
BCC: basal cell carcinoma; cSCC: cutaneous squamous cell carcinoma; MBS: Medicare Benefits Schedule; PBS: Pharmaceutical Benefits Schedule
The list of Medicare codes is not exhaustive. MBS and PBS item numbers and costs as at November 2017.
aAvailable through the PBS and Repatriation PBS and for patients with biopsy-confirmed primary superficial BCC, previously untreated. Patients not meeting these criteria will face a private payment of up to $180.00.
bAvailable through the Repatriation PBS (limited to Department of Veterans' Affairs beneficiaries holding a Repatriation Health Card or a Repatriation PBS card).
Overview of evidence (non-systematic literature review)
Costs to the healthcare system
Fransen et al. (2012) estimated the total cost of KC to the Australian health system in 2015 would be $703.0 million (95% confidence interval [CI], $674.6 to 731.4 million). These cost estimates include diagnosis, treatment and pathology services.
A recent Australian study on the Medicare costs associated with the treatment of skin cancer was published by Gordon et al. (2017) using data from a large, prospective cohort study in Queensland. This is the first cost analysis for skin cancer that specifically examines the cost burden of multiply affected persons. In a 3-year period, over 50% of participants with KC had multiple KCs.
Costs were heavily right-skewed and, as might be expected, increased linearly with greater numbers of skin cancers. The study aggregated the costs for all the skin cancer-related MBS and PBS items for 5134 participants with at least one primary excision for KC. Participants were followed for an average of 3 years (range 1.7–3.7 years).
In total 47% had 1 cancer, 24% had 2, 10% had 3, 9% had 4 or 5 and 10% had more than 5 KCs (Table 10.2). The median government subsidy for keratinocyte cancers over three years was $369 for one cancer rising to $2126 for individuals with six or more cancers, with a maximum cost of $54,618. In addition, costs for other benign skin lesion excisions added $70 to $202 median costs for those individuals in the high-frequency skin cancer groups over 3 years (Table 10.2).
Table 10.2. Medicare costs among individuals by frequency of incident skin cancers (2016 AU$)
|Number of keratinocyte skin cancers per person|
|Number of persons (%)||2424 (47%)||1231 (24%)||510 (10%)||481 (9%)||488 (10%)|
|Skin cancer 3-year costs*
median (min, max)
369 (0, 5735)
624 (0, 9321)
946 (0, 13519)
1169 (161, 12978)
2126 (372, 54618)
|Benign skin lesion 3-year costs*
median (min, max)
0 (0, 2014)
70 (0, 2150)
145 (0, 2982)
134 (0, 8982)
202 0, 6089)
SD: standard deviation
*Skin cancers refer to those histopathologically diagnosed and skin lesions refer to any benign lesion treated under the dedicated MBS codes for benign skin lesions. Source: Gordon et al. (2018)
Besides multiplicity, costs were higher for people with private health insurance, university education and retirement. Consideration of the cost burden of KCs should also include the additional burden of benign lesions that are treated concurrently during skin examinations of persons with suspicious skin lesions. In addition to costs incurred in primary care and specialist private practice estimated by MBS and PBS claims, economic burden of skin cancers borne by hospitals were substantial. In a study by Shih et al. (2017), the costs of treating KCs during inpatient admissions to Victorian public hospitals were estimated at $29 million per annum. If combined with outpatient clinic attendances at the Victorian public hospitals for management of melanoma of the skin and KCs, the estimated costs increased to between $48 million and $56 million in 2012–2013 (Table 10.3).
Moving beyond the public hospital system, an additional $72 million were attributed to the private hospital admissions in Victoria. The estimated total costs between $121 million and $127 million per annum, based on available information, only partially presents the total burden of skin cancers on the hospital systems in the State of Victoria.
