Australia’s Health Care Costs: How Much is Too Much?

Many have decried the lack of cost efficiency in the Australian health care system. It has already become common place to cite population aging as a factor which has contributed to the rise in medical care costs. Recent government measures, which targeted private health insurance rebates, have also been credited for the pressure exerted on the public healthcare system, both in terms of expenditure, as well as in terms of the human resource. But while the motives remain debatable, the fact of the matter is that Australia is spending too much already on health care, and all that money is coming out of its federal budget. Statistics from the Australian Institute of Health and Welfare paint a worrying picture. In 2009-2010, Australia spent $121 billion out of its budget on health care; the next year, the number had inflated to $130 billion. The increase rate of medical costs stands at 6 per cent per year, while the GDP is only growing at 3 per cent each year. In the long-run, this might indeed prove to be too much, as some voices in economic analysis predict that health care expenditure might reach 15 per cent of the GDP per year, in about a decade’s time. Such expenses cannot be sustained by the current economy (or any other economy, for that matter), which makes it imperative to find an alternative.

Possible alternatives

The South Australia Health report for October 2012 explains that in 2007 state authorities devised a health care plan aimed at lowering demand growth. The aim of this strategy was a very tangible one: either decrease demand for medical services, or see the entire state budget gobbled up by medical expenditure by 2032. While demand in South Australia has been lowered over the course of the past five years, it still hasn’t reached acceptable levels – current estimates say the budget is still under the same risk, only the ‘deadline’ now looms around 2038. According to experts in the medical software industry, most Australian states are in a similar situation.

Australia’s Health Care Costs: How Much is Too Much?

The solution, according in the experts’ view, is not to cut costs any further. Cost-cutting measures would only drive more people to avoid seeking medical health care when they need it. This would only increase the incidence of illness, thereby putting more pressure on the medical system, while also lowering Australia’s economic capacity (since it can be assumed that many in the work force would be affected). As such, a better answer to the country’s health care expenses issue would be to provide more accessible services, while also lowering demand in key areas. One way of achieving this is by enabling consumers to find affordable private health insurance policies. Another solution, complementary to the first one, is to lower demand for the most cost consuming areas of medical care.

What are Aussies spending budget money on?

According to the media, the fastest growing area of expenses in health care is that of hospitals, which are currently claiming 95 per cent more money from the federal budget than ten years ago. These facilities now receive $18 billion each year, while the cost of hospitalization per patient per night stands at an estimated $967. Also, the number of people who require ambulance interventions is on the rise: 6,800 people require transportation by ambulance each day, while another 900 receive ambulance visits, but without being transported. Every day, 23,000 Australian citizens are checked into a hospital, while 17,000 visit the emergency room. Some cite tele-health care (available online) as a possible solution, yet it remains to be seen if the national network is efficient enough to handle such demands.

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