Three levels of government are collectively responsible for providing universal health care: federal; state and territory; and local. The federal government mainly provides funding and indirect support to the states and health professions, subsidizing primary care providers through the Medicare Benefits Scheme (MBS) and the Pharmaceutical Benefits Scheme (PBS) and providing funds for state services. It has only a limited role in direct service delivery.
States have the majority of responsibility for public hospitals, ambulance services, public dental care, community health services, and mental health care. They contribute their own funding in addition to that provided by federal government. Local governments play a role in the delivery of community health and preventive health programs, such as immunization and the regulation of food standards.1
Publicly financed health insurance: Total health expenditures in 2014–2015 represented 10.0 percent of GDP, an increase of 2.8 percent from 2013–2014. Two-thirds of these expenditures (67.0%) came from government.2
The federal government funds Medicare, a universal public health insurance program providing free or subsidized access to care for Australian citizens, residents with a permanent visa, and New Zealand citizens following their enrollment in the program and confirmation of identity.3 Restricted access is provided to citizens of certain other countries through formal agreements.4 Other visitors to Australia do not have access to Medicare. Medicare is funded in part by a government levy collected through the tax system, which raised an estimated AUD10.3 billion (USD6.7 billion5) in 2013–2014.6 (In July 2014, the levy was expanded to raise funds for disability care.)
Private health insurance: Private health insurance (PHI) is readily available and offers more choice of providers (particularly in hospitals), faster access for nonemergency services, and rebates for selected services. Government policies encourage enrollment in PHI through a tax rebate and, above a certain income, a penalty payment for not having PHI (the Medicare Levy surcharge).7 The Lifetime Health Coverage program provides a lower premium for life if participants sign up before age 31. For people who do not sign up, there is a 2 percent increase in the base premium for each year after age 30. Consequently, take-up is highest among those 30 and under but rapidly drops off as age increases, with a trend to opt out starting at age 50.
Nearly half of the Australian population (47%) had private hospital coverage and nearly 56 percent had general treatment coverage in 2016.8
Insurers are a mix of for-profit and nonprofit providers. In 2014–2015, private health insurance expenditures represented 8.7 percent of all health spending.9
Private health insurance can include coverage for hospital care, general treatment, or ambulance services. When accessing hospital services, patients can opt to be treated as a public patient (with full fee coverage) or as a private patient (with 75% fee coverage). For private patients, insurance covers the MBS fee. If a provider charges above the MBS fee, the consumer will bear the gap cost unless they have gap coverage. The patient may also be charged for costs such as hospital accommodation, surgery fees (implants and theater fees), and diagnostic tests.
General coverage provides insurance for dental, physiotherapy, chiropractic, podiatry, home nursing, and optometry services. Coverage may be capped by dollar amount or by number of services.
Private health insurance coverage varies by socioeconomic status. PHI covers just one in five (22.1%) of the most disadvantaged 20 percent of the population, a proportion that rises to more than 57.2 percent for the most advantaged population quintile. This disparity is due in part to the Medicare Levy surcharge applied to higher-income earners.10
Services: The federal government defines and funds Medicare benefits, which include hospital care, medical services, and pharmaceuticals, to name a few. States provide further funding and are responsible for the delivery of free public hospital services, including subsidies and incentive payments in the areas of prevention, chronic disease management, and mental health care. The MBS provides for limited optometry and children’s dental care.
Pharmaceutical subsidies are provided through the PBS. To be listed, pharmaceuticals need to be approved for cost-effectiveness by the independent Pharmaceutical Benefits Advisory Committee (PBAC). War veterans, the widowed, and their dependents may be eligible for the Repatriation PBS.11
Nearly half (49%) of federal support for mental health is for payments to people with a disability; the remaining support goes toward payments to states, payments and allowances for caregivers, and subsidies provided through the MBS and PBS.12 State governments are responsible for specialist and acute mental care services.
Home care for the elderly and hospice care coverage are described below in the section “How is the delivery system organized and financed?”
