Australia is spending ever more on health care services. According to the Australian Institute for Health and Welfare, in 2000–01 total expenditure on health was $60.8 billioni; by 2021–22 this had increased to $241.3 billion, and the proportion of GDP had risen from 9 per cent to 10.5 per cent.ii And yet the system seems to be in continual crisis, with ambulance ramping, waiting lists and bed shortages on the news most evenings. Most richer people are protected from this crisis, and the situation is creating growing gaps in health status. The crisis stems from subsidies for private health insurance, the financialisation of health systems, an over-reliance on hospitals rather than primary health care, the existence of futile care and a failure to address the social and commercial determinants of health. Without bold action, the health crisis is shaping up to rival the prominence of the housing crisis as the issue of public concern.
Inequitable access crisis
Our looming health crisis is overwhelmingly one of health inequity. Access to good quality care depends increasingly on how wealthy you are, rather than how sick you are. A Welsh GP, Julian Tudor Hart, coined the term ‘the inverse care law’ to describe how people who most need health care are least likely to receive it. Poorer people tend to be sicker than better-off people, and yet use health services less and have fewer services available in the areas where they live. Australian rural, remote and outer suburban areas are health care deserts. Medicare claims data from 2022–23 show that the number of non-hospital non-referred attendances per person, such as general practitioner (GP) visits, were lowest in remote communities and very remote communities (4.2 and 3.4 per person respectively) and highest in metropolitan areas (6.6 per person).iii A further serious gap in our health system is that dental health is not part of Medicare. Many cannot afford basic dental care, leading to a life lived with pain.iv
This means some people miss out on health care, and those most likely to do so are those living in precarious social and economic situations. Poor access to early-intervention primary health care in particular means that people get sicker, and so when they do they need care, it is the more expensive and often more invasive hospital care that is required. These factors mean the health gap is increasing and the health gradient has steepened. The rate ratio of avoidable mortality in 2016–20 was 2.20, compared with 2.13 in 2013–17, 1.69 in 2003–07 and 1.55 in 1997–2000.v Unless governments take decisive action, the gap will only increase and our overall life expectancy will continue to decline. Health inequalities were also seen during COVID-19: in 2021, according to the Australian Institute of Health and Welfare, the percentage of COVID-19 deaths was 2.6 times higher for the most disadvantaged males compared with the least disadvantaged, and 3.3 times higher for most disadvantaged females compared with least disadvantaged.vi
The private health insurance problem
Medicare was supposed to be Australia’s answer to health care inequality, but in 2024 access to health care in Australia is far more dominated by what people can afford than it was when Medicare was introduced in 1984. One of the most crucial factors driving this trend has been the government-funded Private Health Insurance (PHI) rebate, introduced by the Howard government and maintained by all governments since. The total cost of the rebate reached $6.7 billion in 2023. These subsidies fail on multiple fronts. Compared to a publicly funded universal public health system they are both inefficient and ineffective. Taxpayers and patients pay for the inefficiencies of multiple competing funds, and for their profits. The ACCC’s 2023 report to the Senate found that the private health insurance industry’s net profit after tax went from $1.04 billion in 2021–22 to $19 billion in 2022–23.vii The funding for the PHI premium rebate could produce better and more equitable health outcomes by going directly to health care, illness prevention and health promotion initiatives. The rebate also contributes to a two-tier health system, with good, fast access to care for those who can afford it and long waits for ‘safety net’ care for the rest. A universal public health system breeds solidarity in that all people use the same system. One argument against stopping the rebate has been that it would increase demand on public hospitals, yet econometric modelling by the Melbourne Institute indicates the reverse: that savings from reductions in the rebate would exceed the predicted increase in public hospital costs by a factor of roughly 2.5.
