Growth in health spending at 5 year high, driven by government spending

Australia spent nearly $181 billion on health in 2016–17, according to the latest Australian Institute of Health and Welfare (AIHW) report.

The report, Health expenditure Australia 2016–17, shows that health spending grew more in 2016–17 than at any time in the past 5 years.

‘In 2016-17, health spending grew by 4.7%, compared to an average of 3.1% each year over the past 5 years. This was also the first time spending grew more than the decade average (4.6%) since 2011–12,’ said AIHW spokesperson Dr Adrian Webster.

This equated to more than $7,400 spent per person—over $200 more per person than in the previous year.

Governments were the drivers of this growth.

‘In 2016–17, almost 70% of total health spending was funded by governments, with the Australian Government contributing about 41%, and state and territory governments 27%,’ Dr Webster said.

Total government spending on health grew by 6.8% in real terms in 2016–17, above the decade average of 4.5%.

Due to the relatively rapid growth in government spending, the proportion of tax revenue spent on health increased in 2016–17 following a period of relative stability (rising by 0.8 percentage points to 27.1%).

The rise in total government spending was related to an increase in spending for public hospital services ($1.3 billion in real terms) and inclusions to the Pharmaceuticals Benefits Scheme (PBS).

‘This reflects the recent addition of new pharmaceuticals to treat hepatitis C to the PBS—at a cost of $1.7 billion in 2016–17,’ Dr Webster said.

In contrast to the trend for government spending, spending by non-government sources (including out-of-pocket spending by individuals and spending by private health insurers) saw its lowest growth in a decade.

Individuals, private health insurers and other non-government sources funded 31% of health spending, or $56.5 billion. Around $30 billion of this came from individuals.

‘Non-government spending rose by just 0.2% in 2016–17—well below the decade average of 4.8%,’

‘The amount spent by individuals fell by an average of $10 per person, to $1,190—the second year in a row there was a decline.’ Dr Webster said.

The report also shows that funding of public hospitals has shifted between the different levels of government in recent years.

‘The share contributed by the state and territory governments fell from 53.3% to 51.0%, with the Australian Government share increasing from 38.4% to 40.6% between 2011–12 and 2016–17,’ Dr Webster said.

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