Cost-sharing and out-of-pocket spending: Out-of-pocket payments accounted for 18 percent of total health expenditures in 2013–2014. The largest share (38%) was for medications, followed by dental care (20%), medical services (e.g., referred and unreferred private health insurance), medical aids and equipment, and other health practitioner services.13
There are no deductibles or out-of-pocket costs for public patients receiving public hospital services. General practitioner (GP) visits are subsidized at 100 percent of the MBS fee, and specialist visits at 85 percent. GPs and specialists can choose whether to charge above the MBS fee. About 83 percent of GP visits were provided without charge to the patient in 2014–2015. Patients who were charged paid an average of AUD31 (USD20).14
Out-of-pocket pharmaceutical expenditures are capped. In 2016, the maximum cost per prescription for low-income earners was set at AUD6.20 (USD4.00), with an annual cap of AUD372.00 (USD242.00). For the general population, the cap per prescription is AUD38.30 (USD25.00), which reverts to the low-income cost cap if a patient incurs more than AUD1,476.00 (USD958.00) in out-of-pocket expenditure within a year.15 Consumers pay the full price of medicines not listed on the PBS. Pharmaceuticals provided to inpatients in public hospitals are generally free.
Safety nets: There are three safety nets. The Original Medicare Safety Net covers the cost of all Medicare services out of hospital above an annual out-of-pocket threshold of AUD447 (USD290). The Extended Medicare Safety Net covers 80 percent of out-of-pocket costs over an annual threshold of AUD648 (USD420) for those with government-issued concession cards (e.g., low-income, seniors, caregivers) and AUD2,030 (USD1,318) for others. The “Greatest Permissible Gap” sets the maximum out-of-pocket fee per out-of-hospital service at AUD79.50 (USD52.00). The government is seeking to replace these with a single Medicare Safety Net that would reimburse 80 percent of out-of-pocket costs (up to a cap of 150 percent of the MBS fee) for the remainder of the calendar year once annual thresholds are met: AUD638 (USD414) for concessional patients (including low-income adults, children under 16, and certain veterans); AUD648 (USD420) for parents of school children; and AUD2,030 (USD1,318) for singles and all other families.
Primary care: In 2015, there were 34,367 GPs, 49,060 practitioners registered as generalists and specialists, and 8,386 specialists.16 GPs are typically self-employed, with about four per practice on average.17 In 2012, those in nonmanagerial positions earned an average of AUD2,862 (USD1,858) per week. The schedule of service fees is set by the federal health minister through the MBS.
Registration with a GP is not required, and patients choose their primary care doctor. GPs operate as gatekeepers, in that a referral to a specialist is needed for a patient to receive the MBS subsidy for specialist services. The fee-for-service MBS model accounts for the majority of federal expenditures on GPs, while the Practice Incentives Program (PIP) accounts for 5.5 percent.18
State community health centers usually employ a multidisciplinary provider team. The federal government provides financial incentives for the accreditation of GPs, for multidisciplinary care approaches, and for care coordination through PIP and through funding of GP “Super Clinics” and Primary Health Networks (PHNs). PHNs (which have replaced Medicare Locals) are being implemented in 2015–2016 to support more efficient, effective, and coordinated primary care.
In 2015, there were 11,040 nurses or midwives working in a general practice setting.19 Their role has been expanding with the support of the PIP practice nurse payment. Nurses are also funded through practice earnings. Nurses in general practice settings provide chronic-disease management and care coordination; preventive health education; and oversight of patient follow-up and reminder systems.20
Outpatient specialist care: Specialists deliver outpatient care in private practice (8,001 specialists in 2015) or in a public hospital (3,745).21 Patients are able to choose which specialist they see, but must be referred by their GP to receive MBS subsidies. Specialists are paid on a fee-for-service basis. They receive a subsidy through the MBS of 85 percent of the schedule fee and set their patients’ out-of-pocket fees independently. Many specialists split their time between private and public practice.
Administrative mechanisms for direct patient payments to providers: Many practices have the technology to process claims electronically so that reimbursements from public and private payers are instantaneous, and patients pay only their copayment (if the provider charges above the MBS fee). If the technology is not in place, patients pay the full fee and seek reimbursement from Medicare and/or their private insurer.
