Health

Budget Review 2019–20 Index

Jennifer Phillips, Alex Grove and Lauren Cook

Key figures

  • Total spending on health in 2019–20 is estimated to be $81.8 billion, representing 16.3 per cent of the Australian Government’s total expenditure (see Table 1).
  • Medical services and benefits, comprised primarily of Medicare and Private Health Insurance Rebate expenses, will account for $33.7 billion, or 41.2 per cent of total health funding in 2019–20. Growth in Medicare expenses is the major driver of growth.
  • Pharmaceutical benefits and services, comprised largely of Australian Government subsidies for Pharmaceutical Benefits Scheme (PBS) medicines, will account for $12.7 billion, or 15.5 per cent of total health spending, in 2019–20.
  • Assistance to the states for public hospitals, comprising the Australian Government’s contribution to public hospital funding, will account for $22.5 billion, or 27.5 per cent of total health funding in
    2019–20. In addition to $22.5 billion in National Health Reform Funding the Government will provide $269.5 million in National Partnership payments (p.17).
  • Hospital services, comprised mainly of payments to the states and territories to deliver veterans’ hospital services, will account for $1.3 billion, or 1.6 per cent of total health funding in 2019–20.
  • Health services, comprised of Australian Government expenses associated with the delivery of population health, medical research, mental health, blood and blood products, other allied health services, health infrastructure and disbursement from the Medical Research Future Fund (MRFF), will account for $7.4 billion, or 9.0 per cent of total health funding in 2019–20.
  • General administration, comprised of general administrative costs, investment in health workforce measures and support for rural health initiatives will account for $3.2 billion, or 4.0 per cent of total health funding in 2019–20.
  • Aboriginal and Torres Strait Islander health, Indigenous-specific services under the Indigenous Australians Health Program, will account for $962.0 million, or 1.2 per cent of total health funding in 2019–20.

Table 1: total health expenses, $ million

2018–19
(est.)
2019–20
(est.)
2020–21
(est.)
2021–22
(proj.)
2022–23
(proj.)
Medical services and benefits  32 197  33 687  35 121  36 823  38 814
Pharmaceutical benefits and services  13 457  12 688  10 877  10 862  11 085
Assistance to the States for public hospitals  21 708  22 535  23 622  24 815  26 183
Hospital services  1 385  1 298  1 218  1 181  1 149
Health services  7 505  7 371  7 441  7 646  8 021
General administration  3 395  3 236  3 252  3 194  3 228
Aboriginal and Torres Strait Islander health   922   962   998  1 031  1 065
Total  80 569  81 777  82 530  85 552  89 544

Note: totals may not sum due to rounding
Source: Australian Government, Budget strategy and outlook: budget paper no.1: 2019–20, pp. 5-19.

Figure 1: estimated Australian Government expenses on health

Estimated Australian Government expenses on health

Source: Australian Government, Budget strategy and outlook: budget paper no.1: 2019–20, p. 5-19.

Key trends

The following figures come from Budget Paper no. 1 unless otherwise stated:

  • Spending on health is expected to increase by 2.0 per cent in real terms (accounting for inflation) from 2019–20 to 2022–23. The largest drivers of this increase will be growth in assistance to the states for public hospitals, and medical services and benefits.
  • Real spending on medical benefits is expected to increase by 9.8 per cent from 2019–20 to 2022–23. This is largely due to ongoing growth in the use of medical services and the use of high value items on the Medicare Benefits Schedule. Expenses for private health insurance are expected to increase by 0.7 per cent in real terms over the period 2019–20 to 2022–23. Expenses for dental services are expected to decrease 2.0 per cent in real terms over the period 2019–20 to 2022–23.
  • Real spending on pharmaceutical benefits and services is expected to decrease by 18.6 per cent from 2019–20 to 2022–23. This is largely due to changes to PBS payment administration, announced in the 2018–19 Budget, which have the effect of reducing both expenditure and revenue (from confidential rebates paid by pharmaceutical companies). Implementation of these changes has been delayed, but it appears the Government still intends to proceed with them. Overall PBS investment (expenses less revenue) is expected to be relatively flat over the forward estimates in nominal terms (p. 88).
  • Real spending on assistance to the states for public hospitals is expected to increase by 8.3 per cent over the period 2019–20 to 2022–23. The current public hospital agreement between the Commonwealth and the states and territories is due to expire in mid-2020. In the 2018–19 budget, the Government committed to a new health and hospitals agreement from 2020–21 to 2024–25. Consistent with current arrangements, under this agreement the Commonwealth will fund 45.0 per cent of the efficient growth of activity based services, capped at 6.5 per cent per annum. Budget paper no. 3 (p. 18) states that the new agreement is being developed for approval by the Council of Australian Governments before the end of 2019.

Significant policy announcements

Table 2: significant policy announcements, $ million

Budget measure 2018–19
(est.)
2019–20
(est.)
2020–21
(est.)
2021–22
(proj.)
2022–23
(proj.)
Dental          
Child Dental Benefits Schedule — three year extension - - - - -
Medicare
Guaranteeing Medicare — strengthening primary care 46.7 147.1 142.0 268.8 449.5
Guaranteeing Medicare — improved access to diagnostic imaging 8.0 35.9 52.2 89.9 126.5
My Health Record
My Health Record — continuation - - - - -
Medical Research Future Fund
Investing in Health and Medical Research — Medical Research Future Fund — Ten Year Investment Plan 0.3 8.4 5.9 9.3 8.4
Hospitals
Supporting Our Hospitals — additional infrastructure and services 16.2 5.1 7.6 19.6 29.6
Supporting Our Hospitals — Community Health and Hospitals Program - - - - -
Medicines
Improving Access to Medicines — Life Saving Drugs Program nfp nfp nfp nfp nfp
Improving Access to Medicines — Pharmaceutical Benefits Scheme — new and amended listings (expense) 46.7 101.0 17.8 17.5 18.4
(related revenue) nfp nfp nfp nfp nfp
Improving Access to Medicines — supporting community pharmacy -85.0 -46.0 76.7 76.7 76.7
Mental health
Prioritising Mental Health – caring for our community 8.6 12.9 39.3 40.0 48.6
Prioritising Mental Health – national headspace network 13.9 16.7 34.3 42.6 45.9
Prioritising Mental Health – Early Psychosis Youth Services - - - - -

