Health overview

Budget Review 2010-11 Index

Budget 2010–11: Health


Amanda Biggs         

There have been calls for reform to the Australian health system for a long time.[1] The centrepiece of the 2010–11 Budget for health is the Rudd Government’s response to an extensive consultation process on the shape of this reform. This involved the commissioning of three major reports, and extensive discussions with health care providers, community and stakeholder groups, the public and other levels of government.

The Budget sets out the new National Health and Hospitals Network (NHHN), which will radically change the way that hospitals are funded, and provides funding for a range of other significant health initiatives. Some of these were announced earlier this year at the Council of Australian Governments’ (COAG) meeting.[2] Funding is provided to: establish the infrastructure and institutions for the NHHN, improve hospital services through the proposed Local Hospital Networks (LHNs), develop new primary health care organisations to coordinate services (to be known as Medicare Locals), improve the management of diabetes, expand and support the health workforce, build more GP super clinics and fund GP infrastructure, increase some mental health services, implement e-health initiatives, ensure sustainability of the Pharmaceutical Benefits Scheme (PBS), take action on smoking and alcohol, develop a more integrated aged care system, and fund the advertising of these reforms. This Budget also includes funds for a number of other measures, including partly restoring the Medicare rebate for cataract surgery that was reduced last year.[3]

These funding commitments, along with those made earlier in the year at COAG, provide a package totalling $7.3 billion over five years.[4] Over the forward estimates, expenditure on the health function is forecast to grow by 9.3 per cent a year, significantly higher than growth forecasts from recent budgets.[5] The Government is seeking to generate savings and revenue to offset some of the costs, mainly by reducing the price paid for subsidised medicines, increasing the tobacco excise, and increasing the threshold for the medical expenses tax offset. It will also continue to press for a means test on the private health insurance rebate, a measure that has been rejected by the Senate.[6]

While the health funding and reform commitments in the Budget are significant, some argue that aged care, mental health, Indigenous health and dental health have not received adequate attention.[7] The calls for greater investment in these sectors are likely to continue into the future. Mental health in particular remains an area of significant stakeholder concern. While some funding announcements in the Budget have been welcomed, some in the health sector have expressed considerable disappointment with the Budget overall.[8] In residential aged care, there remain concerns over the longer-term viability of the sector, given funding gaps between the cost of providing care and the available government subsidies.[9] Reforming the health workforce to meet the challenges of current and future health needs continues to be a challenge for policy makers and, while alternative workforce options are being investigated, this Budget appears to have favoured more traditional solutions.[10]

Nevertheless innovative approaches, such as the budget proposals to manage patients with diabetes (and veterans with chronic diseases) through fund-holding arrangements, signal a preparedness to explore new models. However, changes are usually associated with uncertainty and questions remain over whether such approaches will deliver better care or create perverse incentives. Meanwhile, the fate of some savings measures remain uncertain; the legislation means-testing the private health insurance rebate remains unsupported in the Senate, and expected savings from reforms to pharmaceutical pricing arrangements may be difficult to fully realise.[11]

Significant challenges also remain to realising the Government’s ambitious reform agenda. How the proposed independent LHNs and Medicare Locals will improve integration and coordination at the local level is yet to be determined. Governance arrangements need to be established, performance standards set, information and data systems established, reporting protocols agreed and, not least, goodwill established between stakeholders and vested interests overcome. Furthermore, although Western Australia will continue to be funded through the existing National Healthcare Specific Purpose Payment arrangements, it will continue to remain outside these arrangements as long as it is not a signatory to the COAG agreement. A truly national reform program therefore remains an elusive goal.

[1].    A Boxall, ‘Reforming Australia’s health system, again’, Medical Journal of Australia, vol. 192, no. 9, pp. 528–30, viewed 14 May 2010,

[2].    Council of Australian Governments, Communiqué, 29th Meeting, 19–20 April 2010, viewed 18 May 2010,

[3].    Unless otherwise indicated, the budget figures are taken from: Australian Government, Budget measures: budget paper no. 2: 2010–11, Commonwealth of Australia, Canberra, 2010.

[4].    N Roxon (Minister for Health and Ageing), Building a health and hospitals network for Australia’s future, media release, Canberra, 11 May 2010, viewed 17 May 2010, .

[5].    Australian Government, Budget strategy and outlook: budget paper no. 1: 2010–11, Commonwealth of Australia, Canberra, 2010, p. 6–18.

[6].    This measure remains stalled in the Senate.

[7].    J Breusch, ‘Nursing homes press funds case’, Australian Financial Review, 14 May 2010, p. 20, viewed 14 May 2010,;query=Id%3A%22media%2Fpressclp%2FK8PW6%22 

[8].    The Mental Health Council of Australia has condemned the lack of funding in the Budget. See Mental Health Council, Government wrong – this is not a good budget for mental health, media release, 13 May 2010, viewed 17 May 2010,

[9].    These concerns are explored in more detail in the brief by Rebecca de Boer, below.

[10]. For more detail, refer to the workforce brief by Dr Rhonda Jolly, below.

[11]. For more detail, refer to the PBS and pharmacy brief by Rebecca de Boer, below.