Health Expenditure Australia 2019-20

The $86.4 billion of health spending in 2019–20 by the Australian Government represented 26.4% of tax revenue, 2.3% higher than in 2018–19 (Figure 9). This is due to the fact that Australian Government nominal health spending grew by 7.3% while its tax revenue decreased by 2.0% in 2019–20 (Table 11).

Figure 9: Ratio of Australian Government health spending to Australian Government tax revenue, current prices, 2009–10 to 2019–20

Australian Government spending in 2019–20 (Figure 10) comprised:

• direct Australian Government spending ($50.7 billion, or 58.7%), mostly administered through the Department of Health on programs for which the government has responsibility, such as the MBS, PBS and health research. For the first time, this also includes some health spending by the Department of Defence ($524 million)
• grants to states and territories ($26.8 billion, or 31.0%), including National Health Reform funding, National Partnership on COVID-19 Response (NPCR), other National Partnership Payments (NPPs) and the Highly specialised drug (HSD) funding in public hospitals
• rebates and subsidies for privately insured people under the national Private Health Insurance Act 2007 ($6.1 billion, or 7.0%)
• DVA funding for goods and services provided to eligible veterans and their dependants ($2.9 billion, or 3.3%)
• medical expenses tax rebate ($4 million, officially phased out after 2018–19).

The 5.6% increase in Australian Government spending between 2018–19 and 2019–20 can be attributed to increases to specific program spending ($2.1 billion increase) and funding to states and territories through grants ($2.6 billion increase). The main driver of this increase was the funding by the Australian Government from March 2020 in response to the COVID-19 pandemic.

Figure 10: Australian Government total health spending by program, constant prices⁽ᵃ⁾, 2009–10 to 2019–20

During 2019–20, more than one-third (35.3%) of Australian Government health spending was for primary health care ($30.5 billion) (Figure 11). Of this:

• pharmaceuticals subsidised through the PBS contributed $11.4 billion
• unreferred medical services (mainly visits to a general practitioner) was $11.3 billion
• spending on other health practitioners was $2.5 billion (Table A6).

Figure 11: Australian Government health spending, by area of spending, constant prices⁽ᵃ⁾, 2009–10 to 2019–20

Spending on public hospitals was the next largest area of Australian Government health spending (between $26.8 billion and $29.0 billion depending on how some MBS and PBS benefits for services provided in public hospitals are treated), followed by referred medical services ($15.3 billion or $13.7 billion also depending on how some MBS spending is treated).

The estimated spending on public hospitals and referred medical services by the Australian Government is represented as a range here to reflect additional components of MBS and PBS spending that have not historically been treated as public hospital spending in the national health accounts methodology but that are believed to be related to services provided in public hospitals.

In 2019–20, the rebate for private health insurance premiums paid by the Australian Government was similar to that in 2018–19—$6.1 billion compared with $6 billion (Figure 12). The rebate amount presented here is an estimate of the rebate paid out as benefits (to estimate health spending). This is done to exclude spending on non-health related items such as health insurance advertising. It is therefore smaller than the total rebate paid to individuals to reduce premiums, which are reported elsewhere (such as in Department of Health and ATO annual reports). More details on the estimation can be found in the Australian National Health Account: concepts, methodology and data sources.

Figure 12: Health insurance premium rebates, constant prices⁽ᵃ⁾, 2009–10 to 2019–20

In 2019–20, the DVA spent $2.9 billion on health, mostly on primary health care ($1.4 billion) and hospitals ($1.3 billion). Total DVA spending decreased by 1.8% in 2019–20 (Figure 13a).

Over the decade to 2019–20, there was a consistent decline in DVA spending on hospitals, with public hospitals decreasing by an average of 5.4% per year and private hospitals by 4.3% in real terms. DVA spending on primary health care also decreased in real terms by a yearly average of 2.8%, accompanied by an average decrease in spending on other services by 2.6%.

Based on the number of people in the DVA treatment population (which includes all DVA Orange, Gold and White cardholders), DVA spent $11,444 on health per member of the treatment population in 2019–20 which is 44.4% higher than the health spending per person in the total Australian population ($7,926). This average health spending per member of the DVA treatment population peaked in 2014–15 and decreased over the period 2015–16 to 2019–20 (Figure 13b). This recent downward trend in the health spending per member of the DVA treatment population is due to an increase in the number of DVA clients, including clients receiving a White card under Non-liability health care arrangements where treatment for mental health conditions are funded by DVA without accepting these conditions are service-related.

Figure 13a: Department of Veterans’ Affairs health spending by area of spending, constant prices⁽ᵃ⁾, 2009–10 to 2019–20

Figure 13b: Average health spending per client of the DVA treatment population and per person in the Australian resident population, constant prices⁽ᵃ⁾, 2009–10 to 2019–20 ($)

In 2019–20, for the first time the Department of Defence (Joint Health Command) submitted some data on health spending, with a total of $524 million. The biggest area of spending was other health practitioners ($141 million), followed by referred medical services ($96 million), unreferred medical services ($84 million), private hospitals ($72 million), administration ($61 million), and dental services ($45 million). Trend analysis will be provided when more data are available in future reports.

The amounts shown represent actual health expenditure by the Department of Defence for its ADF and APS employees that could be categorised as per AIHW’s area of expenditure classification, including direct spending on health care to members, direct costs of pharmaceuticals purchased by the Department and costs for administration, including the Defence electronic health record.

It will not be possible to reconcile this exactly against other departmental financial reporting because some expenditure within the Joint Health Command is not related to patient care and because of the accounting practices (e.g. cost accrual) employed in departmental reporting. There are also areas of health expenditure within the Department that cannot be extracted from Departmental reporting such as building maintenance and other infrastructure costs and material used within the operational environment.

During 2019–20, health spending by state and territory governments was 26.1% of their tax revenue (Figure 14). This was 1.8 percentage points higher than 2018–19. This is due to the fact that State and territory governments’ nominal health spending increased by 6.6%, while tax revenue reduced by 0.6% (Table 16).

Figure 14: Ratio of state and territory government health spending to state and territory government tax revenue, current prices, 2009–10 to 2019–20

In 2019–20, the ratio of health spending to tax revenue varied across state and territory, with the highest in Western Australia (34.7%) and the lowest in New South Wales (25.9%) (Figure 15).

Figure 15: Ratio of total health spending to tax revenue for each state and territory government, current prices, 2009–10 to 2019–20

In 2019–20, state and territory governments spent $35.9 billion (63.9%) on hospitals, with the most ($34.9 billion) on public hospitals. Another $10.6 billion (18.9%) was spent on primary health care; $8.3 billion of which was in community health services (Figure 16; Table A6).

In 2019–20, state and territory spending increased in real terms in these areas:

• public hospital services by $1.8 billion (5.4% increase compared with 2018–19)
• research by $0.3 billion (50%)
• capital by $0.2 billion (5.0%)
• other services (patient transport services, aids and appliances, administration) by $0.03 billion (0.8%).

Spending on primary health care and private hospitals decreased by $0.1 billion (–1.4%) and $0.02 billion (–1.6%) respective

Figure 16: State and territory government total health spending, by area of spending, constant prices⁽ᵃ⁾, 2009–10 to 2019–20

These estimates of public hospital spending differ from those reported in the NHFB statistics for a range of reasons, including where funding is provided to support public hospital service delivery outside the NHFP, differences between cash and accrual accounting practices and treatments of capital and interests. More details can be found in Comparison and alignment of Australian health expenditure estimates.