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1301.0 - Year Book Australia, 2006  
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Contents >> Chapter 9 - Health >> Health care delivery and financing

This section draws extensively on material provided by the Australian Government Department of Health and Ageing (September 2005).

HEALTH CARE DELIVERY AND FINANCING

GOVERNMENTS' 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 people are jointly funded by the Australian, state and territory governments. Residential facilities for aged people 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 and organ transplants, 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. The reforms also provide for admitted patients to receive up to one month's supply of pharmaceuticals on discharge from hospital, paid by the PBS rather than the hospital.

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.

THE 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.

The private sector's share of surgical episodes requiring the use of an operating room was 55.5% in 2003-04, compared with 55.2% in 2002-03. 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. The rebate was increased in April 2005 to 35% for people aged 65-69 years and to 40% for people aged 70 years and over.

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 practitioners
  • 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 private health insurance rebate for private health insurance.

Diagram 9.35 shows the major flows of funding between the government and non-government sectors, and the providers of health goods and services.

9.35 THE STRUCTURE OF THE AUSTRALIAN HEALTH CARE SYSTEM AND ITS MAJOR FLOW OF FUNDS
Diagram 9.35: THE STRUCTURE OF THE AUSTRALIAN HEALTH CARE SYSTEM AND ITS MAJOR FLOW OF FUNDS

Source: AIHW 2005e.


MEDICARE

Medicare is Australia's universal health insurance scheme. Introduced in 1984, its three objectives are to make health care affordable for all Australians, to give all Australians access to health care services, and to provide a high quality of care.

Medicare benefits

Medicare benefits provide financial assistance to people who incur medical expenses for selected professional services rendered by medical practitioners, participating optometrists, practice nurses, dentists and other allied health professionals. Medicare benefits are based on a schedule of fees.

Practitioners are not required to adhere to the schedule fee, except for optometry, which is a participating scheme under which practitioners sign an undertaking to charge no more than the schedule fee for the services they perform.

Where practitioners bulk bill the Health Insurance Commission, they receive the Medicare rebate, and they cannot levy additional charges on the patient.

Medicare benefits do not cover services to public patients in public and private hospitals, services provided under Veterans' Affairs arrangements (see Services provided to veterans and their families in the Income and welfare chapter), some compensation cases, and some services provided under other publicly-funded programs.

For private in-patients in hospitals or approved day surgeries, the Medicare benefit is 75% of the schedule fee. Amounts paid in excess of the rebate may be claimed under private health insurance arrangements.

For non-hospital services, from 1 January 2005, the Medicare benefit is 100% of the schedule fee for out-of-hospital non-referred general practitioner (GP) attendances, including practice nurse items, and for all other out-of-hospital services, 85% of the schedule fee or the schedule fee less the maximum gap ($60.00 from 1 November 2004), which ever is greater.

With effect from 1 February 2004, additional benefits ($5.10 and $7.65, from 1 November 2004) are paid to GPs as an incentive for bulk billing. The $7.65 incentive applies to bulk-billed services provided by GPs, to people under 16 years of age or concession card holders, to people in Tasmania or in specified rural and remote areas, and with effect from 1 September 2004, to a number of other geographical areas. The $5.10 incentive applies to bulk-billed services provided by GPs to people under 16 years of age or to concession card holders in other parts of Australia.

A number of 'safety net' arrangements apply for patients billed for out-of-hospital services. For Commonwealth concession card holders and families who receive Family Tax Benefit Part A, once out-of-pocket costs (fee charged less benefit paid) exceed $306.90 in 2005, Medicare covers 80% of the out-of-pocket costs for the remainder of the year. For other singles and families, Medicare covers 80% of the out-of-pocket costs, once those costs have exceeded $716.10 in 2005. In addition, when gap payments (fee charged less benefit paid, where fee charged is less than the schedule fee; or schedule fee less benefit paid, where fee charged is at or above the schedule fee) exceed $335.50 for an individual or family in 2005, Medicare benefits increase to up to 100% of the schedule fee for the remainder of the year.

