Budget Resources
Melanie Conn
Federal health spending (over $110 billion next year) pays
for services relevant to the entire Australian community. The Australian, state
and territory governments share
responsibility for Australia’s health system. For example, the Australian
Government is responsible for Medicare, the Pharmaceutical Benefits Schedule
(PBS) and supporting primary health care services, while the states manage
public hospitals (with financial assistance from the Australian Government) and
deliver many community-based and preventive services. This article explores federal
health expenditure over time, anticipated hospital funding and selected
significant budget measures relating to medicines, mental health and the $1.2 billion
‘Strengthening Medicare’ package.
Hospitals and Medicare are driving
growth in expenditure
The 2024–25 Budget projects health spending of $112.7
billion in 2024–25, increasing to $122.8 billion in 2027–28 (Budget
strategy and outlook: budget paper no. 1: 2024–25, p. 206). As COVID-19
related measures have fallen away – the Australian
Government spent an estimated $35.1 billion on the health response – projected
spending has largely reverted to trend (Figure 1).
Figure 1 Health function expenditure, 2013–14
to 2027–28
Source: Parliamentary Budget
Office (PBO), Historical fiscal data, 2024–25
Budget update, (Canberra: PBO, 2024), table 7.
Budget
paper no. 1 highlights spending on hospitals and Medicare among the
fastest-growing major payments over the medium term (p. 91). Public hospital
funding has grown as a share of health expenditure from 22% in 2013–14 to 27%
in 2024–25 (Figure 1) and is set to grow by nearly 21% over the forward
estimates period (further discussion below) (Figure 2). Medicare expenditure is
projected to grow around 17% due to continued growth in demand for services,
mostly driven by population growth (p. 206). Expenditure on the PBS is
projected to remain stable, reflecting existing price control policies and that
the projections do not include new listings. Other areas of expenditure remain
relatively steady, with the decline in spending on health services reflecting the
end of certain measures for preventive health and chronic disease (Budget
paper no. 1, p. 208).
Figure 2 Major health
expenditure sub-functions, 2024–25 to 2027–28
Source: Australian Government, Budget Strategy and Outlook: Budget Paper no. 1:
2024–25, 210–211.
Hospital funding estimates do not
include additional funding offered to states
The National
Health Reform Agreement sets the parameters for the Australian Government’s
contribution to public hospital services. The current Agreement expires on 30
June 2025.
The projections over the forward estimate years (Figure 2)
are based on the current National Health Reform Agreement, and do not reflect
the Australian Government’s commitment, announced
in December 2023, to increase its share of funding to 45% by 2035. A mid-term
review of the current agreement recommended the Australian Government
increase its contribution (approximately 40% nationally in 2022–23) to 45% over
the course of the next agreement (pp. 88–89). In December 2023, the Minister
for Health and Aged Care, Mark Butler, stated this would provide an
additional $13.2 billion in the 5 years to 2030. Subsequent
reporting suggests there has been a revised Australian Government offer to
increase spending by 13.5% in 2026. Budget
paper no. 1 explains the Contingency Reserve includes a provision to
reflect outcomes of the December 2023 National Cabinet meeting, as the funding
remains subject to negotiations (pp. 225–226). Governments
are working to agree a new hospital funding agreement by the end of June
2024.
The increase in Australian Government funding for hospitals should
help state governments with issues such as ramping, elective surgery waitlists,
and workforce shortages. Hospitalisation is an expensive
form of care and governments will need to continue to drive efficiency in
service provision and invest in primary and preventive care that help avoid
hospitalisation where possible.
$1.2 billion to help secure the
next hospital funding agreement
The Budget provides some further detail on the $1.2 billion ‘Strengthening
Medicare’ package of measures announced
by National Cabinet in December 2023.
Most funding ($882.2 million over the forward estimates)
will support earlier discharge from hospital for older Australians (Budget
measures: budget paper no. 2: 2024–25, p. 126; unless specified
otherwise, all page number references below refer to this budget paper). Public
health systems have had significant issues with hospital patients staying
longer than medically necessary because they did not have a suitable next place
to go. In
2021–22, 10.7 per 1,000 patient days were used by patients waiting for
residential aged care, up from 9.2 days the year before (Table 14A.28). The Australian
Medical Association estimated that patients in hospital waiting for
residential aged care services cost the health system between $316.7 million
and $847.6 million in 2020–21 alone (p. 4).
