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1301.0 - Year Book Australia, 2004  
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Contents >> Health >> Health care delivery and financing

Government role

The Australian Government funds, directly or indirectly, most non-hospital medical services, pharmaceuticals and health research. Public hospital services, and home and community care for aged and disabled persons are jointly funded by the Australian, state and territory governments. Residential facilities for aged persons are funded by a number of sources, including the Australian Government. Public health insurance is provided through Medicare, which is discussed in more detail later in this chapter.

The states and territories are primarily responsible for the delivery and management of public health services and the regulation of health care providers and private health facilities. They deliver public hospital services and a wide range of community and public health services. For example, some state and territory government funded organisations provide school dental care and dental care for low income earners, with other dental care being delivered in the private sector without government funding. Local governments within states deliver most environmental health programs.

Public hospitals, which provide the majority of acute care beds, are funded by the Australian, state and territory governments, in addition to receiving revenue from services to private patients. Large urban public hospitals provide most of the more complex types of hospital care such as intensive care, major surgery, organ transplants and renal dialysis, as well as non-admitted patient care. Many public hospitals have their own pharmacies which provide medicines to admitted patients free-of-charge and do not attract direct Australian Government subsidies under the Pharmaceutical Benefits Scheme (PBS). This is discussed in more detail later in this chapter.

A small number of doctors and paramedical professionals are salaried employees of the various tiers of government. Many salaried specialist doctors in public hospitals are able to treat some private patients in hospital and usually contribute to the hospital a portion of the income earned from fees charged. Other doctors may contract with public hospitals to provide medical services.

Private sector role

The private sector, operating in the delivery of, and insurance for, health services, receives both direct and indirect government subsidies. Within this sector, organisations operating for profit and not-for-profit play a significant role in providing health services, public health and health insurance. For example, privately owned nursing homes provide the majority of long-term aged care beds.

Separate non-admitted and day hospital facilities for admitted patient surgical procedures are mostly located in the private sector. This sector includes a large number of doctors and paramedical professionals who are self-employed, generally providing services such as general practice and specialist services, diagnostic imaging, pathology and physiotherapy.

Most prescribed pharmaceuticals dispensed by private sector pharmacies are directly subsidised by the Australian Government through the PBS.

An important component of the Australian health care system is private health insurance, which can cover part or all of the hospital charges to private patients directly, a portion of medical fees for services provided to private admitted patients in hospitals, paramedical services, some dental services and some aids such as spectacles. The Australian Government subsidises private health insurance premiums through a 30% rebate.

National health care system

There are five major kinds of Australian Government health funding mechanisms:

  • grants to state and territory governments under the Australian Health Care Agreements to assist with the cost of providing public hospital services
  • medical benefits, providing patients with rebates on fees paid to privately practising doctors and optometrists
  • pharmaceutical benefits, through the PBS, providing patients with access to a broad range of subsidised medicines
  • Health Program Grants to government and non-government service providers for a range of health services (e.g. radiation oncology (capital component), pathology and primary medical services). Health Program Grants are used to achieve health policy objectives such as improving access for specific population groups, influencing the growth and distribution of selected and potentially high cost services, or providing an alternative to fee-for-service arrangements, such as the Medicare and PBS
  • the 30% private health insurance rebate.

Medicare levy

When Medicare began in 1984, the levy was introduced as a supplement to other taxation revenue to enable the Australian Government to meet the additional costs of the universal national health care system, which were greater than the costs of the more restricted systems that preceded it.

In 2000-01, revenue raised from the Medicare levy was approximately 18% of total Australian Government health expenditure. The Australian Taxation Office estimated revenue from the Medicare levy to be $4.6b in 2000-01.

The Australian Government funding of hospitals

Australian Government funding to the states' and territories' health systems is made through the Australian Health Care agreements.

In 2002-03 total Australian Government funding under the Australian Health Care Agreements was around $7.2b. Of this amount, over 98% was paid to the states and territories as Health Care Grants, while the balance was either allocated to national initiatives in areas of mental health, palliative care and casemix development, or paid to those states and territories which were eligible to receive financial assistance from the National Health Development Fund.

Total health expenditure

For 2000-01, the preliminary estimate of total expenditure on health (including both public and private sectors) was $60.8b, compared with expenditure of $55.7b in the previous year (table 9.22). This represented an average rate of health expenditure in 2000-01 of $3,153 per person. In 2000-01, governments provided more than two-thirds (70%) of the funding for health expenditure, while the remaining 30% was provided by the private sector. Health expenditure in volume terms grew at an average annual rate of 4.4% between 1990-91 and 2000-01. In 2000-01, health expenditure as a proportion of gross domestic product was 9.0%. This ratio was 8.8% in 1999-2000, up from 8.7% in 1998-99.