After-hours care: GPs are required to ensure that after-hours care is available to patients but are not required to provide care directly. They must demonstrate that processes are in place for patients to obtain information about after-hours care and that patients can contact them in an emergency. After-hours walk-in services are available and may be provided in a primary care setting or within hospitals. As there is free access to emergency departments, these also may be utilized for after-hours primary care.
The federal government provides varying levels of practice incentives for after-hours care, depending on whether access is direct or provided indirectly through arrangements with other practitioners in the area. Government also funds PHNs’ support for and coordination of after-hours services, and there is an after-hours advice and support line.
Hospitals: In 2014–2015, there were 698 public hospitals (678 acute, 20 psychiatric), with a total of nearly 60,300 beds, an increase of 1,700 beds over the previous year, despite there being 20 fewer hospitals. In the same period, there were 624 private hospitals (342 day hospitals and 282 others) with 32,000 beds.22 Private hospitals are a mix of for-profit and nonprofit.
Public hospitals receive a majority of funding (91%) from the federal government and state governments, with the remainder coming from private patients and their insurers. Most of the funding (62% of the total recurrent expenditure) is for public-physician salaries. Private physicians providing public services are paid on a per-session or fee-for-service basis. Private hospitals receive most of their funding from insurers (47%), federal government’s rebate on health insurance premiums (21%), and private patients (12%).23
Public hospitals are organized into Local Hospital Networks (LHNs), of which there were 147 in 2016. These vary in size, depending on the population they serve and the extent to which linking services and specialties on a regional basis is beneficial. In major urban areas, a number of LHNs comprise just one hospital.
State governments fund their public hospitals largely on an activity basis, using diagnosis-related groups. Federal funding for public hospitals includes a base level of funding, with funding for growth set at 45 percent of the “efficient price of services,” determined by the Independent Hospital Pricing Authority. From July 2017, the Commonwealth will fund 45 percent of the efficient growth in these services, capped at 6.5 percent of total growth.24 States are required to cover the remaining cost of services, providing an incentive to keep costs at the efficient price or lower. Small rural hospitals are funded through block grants.25
Mental health care: Mental health services are provided in many ways, including by GPs and specialists, in community-based care, in hospitals (both in- and outpatient, public and private), and in residential care. GPs provide general care and may devise treatment plans of their own or refer patients to specialists. Specialist care and pharmaceuticals are subsidized through the MBS and PBS.
State governments fund and deliver acute mental health and psychiatric care in hospitals, community-based services, and specialized residential care. Public hospital–based care is free to public patients.26
As part of the federal government’s response to a recent review by the National Mental Health Commission, funding through Primary Health Networks will be redirected to commission mental health services that meet local needs. The focus will be on suicide prevention and coordinated care.27
Long-term care and social supports: The majority of people living in their own homes with severe or profound limitations in core activities receive informal care (92%). Thirty-eight percent receive only informal assistance, and 54 percent receive a combination of informal and formal assistance. In 2009, 12 percent of Australians were informal caregivers, and around 30 percent of those were the primary caregiver (carer). In 2011–2012, federal government provided AUD3.18 billion (USD2.07 billion) under the income-tested Carer Payment program, and AUD1.75 billion (USD1.14 billion) through the Carer Allowance (not income-tested and offered as a supplement for daily care). Federal government also provides an annual Carer Supplement of AUD480 million (USD312 million) to help with the cost of caring. Recipients of the Carer Allowance who care for a child under the age of 16 receive an annual Child Disability Assistance Payment of AUD1,000 (USD649). There are also a number of respite programs providing further support for caregivers.28
Home care for the elderly is provided through the Commonwealth Home Support Program in all states except Western Australia. Subsidies are income-tested and may require copayments from recipients. Services can include assistance with housework, basic care, physical activity, and nursing, among others. The program began in July 2015 as a consolidation of home and community care, planned respite for caregivers, day therapy, and assistance with care and housing.29 The Western Australian government administers and delivers its Home and Community Care Program with funding support from federal government.
