Healthcare in Australia

Australia is roughly the size of the continental United States, but has a population of only 19.6 million. It has a federal government (properly known as the Commonwealth) and governments for each of the six states and two territories.

Q: What kind of health system does Australia have?

A: The Australian healthcare system is mixed. Responsibilities for healthcare are divided between the federal and state governments, and both the public and the private sectors play a role.

Australia spends about 8.5% of gross domestic product on healthcare, which compares favorably to spending in countries such as the United States (13.7%), Canada (9.5%), and England (7.0%).

Government programs underpin the key aspects of healthcare. Medicare, which is funded out of general tax revenue, pays for hospital and medical services. Medicare covers all Australians, pays the entire cost of treatment in a public hospital, and reimburses for visits to doctors.

There is no limit on fees charged by doctors. There is, however, a government-set fee schedule. Doctors can bill patients or send their bills directly to the government insurance authority, the Health Insurance Commission (HIC). If sent to the HIC, the payment is 85% of the government-set fee for out-of-hospital expenses and 75% of the government set fee for in-hospital services; the money is paid directly to the doctor, and the doctor is not allowed to charge the patient an additional fee. About 75% of family physician services are directly billed to the HIC. If a doctor bills the patient directly, the patient then applies for the rebate of the government set fee.

Public hospitals are owned by the state. About 70% of beds are in public hospitals, and major teaching hospitals are public hospitals. Budgets for public hospitals are usually set on the basis of their case-mix, using an Australian version of Diagnosis Related Groups. In the past, the majority of private hospitals were owned by charitable organizations, but for-profit corporations – which are listed on the stock exchange – now own an increasing proportion. Private, freestanding surgical centers are a rapidly growing phenomenon. Few private hospitals have emergency departments, so, in an emergency, most Australians rely on the public hospital system.

Australia has a Pharmaceutical Benefit Scheme (PBS), which subsidizes the cost of medication. The scheme covers most prescriptions with some exceptions, such as Viagra. (Before approving a drug to be listed on the PBS, the government assesses its cost effectiveness.) Aged pensioners and people on low income pay A$3.60 (US$1.94 at an August 2002 exchange rate) out-of-pocket for pharmaceuticals, while others pay A$22.40 (US$12.07) per prescription. Both schemes have "safety nets" on total expenditure for a patient or family in a year: after 52 prescriptions, pensioners receive prescriptions at no charge; all others after spending A$686.40 (US$369.94), pay A$3.60 (US$1.94) per remaining script for that year. Pharmaceuticals (including nonprescription medications) account for about 12% of total health expenditure compared to about 19% spent on medical services.

Q: How is the healthcare system funded?

A: Government pays about 70% of healthcare costs (approximately 47% from the federal and 23% from state governments); the remainder is paid by non-government sources, e.g., insurance and private pay.

The share of costs varies significantly across service types. Public hospitals, for example, are about 48% federal, 45% state, and the balance private sector funded. Medical services, on the other hand, are 82% federal funded with the balance paid mainly by the patient.

Private health insurance (which covers about 8.6% net of health costs) receives a 30% subsidy from the federal government. Everyone is eligible for this subsidy. And 45% of the population has private health insurance; for a family, it costs between A$1,000 and A$2,000 per year (US$539 to US$1,078). People buy insurance directly from the insurance company (not via an employer). Insurance products are not risk-rated.

Q: What is the quality of care in each system?

A: Overall, quality of care in Australia in both the public and private sectors is comparable to other developed countries. As in the United States, there is concern about the number of adverse events that occur in hospitals. The major teaching hospitals have significant research profiles and the care is first-rate. Suburban and rural hospitals are also seen as providers of high-quality care.

Q: What are the current concerns among healthcare workers in the country?

A: One of the worldwide fallouts of September 11 has been escalating costs of insurance and re-insurance arrangements, and this has placed pressure on the medical malpractice insurance in Australia. The major medical malpractice insurer in New South Wales (pop. 6.5 million) and Queensland (pop. 3.6 million) has recently collapsed, leaving doctors without coverage in their private work (state governments provide coverage for public hospital care).

Longer-term issues include concerns about the potential shortage of nurses in most states and the adequacy of equipment and capital funding, and general questioning about the level of financing of the system.

Q: What are the current concerns among patients?

A: The Australian healthcare system is in relatively good shape. Out-of-pocket costs are moderate and access to emergency care is good. However, there are a number of concerns for people without access to the pensioner-level subsidy for pharmaceuticals, especially for the chronically ill.

There are also extensive waiting times for elective surgeries at public hospitals. Although waiting lists for the most urgent elective surgery for heart disease and cancer are almost nonexistent, there are long waiting lists for orthopedic surgery (median wait for total hip replacement is 88 days; 10% of patients waited over 345 days in 1999 to 2000), and cataract surgery (median is 73 days; 10% waited more than 316 days). One of the attractions of health insurance is the ability to bypass public hospital waiting lists.

There are also problems of access in rural Australia. Although there is a flying doctor service and increased use of telehealth services, the very small populations in rural areas do not receive the same level of specialist cover and access.

There is also a significant problem of the health status of Australia's 427,000 indigenous people, with the life expectancy at birth for Aboriginal and Torres Strait Islander people being 20 years below that of the total population.

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