Health expenditure is growing

By Erin Mathews. Election Watch Journalist

Australia has one of the world’s best health systems.

Even so, it wouldn't be an election campaign without politicians throwing money and/or accusing the other side of inefficiently throwing excessive amounts of money at the health system. Something all sides must agree on, though, is that maintaining a good health system requires cold, hard cash.

We spend a lot more on health now than we did in the 1990s. Today, health expenditure accounts for 9.7% of Australia’s GDP and that spending has grown significantly over the past 25 years. It’s best illustrated by looking at what we spend on health per head: in 1989-90 it was less than $3000; in 2013-14 it was closer to $7000.

Yes, there are more Australians today than there were 25 years ago. Yes, there are more older Australians. Both these factors have contributed to the increased costs of health services. However neither of those factors completely explains the increase, as health expenditure has outpaced both population growth and the ageing population. 

There are other reasons we’re spending so much more on health. For instance, there are more things to spend money on - like new treatments and technologies, more widely-used drugs listed on the Pharmaceutical Benefits Scheme (PBS) and the expansion of the Medicare Benefits Schedule.

Health expenditure isn’t just paid for by governments – individuals pay too. As total health expenditure has increased, so too has the amount each person spends on health.

Part of the reason individuals have spent more on health this century is that more people started buying private health insurance when Lifetime Health Cover was introduced in 2000.

The (sort-of) good news is that as the amount individuals spend on health has increased, so too has the average annual income – although not quite at the same pace, according to modelling by the Australian Institute of Health and Welfare.

Since 2013, what was a rapidly-growing health bill has slowed to low growth. The promises made during this election will provide the best indication to how much cash our health system will receive in the years to come.


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