Health spending: patients bearing higher costs

Parliament house flag post

Health spending: patients bearing higher costs

Posted 2/05/2013 by Amanda Biggs



Recent reports have highlighted the growing cost of health services and the increasing financial burden on individuals. According to data from the Australian Institute of Health and Welfare (AIHW) Australia spent more than $130 billion on health in 2010–11, or around 9.3% of Gross Domestic Product (GDP). Around 70% of this was spending by Government—the Commonwealth and the states and territories combined, through programs such as Medicare, public hospital services and the Pharmaceutical Benefits Scheme (PBS). But a significant and growing component of health expenditure comes from individuals.


Australians paid $24.3 billion out-of-pocket on purchasing health goods and services in 2010–11. More than a third of this was used to purchase medicines—mostly non-PBS medicines—about 18% was spent on dentistry, 10% for aids and appliances and 11% on doctor provided services. Around 7% was spent on services purchased from other (non-medical) health providers. Over the last decade, out-of-pocket spending on health has grown slightly faster than overall spending on health (6.2% compared to 5.3% growth).

Australians also contribute to the cost of government funded health programs via the taxation system. The 1.5% Medicare levy on income tax raised around $9 billion in 2011–12, meeting just over half the cost of Medicare itself.

In terms of annual individual expenditure, the Consumers Health Forum (CHF) recently estimated that Australians pay an average of $1075 per year out-of-pocket on health services. This is $94 higher than the average paid in other developed countries.

So why are Australians who have access to free public hospital treatment, subsidised medicines and rebates for medical services, paying so much out of their own pockets for health care?

The answer is not straightforward, but a number of factors could be driving this expenditure, including government policies.

Successive governments have encouraged Australians to purchase private health insurance (PHI), in the interests of reducing the load on the public system. The Government provides a means-tested rebate on premiums; the Medicare Levy surcharge is a financial disincentive on higher income earners to forego purchasing private hospital cover; and Lifetime Health Cover penalises those aged over 30 with a 2% loading on their premium for each year they delay taking up cover. Together, these policies have been credited with driving growth in PHI membership, reversing the downward trend which occurred following the introduction of Medicare in the mid-1980s.

Patients with PHI can potentially avoid long public hospital waiting times and choose their own doctor. PHI can also help defray the cost of ancillary services such as dentistry and optometry. But sometimes there will be a gap between the fee charged by the provider and what the health insurer and/or Medicare reimburses. The regulator estimates that while few hospital services generate a gap, nearly half of all ancillary services will include a gap payment (see figure p.17 of their annual report).

Patients with chronic conditions such as diabetes often need multiple medications to manage their condition. While the PBS helps subsidise the cost of these medicines, patient co-payments apply ($5.90 for concession card holders and $36.10 for others). A safety net applies after annual expenditure reaches a certain threshold, but patient co-payments up to this point can be high. In 2010–11, patient co-payments for PBS medicines totalled $1.5 billion, according to AIHW (p. 69 of the AIHW report). But patients paid considerably more for over the counter and non-subsidised medicines—$6.3 billion according to AIHW (p. 71). Growth in the cost of medications paid for by individuals is well above other health costs.

While Medicare reimburses patients for many professional medical services and bulk billing is common, a growing proportion of medical costs are being met by individuals. Out-of-pocket expenditure on medical services increased by 6.5% in 2010–11 according to AIHW (p. 63). While patient costs can be offset by the Medicare Safety Net, many services now have a cap on reimbursement. CHF points out that more patients are now foregoing seeing their doctor due to cost. Some argue the fee for service model which remunerates doctors is the problem. Doctors are paid for each time they see a patient, creating a financial incentive for them to see more patients, but not necessarily provide a quality service.

Added to this is the cost of non-medical health goods and services. These include a range of complementary therapies such as physiotherapy and so-called alternative therapies like homeopathy and aromatherapy. In 2010–11, individuals paid around $1.8 billion for such services.

Then there is our health ‘system’, which the National Health Reform Commission described in 2009 as fragmented and unduly complex. CHF describes it as ‘failing’. As more Australians develop lifestyle related chronic conditions and health costs to both patients and governments grow, calls for reform to our health system look set to continue.

Image Source: Victorian Department of Health



Thank you for your comment. If it does not require moderation, it will appear shortly.

Add your comment

[Click to expand]

We welcome your comments, or additional information which is relevant to a post. These can be added by clicking on the ‘Add your comment’ option above. Please note that the Parliamentary Library will moderate comments, and reserves the right not to publish comments that are inconsistent with the objectives of FlagPost. This includes comments that are not relevant to the article, factually incorrect or politically partisan, as well as spam, profanity and personal abuse. We will close comments after three months.




