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