Medicare and hospital funding

Budget Review 2018–19 Index

Amanda Biggs

The Government has announced a number of measures relating to Medicare in this Budget. Expenditure on Medicare is estimated to be $24.1 billion in 2018–19, an increase in real terms of 1.1 per cent on 2017–18.[1] Funding for Medicare is now through a special account, the Medicare Guarantee Fund, which was established as a result of last year’s Budget.[2]

New Medicare Benefits Schedule listings

A number of new and amended listings will be added to the Medicare Benefits Schedule (MBS) as a result of recommendations made by the independent Medical Services Advisory Council (MSAC). Among the new items to be funded are:

  • a new pathology test for patients with a cystic fibrosis gene mutation
  • treatment for patients with idiopathic (of unknown cause) overactive bladder
  • magnetic resonance imaging (MRI) prostate scans for diagnosing prostate cancer and for monitoring diagnosed patients.[3]

The total cost over four years from 2018–19 is estimated to be $25.4 million.[4]

In addition, the Budget includes $49.4 million in funding over four years for a raft of new and amended listings as a result of recommendations made by the clinician-led MBS Review Taskforce which has been considering how to align the more than 5,700 items on the MBS with contemporary clinical evidence and practice. The first tranche of recommendations made by the Taskforce resulted in the removal of 24 obsolete items from the MBS in the 2016–17 Budget.[5] Net savings of $189.7 million from the Review have been ‘re-invested by the Government in Medicare’.[6] Recently, the Chair of the Taskforce announced that the Government had accepted 38 of its most recent recommendations which included a number of additions and amendments to the MBS.[7] New items to be funded include:

  • renal medicine items to support dialysis services in rural and remote regions, which will improve access for Aboriginal and Torres Strait Islander people with kidney disease. Aboriginal and Torres Strait Islander people experience kidney disease at 7.3 times the rate of other Australians[8]
  • three dimensional (3D) breast tomosynthesis—a form of high resolution imaging for breast cancer detection.

Amendments include restricting GP referrals for some MRI scans for knees, and restructuring the schedule for spinal surgery services.[9]

New listings and amendments to the MBS do not require legislation, but are enacted through legislative instrument.

Modernising the health and aged care payments system

Last year’s Budget included funding of $67.3 million (over one year) to modernise the health and aged care payments ICT systems. This budget includes an additional $106.8 million over four years to progress this work.[10]

Low income thresholds

The Budget includes the annual adjustment to the Medicare levy low income thresholds, in line with movements in the Consumer Price Index (CPI). These annual adjustments ensure that those on incomes below these thresholds are exempt from paying the Medicare levy. The low income thresholds will be increased to $21,980 for singles, $37,089 for families and $48,385 for seniors and pensioners.[11] The cost to the Budget over the forward estimates is $230.0 million. These threshold adjustments will require legislation.

Medicare levy

As expected, the Budget confirmed that the Government will not proceed with the planned 0.5 percentage point increase to the Medicare levy which was to be used to help fund the National Disability Insurance Scheme (NDIS).[12] The levy will remain at 2.0 per cent. The implications of this decision are briefly discussed in the Library Flagpost article, ‘‘Fighting for funding’: where to next for the NDIS?’.[13]


$9.5 million over five years from 2017–18 is provided to improve compliance and debt recovery arrangements for doctors. The measure includes ‘better targeting investigations into fraud, inappropriate practice and incorrect claiming’.[14] Legislation will be introduced to support these measures.[15]

Stakeholder reaction

Stakeholder reaction to individual Medicare measures has varied. For example, the Australian Healthcare and Hospitals Association (AHHA) welcomed the continuing work of the MBS Review Taskforce[16] and the Consumers Health Forum welcomed the ‘additional funding for hospitals, Medicare, aged care and medicines’.[17] However, some in the diagnostic imaging sector have criticised the government for failing to immediately end the freeze on indexation of diagnostic imaging fees, and for restricting GP-referred MRI scans on knees.[18] A number of disability and social sector stakeholders have expressed disappointment over the decision to not proceed with the Medicare levy increase.[19]

Hospital funding

All but two states (Victoria and Queensland) have signed up to a new five-year public hospital funding agreement from 2020–21.[20] Under the agreement, the Government has committed to providing $130.2 billion over five years from 2020–21, based on funding 45 per cent of the efficient growth in hospital activity, with total funding growth capped at 6.5 per cent a year.[21] These parameters are the same as those operating under the current agreement. Estimated allocations to individual states and territories to 2021–22 are provided in the Budget,[22] but final entitlements will be subject to reported hospital activity levels and the determination of the national efficient price for hospital services by the Independent Hospital Pricing Authority.

