Rapid growth in government health spending during COVID-19 pandemic

According to a new report by the Australian Institute of Health and Welfare, Australia’s spending on health goods and services during the COVID-19 pandemic grew to $220.9 billion.

Spending on health goods and services grew by $14.6 billion to $220.9 billion during 2020–21 – the second year (first full year) of the COVID-19 pandemic in Australia, according to a new report by the Australian Institute of Health and Welfare (AIHW).

The report, Health expenditure Australia 2020–21, shows that total health spending is equivalent to 10.7% of the Gross Domestic Product (GDP), the highest ratio since consistent data became available in 1985–86, and 0.5 percentage points higher than in 2019–20.

After adjusting for inflation, total health spending grew by 7.1% compared with 2019–20 – more than double the average yearly growth rate over the decade (3.4%). This translated to an average health spending of $8,617 per person in 2020–21 – an increase of $533 in real terms from the previous year.

“The increase in health spending during 2020–21 was driven by factors such as government COVID-19-related health funding and people catching up on medical care and treatment services that had previously been delayed,’” AIHW spokesperson Dr Adrian Webster said.

Despite the increase relative to GDP, the ratio of government health spending to total government expenses was 15.4%, 0.3 percentage points lower than 2019–20, indicating government expenses in other areas (such as income support payments) grew even faster than health spending.

Australian Government spending was $94.4 billion, representing a $5.8 billion real increase (6.5%) from the previous year. This was more than double the average annual real growth in the decade to 2020–21 (3.2%) and also higher than 2019–20 (5.1%). State and territory governments spent $61.6 billion on health, an increase of 8.6% ($4.9 billion) from 2019–20 in real terms, above the average for the decade of 3.7%.

Government spending through the National Partnership on COVID-19 Response (NPCR) was $7.7 billion ($4.0 billion by the Australian Government and $3.7 billion by state and territory governments). Australian Government spending through specific COVID-19 Department of Health and Aged Care programs (outside the NPCR) was estimated to be $6.2 billion.

With the gradual easing of many social, economic, business and travel restrictions during 2020-21, hospital admissions, emergency department presentations, outpatient care services and other usual activities within the health system increased.

Spending by individuals rose by 9.3% to $33.2 billion during 2020–21, rebounding from a 7.9% decrease in 2019–20, with average per person individual health spending increasing by $105 to $1,293. Spending by private health insurance providers rose by 6.2% ($1.1 billion) in real terms to $18.0 billion.

The proportion of health spending funded by individuals remained relatively low after generally declining over the past decade (14.7% and 15.0% in current prices in the last two financial years compared with 18.0% in 2010–11).

Dr Webster said, “Over time, spending on hospitals has tended to increase faster than spending on primary health care., however, this appeared to shift during the pandemic, with primary health care spending growing more quickly.”

“Spending on hospitals grew by $4.2 billion in real terms to $89.7 billion, making up 40.6% of total health spending.

“Spending on primary health care increased by $6.7 billion to $73.4 billion, with $13.1 billion going to unreferred (mainly general practice) medical services – including $2.1 billion for Medicare Benefits Schedule telehealth services. Primary health care spending also included $12.5 billion for subsidised pharmaceuticals and $11.2 billion on other medications,” Dr Webster said.

Ritchelle Drilon

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Ritchelle is a Content Producer for Healthcare Channel, Australia’s premier resource of information for healthcare.

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