Health overview

Budget Review 2021–22 Index

Melanie Conn

Key figures and trends

Total spending on health in 2021–22 is estimated to be $98.3 billion, representing 16.7% of the Australian Government’s total expenditure (Budget Strategy and Outlook: Budget Paper No. 1: 2021–22, pp. 161–162). Table 1 below shows expenses by sub-function as forecast in the Budget papers (nominal) while Figure 1 shows this in constant 2021–22 dollars (real terms). Total expenses are projected to increase by 2.0% in real terms between 2020–21 and 2021–22, before decreasing by 2.1% by 2024–25, largely due to the cessation of COVID-19 emergency response measures.

Table 1: health function expenses, 2020–21 to 2024–25 (nominal)

$ million (estimates) 2020–21 2021–22 2022–23 2023–24 2024–25
Medical services and benefits 36,841 37,551 38,352 39,960 41,656
Assistance to the states for public hospitals 22,646 25,463 26,649 28,238 29,916
Pharmaceutical benefits and services 14,762 15,208 15,375 15,817 16,127
Health services 14,130 13,653 9,755 9,658 9,811
General administration 4,036 4,233 3,491 3,419 3,405
Hospital services 1,143 1,195 1,147 1,161 1,172
Aboriginal and Torres Strait Islander health 975 980 1,011 1,048 1,089
Total 94,533 98,283 95,779 99,300 103,177

Note: totals may vary due to rounding.

Source: Australian Government, Budget strategy and outlook: budget paper no. 1: 2021–22, p. 171.

Figure 1: health function expenses, 2020–21 to 2024–25 (real, 2021–22 dollars)

Note: The Parliamentary Library has estimated real expenses using 2021–21 dollars; due to methodological differences, these estimates may produce growth rates that differ slightly from those reported in Budget Paper No. 1.

Source: Parliamentary Library estimates, adapted from Australian Government, Budget strategy and outlook: budget paper no. 1: 2021–22, p. 171.

Budget Paper No. 1 details expenses by sub-function (pp. 171–173):

  • Medical services and benefits, comprised largely of Medicare and Private Health Insurance rebate expenses, will account for $37.6 billion, or 38.2% of total health expenses in 2021–22.
    • Real spending is expected to increase by 3.4% from 2021–22 to 2024–25, with the largest driver of this increase being ongoing growth in the use of medical services listed on the Medicare Benefits Schedule (MBS). Expenses for private health insurance are expected to decrease in real terms over the period.
  • Assistance to the states and territories, comprising the Australian Government’s contribution to public hospital funding, will account for $25.5 billion, or 25.9% of total health expenses in 2021–22 (excluding National Partnership payments).
    • Real spending is expected to increase by 10.3% from 2020–21 to 2021–22, largely reflecting higher than anticipated growth in the volume of services, and then increase by 9.5% in real terms from 2021–22 to 2024–25.
    • A breakdown of Commonwealth National Health Reform funding to each state and territory in 2019–20 and estimates for 2020–21 to 2024–25 can be found in Federal Financial Relations: Budget Paper No. 3: 2021–22 (pp. 19–21).
  • Pharmaceutical benefits and services, comprised primarily of Australian Government subsidies for Pharmaceutical Benefits Scheme (PBS) medicines, will account for $15.2 billion, or 15.5% of total health spending in 2021–22.
    • Expenses are expected to be relatively steady over the forward estimates.
  • 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 and health infrastructure, will account for $13.7 billion, or 13.9% of total health funding in 2021–22. The sub-function also includes expenses associated with COVID-19 response measures.
    • Expenses are expected to decrease by 33.0% in real terms between 2021–22 and 2024–25 due to the cessation of pandemic response measures.
  • General administration, comprised of general administrative costs, investment in health workforce measures and support for rural health initiatives, will account for $4.2 billion, or 4.3% of total health funding in 2021–22.
    • Due to COVID-19 response measures, expenses are expected to increase by 2.9% in real terms between 2020–21 and 2021–22, before decreasing by 25.0% between 2021–22 and 2024–25.
  • Hospital services, comprised mainly of payments to the states and territories to deliver veterans’ hospital services, will account for $1.2 billion, or 1.2% of total health funding in 2021–22.
    • Expenses are expected to decrease by 8.5% in real terms over the period 2021–22 to 2024–25, reflecting an expected reduction in the number of veterans requiring treatment and efficiencies achieved in the pricing arrangements.
  • Aboriginal and Torres Strait Islander health, reflecting health portfolio Indigenous-specific services, will account for $980 million, or 1.0% of total health funding in 2021–22.
    • Real expenses are expected to increase by 3.5% between 2021–22 and 2024–25, related to utilisation of the Indigenous Australians’ Health Program.