The Government is also providing $100 million for a new Health Innovation Fund—$50 million in 2018–19 and $50 million in 2020–21—for ‘trials that support preventive health innovations and better use of health data’.[23] The Fund is conditional on all states and territories signing the hospital funding agreement.[24]

In addition to funding for public hospital activities, the Budget includes $188.9 million to support the expansion of the Joondalup Health Campus and Osborne Parks Hospital, and refurbishment of Royal Perth Hospital.[25] The funding is being provided in the form of a GST top-up payment to Western Australia for 2017–18.[26]

Stakeholder reaction

Stakeholder reaction has been varied. The CHF has welcomed the ‘record funding for hospitals’ and the proposed Health Innovation Fund, which will ‘look at models of care that involve specialist hospital providers working in innovative ways outside of the hospital walls and better integrating with primary and community health services’.[27] The Australian Medical Association has argued that ‘more [hospital] funding will be needed over the long term’.[28] Meanwhile, Victorian Minister for Health, Jill Hennessy has criticised the Government for not increasing the Commonwealth’s contribution to 50 per cent of the efficient growth of hospital activity and was also critical of the lack of funding for health infrastructure projects in Victoria.[29]

[1].          Australian Government, Budget strategy and outlook: budget paper no. 1: 2018–19, p. 6-19.

[2].          The Medicare Guarantee Act 2017 received Royal Assent on 26 June 2017.

[3].          Department of Health (DoH), ‘Guaranteeing Medicare – Medicare Benefits Schedule – new and amended listings’, Budget 2018–19 Fact Sheet, 8 May 2018.

[4].          Australian Government, Budget measures: budget paper no. 2: 2018–19, p. 109.

[5].          DoH, ‘Healthier Medicare – removing obsolete services from the Medicare Benefits Schedule’, Budget 2016–17 Fact Sheet, 3 May 2016.

[6].          Budget measures: budget paper no. 2: 2018–19, p. 110.

[7].          B Robinson (Chair of the MBS Review Taskforce), ‘Latest recommendations accepted by Government, media release, 29 April 2018.

[8].          DoH, ‘Indigenous Health – investment in remote renal services and infrastructure’, Budget 2018–19 Fact Sheet, 8 May 2018.

[9].          DoH, ‘Guaranteeing Medicare –Medicare Benefits Schedule Review – response to Taskforce recommendations’, Budget 2018–19 Fact Sheet, 8 May 2018.

[10].       Budget measures: budget paper no. 2: 2018–19, pp. 110–111.

[11].       Ibid., p. 32.

[12].       Ibid.

[13].       L Buckmaster, ’Fighting for funding’: where to next for the NDIS?’,FlagPost, Parliamentary Library blog, 27 April 2018.

[14].       Budget measures: budget paper no. 2: 2018–19, p.109.

[15].       DoH, ‘Guaranteeing Medicare – improving safety and quality through stronger compliance’, Budget 2018–19 Fact Sheet, 8 May 2018.

[16].       Australian Healthcare and Hospitals Association (AHHA) ‘Health data boost right step on the road to reform’, media release, 8 May 2018.

[17].       Consumers Health Forum (CHF), ‘Health budget includes welcome consumer focus’, media release, 8 May 2018.

[18].       Australian Diagnostic Imaging Association, ‘Budget: Government is “miles short” on Medicare’, media release, 8 May 2018.

[19].       L Buckmaster, op. cit.

[20].       G Hunt (Minister for Health), ‘Northern Territory and Tasmania sign onto record hospital funding agreement’, media release, 23 April 2018.

[21].       Budget measures: budget paper no. 2: 2018–19, p. 126.

[22].       Australian Government, Federal financial relations: budget paper no. 3: 2018–19, p. 15.

[23].       Budget measures: budget paper no. 2: 2018–19, p. 126.

[24].       DoH, ‘Record Hospital Investment – National Health Agreement 2020–21 to 2024–25’, Budget 2018–19 Fact Sheet, 8 May 2018.

[25].       Federal financial relations: budget paper no. 3: 2018–19, p. 23.

[26].       Budget measures: budget paper no. 2: 2018–19, p. 144.

[27].       CHF, op. cit.

[28].       Australian Medical Association (AMA), ‘Safe and steady health budget, but bigger reforms are still to come, media release, 9 May 2018.

[29].       J Hennessy (Victorian Minister for Health), Patients suffer as Turnbull gives big business a tax cut, media release, 8 May 2018.


All online articles accessed May 2018.

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