Aged-care, or nursing, homes may be private nonprofit or for-profit, or run by state or local governments. Federally subsidized residential aged-care positions are available to those who are approved by an Aged Care Assessment Team. Hospice care is provided by states through complementary programs funded by the Commonwealth. The Australian government supports both permanent and respite residential aged care. Eligibility is determined through a needs assessment, and permanent care is means-tested.30
In 2013, the federal government, in partnership with states, implemented the pilot phase of the National Disability Insurance Scheme, with full implementation planned for 2019–2020. The scheme provides more-flexible funding support (not means-tested), allowing greater tailoring of services.
Intergovernmental collaboration and decision-making at the federal level occur through the Council of Australian Governments (COAG), with representation from the prime minister and from the first ministers of each state. The COAG focuses on the highest-priority issues, such as major funding discussions and the interchange of roles and responsibilities between governments. The COAG Health Council is responsible for more-detailed policy issues and is supported by the Australian Health Ministers’ Advisory Council (www.coaghealthcouncil.gov.au/).
The federal Department of Health oversees national policies and programs such as the MBS and PBS. Payments through these schemes are administered by the Department of Human Services. The PBAC provides advice to the Minister for Health on the cost-effectiveness of new pharmaceuticals (but not routinely on delisting).
Several national agencies and the state governments are responsible for the quality and safety of care (see below). The Australian Institute of Health and Welfare and the Australian Bureau of Statistics (ABS) are the major providers of health data.
Regulatory oversight is provided by a number of agencies, such as the Therapeutic Goods Administration, which oversees supply, imports, exports, manufacturing, and advertisement; the Australian Health Practitioner Regulation Agency, which ensures registration and accreditation of the workforce in partnership with National Boards; and the Australian Prudential Regulation Authority, for private health insurance. The Australian Competition and Consumer Commission promotes competition among private health insurers. Beginning in July 2016, the Australian eHealth Commission will take over responsibility from the National eHealth Transition Authority for matters relating to electronic health data.
The state governments operate their own departments of health and have devolved the management of hospitals to the LHNs. The LHNs are responsible for working collaboratively with PHNs. There are patient–consumer organizations and groups operating at the national and the state level.
The overarching strategy for ensuring quality of care is captured in the National Healthcare Agreement of the COAG (2012). The agreement sets out the common objective of Australian governments in providing health care—improving outcomes for all and the sustainability of the system—and the performance indicators and benchmarks on which progress is assessed. It also sets out national-priority policy directions, programs, and areas for reform, such as that of major chronic diseases and their risk factors. Indicators and benchmarks in the agreement address issues of quality from primary to tertiary care and include disease-specific targets of high priority, as well as general benchmarks.
The Australian Commission on Safety and Quality in Health Care (ACSQH) is the main body responsible for safety and quality improvement in health care. The ACSQH has developed service standards that have been endorsed by health ministers. These include standards for conducting patient surveys, which must be met by hospitals and day surgery centers to ensure accreditation. The ABS, the national government statistical body, also undertakes an annual patient experience survey.
The Australian Council on Healthcare Standards is the (nongovernment) agency authorized to accredit provider institutions. States license and register private hospitals and the health workforce, legislate on the operation of public hospitals, and work collaboratively through a National Registration and Accreditation Scheme to facilitate workforce mobility across jurisdictions while maintaining patient protections.
The Royal Australian College of General Practitioners has responsibility for accrediting GPs. The MBS includes financial incentives such as the PIP, and approximately 85 percent of GPs are accredited. To be eligible for government subsidies, aged-care services must be accredited by the government-owned Aged Care Standards and Accreditation Agency.
There are a number of disease and device registries. Government-funded registries are housed in universities and nongovernmental organizations, as well as within state governments. The ACSQH has developed a national framework to support consistent registries.
The National Health Performance Authority reports on the comparable performance of LHNs, public and private hospitals, and other key health service providers. The reporting framework, agreed to by the COAG, includes measures of equity, effectiveness, and efficiency.
The federal government has regulatory oversight of quarantine, blood supply, pharmaceuticals, and therapeutic goods and appliances.31 In addition, there are a number of national bodies that promote quality and safety of care through evidence-based clinical guidelines and best-practice advice. They include the National Health and Medical Research Council and Cancer Australia.
