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1301.0 - Year Book Australia, 2005  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 21/01/2005   
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Contents >> Health >> Health care delivery and financing

This section draws extensively on material provided by the Australian Government Department of Health and Ageing (September 2004).

Government role

Australia's health policy is funded and delivered by several levels of government, and is supported by private health insurance arrangements. Medicare, the national health insurance scheme, is funded and administered by the Australian (Commonwealth) Government and provides cover for a range of primary care services, including visits to medical practitioners. This is supported by optional private health insurance for ancillary services and private hospital treatments. The public hospital system is jointly funded by the Australian, and state and territory governments, and administered at the state/territory level.

Most non-hospital medical services, pharmaceuticals and health research receive funding directly or indirectly from the Australian Government. 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). The Australian Health Care Agreements provide for reforms to the pharmaceutical arrangements. Where a state or territory enters into a reform agreement with the Australian Government, under some circumstances pharmaceuticals provided to non-admitted and same-day patients may be charged to the 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. A 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, optometrists and other allied health practioners.
  • 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 for private health insurance.

Diagram 9.30 shows the major flows of funding between the government and non-government sectors, and the providers of health goods and services.

9.30 THE STRUCTURE OF THE AUSTRALIAN HEALTH CARE SYSTEM AND ITS MAJOR FLOW OF FUNDS

Diagram 9.30: THE STRUCTURE OF THE AUSTRALIAN HEALTH CARE SYSTEM AND ITS MAJOR FLOW OF FUNDS


Source: AIHW 2004f.


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 2003-04 revenue raised from the Medicare levy was 16.8% of total Australian Government health expenditure. The Australian Taxation Office estimated revenue from the Medicare levy to be $5.45b in 2003-04.

Pharmaceutical Benefits Scheme (PBS)

The Australian Government provides Medicare-eligible persons with affordable access to a wide range of necessary and cost effective prescription medicines through the PBS. The following details relate to charges and safety net levels applying at 1 January 2004.

Medicare-eligible patients who do not hold a Health Care Card, Pensioner Concession Card or Commonwealth Seniors Health Card, are required to pay up to the first $23.70 for each prescription item for medicines listed on the PBS. Concessional patients who hold a concession card must pay $3.80 per prescription item.

Individuals and families are protected from large overall expenses for PBS listed medicines by safety nets. For general patients (non-cardholders), once the eligible expenditure of a person and/or their immediate family exceeds $726.80 within a calendar year, the additional payment the patient has to make per item (co-payment) decreases from $23.70 to the concessional co-payment rate of $3.80.

For concessional and pensioner patients (cardholders), once their total eligible expenditure exceeds $197.60 within a calendar year, any further prescriptions are free for the remainder of that year. All pensioners continue to have their pensions supplemented by a pharmaceutical allowance of $2.90 per week payable fortnightly, or $150.80 per year, to help defray their out-of-pocket pharmaceutical expenses. The allowance is not paid to other concessional beneficiaries.

Patients may pay more than the relevant co-payment where there is more than one brand of the same drug or alternative product that produces similar results. The Government subsidises on the basis of the lowest priced drug, and any difference in price due to brand or product premiums must be met by the patient. The premium cannot be counted towards the patient's safety net. There is always one brand of a drug available on the PBS that does not have a brand premium.

In 2003-04 the PBS had 165.4 million benefit prescriptions, representing a cost to the Australian Government of $5,607.5m (table 9.31).

The number of PBS prescriptions per person in 2003-04 was 8.2, compared with 8.0 in 2002-03. The number of benefit prescriptions increased by 4.4% over the previous year, and the cost to Government of these prescriptions grew by 10.9% (in current dollars).

The rate of growth in prescription numbers and their cost reflects the ongoing trend towards newer and more costly medicines.


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

Australian Government
cost(a)
Script
volume(b)
Average Government
cost per script(b)
Average patient
cost per script(b)(c)
Prescriptions
per person(b)
$m
millions
$
$
no.