Australia spends much less on health care than the United States, where the health system is much more open to market forces—10 per cent compared to over 16 per cent of GDP. Yet Australia seems to be heading down the path of more privatised health care, despite the evidence that public systems are more equitable and more efficient. A 2018 review found that public hospitals are at least as efficient as, or more efficient than, private hospitals and more accessible to all people.viii A further review found that marketised health reforms had inconclusive or negative impacts on health equity both in terms of access relative to need and in terms of health outcomes.ix
Financialisation
One of the most threatening clouds on the health crisis horizon is the steady privatisation of Australian health care, which has prepared the way for financial institutions to invest in and take profits from health care entities, a worldwide trend. An article published in the prestigious New England Journal of Medicine earlier this yearx examined the financialisation of the US health care system. It defined this as involving ‘the transformation of public, private, and corporate health care entities into saleable and tradable assets from which the financial sector may accumulate capital’. At the same time, patients are facing higher costs in the form of out-of-pocket expenses and rising premiums. This is in a country in which the most common cause of bankruptcy is health care expenses and where 9 million adults are rationing their prescription drugs due to the high cost of medications.xi
In Australia, hedge funds and other financial entities are looking for places to invest and take profit. The annual number of private equity acquisitions of clinics and private hospitals in Australia grew from three in 2008 to eighteen in 2022. During 2020–22 there were thirty-nine acquisitions to the value of $24.1 billion. The investment focus has shifted from in vitro fertilisation to general practice and ophthalmology, oncology, radiology and imaging. Examples include hospital operator Healthscope in 2010 and GP chain Fullerton Health, now Partnered Health, with more than sixty GP clinics in 2021.xiiFor patients this means higher costs and a less efficient system. Australian governments need to ensure that these patterns of investment do not become more common in Australia, and use all regulatory tools to keep our system as public as possible. We should take heed of the advice of Tudor Hart, who noted that the inverse care law operates ‘more completely where medical care is most exposed to market forces, and less so where such exposure is reduced’. Medicare was introduced to overcome this inverse care law and has worked well in doing so—up till now.
The other pressure on health care costs and accessibility comes from rising specialist fees and doctors’ salaries. A worldwide doctor shortage puts pressure on state governments to pay doctors more in order to attract staff. Between 2019–20 and 2020–21, profits for private specialists increased by 11 per cent, while those for GPs increased by only 2 per cent.xiii While specialists fees are subject to some regulation through Medicare, gap payments are increasing and so out-of-pocket costs to patients are also increasing. A recent report shows that only 58 per cent of fees were covered by Medicare in 2022, down from 79 per cent in 2000, and the rate has been declining since Medicare began. The concern about the burden of out-of-pocket costs on patients, and particularly on those on low incomes, has been widely expressed, including recently in the Medical Journal of Australia.xiv Use of medical specialists outside hospitals is also dictated by where people live. While 41 per cent of those in North Sydney had a Medicare-subsidised specialist attendance in 2022–23, only 14 per cent of those in the Northern Territory and 23 per cent in country Western Australia did. The increasing specialist fees are likely to increase the pressure on public hospital emergency departments, because people who don’t receive adequate out-of-hospital care will end up there.
Too much futile health care?
A further pressure on the system is the question of whether in some parts of the health system people are getting too much care. In 2017 The Lancet spoke of ‘Right Care’, which considers not only when the provision of medical services is inadequate but also when it is more likely to cause harms than good.xv Futile care, which usually occurs at the end of life, also involves opportunity and emotional costs.xvi The continuation of chemotherapy for cancer patients when all clinical indicators are that the patient is terminally ill is one example. Other examples of futility in non-terminal situations include prescribing a non-indicated computed tomography scan for a trauma patient whose chest X-ray shows no pulmonary problem, or performing a thyroidectomy on a patient whose hyperthyroidism has been successfully managed by medication therapy and has no manifestation of malignancy.xvii In 2017, Carter et al. showed that 12 per cent of patients who died in three Australian hospitals had received ‘futile care’.xviii Questions have also been asked about the extent of imaging , as multiple private providers making profit from these services are likely to over- rather than under-service.xix While biomedicine is making breakthroughs in such forms as drugs targeted at individual genomic profiles or better imaging, it is delivering diminishing marginal population health return.xx‘Disease mongering’ has also been identified as a potential waste of resources, as a process which turns healthy people into patients, causing iatrogenic harm and wasting resources.xxi
Not enough access to early-intervention comprehensive primary health care
The Australian health system is overwhelmingly medical in orientation, as shown by its focus on hospitals and private general medical practitioners. Yet health is about so much more than medicine. In 1973 the need to broaden the system beyond medical services was recognised with the establishment of the Australian Community Health Program (CHP). The CHP was only funded for a few years, but it left a rich legacy of multidisciplinary community health centres and services. Those in South Australia and Victoria were world-leading in providing communities with multidisciplinary primary health care, employing a mix of doctors, physiotherapists, podiatrists, social workers, psychologists and occupational therapists. They also offered a range of activities that could prevent disease and promote health. Groups were offered to help people manage chronic disease, including mental illness, and others such as positive parenting groups, stress management and foot care were aimed at promoting health. Assertiveness training gave women, especially, the skills to prevent coercive control and avoid domestic violence. Supermarket tours guided by nutritionists helped promote healthy eating.
