This report is the third in the Australian Institute of Health and Welfare's (AIHW) disease expenditure series and provides a systematic analysis of Australian health expenditure in 2004-05, allocated by disease. Disease and injury groups are defined as in the second Australian Burden of Disease (BoD) study (Begg et al. 2007). Over two thirds (70%) of total recurrent health expenditure was able to be allocated by disease, or $52.7 billion in total. That expenditure was for admitted patient hospital services, out-of-hospital medical services, dental services, optometrical services, prescription pharmaceuticals, community mental health services, public health cancer screening services and research.

Main disease groups

In 2004-05, the following seven disease groups accounted for more than half (57% or $29.8 billion) of allocated health expenditure in Australia (Figure 1 and Table 2.4):

  • cardiovascular diseases—$5.9 billion (11% of total allocated health expenditure)
  • oral health—$5.3 billion (10%)
  • mental disorders—$4.1 billion (8%)
  • musculoskeletal diseases—$4.0 billion (8%)
  • neoplasms—$3.8 billion (7%)
  • injuries—$3.4 billion (7%)
  • respiratory diseases—$3.3 billion (6%).

Figure 1: Expenditure on disease by type of health service for selected broad disease groups, 2004–05 ($ million)

Stacked bar chart shows breakdown of expenditure for the seven disease groups, by: admitted patient services, out-of-hospital medical services, prescription pharmaceuticals, research and other (which includes dental services, community mental health and cancer screening programs). Of the disease groups, expenditure on admitted patient services were greatest for cardiovascular diseases (over $3 billion), injuries, and neoplasms (both at around $2.4 billion). Out-of-hospital medical services expenditure was greatest for musculoskeletal (nearly $1.2 billion) and cardiovascular (over $1.1 billion) diseases, followed closely by respiratory diseases (over $1 billion). Of all disease groups, neoplasms allocated the most expenditure to research, around $380 million.

Expenditure on National Health Priority Area conditions

Expenditure on the seven conditions agreed by Australian Health Ministers as National Health Priority Areas (NHPAs) was $22.8 billion, or 43% of total allocated health expenditure (Table 2.5).

Five of the seven NHPAs ranked within the top seven groups listed above—cardiovascular diseases, mental disorders, musculoskeletal diseases, neoplasms and injuries.

Health expenditure by age and sex

Health care costs are generally higher for older people because of the increased levels of chronic diseases and greater numbers with life-threatening illnesses in these age groups. In 2004-05, over one-fifth (21%) of total allocated health expenditure ($11.0 billion) was for people aged 75 years and older (Table 2.7).

In 2004-05, allocated health expenditure was 18% higher for females than for males—$28.6 billion compared with $24.1 billion.

On a per person basis, allocated health expenditure was:

  • higher overall for females than for males—$2,781 for females compared with $2,380 for males. If maternal conditions are excluded, expenditure was $2,618 or 10% higher than for males (Table 2.8)
  • higher for females than males for musculoskeletal diseases and genitourinary disorders, but lower for the cardiovascular and injury groups (Figure 2.5)
  • higher for males in the early stages of life (up to 14 years of age) (Figure 2.6), mainly due to a higher incidence of congenital conditions and chronic illnesses, such as asthma (Begg et al. 2007)
  • higher for females for all age groups between 15-24 years and 45-54 years (Figure 2.6), even when maternal conditions are excluded
  • higher for males for all age groups 55 years and older (Figure 2.6), due in part to higher expenditure for cardiovascular diseases and neoplasms.

In a previous report of 2000-01 disease expenditures (AIHW 2005), allocated health expenditure per person was higher for females aged 85 years and over than for males in the same age group. This was because, in contrast to this report, expenditure on residential aged care was included in the analysis—an area where more females receive care.

Changes in health expenditure by disease, 2000–01 to 2004–05

A number of changes to the methods for allocating expenditure by disease since the 2000–01 report means that estimates between the two time periods are only comparable for admitted patient hospital services, out-of-hospital medical services and prescription pharmaceuticals. Between 2000–01 and 2004-05, adjusted for inflation, average growth in allocated health expenditure for these three comparable areas was 20% (or $7.2 billion).

Taking into account only the three comparable areas of expenditure between this report and the previous one, above-average growth was recorded for the following disease groups:

  • endocrine, nutritional and metabolic (32%)
  • musculoskeletal (26%) — diabetes mellitus (26%)
  • neoplasms (23%), and
  • injuries (22%).

On a per person basis and adjusted for inflation, allocated health system expenditure averaged $2,170 in 2004-05, which was $249, or 13%, higher than in 2000-01. Allocated expenditure was also higher in 2004-05 than in 2000-01 for every age group.