In 2004-05, the Australian Government Health Insurance Commission paid benefits of $9,922.9 million (m) (or $487.62 per person) for 236.3 million items of services (11.6 services per person) (table 9.36).

9.36 MEDICARE SERVICES PROVIDED AND BENEFITS PAID

Services(a)
Benefits(b)


Total
Per person
Total
Per person
million
no.
$m
$

1993-94
180.2
10.1
5,373.3
300.94
1994-95
188.0
10.4
5,696.7
315.23
1995-96
196.0
10.7
6,038.4
329.77
1996-97
198.8
10.7
6,158.0
332.55
1997-98
202.2
10.8
6,333.5
338.49
1998-99
206.3
10.9
6,669.1
352.38
1999-2000
209.6
10.9
6,945.0
362.60
2000-01
213.9
11.0
7,326.8
377.41
2001-02
220.7
11.2
7,829.5
398.63
2002-03
221.4
11.1
8,115.5
408.38
2003-04
226.4
11.3
8,600.0
427.62
2004-05
236.3
11.6
9,922.9
487.62

(a) Increases in services over time also reflect structural changes to Medicare and changes in service provision (including services previously provided by state government under grant arrangements).
(b) In current prices.

Source: Health Insurance Commission.


Medicare levy


When Medicare began in 1984, a 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.

The Australian Taxation Office estimated revenue raised from the Medicare levy in 2004-05 to be $6.1b which represents 17.2% of estimated total Australian Government health expenditure for the year.

PHARMACEUTICAL BENEFITS SCHEME (PBS)

The Australian Government provides Medicare-eligible people 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 2005.

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 $28.60 for each prescription item for medicines listed on the PBS. Concessional patients who hold a concession card must pay $4.60 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 $874.90 within a calendar year, the additional payments the patient has to make per item (co-payment) decreases from $28.60 to the concessional co-payment rate of $4.60.

For concessional and pensioner patients (cardholders), once their total eligible expenditure exceeds $239.20 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 in certain circumstances. A special patient contribution is payable for a pharmaceutical benefit where there is a disagreement between the manufacturer and the Government over the dispensed price for that benefit item. This extra charge is paid by all patients, together with their usual patient contribution.
  • In the case of brand premiums, the Government subsidises on the basis of the lowest priced drug, and any difference in price due to a brand premium 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.
  • Under the therapeutic group premium arrangements, the Government reimbursement to pharmacists is based on the lowest priced benefit items within identified therapeutic groups. Patients pay the difference for higher priced items. Exemptions on medical grounds are available.
  • For other special patient contributions, although some medicines in reference pricing groups deliver similar health outcomes, they may not be interchangeable for patients. Unlike products with brand and therapeutic group premiums, patients may not be able to avoid the additional costs by taking another medicine. Where the prescribing doctor believes that there is no clinically appropriate alternative, the Government will pay the special patient contribution on behalf of the patient for most of the drugs with these patient paid charges.

In 2004-05 the PBS had 170.3 million benefit prescriptions, representing a cost to the Government of $6,001.2m (table 9.37).

The number of PBS subsidised prescriptions per capita in 2004-05 was 8.3, compared with 8.2 in 2003-04. The number of subsidised prescriptions increased by 3.0% over the previous year, and the cost to Government of these prescriptions grew by 7.0% (in current dollars).

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

9.37 PBS, Subsidised prescriptions(a)

Year
Government
cost(b)
Script
volume(c)
Average Government
cost per script(c)
Average patient cost
per script(c)(d)
Subsidised prescriptions
per capita(c)
$m
millions
$
$
no.

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
2004-05
6,001.2
170.3
31.16
6.11
8.3

(a) In current prices.
(b) 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) Drugs, Highly Specialised Drugs, Section 100 drugs and issue costs of Safety Net cards.
(c) 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 relate to Concessional, General and Doctor's Bag categories.
(d) 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 or on private (non PBS) prescriptions.
Note: Payments for IVF Centre Hormones, Human Growth Hormones, Aboriginal Health Services, and prescription medicines subsidised by the Government under the Repatriation Pharmaceutical Benefits Scheme which is administered by the Department of Veterans' Affairs, are totally excluded.

