Health spending slows to record low growth level

24 September, 2014

Spending on health in 2012–13 slowed to record low levels, according to a new report from the Australian Institute of Health and Welfare (AIHW).

The report, Health expenditure Australia 2012–13, shows total spending on health goods and services in Australia was estimated at $147.4 billion in 2012–13 (9.67 per cent of GDP). This was just 1.5 per cent higher than in 2011–12.

"This is the lowest growth the AIHW has recorded since it began the Health expenditure Australia series in the mid-1980s, and more than three times lower than the average growth over the last decade (5.1 per cent)," said AIHW Director and CEO David Kalisch.

The report shows government spending on health overall fell by 0.9 per cent in 2012–13, largely due to a fall of 2.4 per cent in the Australian Government's funding. During the previous decade, Australian Government spending had experienced average annual growth of 4.4 per cent.

Decreased Australian Government spending

The main drivers of the decrease in Australian Government spending were reductions in spending on the Pharmaceutical Benefits Scheme, public health, dental services and e-health. Spending also fell in the categories of health insurance premium rebates, Department of Veterans' Affairs funding and the medical expenses tax rebate in 2012–13.

The report also shows that growth in state and territory government funding of health expenditure was relatively low. State and territory health spending grew by just 1.4 per cent in 2012–13, 4.2 percentage points lower than the average growth for the decade.

In 2012–13, governments funded $100.8 billion or 68.3 per cent of total health expenditure in Australia. This was 1.6 percentage points lower than in 2011–12, the largest reduction of the decade. The Australian Government's contribution was $61.0 billion (41.4 per cent of total funding) and state and territory governments contributed $39.8 billion (26.9 per cent).

Non-government funding

Non-government funding sources provided the remaining $46.6 billion (31.6 per cent). The share contributed by non-government sources rose by 1.6 percentage points, with individuals contributing just over half of the increase (0.9 percentage points).

"In contrast to government funding, growth in non-government funding was relatively strong. It grew by 7.2 per cent in 2012–13 compared to the average of 5.4 per cent for the decade," Kalisch said.

In 2012–13, estimated spending per person on health averaged $6,430, which was $17 less per person than in the previous year.

"This small reduction meant that expenditure essentially grew in proportion to—rather than faster than—population growth for the first time in the decade," Kalisch said.

The AIHW is a major national agency set up by the Australian Government to provide reliable, regular and relevant information and statistics on Australia's health and welfare.