Agency Resourcing: Budget Paper No. 4: 2021–22 (p. 161) shows that a number of agencies in the Health portfolio will increase staffing in 2021–22. Average staffing levels will increase from 6,559 in 2020–21 to 7,534 in 2021–22, with notable increases at the Department of Health (+498 to 4,634) and the Australian Digital Health Agency (+82 to 335).

Significant policy measures

Selected Health portfolio measures from Budget Measures: Budget Paper No. 2: 2021–22 are outlined below. Mental health and the COVID-19 health response are addressed in separate briefs.

Medicare and primary care


On 26 April 2021, the Minister for Health announced $114 million to extend telehealth until the end of 2021. However, Budget Paper No. 2 includes $204.6 million for the extension of temporary telehealth MBS services (p. 105). While the increase is not explicitly explained, there are changes to exempt certain patient cohorts from the requirement to have a  pre-existing relationship with a doctor to access telehealth for certain consultations, including smoking cessation consultations, sexual and reproductive health consultations and drug and alcohol counselling (see the Health Portfolio 2021–22 Budget Stakeholder Pack, p. 79). In welcoming the measure, the Royal Australian College of General Practitioners indicated it had pushed hard for the change.

The Australian Medical Association continues to call for permanent telehealth arrangements to be settled as soon as possible.

Rural workforce

The Budget provides $65.8 million to increase and better target the Rural Bulk Billing Incentive (Budget Paper No. 2, p. 111). This is intended to encourage doctors to bulk bill vulnerable patients and help improve the financial viability of practices in rural and remote areas. For the first time, the size of the incentive payment increases the more rural the location, based on the Modified Monash Model (see the Health Portfolio 2021–22 Budget Stakeholder Pack, p. 67). From 1 January 2022, the incentive will increase from the current 150% of the incentive in metropolitan areas to:

  • 160% in large and medium rural towns (Modified Monash (MM) category 3-4)
  • 170% in small rural towns (MM 5)
  • 180% in remote areas (MM 6)
  • 190% in very remote areas (MM 7), or up to $12.35 per consultation.

The Rural Doctors Association of Australia (RDAA) welcomed this announcement as the first time in Medicare policy that there has been a distinction between large regional cities and ‘real rural’ and remote settings.

The RDAA also welcomed an expansion of the John Flynn Prevocational Doctor Program (which has been established by consolidating and redirecting existing funding streams, Budget Paper No. 2, p. 112), but said it fell short of the number of rural training places for junior doctors it believes are required to address the maldistribution of doctors across Australia.

Changes to the Medicare Benefits Schedule

The Budget includes several changes to the MBS across multiple measures, with a total of $711.7 million for new and amended MBS items (Health Portfolio 2021–22 Budget Stakeholder Pack, p. 62).

The most expensive individual measure is $288.5 million to provide access to Medicare subsidised repetitive Transcranial Magnetic Stimulation for the treatment of medication-resistant major depressive disorder (Budget Paper No. 2, p. 122), which has been welcomed by the Royal Australian and New Zealand College of Psychiatrists.

There are measures involving both new investment and efficiencies in response to MBS Review Taskforce recommendations to align the MBS with contemporary practice, tighten clinical indicators, list new items, remove obsolete items and restrict inappropriate co-claiming (Budget Paper No. 2, pp. 109–110). Changes are being made to orthopaedic surgery services, gynaecology services, plastic and reconstructive surgery and pain management services, for a net investment of $33.5 million over four years from 2021–22.

There is also $3.2 million in 2021–22 to continue the review of the MBS (p. 110).

Primary care

Notable primary care initiatives in the Budget include:


There are no major new dental initiatives in 2021–22 Budget, but there is additional funding for some existing programs:

  • $107.9 million in 2021–22 to extend the National Partnership Agreement on Public Dental Services to Adults for one year, to help states and territories provide approximately 180,000 public dental services to adult concession card holders (Budget Paper No. 2, p. 110).
    • This is the third one-year extension to the Agreement, which was initially established from 1 January 2017 to 30 June 2019. The Australian Dental Association welcomed the extension but called for a long-term solution to public dental services.
  • $7.3 million over four years from 2021–22 to expand eligibility for the Child Dental Benefits Schedule (CDBS) to children under two years old (p. 110). The Fourth Review of the Dental Benefits Act 2008, tabled in 2019, had recommended lowering CDBS eligibility to one year olds (p. 20).

The Final Report of the Royal Commission into Aged Care Quality and Safety called for the Australian Government to establish a new Senior Dental Benefits Scheme commencing no later than 1 January 2023 (recommendation 60, p. 249). The Australian Government response to the report states this recommendation is subject to further consideration by 2023 (p. 42).

Digital health

The Budget provides funding for several digital initiatives, including:

  • $421.6 million over two years as part of the cross-portfolio ‘Digital Economy Strategy’ measure (Budget Paper No. 2, p. 75), comprising:
    • $301.8 million for My Health Record
    • $87.5 million for operational funding for the Australian Digital Health Agency
    • $32.3 million for continued funding related to the 2018–2022 Intergovernmental Agreement on National Digital Health (Health Portfolio 2021–22 Budget Stakeholder Pack, p. 81).