Table 10.3: Estimated inpatient admission costs and outpatient clinic costs for the Victorian public hospital system 2012–2013
|Inpatient admissions costs|
|AR-DRG Code||DRC description||Average cost per separation||Melanoma
|J69A||Skin Malignancy with complications||$ 16,183||$ 4.25||$ 29.05|
|J69B||Skin Malignancy no complications||$ 10,137||$ 7.43|
|J69C||Skin Malignancy, same day||$ 805||$ 1.68|
|Total||$ 13.36||$ 29.05|
|Outpatient clinic costs|
|Estimation for hospital
|Estimation for ICS
|Estimation for Victorian public hospital system ($ million)|
|Hospital A||$ 533,000||$ 1,761,000||$ 10.12|
|Hospital B||$ 557,000||$ 557,000||$ 6.90|
|Hospital C||$ 2,386,000||$ 3,874,000||$ 13.32|
AR-DRG: Australian Refined Diagnosis Related Group classification system; ICS: integrated cancer service. Source: Shih et al. (2017)
Costs to patients
Out-of-pocket expenses are likely to be substantial in patients with multiple skin cancers over time (Table 10.4). Patient out-of-pocket expenses should not be ignored in the consideration of treatment options as trends in Australia suggest that health care co-payments by consumers, in general, are rising quickly and may be particularly distressing for patients with several concurrent health conditions. In private practices, patients should be given written information about the expected out-of-pocket expenses for their treatment. This written information should be provided at the initial consultation with the clinician (GP or specialist), before starting treatment.
The overall bulk-billing rate for skin cancer reported by Gordon et al. (2017) for over 5000 patients was between 34% and 60%, depending on skin cancer frequency. These rates were substantially lower than the GP bulk-billing rate reported for Australia overall (79–82%) during 2011–2014 and were also lower than the national KC bulk-billing rate (81%). Participants with many skin cancers in this study were less likely to be bulk-billed compared with participants with only one or two skin cancers. Older persons and people with a university education have higher than average levels of private health insurance, and private health insurance is the strongest factor contributing to reportable Medicare out-of-pocket costs.
However, the scope of the analyses did not capture all potential costs that may occur subsequent to the excision (e.g. dressings, antibiotics for infections) and were not recognised in Medicare data as relating to skin cancer treatment. Also omitted were out-of-pocket expenses related to receiving care such as travel and parking expenses and income lost through interruptions to employment. These additional expenses may be high for patients treated on multiple occasions and those living long distances from treatment centres. Consequently, there are wider societal burdens to employers, partners and carers and the longer-term economic burden is likely to be substantial. Doran et al (2015) estimated total lifetime costs of skin cancer diagnosed in 2010 in New South Wales at $536 million, of which 72% of total costs were direct costs and 28% were indirect costs. KC accounted for 68% of the total skin cancer economic costs, $365 million. Indirect costs, including productivity cost associated with morbidity and premature mortality using the human capital approach, were $131 million for melanoma and $18 million for KC. Average lifetime cost based on this incidence-based estimate was $44,796 per melanoma and $2459 per KC.
Table 10.4. Patient out-of-pocket costs among individuals by frequency of incident skin cancers (2016 AU$)
|Number of keratinocyte skin cancers per person|
|Number of persons, n (%)||2424 (47%)||1231 (24%)||510 (10%)||481 (9%)||488 (10%)|
|Skin cancer 3-year costs
Number (%) persons bulk billed*
median (min, max)
197 (2, 7177)
336 (3, 8704)
475 (2, 2803)
502 (2, 5753)
1008 (5, 13673)
|Benign lesion 3-year costs
Number % persons bulk billed*
median (min, max)
86 (3, 2257)
88 (3, 1116)
92 (6, 1439)
105 (2, 1043)
104 5, 1966)
SD: standard deviation
*Bulk billed refers to patients having zero out-of-pocket costs and services are fully covered by Medicare Australia. Source: Gordon et al. (2018)
New treatments for keratinocyte cancers
Vismodegib (Erivedge) is listed on the PBS for the treatment of metastatic or locally advanced basal cell carcinoma, for which neither surgery nor curative radiotherapy is appropriate. It is administered in 150mg capsules, 28 per pack for a course of treatment. An estimated 113 Australians per year now have access to vismodegib at $39.50 per month, which would otherwise cost $7450 for a course of treatment.
Sonidegib (Odomzo) is also listed on the PBS for metastatic or locally advanced basal cell carcinoma for which neither surgery nor curative radiotherapy is appropriate. It is administered in 200mg capsules, 30 per pack for a course of treatment at $39.50 per month for patients, and a cost of $7971 for a course of treatment to government.