9.22 TOTAL HEALTH EXPENDITURE(a) AND RATE OF GROWTH

Expenditure
Rate of growth


Current prices
Chain volume measures(a)
Current prices
Chain volume measures(a)
$m
$m
%
%

1990-91
31,267
38,004
n.a.
n.a.
1991-92
33,123
38,469
5.9
1.2
1992-93
35,098
39,893
6.0
3.7
1993-94
36,990
41,714
5.4
4.6
1994-95
39,216
43,758
6.0
4.9
1995-96
42,082
45,905
7.3
4.9
1996-97
45,195
48,224
7.4
5.1
1997-98
48,360
50,642
7.0
5.0
1998-99
51,680
53,026
6.9
4.7
1999-2000
55,668
55,668
7.7
5.0
2000-01
60,779
58,490
9.2
5.1

(a) Reference year is 1999-2000. Chain volume measures are discussed in detail in the section 'Chain volume or ‘real’ GDP', 'Chapter 29, National accounts'.
Source: AIHW 2003d.

Hospitals

Public hospitals

In 2001-02 there were 746 public hospitals nationally, including 22 psychiatric hospitals, compared with 760 in 1997-98. There were an average of 51,461 beds in public hospitals during 2001-02 (table 9.23), representing 65% of all beds in the hospital sector (public and private hospitals combined). Public hospital beds have declined from 3 beds per 1,000 population in 1997-98 to 2.6 beds in 2001-02.

The number of patient separations (discharges, deaths, and transfers) from public hospitals during 2001-02 was around 4 million, compared with 3.8 million in 1997-98. Same-day separations accounted for 48% of total separations in 2001-02 compared with 43% in 1997-98.

Total days of hospitalisation for public health patients during 2001-02 amounted to 16.3 million, a decrease of 0.4% since 1997-98. The average length of hospital stay per patient in 2001-02 was 4.1 days. For 1997-98 the corresponding figure was 4.4, reflecting the lower number of same-day patients compared with 2001-02. If same-day patients are excluded, the 2001-02 average length of stay was 6.9 days, compared with 7.0 days in 1997-98.

An average of 192,187 staff (full-time equivalent) were employed at public hospitals in 2001-02, of whom 44% were nursing staff and 10% were salaried medical officers. Revenue amounted to $1,532m. Most of this revenue (58%) was from patients' fees and charges. Recurrent expenditure amounted to $16,848m, of which 62% was for salaries and wages. The difference between revenue and expenditure is made up by payments from state/territory consolidated revenue and specific payments from the Australian Government for public hospitals, in roughly equal proportions.

Private hospitals

There were 537 private hospitals in operation in 2001-02, comprising 277 acute hospitals, 24 psychiatric hospitals and 236 free-standing day hospital facilities. The number of acute and psychiatric hospitals has slightly increased on last year but continued the downward trend since 1997-98 when 317 of these hospitals were in operation. In contrast, day hospital facilities have shown strong growth for several years, with only 175 in operation in 1997-98.

Between 1997-98 and 2001-02, the average number of beds available in private acute and psychiatric hospitals increased by 7% to 24,748. There were 1.4 private hospital beds available per 1,000 population in 2001-02. The average number of beds or chairs available at free-standing day hospital facilities (used mainly for short post-operative recovery periods) increased over the same five-year period by 31% to 1,764, reflecting the continued growth in the numbers of free-standing day hospitals.

Private hospital separations in 2001-02 totalled more than 2.5 million, of which 83% were from private acute and psychiatric hospitals and 17% from free-standing day hospital facilities. Same day separations accounted for 60% of all private hospital separations (compared with 48% of public hospital separations). This higher proportion of same day separations contributed to the lower average length of stay in private hospitals (2.8 days) compared to public hospitals (4.1 days) (table 9.23).

The average number of full-time equivalent staff employed at all private hospitals was 48,506, of whom 62% were nursing staff. Total operating expenditure for private acute and psychiatric hospitals during 2001-02 amounted to $4,777m. Some 55% of this amount was spent on salaries and wages (including on-costs). Revenue received during the year was $5,066m, of which 94.5% was received as payments from, or in respect of, patients. Total recurrent expenditure for free-standing day hospital facilities during 2001-02 amounted to $219m, and revenue received during the year was $262m.

