How much does Medicare cost?

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How much does Medicare cost?

Posted 21/02/2014 by Amanda Biggs

The Treasurer, Mr Hockey said on Channel Seven’s Sunrise program on 21 February 2014, that the cost of Medicare was going to soon rise from $65 billion a year to $75 billion a year. However, the official transcript later clarified this to include other federal health expenditure. Seeing Medicare in the context of these wider figures, it is evident the actual cost of Medicare is considerably lower.

According to Budget Paper no. 1 (2013–14) spending on Medicare for the current financial year is estimated to be $19.0 billion and is forecast to grow to $23.6 billion in 2016–17. Medicare is the fourth most expensive program after payments to the states, support for seniors (mainly the aged pension) and family tax benefits.

Expenditure on Medicare covers benefits paid for services listed in the Medicare Benefits Schedule (MBS), including GP visits, specialist consultations and operations in private hospitals.

Total Commonwealth expenditure on health services overall is estimated to be around $62 billion this financial year, growing to $75.4 billion in 2016–17.

Spending on medical services and benefits, which includes Medicare and the private health insurance rebate, as well as other medical payments made by the Commonwealth, is estimated to total $25.5 billion this year, rising to $30.5 billion in 2016–17.

Meanwhile, revenue from the Medicare levy—a 1.5% levy on taxable income—is estimated to total $10.3 billion in 2013–14, but is forecast to grow by nearly 60% to $16.2 billion in 2016–17. The levy is to be raised to 2% from July 2014, to help fund the NDIS, which accounts for some of this forecast growth. It should be noted that the Medicare levy only partially offsets the cost of Medicare; the remaining funds are drawn from taxation revenue.

Table 8.1: Trends in the major components of medical services and benefits sub‑function expenses(a)

Estimates Projections
Medicare services 18,549 19,092 20,843 22,161 23,662
Private health insurance(a) 5,564 5,399 5,578 5,748 5,912
General medical consultations and services 928 916 912 904 908
Primary care practice incentives 281 208 223 229 234
Other -15 -63 -126 -124 -168
Total 25,307 25,552 27,430 28,918 30,548

 (a) Following changes to indexation, announced in the MYEFO, the estimated financial impact of premium growth on the forward estimates for the Private Health Insurance Rebate has been removed from the Contingency Reserve and included in the published estimates.

Source: Budget Strategy and Outlook: Budget paper no. 1: 2013-14, p. 6-27. 

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