The AIHW has been reporting on health expenditure in Australia for more than 3 decades as part of preparing Australia’s National Health Accounts (ANHA). This Health expenditure Australia report presents estimates of the amount spent on health goods and services in Australia for 2020–21, and the decade leading up to this. This report’s estimates are based on data from the AIHW’s Health Expenditure Database (HED), a collation of more than 50 data sources capturing health spending by governments, individuals, private health insurers and other private sources. The purpose is to use the best available data to provide the most comprehensive picture of:

  1. how much was spent on health
  2. funded by who
  3. on what areas of health goods and services.

The ANHA aims to support a long-term, whole-of-system understanding of health spending nationally and over time. This system is unique in Australia and it varies from other health system reporting in scope, degree of stability over time and classification systems used. Other systems tend to focus on specific funding programs, jurisdictions or time periods.

The long-term holistic approach within the ANHA requires methods to appropriately allocate spending figures from multiple and often overlapping data sources. These sources change over time to the relatively stable ‘area’ and ‘source’ categories used in the ANHA. In doing so, care is taken to avoid the risk of misallocation, unnecessary breaks in the time series, missed data and double counting.

The methods used in the ANHA are overseen by the Health Expenditure Advisory Committee (HEAC). The HEAC includes subject matter experts and representatives from the Australian Government and all state and territory governments, as well as some non-government organisations. The AIHW has worked with the HEAC over many years to develop approaches to maximise the completeness and accuracy of the estimates over time and minimise the risk of double counting. For example, when estimating total spending on hospital services in a year, the funds the Australian Government gives to states and territories are subtracted from the hospital spending reported by the states and territories to derive the amount that the states and territories spent from their own resources. Further information can be seen at Compilation of health expenditure estimates.

The holistic approach, unique classification system and methods developed for the ANHA mean the figures reported here often vary from other data sources, particularly where other reporting tends to focus on specific funding programs, institutions, funders or purposes. For example, program-specific reporting such as for the Medicare Benefits Scheme, government budget papers or health department annual reports vary from the figures here due to differing classifications, scopes and methods used to account for double counting. See Comparison and alignment of health expenditure estimates for detailed information.

As part of ongoing data quality improvement activities, the AIHW, through the HEAC, works with the Australian Bureau of Statistics (ABS), Department of Health and Aged Care, State and territory Health Departments, the National Health Funding Body (NHFB), the Organisation for Economic Co-operation and Development (OECD) and other data suppliers to ensure the estimates presented in the ANHA are as complete and accurate as possible and reflect changes in health system financing over time.

This report includes Department of Defence spending in more detail than in previous iterations as well as reference to potential adjustments to estimates surrounding spending on services provided in hospitals (particularly certain services funded through the Medicare Benefits Scheme (MBS)). These potential adjustments suggest that some spending on referred medical services could be captured in hospital spending (i.e. a re-allocation of spending between categories). At this point, data limitations prevent a full inclusion of these adjustments within the ANHA, however, an attempt to quantify the potential impacts has been included in this report and the AIHW continues to work with data providers to resolve the outstanding issues for future reporting.

A summary of some of the broad issues is provided below. See Australian National Health Account: Overview of data sources and methodology for more information on data sources and methodologies, as well as a comparison between this report and other health spending figures published elsewhere.

Examples of other health expenditure reporting

Examples of other health expenditure reporting include:

  • The Australian Bureau of Statistics (ABS) uses the System of National Accounts to report Australia’s National Accounts (ABS 2016). This economy-wide classification system is broader than just the health sector and uses different data sources, classifications and estimation methods to the ANHA to ensure consistency across the economy. For example, where spending through health insurance is considered part of the health system under the ANHA, it is considered part of the insurance sector in the System of National Accounts. Another reason for variation comes from the ABS use of the Government Finance Statistics (Australian GFS, or AGFS, referred to as 'GFS' in this report) as a source for government spending, which varies from the source used by the AIHW, the latter having been tailored specifically for the ANHA. While the basis for both systems is the general ledger transactions that are recorded by the various government agencies, including Departments of Health, the 2 vary for a number of reasons, including:
    • The GFS approach is a ‘purpose’ classification, which means that the basis for classifying expenditures is the purpose for which the expenditure relates, rather than the nature of the product or service purchased. This means, for example, that remote housing constructed for the purpose of housing medical staff would be treated as health spending in the GFS but not in the ANHA.
    • The health classification in the GFS potentially includes activities that are outside of the scope of the ANHA (e.g. nursing and convalescent home services) and may exclude activities that are within the scope of the ANHA. (e.g. private health insurance premium rebates)
  • All governments within Australia produce financial reports, including annual reports, budget papers and specific program data. While these generally use the same source data as are provided to the AIHW (audited financial statements and ‘general ledgers’), variations in scope can occur between what might, for example, be in a report covering spending across a health and human services portfolio and what is needed for the ANHA. Classifying the data to fit the ANHA classification system can require adjusting specific items to avoid duplication, or drawing on other data sources, such as hospital activity data, to ‘fit’ the spending into ANHA categories. For example, staff engaged by a specific health service might technically be considered departmental staff in some states and territories. In these cases, spending can essentially be captured twice in the annual report but this duplication is eliminated for reporting to the AIHW. The states and territories conduct this work each year as part of the Government Health Expenditure National Minimum Data Set (GHE NMDS) collation. The AIHW continually reviews this with the states and territories bilaterally and through the HEAC to maximise consistency over time and between jurisdictions. The results, however, inevitably vary to some degree from what is publicly reported. A high level indicative overview outlining the variation between the ANHA figures for governments and the figures reported in the respective health authority annual reports for 2020–21 is presented in Table C2 to illustrate the observed variations.
  • The Administrator of the National Health Funding Pool (NHFP), supported by the National Health Funding Body (NHFB) publishes data on funding and payments through the NHFP that was established under the National Health Reform Agreement (NHRA). These data form an important component of the spending outlined in this report, particularly with public hospital spending. However, not all public hospital spending outlined in this report is administered through the NHFP, so additional information sources are drawn on to capture the full scope of public hospital spending. Note that 'public hospital spending' or 'spending on public hospitals' in this report are actually referring to public hospital services as an area of expenditure, not public hospitals as entities.
  • Each year the AIHW provides a derivation of the ANHA to the Organisation for Economic Co-operation and Development and the World Health Organization in accordance with the classification used for international reporting, known as the System of Health Accounts. Despite being derived from the same source data, differing classification systems can result in variations in health spending for particular components of the health system. For example, the System of Health Accounts does not include spending on health and medical research and capital spending while the ANHA does.

2020–21 was the second year (and the first full year) of the COVID-19 pandemic in Australia. The pandemic not only affected health spending in direct (mainly through governments’ programs such as the NPCR) and indirect ways (mainly through reduced activities due to pandemic-related lockdowns, restrictions, and temporary suspension of non-urgent elective surgery), but also affected the data collection and processing for health expenditure itself.