Total health expenditure

Total health expenditure is set to increase by 2.1% in 2023-24, reaching $258.5 billion. The curbing of COVID-19-related payments has constrained growth in health expenditure in the current year. However, increases in Medicare expenses will strengthen growth in medical services and benefits, mainly comprising Medicare and Private Health Insurance Rebate expenses. Additionally, the Australian Government's contribution to public hospital funding is set to grow in line with an increasing volume of services. Australia's ageing population has also been a continuing driver for health services, further contributing to rising health expenditure.

Besides the pandemic, Australia's ageing population has been the major driver of total health expenditure growth over the past five years. Older people are typically more susceptible to chronic illness and disease. This group makes greater use of general practitioners, specialists, allied health practitioners and general hospitals than younger demographics. The majority of these practitioners and facilities are subsidised by Medicare or, in the case of general hospitals, through state government funding, boosting total health expenditure.

The price of healthcare services typically increases at a greater rate than inflation. Both public and private general hospitals generally require significant funds for advancements and innovations in medical technology as the effectiveness of medical procedures and treatments available to patients are constantly improving. New technologies are usually more expensive, and higher prices are required to cover the cost of these upgrades and research. Higher prices for healthcare services, the ageing population and expanding private health insurance coverage have combined to drive growth in total health expenditure. Furthermore, additional health expenditure was required throughout the COVID-19 pandemic to support the sector. Obtaining and distributing the vaccine also bumped up health expenditure during the pandemic. Total health expenditure is forecast to rise at a compound annual rate of 5.8% over the five years through 2023-24.