Notes: ‘-‘ means zero; ‘nfp’ means for ‘not for publication’.
Source: Australian Government, Budget measures: budget paper no. 2: 2019–20, pp. 84–108.

As outlined in table 2 above, the 2019–20 Budget includes a number of proposed policy measures that relate to health. Further information on these measures is provided below.

Dental

  • Over $1.0 billion for a three year extension of the Child Dental Benefits Schedule (CDBS) from 1 January 2020. The CBDS provides eligible children aged between 2 and 17 years access to $1,000 of dental services over a two year period. Provision for this funding has already been included in the forward estimates.

Medicare

  • A $1.1 billion commitment to strengthen primary health care. This announcement builds on funding provided for primary care in the Mid-Year Economic and Fiscal Outlook (MYEFO) 2018–19 (pp. 183–184) and includes:
    • $448.5 million over three years from 2020–21 for a new chronic disease care funding model. Under this model, Australians over the age of 70 will be able to voluntarily enter into an agreement with their general practitioner, and receive more personalised, coordinated care. Patients will also be able to receive consultations, referrals, scripts and test results remotely
    • $201.5 million over five years for the Practice Incentives Program Quality Improvement Initiative, including retention of the Aged Care Access Incentive
    • $187.2 million over four years to re-introduce indexation (p. 89) to all 176 remaining General Practitioner services on the Medicare Benefits Schedule from 1 July 2019. The decision to re‑introduce indexation matches a commitment made by Labor in March 2019 to end the indexation pause on these services one year ahead of schedule. The pause on Medicare indexation was first introduced by Labor in the 2013–14 Budget (p. 177) as a temporary measure to July 2014. It was reimposed by the Liberal National Government in MYEFO 2014–15 (p. 166) and extended in the 2016–17 Budget (p.108) to July 2020 and 
    • $62.2 million over five years to implement a new medical training pathway for rural generalists and provide additional training places for General Practitioners in rural, remote and regional communities.
  • $308.9 million over five years from 2018-19 for improved access to diagnostic imaging services (partial funding for this measure has already been included in the forward estimates). This measure includes:
    • provision of an additional 23 Magnetic Resonance Imaging (MRI) licences to provide Medicare subsidised access to imaging services. This takes the total number of new licences announced by the Government since 2018 to 53, with a cost of $379 million (p. 16)
    • $198.6 million to increase the Medicare rebate for all diagnostic radiology and ultrasounds on the Medicare Benefits Schedule (MBS) from 1 July 2020 and
    • $32.6 million for two new Medicare items for MRI of the breast for the diagnosis of breast cancer.

My Health Record

  • $200.0 million in 2019–20 to continue the My Health Record system. Funding for this measure has already been provided for by the Government.

Medical Research Future Fund

  • A $5.0 billion, Ten Year Investment Plan for the Medical Research Future Fund (MRFF). The plan is underpinned by four themes—patients, researchers, translation and missions. Provision for disbursements from the MRFF has already been included in the forward estimates. Significant measures under this plan include:
    • a further $931.0 million (total $1.3 billion) allocated to improve the health of Australians through the development of new treatments and cures informed by the latest research, such as $354.0 million for Clinical Trials for Rare Cancers, Rare Diseases and Unmet Needs; and $554.0 million for Emerging Priorities and Consumer Driven Research
    • a further $444.6 million (total $792.8 million) for health and medical research, industry researcher exchange and training, and clinical researchers
    • a further $1.2 billion (total $1.4 billion) for research missions—long-term investments in health and medical research to address complex issues. This includes the Australian Brain Cancer Mission, the Million Minds Mental Health Research Mission and the Genomics Health Futures Mission (announced in the 2018–19 Budget), among others and
    • a further $1.2 billion (total $1.5 billion) for translation projects in a range of areas, including: preventive and public health research, primary health care research and medical research commercialisation.

Hospitals

  • $1.3 billion over seven years from 2018-19 as part of the Community Health and Hospitals Program. The program covers four priority areas: hospital infrastructure; drug and alcohol treatment; preventive health, primary care and chronic disease management; and mental health. Provision for this funding has already been included in the forward estimates. Significant funding under this measure so far includes:

Medicines

Mental health

  • The 2019–20 Budget includes $736.6 million in funding over seven years for mental health, some of which has already been provided for by the Government (p. 1-21). Significant measures include:
    • $114.5 million over five years from 2020–21 to fund a trial of eight adult community mental health centres. It is intended that the centres will provide people seeking help with on-the-spot treatment, advice and support without needing a prior appointment
    • $152.0 million over seven years from 2018–19 for additional services across the headspace youth mental health network to reduce waiting times and improve the quality of services
    • $111.3 million over seven years from 2018–19 for an additional 30 headspace services across Australia. This includes 10 new headspace centres and 20 new satellite services and
    • $109.7 million from 2019–20 to extend the Early Psychosis Youth Services program at 14 headspace centres for an additional two years. Funding for this measure has already been provided for by the Government.

 

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