Paying for universal healthcare

Paying for universal healthcare

Australia has seen a great deal of debate in recent times regarding growing – and potentially unsustainable – health expenditure. Indeed, the Commission of Audit has flagged numerous changes to the current Medicare system, including a co-payment of up to $15. This builds on earlier discussion by The Australian Centre for Health Research (ACHR), who proposed a $6 co-payment for patients who are accessing bulk-billed general practice (GP) appointments and services1. The ACHR make three main arguments for this policy: firstly, it would send a clear ‘price signal’ to consumers to increase the perceived value of the system; secondly, it would disincentivise GP visits for potentially spurious conditions; and, thirdly, it would encourage people to be more proactive with preventative approaches to health and to embrace positive lifestyle changes.

The ACHR claim that all of this will lead to a saving of $750 million. However, when evaluating this proposal, we need to consider three things when making a judgement about the desirability of a co-payment:

  • Is our health expenditure currently a problem – does it actually need to be reduced?
  • Even if the projected saving of $750 million from the $6 co-payment is realistic, is it something that we want to do philosophically?
  • And finally, even were we to accept that it is a problem and politically we support the co-payment, is the $750 million a meaningful solution?

If we first consider the context of this report in terms of GP visits in Australia, currently approximately 77% of Medicare-associated visits are bulk-billed2. This has been as high as 82% according to a statement by Tanya Plibersek3 (former Federal Health Minister). Given that approximately 178.5 million services were provided in the 2013-2014 year-to-date July-December period, this leads to a significant level of healthcare expenditure associated with bulk-billing.

However, when considering just how significant this expenditure is, we must assess the total health expenditure in Australia and how much the government contributes to this. According to the Australian Institute of Health and Welfare (AIHW), total health expenditure in 2011-2012 (the most recent period published) was $140.2 billion (9.5% of GDP)4. Further, the AIHW suggests that “Governments funded 69.7% of total health expenditure during 2011-2012”, which is $97.72 billion. Given this, we need to consider whether the projected benefits (which are largely based on one criticised study by the RAND corporation5) are worth the relatively small savings ($750 million of $97.72 billion is 0.767%). Given that total health expenditure increased $7.6 billion between the periods 2010-2011 and 2011-20124, this is really just a drop in the ocean.

As we’ve seen, the health budget is increasing – both in real dollar terms and as a percentage of GDP (from 8.4% to 9.5% in 2001-02 to 2011-12 respectively4). However, it’s unclear that the ACHR proposal will be a useful response to the increasing cost of healthcare associated with an aging population that suffer from complex chronic disease states. Comparatively though, according to the World Bank6, Australian healthcare costs in 2011 were at 9.0% of GDP. The UK was 9.3% and the USA was the astronomically high 17.9%. Similar World Bank data7 suggests that whilst Australian healthcare expenditure per capita ($5939 in 2011) was much higher than the UK, it’s still lower than the USA, Switzerland, and Denmark.

Despite these comparisons however, we do take the view that our healthcare expenditure rising is a problem. Despite the AIHW suggesting that a large portion of the rise as a percentage of GDP is due to the Global Financial Crisis2, it’s still a trajectory that is in the long-term unsustainable. On a per capita basis, according to the World Bank Data from before6,7, Australians do spend more than many comparable countries. Aside from this, it is the trend that is the concern when considering future health budget strategy – particularly given the risk of a GDP growth slowdown in Australia if we aren’t successfully able to transition from a mining-centric economy (though that is beyond the scope of this piece).

So, given that we believe our rising healthcare costs is a problem, could we philosophically and pragmatically accept a $6 co-payment? Though the ethical and philosophical point regarding the role of government and universal healthcare is left to the reader, we suggest looking at things in as pragmatic a way as possible when it comes to imperfect policy debates. While superficially attempting to ‘nudge’ Australians toward better preventive health and living healthier lifestyles is a laudable public health goal, if for no other reason than it’s philosophically more likely acceptable to people of all political stripes than direct coercion, a $6 co-payment is a relatively blunt way of doing it. And leaving aside these concerns, we need to worry about whether this disincentivisation (which is part of the purpose of the plan) will lead to the poor and the unwell either seeking treatment in the emergency departments of hospitals (because it’s still currently free) or being hospitalised altogether because their health has become so bad due to them not being treated earlier for a condition that could have been addressed in a primary healthcare setting. This could be incredibly expensive – in NSW in 2009-10, an average ED visit costs $3968, without considering admission or ICU costs for very unwell patients. As such, we don’t believe that in practical terms this is a great solution – there is a chance of significant cost overrun. The philosophical side is left to the reader.

Finally, even if we were to consider the $6 co-payment as permissible, is the $750 million a significant sum? We believe it’s not, for the reasons discussed above. It would need to be paired with other more significant cuts to have any real utility in arresting the rise in healthcare expenditure.

Given all of this, we believe that the co-payment proposal is not a good idea in the near-term. Australians seem to support universal healthcare, and doctors and patients alike abhor the idea of a US-style health system9. Fundamentally eroding the notional right to access to healthcare would potentially be politically costly, and is likely to have unintended consequences and flow-on costs associated with worsening quality of life and increased hospital utilisation by the poorest and most unwell citizens of Australia. Other options are likely to need to be considered in the near-term, and various possibilities have already been flagged (e.g. sequestering a portion of superannuation toward healthcare costs10). These other policy options should be getting more air-time; the co-payment is unlikely to work – and could well be harmful – with regard to its stated goals and objectives.


  1. Australian Centre for Health Research, “A proposal for affordable cost sharing for GP services funded by Medicare”, Cormorant Policy Advice, October, 2013. Accessed April 10, 2014,
  2.  “Quarterly Medicare Statistics – March Quarter 2007 to December Quarter 2014”, accessed April 9, 2014,$File/MBS%20Statistics%2020134%20DecQtr%2020140121.pdf
  3. ABC & National Press Club, “National Press Club: Tanya Plibersek and Peter Dutton”, ABC Online, August 27, 2013. Accessed April 2, 2014.
  4. Australian Institute of Health and Welfare 2013. “Health expenditure Australia 2011–12.” Health and welfare expenditure series no. 50. Cat. no. HWE 59. Canberra: AIHW.
  5. Jim Gillespie, “Mind the Gap: $6 GP visit proposed ignores the evidence”, The Conversation, January 9, 2014. Accessed April 3, 2014,
  6. World Bank. “Health expenditure, total (% of GDP)”. Accessed April 5, 2014,
  7. World Bank. “Health expenditure per capita (current US$)”. Accessed April 5, 2014,
  8. NSW Health. “Cost of Care Stanards 2009/10”, 2011. Accessed April 4, 2014,
  9. Personal correspondence
  10. Committee for Economic Development of Australia, “Healthcare: Reform or ration”, April 2013. Accessed April 7, 2014,

Image: ‘Doctor talking with a patient’ by National Cancer Institute, Licence at domain mark