Macro-Economic Outlook for the Australian Health System

Professor Laurie Brown

Future of Health Policy Reform Summit

26 – 27 October 2015

ParkRoyal Darling Harbour, Sydney

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Questions

• To what extent have healthcare costs of health services risen over the last decade?

• What have the trends in Australian Government expenditure on health been since 2004 under different political parties and leaders?

• To what extent do we want to share the cost of health care - can we maintain universal healthcare in Australia today?

• Has the Australian Government given less to the States and Territories for health under the Abbott Liberal Government?

• Can we improve health without increasing health spending?

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Change in expenditure

A change from one year to another in expenditure, at current prices, can result from • changes in prices (inflation) of health goods and services• a growth in utilisation (volume), or • a combination of both

Volume is affected by• the population’s age structure• changes in the overall and relative intensity of use of

different health goods and services• changes in technology and medical practice, and • general economic and social conditions

3

Total Healthcare Expenditure since 2004

4

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

$ m

illio

n

Year

Current Constant

Annual Growth in Costs

5

Ave. 7.7

Ave. 5.00

2

4

6

8

10

12

Pe

rce

nta

ge

Year

Current Constant

Total Health Expenditure relative to GDP

6

5

6

7

8

9

10

Pe

rce

nta

ge

Year

Current Constant

International Comparison (Health Expenditure as % GDP)

7

0

2

4

6

8

10

12

14

16

18

Ko

rea

Esto

nia

Turk

ey

Po

lan

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Mex

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Cze

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Un

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Kin

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No

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Un

ited

Sta

tes

% G

DP

OECD Country

2004 2013

International Comparison (Rank)

8

0

5

10

15

20

25

30

35

40

Ko

rea

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Turk

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Po

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Un

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and

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stri

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man

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Un

ited

Sta

tes

Ran

k

OECD Country

2004 2013

9

Life expectancy at age 65 years in OECD countries, 2012.

10

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

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Female Male

Average Health Expenditure per Person ($)

11

0

1000

2000

3000

4000

5000

6000

7000

$ p

er p

erso

m

Year

Current Constant

Allocated Health Expenditure per person by age and sex 2008-09

12

13

14

15

16

17

Annual Rates of Inflation

18

-1

0

1

2

3

4

5

6

7

2004−05 2005−06 2006−07 2007−08 2008−09 2009−10 2010−11 2011−12 2012−13 2013-14

Rat

e o

f In

flat

ion

(%

)

Year

Health inflation General inflation

Composition of Growth in Current Prices

19

Annual Growth

Rate Inflation

Volume (real

growth)2004−05 10.3 37.6 62.42005−06 6.9 62.9 37.12006−07 9.5 37.3 62.72007−08 9.1 27.3 72.72008−09 10.5 29.5 70.52009−10 6.7 42.3 57.72010−11 7.8 8.8 91.22011−12 7.9 22.9 77.12012−13 3.8 70.1 29.92013-14 4.9 37.2 62.8

7.7 37.6 62.4Average

Total Australian Government Spending

20

Australian Government Health Spending

21

Increases in (Residual) Life Expectancy for Australians at age 65 years

22

In 2035 Australian men aged 65 years can expect to live to 87.7 years and women to 89.4 years (84.8 & 87.4 in 2015)

11.3

12.9

0.0

5.0

10.0

15.0

20.0

25.0

30.0

1900 1920 1940 1960 1980 2000 2020 2040

Life

Exp

ect

ancy

(Ye

ars)

Year

Male Female

19.8

22.4

24.4

22.7

Growth of Australia’s Older Population

23

44

3329

05101520253035404550

0.0

5.0

10.0

15.0

20.0

25.0

2015 2020 2025 2030 2035 2040 2045 2050 2055

De

pR

atio

Pe

rce

nta

ge

Year

Males 65+ years Females 65+ years Males 85+ years

Females 85+ years Dep Ratio

Dep Ratio is the dependency ratio measured as the number of persons aged 15-64 years per 10 persons aged 65 years and over

Growth of Australia’s Older Population (aged 65 years and over)

24

Male(m)

Female(m)

Total (m)

Growth(%)

2015 1.662 1.906 3.568

2035 2.889 3.301 6.190 74

2055 4.016 4.518 8.534 38

25

CONCLUSIONS• Slow growth

– Inflation vs utilisation– International position

• Decreasing Australian Government expenditure

• Government remains main funder• Future challenges• Social Determinants of Health

– Across Government approaches– Joined-up approaches

26

Thank you

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www.governanceinstitute.edu.au

References:AIHW (2015) Health Expenditure Australia 2013-14, Health

and Welfare Expenditure Series Number 54

2015 Intergenerational Report