9.23 PUBLIC AND PRIVATE HOSPITALS - 2001-02

Units
Public(a)
Private(b)
Total

Bed supply
Facilities
no.
746
537
1,283
Beds/chairs(c)
no.
51,461
(d)26,512
(d)77,973
Activity
Total separations
’000
3,968
2,551
6,519
Same day separations
’000
1,888
1,525
3,413
Total patient days
’000
16,266
7,228
23,494
Average length of stay
days
4.1
2.8
3.6
Average length of stay excluding all
same-day separations
days
6.9
5.6
6.5
Average occupancy rate
%
87.0
(e)75.2
(e)83.0
Non-admitted patient occasions of service
’000
39,523
(e)1,748
(e)41,271
Staff (full-time equivalent)(c)
’000
192
49
241
Revenue
$m
1,532
5,328
6,860
Recurrent expenditure
$m
(f)16,848
4,996
21,844

(a) Acute and psychiatric hospitals.
(b) Acute and psychiatric hospitals and free-standing day hospital facilities.
(c) Annual average.
(d) Including beds, chairs, recliners at free-standing day hospital facilities.
(e) Excluding free-standing day hospital facilities.
(f) Excluding depreciation.
Source: Private Hospitals, Australia, 2001-02 (4390.0); AIHW 2003a.

Pharmaceutical Benefits Scheme (PBS)

The Australian Government provides persons eligible for Medicare with access to a wide range of prescription medicines through the PBS. Further discounts are given to concession card holders such as Health Care Card, Pensioner Concession or Australian Government Seniors Health Card. The following details relate to charges and safety net levels applying at 1 January 2003.

In 2002-03 the PBS had 159 million benefit prescriptions, representing a cost to the Australian Government of $4,584.7m and a total cost, including co-payments, of $5,444.4m (table 9.24).

The number of PBS prescriptions per capita in 2002-03 was 8.0, compared with 7.9 in 2001-02. The number of benefit prescriptions increased by 2.6% over the previous year, and the cost to the Australian Government of these prescriptions grew by 9.2% (in current dollars).

The rate of growth in prescription numbers and their cost reflects the ongoing trend towards newer and more costly medicines. Over the 10 years from 1992-93 to 2002-03, the average PBS dispensed price doubled, from $16.76 to $34.24 (in current dollars).

9.24 PBS(a), Prescription volume and cost (current dollars)

Prescription volume
Australian Government cost
Total cost(b)
Prescriptions
per capita
Average dispensed price
in current prices
millions
$m
$m
no.
$

1990-91
96.3
1,171.5
1,330.5
5.6
13.82
1991-92
94.1
1,134.0
1,442.2
5.4
15.32
1992-93
106.2
1,419.5
1,779.4
6.0
16.76
1993-94
115.0
1,701.3
2,097.0
6.5
18.23
1994-95
118.7
1,897.4
2,341.9
6.6
19.73
1995-96
124.9
2,207.4
2,685.5
6.9
21.50
1996-97
124.1
2,348.3
2,878.5
6.7
23.20
1997-98
125.1
2,541.5
3,112.3
6.7
24.88
1998-99
128.9
2,795.6
3,397.0
6.8
26.35
1999-2000
138.1
3,187.2
3,839.0
7.2
27.80
2000-01
148.0
3,820.6
4,564.7
7.6
30.83
2001-02
155.0
4,197.3
5,003.3
7.9
32.29
2002-03
159.0
4,584.7
5,444.4
8.0
34.24

(a) Includes PBS categories of Concessional, General, Safety Net and Emergency (Doctor's Bag) Drugs prescriptions. Excludes: (i) payments through miscellaneous services (Highly Specialised Drugs, IVF Centre Hormones, Human Growth Hormones, Safety Net Card issue costs, Aboriginal Health Services, etc.). In 2001-02 this expenditure was $395.0m (ii) prescription medicines subsidised by the Australian Government under the Repatriation Pharmaceutical Benefits Scheme (RPBS) administered by the Department of Veterans' Affairs. In 2002-03, there were 15.4 million RPBS prescriptions at a cost to the Australian Government of $426.0m.
(b) Total cost consists of Australian Government cost and patient co-payments.
Source: T. Lloyd, (Department of Health and Ageing) 2003, pers. comm., 22 July 2003.