In addition to extending and expanding Australian Government
transition and palliative care programs (over $270 million), the package
provides $610.4 million over 4 years for states and territories to invest in ways
to address long stay older patient challenges (p. 126). While this funding is
substantial, the lack
of a suitable workforce may constrain effectiveness.
The package also provides an additional $227.0 million over
3 years for Medicare Urgent Care Clinics (p. 128). This will fund 29
additional clinics (bringing the total to 87) as well as additional support (as
yet unspecified) to regional and rural clinics. Doctors’
groups expressed disappointment,
arguing funding would be better invested in general practice, and called for an
evaluation. It appears jurisdictions are being consulted on locations for new
clinics, and specific sites are being announced progressively, for example Armadale
(WA), Bridgewater
(Tasmania) and Ryde
(NSW).
The third element of the package is $90 million over 3 years
from 2023–24 (p. 111) to fund implementation of the health-related
recommendations of the Independent
review of Australia’s regulatory settings relating to overseas health
practitioners (the Kruk Review). Commissioned
by National Cabinet in September 2022, the review found an urgent need to
reform current regulatory arrangements to make it simpler, faster, fairer and
less costly for overseas health practitioners to come to Australia. A Health
Workforce Taskforce in the Department of Health and Aged Care will oversee
implementation of recommendations. States and territories are responsible for
the legislative
framework for health practitioner regulation.
This package of measures, together with the commitment to
expand its share of funding, will underpin the Australian Government’s position
in negotiating with state and territory governments over future hospital
funding arrangements.
Cost of living relief for medicines,
but the end of the $1 discount
The ‘Securing cheaper medicines’ measure (p. 124) provides $484.4
million over 6 years from 2023–24 to freeze annual indexation of co-payments for
PBS-subsidised medicines. The general co-payment will remain at $31.60 until 1
January 2026, while the co-payment for concession card holders will remain at
$7.70 until 1 January 2030. This builds on the 2022–23
budget measure that reduced the general co-payment from $42.50 to $30 from
1 January 2023. Cost of living pressures have reduced access to medicines, with
the proportion of people who delayed
or did not get prescription medicine due to cost rising from 5.6% in
2021–22 to 7.6% in 2022–23, with higher levels among seniors and those living
in areas of socio-economic disadvantage.
However, the Budget also flags the demise of the optional $1
discount, introduced
by the Abbott Government. Since
1 January 2016, pharmacists have been able to choose to discount the
patient co-payment by up to $1. This amount will now be reduced each year until
it reaches zero. This represents a win
for the Pharmacy Guild in the soon
to be finalised 8th Community Pharmacy Agreement negotiations. The Guild
has argued
it undermines universality and creates inequities (p. 3), while Chemist
Warehouse, a major user of the discount, criticised
the phase-out as a ‘backward and anti-competitive step’.
The government will need to amend the National
Health Act 1953 to implement these measures.
Can new mental health services fill
gaps?
The ‘Mental health’ measure funds the government’s response
to the 2022 evaluation
of the Better Access initiative, providing $888.1 million over 8 years and
$139.8 million per year ongoing (p. 116) (some
government briefing materials refer to $361 million, which appears to be
the funding over the forward estimates). Better
Access provides a limited annual number of Medicare-subsidised mental
health services. The evaluation found
the initiative delivers positive outcomes but has accessibility issues (pp.
14–15). The Government states the budget measure aims to fill gaps in
Australia’s mental health service provision that have put pressure on existing
services.
In its 2020 Mental
health inquiry report, the Productivity Commission suggested that up to 1
million people with mental illness were receiving no clinical care (p. 29). The
Commission identified key gaps in low intensity services and services for the
‘missing middle’ who have symptoms too complex to be treated through current
Medicare-rebated GP and psychologist services but not reaching the threshold
for state or territory funded specialised mental health services (pp. 29-30).
The centrepiece of the budget measure is funding to
establish a new, free of charge, early intervention digital mental health
service ($588.5 million over 8 years with $113.4 million per year ongoing, p.