This builds on the $200.0 million in funding provided for these activities in each of the previous two financial years (Budget Measures: Budget Paper No. 2: 2019–20, p. 103 and Budget Measures: Budget Paper No. 2: 2020–21, p. 248).

  • $45.4 million as part of the Government response to the Royal Commission into Aged Care Quality and Safety (recommendation 68, p. 46) to roll out electronic medication charts in residential aged care facilities, drive use and integration of My Health Record and establish digital support for transitions between aged care and hospital settings (Health Portfolio 2021–22 Budget Stakeholder Pack, p. 81).
  • $36.0 million over four years from 2021–22 (and $1.6 million per year ongoing) as part of the Deregulation Agenda to expand the Health Products Portal, providing a single digital channel for industry to manage applications to the PBS, Medical Services Advisory Committee and the Prostheses List (Budget Paper No. 2, p. 67).

Pharmaceutical Benefits Scheme listings

The Budget provides $878.7 million over five years from 2020–21 for new and amended listings on the PBS, the Repatriation Pharmaceutical Benefits Scheme and the Stoma Appliance Scheme (Budget Paper No. 2, p. 115). The only new PBS listing not previously announced is galcanezumab (Emgality®), to be listed from 1 June 2021, for the treatment of chronic migraines. Migraine Australia welcomed the listing, noting it had been 692 days since the Pharmaceutical Benefits Advisory Committee had recommended Emgality for listing.

Private health insurance

The Government will achieve savings of $303.9 million over four years from 1 July 2021 by continuing the pause on indexation (first introduced in 2014) of income thresholds for the Medicare Levy Surcharge (MLS) and Private Health Insurance Rebate for a further two years from 1 July 2021, whilst a review of the MLS policy settings is undertaken (Budget Paper No. 2, p. 124). The MLS is a levy paid by taxpayers who do not have private hospital cover and earn above a certain income, with the rate increasing across three income tiers. The Australian Government provides a means-tested rebate to many Australians with private health insurance to help cover the cost of premiums. The base income threshold, under which a taxpayer is not liable to pay the MLS and receives the highest rebate, will remain $90,000 for singles and $180,000 for families. The Government has introduced the Private Health Insurance Amendment (Income Thresholds) Bill 2021 to implement this measure.

The Budget also provides $23.1 million over four years (and $2.1 million per year ongoing) to modernise and improve the administration of the Prostheses List (Budget Paper No. 2, p. 124). The private health insurance sector has long raised concerns about the Prostheses List, which sets the benefits insurers are required to pay for listed products (primarily medical devices), on the basis that in many cases it far outweighs the costs of the same items in the public system and other competitive markets. While the specific reforms to be implemented are not yet detailed, both the medical technology sector and private health insurance industry welcomed the announcement, albeit for slightly different reasons.

Women’s health

The Australian Government announced a $353.9 million Women’s Health Package on 9 May 2021. Notable measures within this package include:

  • $107.5 million to include new genetic testing procedures on the MBS, including $95.9 million for pre-implantation testing of embryos for specific genetic conditions or chromosome variations
  • $100.4 million for improvements to cervical and breast cancer screening programs, including an extension for the BreastScreen Australian Expansion National Partnership Agreement, which supports women aged 70 to 74 to undertake mammograms
  • $47.4 million to support the mental health and wellbeing of new and expectant parents, including to develop a perinatal mental health minimum data set and deliver universal perinatal mental health screening in conjunction with states and territories (see separate Budget Review brief on mental health)
  • $22 million to reform gynaecology services funded by Medicare, including items related to assisted reproductive technology, intrauterine insertions and diagnostic hysteroscopy
  • $13.7 million for a national rollout of the Australian Preterm Birth Prevention Alliance Program (Health Portfolio 2021–22 Budget Stakeholder Pack, pp. 45–46).

Medical research

Budget Paper No. 2 sets out funding for medical research, including:

  • $4.4 million over four years to introduce mitochondrial donation into research settings in Australia and to help facilitate a clinical trial of mitochondrial donation to support families that may be impacted by severe forms of hereditary mitochondrial disease (p. 116). The Mitochondrial Donation Law Reform (Maeve’s Law) Bill 2021 is currently before the Parliament.
  • $6.0 million over four years to continue the Encouraging More Clinical Trials in Australia program under the National Partnership for Streamlined Agreements (p. 116).

Portfolio Budget Statements 2021–22: Budget Related Paper No. 1.7: Health Portfolio affirms anticipated disbursements over the forward estimates of $2.6 billion through the Medical Research Future Fund and $3.6 billion through the National Health and Medical Research Council (p. 34 and p. 351).