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Budget emergency? Not on these numbers

23 Sep 2014

Official figures showing Commonwealth health spending has dropped and costs are increasingly being pushed onto patients make a mockery of Abbott Government claims of an out-of-control health budget, AMA President Associate Professor Brian Owler has said.

In a result that dramatically undermines Federal Government claims of unsustainable growth in health spending, the Australian Institute of Health and Welfare (AIHW) has reported total health expenditure grew by just 1.5 per cent in real terms in 2012-13 to $147 billion – the slowest growth on record – dragged lower by a 2.4 per cent slump in Commonwealth Government spending.

A/Professor Owler said the figures fatally undermined the justification used by the Abbott Government for its controversial health cuts, and called on it to immediately abandon its $7 co-payment proposal and planned $5 cut to the Medicare rebate.

“What the report actually shows, very clearly, is the lowest growth in for the patient's Medicare rebate.”

A/Professor Owler’s comments drew national attention and were cited in the first two questions directed to Prime Minister Tony Abbott by Opposition leader Bill Shorten during Parliamentary Question Time on Tuesday, 23 September.

Challenged on the AIHW findings, Mr Abbott told the House of Representatives that Parliamentary Budgetary Office figures showed Medicare spending was set to grow by 6.1 per cent a year in the next decade, and noted the AMA’s in-principle support for a co-payment.

“I am always happy to hear the public comments of the President of the Australian Medical Association, and I certainly note that the Australian Medical Association is quite happy to support a co-payment in principle…as the President made clear in discussions with me some time ago,” the Prime Minister said.

The AIHW analysis showed that the pressure on the Commonwealth Budget from health was easing even before the Coalition came to office, and that the nation spent 9.67 per cent of gross domestic product on health in 2012-13 – close to the average among advanced economies.

In fact, the AMA President said Government health spending was failing to keep pace with the growth in demand. On average, $6430 was spent on health per person in 2012-13 – a $17 drop in constant price terms in 12 months.

“These numbers clearly demonstrate that there are simply no grounds for taking even more money out of health,” A/Professor Owler said, calling on the Government to scrap its plans for a $5 Medicare rebate cut for GP, pathology and diagnostic imaging services.

“Australia has one of the best-performing and most cost-effective health systems in the world, and the Government is putting that at risk with its ill-considered and unjustified Budget cuts.”


The AIHW report Health expenditure Australia 2012-13 shows not only is spending on health (including by government) slowing, but households are shouldering an increasing share of the nation’s health bill.

Institute Chief Executive Officer David Kalisch said the 1.5 per cent increase in total health expenditure in 2012-13 was “the lowest growth the AIHW has recorded since it began the series in the mid-1980s”, and was three times lower than the average annual growth rate of 5.1 per cent.

But the burden on individuals to contribute to the cost of their health care is increasing. Their share of total health spending rose from 16.6 to 17.8 per cent in the 10 years to 2012-13. The share of private health funds remained steady at around 8 per cent.

A/Professor Owler said there was a worrying trend toward individuals being left to pick up the tab as the Commonwealth’s contribution to the cost of health care shrank.

“The biggest growth in spending as a proportion has actually been for patients, as the cost is being shifted away from the Federal Government,” he said. “If we see the introduction of the co-payment and the other plans that the Government has had, we are actually going to see a much greater growth in terms of out-of-pocket expenditure for patients, and I think that is a bad thing for the health care of Australia.”

Significantly, the AIHW found only modest growth in spending on GP services, which has been targeted by the Federal Government in its proposed $5 Medicare rebate cut.

For the first time, the Institute has reported separately on non-referred medical services, showing that spending in this area of care grew by just 6.1 per cent in 2012-13, following 4.4 per cent growth the previous year.

To put this increase in context, there are more people seeking treatment (the nation’s population is growing an average 1.5 per cent a year), the number of GP services they require is increasing by almost 1 per cent a year and there are more doctors (the GP workforce has expended by 3.5 per cent since 2007-08).

The record slow growth in total health spending was underpinned by the biggest drop in government expenditure on health in a decade – a 1.6 percentage point plunge in 2012-13.

The result shows that the Commonwealth’s health bill was coming down even before the Abbott Government took office, meaning the cuts it has made or plans to implement come from an already shrinking plate.

The previous Labor Government’s price disclosure reforms to the Pharmaceutical Benefits Scheme delivered significant savings, but the slowdown in Commonwealth spending was also due to funding cuts to public health, dental and e-health programs.

On the surface, the Federal Government’s claims of unsustainable growth in health spending appear to be backed by the crucial measure of health expenditure as a proportion of tax revenues.

Before the global financial crisis, both were growing roughly in step. But when the crisis hit, health spending continued to grow while the Commonwealth’s tax take plummeted. As a result, the health-tax ratio surged as high as 29 per cent in 2009-10.

But Institute figures show it has fallen back steadily since then, and dropped to 25 per cent in 2012-13.

Even with a strong 7.2 per cent increase in non-government health spending, the amount expended on health per capita actually shrank by $17 in 2012-13 to $6430 – a 0.3 per cent drop after inflation.

Australia’s overall health spending remains close to the average among developed nations. As a proportion of GDP, in 2012 it was at 9.4 per cent, 0.2 of a percentage point above the OECD average and similar to that in the UK and Norway, and far below 16.9 per cent in the United States.

The Commonwealth is not only unloading its health care burden onto individuals, but also the states, which A/Professor Owler warned could lead to severe problems in the public hospital system, particularly in South Australia and Tasmania.

The AIHW found that, in the 10 years to 2012-13, the Commonwealth’s share of health funding slid from 43.6 to 41.4 per cent, with some of the slack picked up by the states and territories, whose share grew from 24.3 to 26.9 per cent.

“The problem for State governments has been the fact that their revenue base has fallen,” he said. “So, particularly for smaller economies such as South Australia and Tasmania, they are going to have a very difficult time in funding our public hospitals, as the Government shifts cost away from itself, shifts cost back towards State governments, and back to the patients.”

Adrian Rollins


Published: 23 Sep 2014