Investment in skin cancer prevention
Skin cancer prevention programs have great potential to reduce healthcare expenditure but there has been no national spending on prevention of skin cancer for over a decade since the first national skin cancer campaigns between 2006 and 2008. In 2017, Shih et al reported that for an additional $AUD 0.16 ($USD 0.12) per capita investment in future skin cancer prevention across Australia, 140,000 skin cancer cases would be prevented over a 20 year period between 2011 and 2030. Return on investment of skin cancer prevention, from the government perspective, is remarkable. Strong economic credentials of skin cancer prevention have been reported. In Australia, for every dollar spent in the skin cancer prevention programs/campaigns, there was $3.20 and $3.85 in return by averting cancers and savings in future healthcare and societal costs.
Solarium legislation began in Victoria in 2007, which limited the use of people aged under 18 or with very fair skin (skin type 1). The following years saw the other states also introduce age limits; however, compliance with the regulations were poor. From 2012, laws have now passed in all states banning commercial solarium businesses. This was underpinned by campaigning of health organisations including Cancer Council Victoria, Australian Medical Association, Skin & Cancer Foundation Inc., and the Australasian College of Dermatologists. Australia is one of two countries in the world (the other being Brazil) with an outright ban. The prevalence of sunbed use in the previous year among adults was less than 1% in 2016–2017. However, recent media reports have uncovered a black market of illegal solariums, and tanning beds may still legally be purchased and used for private use in peoples’ own homes.
In 2015, a systematic review synthesised evidence from 11 studies reporting on the cost-effectiveness of skin cancer prevention programs. These included four secondary prevention (or screening) studies and seven primary prevention studies. Primary prevention programs or policies were consistently cost-effective or cost-saving for governments, while screening was favourable in certain targeted scenarios only. The primary prevention programs were heterogeneous ranging from sun protection promotion to solarium regulation and school-based education initiatives. However, the quality of the economic analyses were good, the analytical approaches sound, transparent, comprehensive and the model inputs based on best available epidemiological data.
Seven additional economic studies involving KCs and melanomas have been published since the 2015 review, three studies on primary prevention and three on screening/surveillance with five being Australian.
Shih et al. (2017) predicted net social benefits of $1.43 billion over a 20-year period for Australia including direct health system and indirect productivity gains while Pil et al. (2016) estimated returns on investment of €3.6 for €1 invested in primary prevention initiatives in Belgium.
For secondary prevention, a Queensland-based skin awareness intervention for men over 50 years would be more expensive, and potentially worsen quality of life as more in situ melanomas and KCs would not outweigh the benefits of the awareness program. However, in high-risk individuals with a past history of melanoma, an intensive skin surveillance program was cost-effective as melanomas were diagnosed earlier, less extensive treatment was needed and importantly, there was a lower excision rate for suspicious lesions. Finally, including KCs in their analyses, a Belgian study concluded that melanoma diagnosis by dermatologists adequately trained in dermoscopy resulted in both a gain of quality-adjusted life years (less morbidity and/or mortality) and a reduction in costs.
To encourage patients to seek medical attention for any suspicious skin lesions without delay, clinicians should consider whether patients’ out-of-pocket healthcare costs are a barrier to assessment and treatment and consider strategies for minimising these, especially for patients returning for multiple skin cancer treatments.
Future research priorities
Sun protection strategies reduce skin cancers, but most benefits accrue in the future. Conversely, while early detection strategies detect thinner melanomas, it can lead to over-treatment and attendant high costs. On economic grounds there is good evidence that favours primary prevention efforts and some also favour melanoma screening but the two strategies have never been compared against each other for their relative cost-effectiveness.
Further research is necessary to provide information on the priority for government investment in skin cancer prevention. In addition, further studies will be beneficial on the value of interventions that assist in identifying and/or screening targeted populations for their high burden of multiple KCs.
Consistent and sustained prevention measures over an extended period are the key elements of skin cancer prevention to lessen the huge economic burden in Australia. It has been well-documented that sun protection behaviours can be influenced by mass media campaigns and education programs. Evidence also shows that sun protection behaviours change and sunburn incidence decreases during skin cancer prevention campaigns. A sustained and intensive sun protection program is warranted to maintain the prevention benefits.
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