JANUARY

The Australian Health Care System, 2015
Paul Dugdale and Judith Healy
Australian National University
What is the role of government?
Three levels of government are collectively responsible for providing universal health care: federal; state and
territory; and local. The federal government mainly provides funding and indirect support to the states and
health professions, subsidizing primary care providers through the Medicare Benefits Scheme (MBS) and the
Pharmaceutical Benefits Scheme (PBS) and providing funds for state services. It has only a limited role in direct
service delivery.
States have the majority responsibility for public hospitals, ambulance services, public dental care, community
health services, and mental health care. They contribute their own funding in addition to that provided by
federal government. Local governments play a role in the delivery of community health and preventive health
programs, such as immunization and regulation of food standards (Department of the Prime Minister and
Cabinet, 2015).
Who is covered and how is insurance financed?
Publicly financed health insurance: Total health expenditure in 2013–2014 represented 9.8 percent of gross
domestic product (GDP), an increase of 3.1 percent from 2012–2013. Two thirds of this expenditure (67.8%)
came from 2012–2013 (Australian Institute of Health and Welfare [AIHW], 2015).
The federal government funds Medicare, a universal public health insurance program providing free or
subsidized access to care for Australian citizens, residents with a permanent visa, and New Zealand citizens
following their enrollment in the program and confirmation of identity (AIHW, 2014). Restricted access is
provided to citizens of certain other countries through formal agreements (Department of Human Services
[DHS], 2015). Other visitors to Australia do not have access to Medicare. Government funding is raised an
estimated AUD10.3 billion (USD6.7 billion) in 2013–2014 (The Commonwealth of Australia, 2013). (In July 2014,
the levy was expanded to raise funds for disability care.)
Private health insurance: Private health insurance (PHI) is readily available and offers more choice of providers
(particularly in hospitals), faster access for nonemergency services, and rebates for selected services.
Government policies encourage enrollment in PHI through a tax rebate and, above a certain income, a penalty
payment for not having PHI (the Medicare Levy surcharge) (PHIO, 2015). The Lifetime Health Coverage program
provides a lower premium for life if participants sign up before age 31. There is a 2 percent increase in the base
premium for every year after age 30 for people who do not sign up. Consequently, take-up is highest for this
age group but rapidly drops off as age increases, with a trend to opt out at age 50 and up.
Nearly half of the Australian population (47%) had private hospital coverage and nearly 56 percent had general
treatment coverage in 2015 (Private Health Insurance Administration Council, 2015).
Insurers are a mix of for-profit and nonprofit providers. In 2013–2014, private health insurance expenditures
represented 8.3 percent of all health spending (AIHW, 2015).
Private health insurance can include coverage for hospital, general treatment, or ambulance services. When
accessing hospital services, patients can opt to be treated as a public patient (with full fee coverage) or as
a private patient (with 75% fee coverage). For private patients, insurance covers the MBS fee. If a provider
charges above the MBS fee, the consumer will bear the gap cost unless they have gap coverage. The patient
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