Captcha
Generate a new image
Type characters from the image:

Facebook LinkedIn Twitter Add | Email Print

FlagPost

Flagpost is a blog on current issues of interest to members of the Australian Parliament


Parliamentary Library Logo showing Information Analysis & Advice

Archive

Syndication

Tagcloud

refugees asylum immigration climate change Australian foreign policy parliament social security elections welfare reform welfare policy school education Australian Defence Force health financing higher education emissions trading indigenous Australians women private health insurance people trafficking Employment illicit drugs gambling health reform federal election 2010 Middle East disability Sport Australian Bureau of Statistics statistics United Nations Asia Afghanistan income management Medicare health forced labour Taxation Australian Sports Anti-Doping Agency World Anti-Doping Agency United States federal budget Industrial Relations Carbon Pricing Mechanism politics dental health Australian Electoral Commission WADA criminal law transport aid child protection environment poker machines Australia in the Asian Century steroids National Disability Insurance Scheme detention aged care 43rd Parliament slavery health system ASADA Law Enforcement Australian Federal Police Fair Work Act Australian Public Service governance labour force people smuggling debt international relations constitution New Zealand food Australian Crime Commission pharmaceutical benefits scheme OECD corruption pensions public service reform children's health Aviation federal election 2013 foreign debt gross debt net debt defence capability parliamentary procedure Senate Senators and Members ALP Newstart Parenting Payment multiculturalism Youth Allowance sea farers UK Parliament election results voting mental health Federal Court terrorist groups science social media Higher Education Loan Program HECS federal state relations accountability Papua New Guinea youth paid parental leave same sex relationships coal seam gas customs planning doping crime health risks International Women's Day Gonski Review of Funding for Schooling sex slavery Special Rapporteur Northern Territory Emergency Response social policy violence against women domestic violence China ADRV terrorism transparency research and development welfare ASIO intelligence community Australian Security Intelligence Organisation carbon tax mining High Court military history electoral reform employer employee renewable energy regional unemployment fishing by-election European Union family assistance skilled migration banking United Nations Security Council Australian economy forestry food labelling vocational education and training Drugs welfare systems Indonesia children Constitutional reform local government codes of conduct terrorist financing homelessness Parliamentary remuneration money laundering Trafficking in Persons Report energy social inclusion human rights paternalism national security fuel disability employment Tasmania integrity standards NATO Australian Secret Intelligence Service sexual abuse World Trade Organization Australia public health housing affordability bulk billing political parties water productivity health policy Governor-General US economy trade unions export liquefied natural gas foreign bribery firearms question time speaker superannuation public housing expertise public policy climate Intergovernmental Panel on Climate Change leadership Department of Agriculture Fisheries and Forestry regulation Pacific Islands reserved seats new psychoactive substances synthetic drugs UNODC carbon markets animal health middle class welfare Census Indigenous constitutional recognition of local government referendum consumer laws PISA competition policy royal commission US politics language education baby bonus Leaders of the Opposition citizen engagement policymaking Australia Greens servitude Trafficking Protocol forced marriage Population rural and regional alcohol entitlements ministries Hung Parliament social citizenship maritime Iran ANZUS regional students school chaplains federal budget 2011-12 salary Medicare Locals primary care Building the Education Revolution EU China soft power education Fiji India Disability Support Pension Antarctica Diplomacy by-elections state and territories Bills anti-corruption fraud bribery corporate ownership whistleblower G20 economic reform innovation Members of Parliament Scottish referendum early childhood education Middle East; national security; terrorism social services Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 online grooming sexual assault of minors ACT Assembly smoking plain packaging tobacco cigarettes Asia; Japan; international relations Work Health and Safety Migration; asylum seekers; regional processing China; United States; international relations fiscal policy Racial Discrimination Act; social policy; human rights; indigenous Australians Foreign policy Southeast Asia Israel Palestine asylum refugees immigration political finance donations foreign aid Economics efficiency human rights; Racial Discrimination Act employment law bullying asylum seekers Animal law; food copyright Australian Law Reform Commission industry peace keeping contracts workplace policies same-sex marriage disorderly conduct retirement Parliament House standing orders prime ministers election timetable sitting days First speech defence budget submarines workers financial sector Canada Somalia United Kingdom GDP world heritage political engagement leave loading Trade; tariffs; safeguards; Anti-dumping public interest disclosure whistleblowing Productivity Commission limitation period universities Ireland cancer gene patents genetic testing suspension of standing and sessional orders live exports infant mortality honorary citizen railways disciplinary tribunals standard of proof World Health Organisation arts international students skilled graduate visas temporary employment visas apologies roads Italy national heritage NHMRC nutrition anti-dumping Rent Assistance obesity evidence law sacrament of confession US presidential election international days DFAT UN General Assembly deregulation Regulation Impact Statements administrative law small business Breaker Morant regional engagement social determinants of health abortion Members suspension workplace health and safety marine reserves hearing TAFE Victoria astronomy resources sector YMCA youth parliament Korea rebate Australian Greens presidential nomination Racial Discrimination Act political parties preselection solar hot water Financial Action Taskforce Horn of Africa peacekeeping piracy Great Barrier Reef Stronger futures political financing political education Social Inclusion Board early childhood National Quality Framework for Early Childhood Education and Care Murray-Darling Basin sanctions Norway hospitals republic President Barack Obama Presidential visits qantas counselling Korean peninsula Work Choices biosecurity hendra environmental law federalism federation preselection therapeutic goods Therapeutic Goods Administration plebiscites computer games pests suicide nuclear COAG Ministerial Councils floods ADHD stimulant medication advertising electricity extradition conscience votes poverty preventative health rural health coastal erosion Parliamentary Budget Office work-life balance

Show all
Show less
Back to top