Public health expenditure

IBISWorld forecasts public health expenditure to increase by 4.6% in 2024-25, to $192.0 billion. The 2024-25 budget allocated significant investments in Strengthening Medicare, expanding mental health services, improving hospital and aged care systems and making medicines more affordable, contributing to growth in public health expenditure. $2.8 billion was allocated to the Strengthening Medicare package in 2024-25, which includes initiatives like increases in the Medicare Benefits Schedule (MBS) bulk billing incentive payments for Commonwealth concession card holders, children under 16 and pensioners. Furthermore, Medicare expanded its MBS to include items like heart health checks from March 2024. Additional funding in 2024-25 targeted preventative health, chronic disease management and boosting healthcare access in rural and remote areas.

State and territory governments typically provide the majority of funding for public hospitals as they're state-owned and operated. The Federal Government also provides a significant portion of public hospital funding and entirely funds Medicare and the Department of Veterans' Affairs health benefits. All levels of government have little recourse to reduce overall funding, as they provide guaranteed health cost subsidisation for most public health sector services. Patient volume growth, which occurs through population growth and population ageing, is the primary cause of rising public health expenditure.

Public health expenditure has risen faster than total health expenditure over the past five years. This trend is largely driven by rapid growth in public health spending, as an ageing population places greater demand on publicly funded services and Medicare continues to expand. In addition, the long-standing increase in public hospital funding as a proportion of total health expenditure remains a key contributor. The Federal Government offers several incentives to encourage greater private health insurance membership. These include private health insurance premium rebates, the Medicare levy surcharge for individuals without hospital cover earning above a certain income threshold, and Lifetime Health Cover loading, which increases premium costs by 2.0% for every year an individual aged over 30 does not hold private health insurance. Private health insurance membership has grown faster than the population from 2020-2025, reducing patient reliance on the public system.

Public health funding has risen in response to increasing demand for publicly funded services, driven by both population growth and the rising proportion of Australians aged 65 and over. However, despite substantial investment, health service providers continue to call for additional funding as demand keeps rising. The gradual reintroduction of Medicare indexation over the three years to July 2020, following the end of the indexation freeze, has also contributed to the sustained growth in public health expenditure in recent years. IBISWorld forecasts public health expenditure to increase at a compound annual rate of 6.1% over the five years through 2024-25.