The most prominent disparities in health outcomes are between the Aboriginal and Torres Strait Islander population and the rest of Australia’s population; these are widely acknowledged as unacceptable. In 2008, the COAG agreed to set a target of closing the gap in life expectancy by 2031. Progress toward this target is not on track, with the gap currently at 10.6 years for males and 9.5 for females. From 2005–2007 to 2010–2012 there was a very small reduction of 0.8 years for males and 0.1 years for females.32
Disparities between major urban centers and rural and remote regions, and across socioeconomic groups, are also major challenges. The federal government provides incentives to encourage GPs and other health workers to work in rural and remote areas, where it can be very difficult to attract a sufficient number of practitioners. This challenge is also addressed, to an extent, through the use of telemedicine. Since 1999, the Australian government has funded the Public Health Information Development Unit (www.phidu.torrens.edu.au) to publish small-area data showing disparities in access to health services and in health outcomes on a geographic and socioeconomic basis.
Approaches to improving integration and care coordination include the PIP, which provides a financial incentive to providers for the development of care plans for patients with certain conditions, such as asthma, diabetes, and mental health needs. The PHNs were established in July 2015 with the objective of improving coordinated care, as well as the efficiency and effectiveness of care, for those at risk of poor health outcomes. These networks are funded through grants from the federal government and will work directly with primary care providers, health care specialists, and LHNs. Care also may be coordinated by Aboriginal health and community health services.
The Australian Digital Health Agency, established in July 2016, has national responsibility for digital health strategy. An interoperable national e-health program based on personally controlled unique identifiers is now in operation. Around 4 million patients and more than 8,900 providers, two-thirds of whom are in primary care, are registered.33 The record supports prescription information, medical notes, referrals, and diagnostic imaging reports. Patients are also able to add information about allergies, adverse reactions, and their wishes for their health care in the event that they are too unwell to communicate.
The major drivers of cost growth are the MBS and PBS. The federal government regularly considers opportunities to reduce spending growth in the MBS through its annual budget process and has established an expert panel to undertake a review of the entire schedule and to report by the end of 2016.
The federal government influences the cost of the PBS by making determinations about which pharmaceuticals to list on the scheme and by negotiating the price with suppliers. It also provides funds to pharmacies to dispense medicines subsidized through the PBS and to support professional programs and the wholesale supply of medicines. This arrangement is implemented through the current Community Pharmacy Agreement (the Community Pharmacy Agreements were instituted in 1991 and are subject to renegotiation every five years). The Sixth Community Pharmacy Agreement, which began in July 2015, supports AUD6.6 billion (USD4.29 billion) in savings through supply chain efficiencies.34
Hospital funding is set through policy decisions by the federal government, with states required to manage funding within their budgets. Beyond these measures, the major control is through the capacity constraints of the health system, such as workforce supply.
In 2016, the federal government announced that it will implement “health care homes” for the 20 percent of patients with multiple chronic conditions who are most in need of support. Patients will enroll with a GP, who will be paid a bundled payment for their care. The first of these patients are due to begin treatment in a health care home by July 2017.
The federal government has committed to doubling its investment in the public dental program to AUD5.0 billion (USD3.25). It is estimated that the Child and Adult Public Dental Scheme, implemented by states and territories, will help more than 10 million Australians, providing coverage for the 5.3 million children under age 18 and some 5 million low-income adults.
1Department of the Prime Minister and Cabinet, Australian Government, Reform of the Federation White Paper: Roles and Responsibilities in Health. Issues Paper 3 (DPMC, 2015).
2Australian Institute of Health and Welfare, Australian Government, Health Expenditure Australia 2014–15 (AIHW, 2016).
3Australian Institute of Health and Welfare, Australian Government, Australia’s Health 2014 (AIHW, 2014).
4Department of Human Services, Australian Government (2015); accessed Nov. 16, 2015.
5Please note that, throughout this profile, all figures in USD were converted from AUD at a rate of about AUD1.48 per USD, the purchasing power parity conversion rate for GDP in 2015 reported by OECD (2016) for Australia.