Source: HIC Data, DoHA 2005b.


PRIVATE HEALTH INSURANCE

At 30 June 2005 private health insurance was offered by 40 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 to a participation rate of 43% as at June 2005 (graph 9.38).

Graph 9.38: 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 2004-05 total Australian Government funding under the Australian Health Care Agreements was around $8.0b. 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 2003-04 there were 761 public hospitals nationally, including 20 psychiatric hospitals, compared with 748 in 1999-2000. There was an average of 53,327 beds in public hospitals during 2003-04 (table 9.39), representing 67% of all beds in the hospital sector (public and private hospitals combined). Public hospital beds have declined from 2.8 beds per 1,000 population in 1999-2000 to 2.7 beds in 2003-04.

The number of patient separations (discharges, deaths, and transfers) from public hospitals during 2003-04 was 4.2 million compared with just under 3.9 million in 1999-2000. Same-day separations accounted for 49% of total public hospital separations in 2003-04 compared with 46% in 1999-2000.

Total days of hospitalisation for public health patients during 2003-04 amounted to 16.4 million, an increase of 1% since 1999-2000. The average length of hospital stay per patient in 2003-04 was 3.9 days. For 1999-2000 the corresponding figure was 4.2, reflecting the lower number of same-day patients compared with 2003-04. If same-day patients are excluded, the 2003-04 average length of stay was 6.7 days compared with 6.9 days in 1999-2000.

Private hospitals

There were 525 private hospitals in operation in 2003-04, comprising 291 private and acute hospitals and 234 free-standing day hospital facilities. The number of acute and psychiatric hospitals has decreased from last year continuing the downward trend since 1999-2000 when 302 of these hospitals were in operation. In contrast, day hospital facilities have shown strong growth for several years, with only 207 in operation in 1999-2000.

For private acute and psychiatric hospitals during 2003-04, the average number of beds available was 24,642. This was a slight increase on the previous year due to growth in the average number of beds available in regions outside the capital cities. Between 1999-2000 and 2003-04, the average number of beds available increased by 4.1%. There were 1.2 private hospital beds available per 1,000 population in 2003-04. 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 23% to 1,947, reflecting the continued growth in the numbers of free-standing day hospitals.

Private hospital separations in 2003-04 totalled more than 2.7 million, of which 81% were from private acute and psychiatric hospitals and 19% 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 (2.7 days) compared with public hospitals (3.9 days) (table 9.39).

The average number of full-time equivalent staff employed at all private hospitals was 48,577, of whom 63% were nursing staff. Total operating expenditure for private acute and psychiatric hospitals during 2003-04 amounted to $5,576m. Some 52% of this amount was spent on salaries and wages (including on-costs). Revenue received during the year was $5,933m, of which 95.6% was received as payments from, or in respect of, patients. Total recurrent expenditure for free-standing day hospital facilities during 2003-04 amounted to $282m, and revenue received during the year was $341m.

9.39 PUBLIC AND PRIVATE HOSPITALS - 2003-04

Units
Public(a)
Private(b)
Total

Bed supply
Facilities
no.
761
525
1,286
Beds/chairs(c)
no.
53,327
(d)26,589
(d)79,889
Activity
Total separations
’000
4,200
2,688
6,888
Same day separations
’000
2,057
1,632
3,689
Total patient days
’000
16,418
7,329
23,747
Average length of stay
days
3.9
2.7
3.4
Average length of stay excluding all same-day separations
days
6.7
5.6
6.3
Average occupancy rate
%
84.2
(e)75.7
(e)81.5
Non-admitted patient occasions of service
’000
43,622
(e)1,909
(e)45,531
Staff (full-time equivalent)(c)
’000
205
49
254
Revenue
$m
1,640
6,273
7,913
Recurrent expenditure
$m
(f)20,013
5,859
25,872

(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, 2003-04 (4390.0); AIHW 2005d.


HEALTH WORK FORCE

In 2004-05 approximately 402,700 people were employed in health occupations in Australia, comprising 4.1% of the total number of employed people (table 9.40). The largest components of the health work force were registered nurses (163,200), generalist medical practitioners (33,700) and enrolled nurses (28,500).

