Business Environment Profiles - Australia
Published: 16 September 2024
Federal funding for Medicare
32 $ billion
5.3 %
This report analyses the total value of Medicare benefits paid annually. Medicare benefit payments cover most of the cost of doctors' and specialists' consultation fees, tests and examinations, eye tests, surgical procedures and other health related services for all Australian residents. The data for this report is sourced from the Australian Institute of Health and Welfare and is measured in billions of current dollars in financial years.
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IBISWorld expects federal funding for Medicare to increase by 8.1% in 2024-25, to reach $32.0 billion. The Federal Government is investing heavily in Medicare to provide Australians with a more accessible healthcare system amid inflationary and cost-of-living pressures. As part of the Federal Budget 2024-25, the government has committed $2.8 billion to Medicare's reform, including a $1.2 billion package designed to alleviate pressure off hospitals. The budget also includes the plan to open 29 Medicare Urgent Care Clinics, designed to take pressure off emergency departments, bringing the total number of clinics across Australia to 87. The tripling of bulk billing incentives, implemented in November 2023, has also supported funding growth. Ongoing demographic trends, like the ageing Australian population and general population growth, are also expected to continue driving funding growth as the volume of patients serviced by medical practitioners increases.
Growth in federal funding for Medicare is determined by the demand for healthcare services and treatment costs. Demand for services is linked to population growth and age demographics. Older people are generally more susceptible to chronic diseases and illnesses, which makes them more likely to visit a GP or specialist than younger, healthier people. The increasing share of the population aged 70 years and over has meant that a greater proportion of the population is relying more heavily on Medicare funding, which has driven significant funding growth. Overall population growth has also increased Medicare funding, as the expanding population has led to more people needing to visit health professionals for various ailments and illnesses.
Private health insurance membership has experienced weak growth over the past five years, despite efforts by the Federal Government to bolster private insurance membership numbers by offering incentives for people to take up private coverage. Incentives provided by the federal government include a substantial means-tested rebate on insurance premiums, increasing the age of dependents and transparency in out-of-pocket costs. However, sustained increases in health insurance premiums above wage growth, combined with a growing perception from patients that private health insurance does not provide value for money, have constrained total membership numbers and resulted in the total number of insured individuals more or lagging as a share of the population. As the population has aged, the cost burden of health has shifted to Medicare-covered services, placing more significant pressure to increase funding for Medicare.
Strong patient volume growth has caused Medicare funding to increase rapidly over the past five years. Further, advancements in medical technology have resulted in improved healthcare outcomes. However, these processes are generally more expensive, raising healthcare prices faster than inflation. Programs like the Medicare Safety Net cover a more substantial portion of a patient's costs once an out-of-pocket threshold has been reached, which means that Medicare often funds a high proportion of the rising healthcare costs. Overall, IBISWorld forecasts federal funding for Medicare to rise by a compound annual rate of 5.3% over the five years through 2024-25.
IBISWorld forecasts federal funding for Medicare to increase 5.9% in 2025-26, to reach $33.9 bill...
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