6The Commonwealth of Australia, Budget Paper No. 1: Budget Strategy and Outlook 2013–14 (Commonwealth of Australia, 2013); accessed Dec. 9, 2015.
7Private Health Insurance Ombudsman, Australian Government, What Is Covered by Private Health Insurance? (PHIO, 2015); accessed Nov. 16, 2015.
8Australian Prudential Regulation Authority, Australian Government, Statistics: Private Health Insurance Quarterly Statistics, June 2016 (APRA, 2016).
9Australian Institute of Health and Welfare, Australian Government, “Health Expenditure Australia 2013–14” (AIHW, 2015).
10Australian Bureau of Statistics, Australian Government, Australian Health Survey: Health Service Usage and Health Related Actions, 2011–12, cat no. 4364.0.55.002 (ABS, 2013).
11Department of Human Services, Australian Government (2015); accessed Nov. 16, 2015.
12National Mental Health Commission, Australian Government, Contributing Lives, Thriving Communities: Report of the National Review of Mental Health Programmes and Services (NMHC, 2014).
13Australian Institute of Health and Welfare, Australian Government, “Health Expenditure Australia 2013–14” (AIHW, 2015).
14Department of Health, Australian Government, General Practice Workforce Statistics (DH, 2015), Workforce Statistics 2013-14 PUBLIC Web version.pdf; accessed Aug. 12, 2015.
15Department of Health, Australian Government; accessed Aug. 22, 2016.
16Australian Institute of Health and Welfare, Australian Government, National Health Workforce Data Set: Medical Practicioners 2015, table 1.
17Department of Health, Australian Government, General Practice Workforce Statistics (DH, 2015), Workforce Statistics 2013-14 PUBLIC Web version.pdf; accessed Aug. 12, 2015; and Department of Human Services, Australian Government (2015); accessed Nov. 16, 2015.
18Australian National Audit Office, Audit Report No. 5 2010–11. Performance Audit: Practice Incentives Program (ANAO, 2010).
19Australian Institute of Health and Welfare, Australian Government, National Health Workforce Data Set: Nursing and Midwifery 2015, overview table 10.
20Health Workforce Australia, Australian Government (HWA, 2015).
21Australian Institute of Health and Welfare, Australian Government, National Health Workforce Data Set: Medical Practitioners 2015, supplementary table 26.
22Australian Institute of Health and Welfare, Australian Government, Australia’s Hospitals 2014–15 At a Glance (AIHW, 2014); and Australian Institute of Health and Welfare, Australian Government, Hospital Resources 2014–15: Australian Hospital Statistics (AIHW, 2016).
23Australian Institute of Health and Welfare, Australian Government, Hospital Resources 2014–15: Australian Hospital Statistics (AIHW, 2016).
24Council of Australian Governments, accessed Aug. 22, 2016.
25Independent Hospital Pricing Authority, National Efficient Price Determination 2015–16 (IHPA, 2015).
26Australian Institute of Health and Welfare, Australian Government, Mental Health Services in Australia (AIHW, 2015), accessed Nov. 18, 2015.
27Department of Health, Australian Government Response to Contributing Lives, Thriving Communities—Review of Mental Health Programmes and Services (Commonwealth of Australia, 2015).
28Australian Institute of Health and Welfare, Australian Government, “Australia’s Welfare” (AIHW, 2013).
29Department of Social Services (DSS, 2015), Commonwealth Home Support Programme, accessed Sept. 6, 2015.
30Australian Institute of Health and Welfare, Australian Government, Aged Care in Australia (AIHW, 2015), accessed Nov. 18, 2015.
31Australian Institute of Health and Welfare, Australian Government, Australia’s Health 2014 (AIHW, 2014).
32Department of the Prime Minister and Cabinet, Closing the Gap: Prime Minister’s Report, “Healthy Lives,”, accessed Oct. 2, 2016.
33Department of Health, accessed Aug. 28, 2016.
34S. Ley, “Pharmaceutical Benefits Scheme to Be Reformed,” media release (Minister for Health, 2015), accessed Sept. 6, 2015.