1999-2000
3,491.0
137.6
23.08
4.72
7.2
2000-01
4,257.5
147.6
25.81
5.02
7.7
2001-02
4,578.1
154.5
27.08
5.21
7.9
2002-03
5,054.7
158.5
28.84
5.40
8.0
2003-04
5,607.5
165.4
30.17
5.67
8.2

(a) PBS Government cost is reported on an accrual accounting basis. Categories included are expenditure for Section 85 drugs (Concessional and General), Emergency (Doctor's Bag), Highly Specialised Drugs, Section 100 drugs and issue costs of Safety Net cards.
(b) All other information is sourced from the relevant Pharmaceutical Benefits Branch publications 'Expenditure and prescriptions twelve months to...' and is reported on a cash basis. The data only relates to Concessional and General categories.
(c) Average Patient Cost per script is based on patient co-payments, however this does not include the cost of patient purchase of medicines that fall below the co-payment level.
Note: Totally excluded are payments for IVF Centre Hormones, Human Growth Hormones, Aboriginal Health Services, and prescription medicines subsidised by the Government under the Repatriation Pharmaceutical Benefits Scheme (RPBS) which is administered by the Department of Veterans' Affairs.

Source: DoHA 2004b; HIC.


Private health insurance

At 30 June 2004 private health insurance was offered by 41 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 a 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 strongly, 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 43% as at June 2004 (graph 9.32).

Graph 9.32: PERSONS WITH PRIVATE HEALTH INSURANCE, Proportion of total population



Funding of hospitals

Australian Government funding to the state and territory health systems is made through the Australian Health Care Agreements.

In 2003-04 total Australian Government funding under the Australian Health Care Agreements was around $7.5b. Of this amount, over 99% was paid to the states and territories as Health Care Grants, while the residual 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 Pathways Home initiative.

Public hospitals

In 2002-03 there were 748 public hospitals nationally, including 19 psychiatric hospitals, compared with 749 in 1998-99. There were an average of 52,200 beds in public hospitals during 2002-03 (table 9.33), representing 66% of all beds in the hospital sector (public and private hospitals combined). Public hospital beds have declined from 2.9 beds per 1,000 population in 1998-99 to 2.6 beds in 2002-03.

The number of patient separations (discharges, deaths, and transfers) from public hospitals during 2002-03 was just over 4 million compared with 3.9 million in 1998-99. Same-day separations accounted for 49% of total separations in 2002-03 compared with 45% in 1998-99.

Total days of hospitalisation for public health patients during 2002-03 amounted to 16.4 million, an increase of 0.9% since 1998-99. The average length of hospital stay per patient in 2002-03 was 4 days. For 1998-99 the corresponding figure was 4.2, reflecting the lower number of same-day patients compared with 2002-03. If same-day patients are excluded, the 2002-03 average length of stay was 6.9 days compared with 6.8 days in 1998-99.

Private hospitals

There were 536 private hospitals in operation in 2002-03, comprising 271 acute hospitals, 25 psychiatric hospitals and 240 free-standing day hospital facilities. The number of acute and psychiatric hospitals has decreased from last year continuing the downward trend since 1998-99 when 312 of these hospitals were in operation. In contrast, day hospital facilities have shown strong growth for several years, with only 190 in operation in 1998-99.

For private acute and psychiatric hospitals during 2002-03, the average number of beds available was 24,454. Although this was a slight decrease on the previous year, between 1998-99 and 2002-03, the average number of beds available increased by 3%. There were 1.3 private hospital beds available per 1,000 population in 2002-03. 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 1,910, reflecting the continued growth in the numbers of free-standing day hospitals.

Private hospital separations in 2002-03 totalled more than 2.6 million, of which 82% were from private acute and psychiatric hospitals and 18% from free-standing day hospital facilities. Same day separations accounted for 61% of all private hospital separations (compared with 49% 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 with public hospitals (4.0 days) (table 9.33).

The average number of full-time equivalent staff employed at all private hospitals was 47,511, of whom 63% were nursing staff. Total operating expenditure for private acute and psychiatric hospitals during 2002-03 amounted to $5,147m. Some 53% of this amount was spent on salaries and wages (including on-costs). Revenue received during the year was $5,456m, of which 95.4% was received as payments from, or in respect of, patients. Total recurrent expenditure for free-standing day hospital facilities during 2002-03 amounted to $254m, and revenue received during the year was $301m.


9.33 PUBLIC AND PRIVATE HOSPITALS - 2002-03

Units
Public(a)
Private(b)
Total

Bed supply
Facilities
no.
748
536
1,284
Beds/chairs(c)
no.
52,200
(d)26,364
(d)78,564
Activity
Total separations
’000
4,091
2,602
6,693
Same day separations
’000
2,000
1,576
3,576
Total patient days
’000
16,426
7,220
23,646
Average length of stay
days
4.0
2.8
3.5
Average length of stay excluding all same-day separations
days
6.9
5.5
6.4
Average occupancy rate
%
86.2
(e)75.6
(e)82.8
Non-admitted patient occasions of service
’000
40,786
(e)1,919
(e)42,705
Staff (full-time equivalent)(c)
’000
n.a.
48
n.a.
Revenue
$m
n.a.
5,758
n.a.
Recurrent expenditure
$m
(f)18,323
5,401
23,724

(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, 2002-03 (4390.0); AIHW 2004e.