Females comprised 75% of the health work force. The high proportion of females in the health work force is due to their predominance in registered midwifery (99.8%), enrolled nursing (94%), registered nursing (92%) and physiotherapy (71%). Conversely, males represented 84% of the ambulance officers and paramedics, 75% specialist medical practitioners and 58% generalist medical practitioners.

Over a third (39%) of the health work force were employed on a part-time basis, compared with 28% of other employed people in Australia. Of people employed part time in the health work force, 91% were female, a higher proportion than in the total part-time work force (71%). Males constituted 9% of those working part time in the health work force compared with 29% of those working part time in the total 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.

9.40 EMPLOYED PERSONS IN HEALTH OCCUPATIONS(a) - 2004-05

'000
% males
% part-time workers

Health professionals(b)
348.9
24.8
38.7
Generalist medical practitioners
33.7
58.1
21.7
Specialist medical practitioners
21.2
75.2
13.6
Registered nurses
163.2
7.5
48.4
Registered midwives
14.6
0.2
67.6
Physiotherapists
13.3
29.0
32.6
Other health professionals(b)
102.9
33.6
30.9
Health associate professionals
53.8
29.1
42.8
Enrolled nurses
28.5
5.5
50.2
Ambulance officers and paramedics
9.1
83.8
3.3
Aboriginal and Torres Strait Islander health workers
0.6
13.9
21.5
Other health associate professionals
15.6
40.5
53.0
Total employed in health occupations(c)
402.7
25.3
39.2
Total employed
9,800.0
55.2
28.4

(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 2003-04. As a proportion of total household expenditure on goods and services, health and medical care increased from 3.9% in 1984 to 5.2% in 2003-04.

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.

Household expenditure on accident and health insurance accounted for the largest percentage of total average household expenditure on health and medical care in each of the survey periods. However, this percentage was lower in 2003-04 than in 1993-94 (39% compared with 50%) reflecting a decrease in the hospital, medical and dental insurance share of total health expenditure (from 44% in 1993-94 to 34% in 2003-04), possibly as a result of the private health insurance rebate.

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 3.5% in 2003-04, while specialist doctors' fees were lower at 3.9% compared with 9.3% in 2003-04.

The proportion of total health expenditure spent on medicines, pharmaceutical products and therapeutic appliances increased from 20% in 1984 to 25% in 2003-04.

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 2003-04 was $78.4b compared with expenditure of $72.2b in the previous year (table 9.41). This represented an average rate of health expenditure in 2003-04 of $3,919 per person. In 2003-04 governments combined provided just over two thirds (68%) of the total funding for health expenditure. Health expenditure in chain volume terms, that is after adjustment for changes in prices, grew at an average annual rate of 4.6% between 1993-94 and 2003-04. In 2003-04 total health expenditure as a proportion of gross domestic product (GDP) was 9.7% compared with 8.3% in 1993-94.

9.41 TOTAL HEALTH EXPENDITURE AND RATE OF GROWTH

Expenditure
Rate of growth
Ratio of health
expenditure to GDP



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

1993-94
36,990
48,112
. .
. .
8.3
1994-95
39,216
49,973
6.0
3.9
8.3
1995-96
42,082
52,089
7.3
4.2
8.4
1996-97
45,296
54,752
7.6
5.1
8.6
1997-98
48,288
56,615
6.6
3.4
8.6
1998-99
51,440
58,918
6.5
4.1
8.7
1999-2000
55,255
61,855
7.4
5.0
8.9
2000-01
61,635
66,540
11.5
7.6
9.2
2001-02
66,769
69,506
8.3
4.5
9.4
2002-03
72,249
72,249
8.2
3.9
9.5
2003-04
78,369
75,475
8.5
4.5
9.7

(a) Comprises allocated recurrent expenditure, unallocated recurrent expenditure, capital expenditure/outlays and capital consumption.
(b) Reference year for chain volume measures is 2002-03.

Source: AIHW 2005e.


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