1301.0 - Year Book Australia, 2012  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 24/05/2012   
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This section draws extensively on material provided by the Australian Government Department of Health and Ageing (October 2011) and is complemented by a special article on private health insurance in Australia.


Australia's health care system is funded and administered by several levels of government (national, state/territory and local) and is supported by private health insurance arrangements. Australia’s national public health insurance scheme, Medicare, is funded and administered by the Australian Government and consists of three health care components – medical services (including visits to general practitioners (GPs) and other medical practitioners), prescription pharmaceuticals and hospital treatment as a public patient (the latter is jointly funded by the Australian and state/territory governments).

The Australian and state/territory governments fund and deliver a range of other health services including population health programs, community health services, health and medical research, Aboriginal and Torres Strait Islander health services, mental health services, health workforce and health infrastructure.

The Australian Government is primarily responsible for health service funding; regulation of health products, services and workforce; and national health policy leadership. The states and territories are primarily responsible for the delivery and management of public health services (including public hospitals, community health and public dental care), and the regulation of health care providers and private health facilities. Local governments fund and deliver some health services such as environmental health programs.

This public system is supported by optional private health insurance (and injury compensation insurance) for hospital treatment as a private patient and for ancillary health services (such as physiotherapy and dental services) provided outside a hospital.

Most medical and allied health practitioners are employed in private practice. A small number of doctors and allied health professionals are salaried employees of the various tiers of government.


The Australian Government has national responsibility for the following major health funding mechanisms:

  • The Medicare Benefits Schedule (MBS) component of Medicare provides rebates for medical and hospital services to all Australian residents.
  • The Pharmaceutical Benefits Scheme (PBS) component of Medicare provides rebates to private patients for a wide range of prescription pharmaceuticals.
  • National Healthcare Specific Purpose Payments (SPPs), which are associated with the National Healthcare Agreement, enable each state and territory to fund a range of public hospital and health services, including the public hospital component of Medicare. National Healthcare SPPs will be replaced by National Health Reform funding from 2012–13.
  • The National Health Reform Agreement includes Australian Government growth funding to states and territories for public hospital services. This is a national approach to activity-based funding of public hospital services and block funding for small regional and rural hospitals; and new performance, accountability and transparency mechanisms.
  • National Partnership Agreements (NPAs) fund the delivery of specific projects or reforms by states and territories. These currently include hospital reform, preventive health, workforce reform, Aboriginal and Torres Strait Islander health, elective surgery, e-health, vaccines, health infrastructure projects and a range of health services, including cancer screening and health protection programs.
  • The private health insurance rebate subsidises the cost of private health insurance premiums, making it easier for Australians to access treatment as private patients in hospital, as well as a range of ancillary health services.
  • Grants and payments to government and non-government health service providers for a range of health services (e.g. radiation oncology, pathology and primary care medical services) improve service access for specific population groups, influence the growth and distribution of health services, and improve the quality of service and health outcomes; and
  • Health services for war and defence service veterans are provided under a number of schemes administered through the Department of Veterans’ Affairs. These include the Local Medical Officer Scheme, the Repatriation Pharmaceutical Benefits Scheme, and the Repatriation Private Patients Scheme (for treatment as a private patient in hospital).


Medicare provides universal access to subsidised medical and pharmaceutical services and free hospital treatment as a public patient. Introduced in 1984, Medicare’s objectives are to make health care accessible and affordable to all Australians, and to provide a high quality of care.

Medicare Benefits Schedule (MBS)

The MBS provides financial assistance to patients in the form of rebates, to assist in covering the cost of 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, which are set by the Government in consultation with the medical profession. 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.

For private hospital treatment or ‘hospital substitute treatment’ covered by private health insurance, 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 out-of-hospital services, the Medicare benefit is 100% of the Schedule fee for non-referred (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 ($71.20 from 1 November 2010, indexed annually), depending on which is greater. Where practitioners bulk-bill Medicare Australia, they receive the Medicare rebate directly, and they cannot levy additional charges on the patient.

With effect from 1 February 2004, additional benefits of $5.00 per transaction were paid to GPs as an incentive for bulk-billing patients in metropolitan areas. This incentive has been indexed annually and in 2010 a benefit of $5.75 applied to bulk-billed services provided by GPs to persons under 16 years of age or to Commonwealth concession card holders.

From 1 May 2004, an incentive with a benefit of $7.50 per transaction was introduced for GPs practicing in rural areas, Tasmania and eligible metropolitan areas. This incentive has been indexed annually and in 2010 a benefit of $8.75 applied to bulk-billed services provided by GPs to persons under 16 years of age or Commonwealth concession card holders.

A number of 'safety net' arrangements apply for services provided out-of-hospital that are not bulk-billed. Under the original Medicare Safety Net, when gap payments (the difference between the MBS Schedule fee and the Medicare rebate) exceed $399.60 for an individual or family in 2011, they are eligible for 100% of the Schedule fee for out-of-hospital service.

Under the Extended Medicare Safety Net (EMSN), an additional rebate is provided to Australian families and singles who have out-of-pocket costs for Medicare eligible out-of-hospital services once an annual threshold in out-of-pocket costs has been met. In 2011, the annual threshold for Commonwealth concession cardholders, including those with a Pensioner Concession Card, a Health Care Card or a Commonwealth Seniors Card, and people who receive Family Tax Benefits (Part A) is $578.60. For all other singles and families the annual threshold is $1,157.50. Once the relevant annual threshold has been met, Medicare will pay for 80% of any future out-of-pocket costs for Medicare eligible out-of-hospital services for the remainder of the calendar year, except for a small number of services where an upper limit or ‘EMSN benefit cap’ applies.