116. It appears
this includes $163.9 million over the forward estimates). According
to the government:
Approximately 150,000 Australians will use the service each
year … Providing free services to people at the earliest point of intervention,
will make it less likely that their problem will go untreated and worsen into
something more serious. It will also relieve pressure off the Better Access
program to be all things to all people, and support psychologists to work to
their full scope of practice and spend more time treating people with moderate
and high needs. (p. 16)
The government
states (p. 20) the service is based on the UK model of talking
therapies, which in
2022–23 reported a recovery rate of 49.9% among those finishing treatment.
There is also additional funding for Primary Health Networks
to commission mental health services that provide wraparound care for people
with severe and/or complex needs ($71.7 million), new funding for child and
youth mental health services ($29.7 million) and funding to build the clinical
capability of Head to Health Services ($29.9 million, p. 116). A network
of 61 centres, to be renamed as Medicare
Mental Health Centres, is to be opened by mid-2026 (p. 20).
Together, these initiatives represent an expanded effort by
the Australian Government to build system capacity and a stepped care model. This
aligns with reform directions recommended
by the Productivity Commission, which called for a comprehensive community
support system providing the right services for people at the right time (pp. 3,
6). The extent to which the new measures will contribute to building a
person-centred, flexible and integrated mental health system remains to be
seen. Implementation challenges will include adequacy of resourcing to meet
demand, workforce availability and integration with existing services,
particularly at the state and territory level.
Stakeholders have broadly
welcomed
the new investments, for example Beyond
Blue called the early intervention service ‘a significant step towards
vital structural reform’. However, Mental
Health Australia argued the level of funding falls short of need and the Royal
Australian and New Zealand College of Psychiatrists was disappointed by the
lack of any substantial commitment to grow the mental health workforce. The National
Mental Health and Suicide Prevention Agreement and related bilateral schedules,
which are set to expire on 30 June 2026, provide a broad framework for
collaboration with states and territories, but concerted effort on design and implementation
will be required.
The future of the National Mental Health
Commission remains uncertain following the independent
investigation and functional
and efficiency review conducted last year. Minister Butler previously
indicated that the government was considering resetting and strengthening
the commission’s role. The Budget announces that the commission’s functions and
funding will transfer to the Department of Health and Aged Care while the government
considers longer-term arrangements (p. 120).
Some reform areas remain pending
The Public
Health Association of Australia criticised the lack of certainty on resourcing
and timeline for implementation of the Australian Centre for Disease Control
(CDC). The 2023–24 Budget provided
2-year funding to progress its establishment and an interim Australian CDC is currently operating
within the Department of Health and Aged Care.
New preventive health measures ($514.8 million over 4 years,
p. 121) largely reflected extensions of a range of existing activities rather
than any major new initiatives, drawing some
stakeholder criticism.
In his Budget
in reply speech, Opposition leader Peter Dutton criticised the Budget’s
lack of focus on a looming shortage of general practitioners and announced a
$400 million plan to incentivise more junior doctors to pursue a career as a
general practitioner.
Beyond the Kruk Review implementation noted above, there was
limited new funding for health workforce initiatives, with some funding to
support First Nations doctors and a commitment to extend existing single
employer model trials until 31 December 2028 (p. 111). Reviews of health
workforce distribution levers and barriers to
health professionals working to their full scope of practice are currently
underway and will likely shape workforce measures in future budget updates.
All online articles accessed May 2024
For copyright reasons some linked items are only available to members of Parliament.
© Commonwealth of Australia
Creative Commons
With the exception of the Commonwealth Coat of Arms, and to the extent that copyright subsists in a third party, this publication, its logo and front page design are licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia licence.
In essence, you are free to copy and communicate this work in its current form for all non-commercial purposes, as long as you attribute the work to the author and abide by the other licence terms. The work cannot be adapted or modified in any way. Content from this publication should be attributed in the following way: Author(s), Title of publication, Series Name and No, Publisher, Date.
To the extent that copyright subsists in third party quotes it remains with the original owner and permission may be required to reuse the material.
Inquiries regarding the licence and any use of the publication are welcome to webmanager@aph.gov.au.
This work has been prepared to support the work of the Australian Parliament using information available at the time of production. The views expressed do not reflect an official position of the Parliamentary Library, nor do they constitute professional legal opinion.
Any concerns or complaints should be directed to the Parliamentary Librarian. Parliamentary Library staff are available to discuss the contents of publications with Senators and Members and their staff. To access this service, clients may contact the author or the Library‘s Central Enquiry Point for referral.