These centres also advocated for the health of their communities on social and commercial factors affecting health, such as pollution from factories and unsafe work practices, as well as opposing unhealthy commercial activities such as gambling venues and new fast-food outlets. Many centres had boards of management that included elected community members. Over the years these centres have been either closed, as was the case in South Australia in 2014–15, or overly corporatised and amalgamated, as in Victoria. An analysis of why comprehensive primary health care in high-income countries does not flourish has noted that neoliberal policies that focus on short-term outcomes and preference clinical activities are easily countered, and concludes that this preference for short-term visibility over longer-term prevention and community development is a crucial factor. Furthermore, professional and medical dominance tends to drown out community voices, also changing the model of service delivery.xxii Yet community health centres offer a way to make the Australian health system more accessible and equitable as well as more efficient. A network of these centres around the country, with particular concentrations in rural and outer suburban areas would offer safe, user-friendly access to primary medical services, health care and social support. The Aboriginal Community Controlled Health Organisations providing health services to many Aboriginal and Torres Strait Islander peoples are a contemporary example of successful community health centres. They are managed by local elected boards of management and offer excellent primary health care.xxiii
Failure to address the social and commercial determinants of health
Action by governments on the determinants of health is crucial if long-term demand for sick care services is to be managed. Much of the crisis stems from the tsunami of chronic diseases resulting from the impact of a wide range of social and commercial factors. The health of the whole population is threatened by many commercial determinants of health, which include the aggressive marketing and sale of alcohol, ultra-processed foods, sugar-laden drinks and nicotine vapes, and corporate practices that result in massive tax evasion, which leave less in the public purse to fund public services, including health.xxiv In order to make prevention and promotion a reality, governments need mechanisms to make health and wellbeing central priorities. Wellbeing budgets and the WHO’s Health in All Policies approach do this. Lessons from the literature on cross-government action for health suggest that in order to work they need strong political backing from the office of the prime minister or premier, with each government department held to account for its health impact. Health impact assessments need to be conducted on all areas of government activity to determine how adverse impacts can be reduced. Better public transport, greener cities and towns, more support for community-based activities, stronger controls on the gambling industry, safer and more secure employment options, stronger free public education from child care to university—these all contribute to a fairer and healthier society. Currently Australia falls short on nearly all these measures.
The failure to address the underlying determinants of health has the biggest impact on poorer people. We know that the less well-off people are, the more their health is affected by the adverse social determinants of health, including inadequate housing, less access to healthy foods, and to health services, unsafe suburbs, low quality jobs and less disposable income and wealth. Reducing health inequities requires effective action on these social and commercial determinants of health.
What’s to be done?
We must acknowledge that the health care gap is about more than the failure of an overstretched medical/hospital system. If the gap is about the shortfall in sick care services relative to demand, then we need to look at the factors driving demand as well as those limiting supply. We need an approach that embraces building health as well as treating sickness. Our system for treating sickness must be rebalanced to ensure that people are engaged with comprehensive primary health care throughout their lives, so that health challenges are detected and treated early. In the last three decades we have seen a downward spiral in access to appropriate health care. Hospital services are under more and more demand. In response, state governments open more beds. Commonwealth support for primary medical care via Medicare fails to keep pace with demand and out-of-pocket costs rise for patients as access shrinks. This in turn leads to sicker people turning up at hospitals. Hospital services come under more demand and the cycle continues.