Medicare benefits do not cover services to public patients in public or private hospitals, services provided under Veterans' Affairs arrangements, some compensation cases, and some services provided under other publicly funded programs.

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 public health insurance systems that preceded it.

The standard Medicare levy is set at 1.5% of an individual’s taxable income (except where an individual is exempt or pays a reduced levy because of low income). Individuals and families on higher incomes who do not have an appropriate level of private hospital cover may also have to pay a Medicare levy surcharge, which is an additional 1% of taxable income. In 2010–11, taxation revenue from the Medicare Levy (including the Medicare Levy Surcharge) was $8.3 billion.

In 2010–11, Medicare Australia paid benefits of $16.4 billion, or $722.98 per person for 319 million items of services, an average of 14.1 services per person (table 11.26).



Per person
Per person

7 829.5
8 115.5
8 600.0
9 922.9
10 976.3
11 735.6
13 006.5
14 321.9
15 477.1
16 377.4

(a) Including increases in services over time reflect structural changes to the Medicare Benefits Schedule, changes in service provision (services previously provided by state and territory governments under grant arrangements now covered by Medicare), population growth and ageing.
(b) Nominal.
(c) In current prices.

http://www.health.gov.au/internet/main/publishing.nsf/Content/medstat-jun11-tables-aa; http://www.health.gov.au/internet/main/publishing.nsf/Content/medstat-jun11-tables-ab.


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 2011.

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 $34.20 for each prescription item for medicines listed on the PBS. Concessional patients who hold a concession card must pay $5.60 per prescription item.

Under private health insurance, health insurers may offer policies that cover the above costs of the prescription items as part of an episode of hospital treatment or an episode of hospital-substitute treatment.

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 $1,317.20 within a calendar year, the additional payments the patient has to make per item (co-payment) usually decreases from $34.20 to the concessional co-payment rate of $5.60.

For concessional and pensioner patients (cardholders), once their total eligible expenditure exceeds $336 within a calendar year, any further prescriptions are usually free for the remainder of that year.

In the 2010–11 financial year, the PBS processed 188.1 million benefit prescriptions, representing a cost to the Australian Government of $8.8 billion (table 11.27). The number of PBS subsidised prescriptions per person in the 2010–11 financial year was 8.4, compared with 8.3 in 2009–10.

11.27 PHARMACEUTICAL BENEFITS SCHEME(a), Subsidised prescriptions(b)

Financial Year
Government cost(c)
Script volume(d)
Average Government cost per script(d)
Subsidised prescriptions per capita(d)

5 607.5
6 001.2
6 163.1
6 428.3
7 008.9
7 654.7
8 342.0
8 774.9

(a) Payments for prescription medicines subsidised by the Government under the Repatriation Pharmaceutical Benefits Scheme, administered by the Department of Veterans' Affairs, are excluded.
(b) In current prices.
(c) 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.
(d) All other information is sourced from the relevant Pharmaceutical Benefits Branch publications and is reported on a cash basis. The data only relate to concessional, General and Doctor's Bag categories.
Source: Medicare Australia Data; Commonwealth Department of Health and Ageing.


Australia’s public hospital system, which provides the majority of acute-care beds, provides free access to hospital care for public patients. It is jointly funded by the Australian Government and state/territory governments (and can also receive revenue from services to private patients). Public hospitals are run by state and territory governments. Australian Government funding to the states and territories for public hospitals is made through the National Healthcare Agreement and the National Health Reform Agreement between the Australian Government and the states and territories.

In 2006–07, there were 758 public hospitals across Australia, compared with 761 in 2003–04. There was an average of 56,000 beds in public hospitals during 2006–07, representing 68% of all public and private hospital beds. The number of available beds per head of population ranged from 3.3 per 1,000 in the Northern Territory to 4.7 per 1,000 in Tasmania.


At 30 June 2011, private health insurance was offered by 35 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 available to all Australians. Private health insurance can cover part or all of:
  • hospital theatre and accommodation charges to private patients in either a public or private hospital
  • a portion of medical fees
  • allied health services
  • programs to manage and prevent chronic disease
  • dental services
  • aids such as spectacles and
  • ambulance transport.

The introduction of a rebate for private health insurance premiums in 1999, and the Government's Lifetime Health Cover policy in 2000, saw private hospital cover increase, with population coverage rates rising from 31% in June 1999 to 43% in June 2000. At 30 June 2011, almost 10.3 million Australians had private hospital insurance cover (45% of the population). Private hospital and general treatment insurance coverage from 2001 to 2011 is shown in graph 11.28.

11.28 PERSONS WITH PRIVATE HEALTH INSURANCE(a), Proportion of total population


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.

According to the 2009–10 HES, households spent an average of $65.60 per week on medical care and health expenses. This was approximately 5% of an average household's expenditure on goods and services each week.

Major items contributing to overall household medical care and health expenditure were accident and health insurance (40%), health practitioners’ fees (29%), and medicines, pharmaceutical products and therapeutic appliances (27%). The remainder was mainly taken up by hospital and nursing home charges.

Health practitioners’ fees per household averaged $18.99 a week and were mainly for dental treatments (38%) and specialist doctors’ fees (33%). Fees for general practitioners accounted for 9% of all health practitioners’ fees, possibly reflecting the higher level of government subsidisation of GP services.


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Statistics contained in the Year Book are the most recent available at the time of preparation. In many cases, the ABS website and the websites of other organisations provide access to more recent data. Each Year Book table or graph and the bibliography at the end of each chapter provides hyperlinks to the most up to date data release where available.