Health work force

In 2003-04 approximately 384,000 people were employed in health occupations in Australia, comprising 4.0% of the total number of employed persons (table 9.34). The largest components of the health work force were registered nurses (168,500), generalist medical practitioners (35,100) and enrolled nurses (26,600).

Females comprised 74% of the health work force. The high proportion of females in the health work force is due to their predominance in registered midwifery (99.5%), enrolled nursing (91%), registered nursing (93%) and physiotherapy (65%). Conversely, males represented 81% of the ambulance officers and paramedics, 78% specialist medical practitioners and 66% generalist medical practitioners.

Over a third (38%) of the health work force were employed on a part-time basis, compared with 29% of the total number of employed persons in Australia. Of people employed part-time in the health workforce, 90% were female, a higher proportion than the total part-time work force (71%). Males constituted 10% of the part-time health work force compared with 29% 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.


9.34 EMPLOYED PERSONS IN HEALTH OCCUPATIONS(a) - 2003-04

'000
% males
% part-time workers

Health professionals(b)
331.8
25.1
37.7
Generalist medical practitioners
35.1
66.2
18.5
Specialist medical practitioners
19.2
77.7
13.3
Registered nurses
168.5
7.3
47.4
Registered midwives
11.1
0.5
58.0
Physiotherapists
10.8
34.9
39.1
Other health professionals(b)
87.1
33.1
29.5
Health associate professionals
52.2
33.5
40.7
Enrolled nurses
26.6
8.8
49.0
Ambulance officers and paramedics
11.4
81.2
4.7
Aboriginal and Torres Strait Islander health workers
0.8
58.4
37.5
Other health associate professionals
13.4
40.5
55.0
Total employed in health occupations(c)
384.0
26.2
38.1
Total employed
9,528.0
55.5
28.6

(a) Annual average of quarterly data.
(b) Includes health service managers; excludes veterinarians.
(c) Includes health professionals, health service managers, health associate professionals.

Source: ABS data available on request, Labour Force Survey.


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 was lower in 1998-99 compared with 1993-94 (41% to 50%) possibly reflecting the decrease in hospital, medical and dental insurance from 44% of total health expenditure in 1993-94 to 35% in 1998-99.

While the proportion of household health expenditure spent on health practitioners' fees has been similar in each survey since 1984, expenditures on individual items have varied. In particular, general practitioner doctors' fees were higher at 3.8% of total health expenditure in 1984 compared with 2.4% in 1998-99, while specialist doctors' fees were lower at 3.9% compared with 7.8% in 1998-99.

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

Total health expenditure

Health expenditure in Australia includes expenditure funded by the Australian, state and territory governments, by private health insurance and by individuals and households.Total expenditure on health in 2002-03 was $72.2b compared with expenditure of $66.5b in the previous year (table 9.35). This represented an average rate of health expenditure in 2002-03 of $3,652 per person. In 2002-03 governments combined provided almost two-thirds (68%) of the total funding for health expenditure. Health expenditure in volume terms, that is after adjustment for changes in prices, grew at an average annual rate of 4.5% between 1992-93 and 2002-03. In 2002-03 total health expenditure as a proportion of gross domestic product was 9.5% compared with 8.9% in 1992-93.


9.35 TOTAL HEALTH EXPENDITURE AND RATE OF GROWTH

Expenditure
Rate of growth


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

1992-93
35,098
44,764
n.a.
n.a.
1993-94
36,990
46,080
5.4
2.9
1994-95
39,216
47,733
6.0
3.6
1995-96
42,082
49,688
7.3
4.1
1996-97
45,296
52,182
7.6
5.0
1997-98
48,274
54,131
6.6
3.7
1998-99
51,726
56,785
7.2
4.9
1999-2000
55,427
59,435
7.2
4.7
2000-01
61,660
63,812
11.2
7.4
2001-02
66,541
66,541
7.9
4.3
2002-03(c)
72,183
69,306
8.5
4.2

(a) Comprises allocated recurrent expenditure, unallocated recurrent expenditure, capital expenditure/outlays and capital consumption.
(b) Reference year is 2001-02.
(c) Preliminary estimates.

Source: AIHW 2004f.


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