In Consultation

The IPN blog for healthcare professionals.

  • The Funding of Healthcare in Australia – It’s Time to Engage in the Debate

    Dr Malcolm Parmenter
    Posted by on 24 Feb 2014

    Much has been said about the future of healthcare in Australia and about how that will be funded.

    When compared to other OECD countries, healthcare expenditure in Australia has been at the low end of the range. However, in recent years it has been increasing at a much greater rate than government revenue. Between 2006 and 2011, the compound annual growth rate (CAGR) for healthcare expenditure in Australia has been around 8.5%. That compares with a CAGR for government revenue over the same period of approximately 3%. If that trend were allowed to continue, by about 2044, healthcare expenditure in Australia would equal 100% of government revenue.

    Australia’s population is aging. In 2009, 13% of Australians were over 65. By 2050, it is projected that between 25% and 28% of Australians will be over age 65. This increase is vitally important given the very high incidence of chronic disease in older people and the fact that 0.75 of every $1 spent on health is spent on the care of people with chronic disease.

    Much of the growth in healthcare expenditure has been in the hospital sector which now makes up 37% of total outlays. Hospitals in Australia are the responsibility of the State Governments and the private sector (largely funded by private health insurers).

    Compared to hospitals, growth in expenditure on general practice has been subdued. Primary care is, of course, largely funded by the Australian Government through Medicare. As those of us who work in general practice know well, increases to Medicare rebates over time have been considerably less than increases in the cost of living and the cost of running a practice.

    With this background, governments have no choice but to look at ways to reduce the cost of delivering health services. For the last 30 years attempts to control costs have largely been limited to discounted rebate increases, fee cuts and rationing (mostly in the public sector). However, it is now clear it will take more than this to control costs to a level that Australia finds affordable in the future.

    General practice has a lot to offer when it comes to dealing with the problems confronting healthcare in Australia. General practice in Australia already delivers good quality, cost effective medicine. But we can do better, especially in our approach to chronic disease. There is considerable evidence to show that well-structured, GP led, team based approaches to chronic disease are effective in improving health outcomes, reducing the frequency of hospitalisation and reducing cost. This view seems to be shared by most people I talk to, including people in government, private health insurers and the profession.

    There is little doubt that significant change is coming to the way healthcare is delivered and funded in Australia. The Federal Health Minister, Peter Dutton, has confirmed the Federal Government is considering co-payments, changes to chronic disease items and private health insurance involvement in general practice. Many doctors are genuinely fearful of what this change might bring, including the spectre of managed care. However it is now more important than ever that we, as a profession, engage with the payers of healthcare to ensure the decisions made are the best outcomes possible. The payers of healthcare include Federal and State Governments, private health insurers and workplace insurers.

    This is one reason why IPN has agreed to conduct a trial of services for Medibank members in 6 of its medical centres in Brisbane. Should this trial be successful, Medibank intends to offer it to selected IPN and non-IPN medical centres, initially throughout Queensland, followed by the rest of Australia later this year.

    Importantly though, the Medibank trial is just a very small start for what must become a much broader engagement and discussion between all stakeholders.