Private health insurance

Private health insurance is offered by 43 registered health insurers, giving a voluntary option to all Australians for private funding of their hospital and ancillary health treatment. It supplements the Medicare system, which provides a tax-financed public system that is available to all Australians. Depending on the type of cover purchased, private health insurance provides cover against all or part of hospital theatre and accommodation costs in either a public or private hospital, medical costs in hospital, and costs associated with a range of services not covered under Medicare including private dental services, optical, chiropractic, home nursing, ambulance and natural therapies. Overall, the private health sector funds around one-third of all health care in Australia.

Health insurance coverage

The introduction of Medicare in 1984 resulted in Australians' participation in private health insurance steadily declining. The introduction of the Australian Government 30% rebate on private health insurance in 1999, and the Government's Lifetime Health Cover policy in 2000, saw participation in private hospital cover increase dramatically, with participation rates rising from 31% in June 1999 to 46% in September 2000. Rates appear now to have stabilised with a participation rate of 44% as at 31 March 2003 (graph 9.25).

Graph - 9.25 Persons with private health insurance, Proportion of total population


Household expenditure on health and medical care

Average household expenditure on health and medical care increased steadily between 1984 and 1998-99. As a proportion of total household expenditure on goods and services, health and medical care increased from 3.9% in 1984 to 4.7% in 1998-99.

The Household Expenditure Survey (HES) provides estimates of expenditure on medical care and health by households across Australia. Expenditure is net of any refunds and rebates received from Medicare, private health insurance companies and employers. The ABS has undertaken the HES at five-yearly intervals since 1984. Average expenditure in this survey is calculated across all households, not just those households that spent money on specific goods or services.

Expenditure on accident and health insurance accounted for the largest percentage of total expenditure on health and medical care in each of the survey periods. However, this percentage declined markedly between 1993-94 and 1998-99 (from 50% to 41%) reflecting the decrease in hospital, medical and dental insurance from 44% of total health expenditure in 1993-94 to 35% in 1998-99. This decrease was largely due to the falling health insurance coverage, and occurred despite increases in private health insurance costs between 1993-94 and 1998-99.

While the proportion of household health expenditure spent on health practitioners' fees has remained relatively constant since 1984, expenditures on individual items have fluctuated. In particular, general practitioner doctors' fees decreased from 3.8% of total health expenditure in 1984 to 2.4% in 1998-99, while specialist doctors' fees increased from 3.9% to 7.8%.

The proportion of total health expenditure spent on medicines, pharmaceutical products and therapeutic appliances increased from 20% in 1984 to 25% in 1998-99.

Health work force

In 2002-03, approximately 371,500 people were employed in health occupations in Australia, comprising 3.9% of the total number of employed persons (table 9.26). The largest components of the health work force were registered nurses (164,700), generalist medical practitioners (36,700) and enrolled nurses (23,600).

Females comprised 73% of the health work force. The high proportion of females in the health work force is due to their predominance in registered midwifery (100%), enrolled nursing (95%), registered nursing (92%) and physiotherapy (80%). Conversely, males represented 83% of the ambulance officers and paramedics, 74% specialist medical practitioners and 66% generalist medical practitioners.

Over one-third (38%) of the health work force were employed on a part-time basis, as compared to 29% of the total number of employed persons in Australia. Of people employed part-time, 91% were female, a higher proportion than the total Australian part-time work force (73%). Males constituted 9.4% of the part-time health work force compared with 28% for the total part-time work force. The higher proportion of part-time workers in the health sector is a reflection of the greater number of females in the health work force, who are more likely to work part-time.

9.26 EMPLOYED PERSONS IN HEALTH OCCUPATIONS(a) - 2002-03

'000
% males
% part-time workers

Health professionals(b)
324.8
26.4
37.9
Generalist medical practitioners
36.7
65.7
20.9
Specialist medical practitioners
19.5
73.7
20.1
Registered nurses
164.7
8.1
45.2
Registered midwives
9.1
-
60.8
Physiotherapists
10.1
19.7
41.2
Other health professionals(b)
84.7
37.6
32.3
Health associate professionals
46.7
31.9
39.5
Enrolled nurses
23.6
5.0
48.5
Ambulance officers and paramedics
9.4
83.4
3.7
Aboriginal and Torres Strait Islander health workers
1.7
42.3
26.9
Other health associate professionals
12.1
43.0
51.4
Total employed in health occupations(c)
371.5
27.1
38.1
Total employed in Australia
9,441.4
55.5
28.5

(a) Annual average of quarterly data.
(b) Includes Health service managers.
(c) Includes Health professionals, Health service managers, Health associate professionals.
Source: ABS data available on request, Labour Force Survey.


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