Australian health policy needs to make explicit moves away from privatised health care. Phasing out the PHI rebate and the Medicare Levy Surcharge exemption while increasing access to specialists in public hospitals would be a good start.
Oxfam has just released a public statement signed by over seventy global non-government organisations calling for the funding of private-for-profit health care to stop because of overwhelming evidence that it widens health care inequalities and undermines equitable access to care. Health care systems are fairer, more efficient and more effective when in public hands and run for the public good. Australia’s Medicare has been important in keeping health care public, and needs to be strengthened and extended including by establishing stronger primary health care through community health services.
To stem this downward spiral we propose three big-ticket items:
- A National Health Plan that includes action on the population-wide determinants of health and a rebalanced sick care system founded on stronger comprehensive primary health care for all.
- A halt to the growth of private health insurance and privatised health care, and a transfer of funds to the National Health Plan. Private health insurance should be available, but not state subsidised.
- The adoption of a health, and health equity in all policies, approach across governments in order to address the social and commercial determinants of health.
While we move towards these ambitious plans useful interim steps would be:
- Funding a five-year trial of comprehensive primary health care centres (multidisciplinary staff offering curative care, preventive care, support groups and community development) and working with other sectors (especially housing, health, urban planning) to improve their health impact in outer suburban areas, to determine their impact.
- Capping out-of-pocket fees for medical specialists when they claim Medicare benefits.
- Increasing spending on prevention by 2 per cent of the health budget.
- Introducing mandated health equity impact assessments in selected sectors.
What makes our proposals unlikely to happen
Any government instituting the measures listed above is very likely to come into conflict with both the organised medical profession and an aggressive private health care industry hungry for profits. The history of health system reform is marked by the power of the medical-industrial complex to oppose any reform that will weaken its power and income. Calls for reforms that require more spending are met by claims that we cannot afford it. But like all government spending, this is a choice we as a nation can make if we so choose, accepting the opportunity costs of other spending foregone or additional revenues raised.
While health ministers struggle to respond to ambulance ramping, bed shortages and waiting lists for crucial procedures, the real crisis is that for decades, Australian governments have been reluctant to invest serious resources into disease prevention, early intervention and health promotion. A hospital crisis makes headline news, whereas a lack of prevention and health promotion is not similarly newsworthy—or backed by a strong advocacy constituency. So not surprisingly, very little of our health service expenditure goes on preventing disease or promoting health and wellbeing. Governments need to pay much more attention to preventing disease and promoting health through action on the social and commercial determinants of health and health equity. Doing this will help stem the rising tide of chronic diseases that will continue to swamp hospitals unless its root causes are addressed. Yet until there is a groundswell of support for such action, it is unlikely to happen and the crisis will intensify.
Health inequities have been increasing since the 1990s, and COVID-19 showed how stark the socio-economic difference can be in terms of death rates. Australian life expectancy dropped for the first time in over a century this year. In the future, if we continue to privatise our health system, fail to make health care accessible to all and fail to invest in prevention with concerted action on all the social determinants of health, then the health crisis will show up in widening gaps and falling life expectancies, especially for those at the bottom of the socio-economic ladder.
i Australian Institute for Health and Welfare, Health Expenditure Australia 2000-21, Canberra: Australian Institute for Health and Welfare, 2002.
ii Australian Institute for Health and Welfare, Health Expenditure Australia 2021-22, Canberra: Australian Institute for Health and Welfare, 2023.
iii Australian Institute for Health and Welfare, Rural and Remote Health, Canberra: Australian Institute for Health and Welfare, 2024.
iv Emily J. Callander, ‘Out-of-pocket fees for health care in Australia: implications for equity’, Medical Journal of Australia, 218(7), 2023, pp 294–97.
v Joanne Flavel, Martin McKee, Fisaha Haily Tesfay et al., ‘Explaining health inequalities in Australia: the contribution of income, wealth and employment’, Australian Journal of Primary Health, 28(6), 2022, pp 474–81; PHIDU, Social Health Atlas of Australia, Adelaide: Public Health Information Development Unit, 2022.
vi Australian Institute of Health and Welfare, The First Year of COVID-19 in Australia: Direct and Indirect Health Effects, Canberra: Australian Institute for Health and Welfare, 2021.
vii Australian Competition and Consumer Commission, Report to the Australian Senate On Anti-competitive and Other Practices by Health Insurers and Providers in Relation to Private Health Insurance For the Period 1 July 2022 to 30 June 2023, Canberra: Commonwealth of Australia, 2023.
viii Florien M. Kruse, Niek W. Stadhouders, Eddy M. Adang, et al., ‘Do private hospitals outperform public hospitals regarding efficiency, accessibility, and quality of care in the European Union? A literature review’, International Journal of Health Planning and Management, 33(2), 2018, pp e434–e453.
ix Clare Bambra, Kayleigh Garthwaite and David Hunter, ‘All things being equal: does it matter for equity how you organize and pay for health care? A review of the international evidence’, International Journal of Health Services, 44(3), 2014, pp 457–77.
x Joseph Dov Bruch, Victor Roy and Colleen M. Grogan, ‘The financialization of health in the United States’, New England Journal of Medicine, 390(2), 2024, pp 178–182.
xi Laryssa Mykyta and Robin A. Cohen, ‘Characteristics of adults aged 18–64 who did not take medication as prescribed to reduce costs’, NCHS Data Brief, 470, 2021, n.p.
xii Victoria L. Berquist, ‘Private equity investment in health care delivery, Australia, 2008–2022’, Medical Journal of Australia,220(7), 2024, pp 368–71.
xiii Anthony Scott, Trends in the Structure and Financial Health of Private Medical Practices in Australia, Melbourne: Melbourne Institute: Applied Economic and Social Research, 2022.
xiv Callander, ‘Out-of-pocket fees’.
xv Sabine Kleinert and Richard Horton, ‘From universal health coverage to right care for health’, The Lancet, 390(10090), 2017, pp 101–02.
xvi Thanh N. Huynh, Eric C. Kleerup, Prince P. Raj, et al., ‘The opportunity cost of futile treatment in the ICU*’, Critical Care Medicine, 42(9), 2014, pp 1977–82.
xvii Maryam Aghabarary and Nahid Dehghan Nayeri, ‘Medical futility and its challenges: a review study’, Journal of Medical Ethics and History of Medicine, 9, 2016, p. 11.
xviii Hannah E. Carter, Sarah Winch, Adrian g. Barnett, et al., ‘Incidence, duration and cost of futile treatment in end-of-life hospital admissions to three Australian public-sector tertiary hospitals: a retrospective multicentre cohort stud’, BMJ Open, 7(10), 2017, pp e017661.
xix Sean Docking, Rebecca Haddock and Rachelle Buchbinder, ‘Australian health policies related to diagnostic imaging: too much of a good thing?’, Australian Health Review, 46(5), 2022, pp 635–638.
xx Anthony Bowen and Arturo Casadevall, ‘Increasing disparitries between resources inputs and outcome, as measured by certain health deliverables, in biomedical research’, Proceedings of the National Academy of Sciences of the United States of America 112(36), 2015, pp 11335–40.
xxi Ray Moynihan, Jenny Doust and David Henry, ‘Preventing overdiagnosis: how to stop harming the healthy’, British Medical Journal, 2022, p. 344.
xxii Fran Baum and Toby Freeman, ‘Why community health systems have not flourished in high income countries: what the Australian experience tells us’, International Journal of Health Policy and Management, 11(1), 2022, pp 49–58.
xxiii Megan Ann Campbell, Jennifer Hunt, David J. Scrimgeour, et al., ‘Contribution of Aboriginal Community-Controlled Health Services to improving Aboriginal health: an evidence review’, Australian Health Review, 42(2), 2018, pp 218–26.
xxiv Anna B. Gilmore, Alice Fabbri, Fran Baum et al., ‘Defining and conceptualising the commercial determinants of health’, The Lancet, 401(10383), 2023, pp 1194–1213.