Are we tackling the root problem of healthcare affordability in Australia?

Australia's Medicare system has long been a cornerstone of equitable healthcare. However, rising out-of-pocket (OOP) costs and systemic inefficiencies are eroding its accessibility.

With 8.8% of Australians delaying GP visits due to cost across 2023/24 - up from 7% the previous year - and 20.4% avoiding mental health services for financial reasons, it is clear that affordability is a growing crisis.

The time has come to rethink Medicare, leveraging evidence-based models to ensure it meets modern challenges.

The Medicare system is under increasing strain

OOP costs

Australians face some of the highest OOP healthcare costs among OECD countries, despite universal coverage. These expenses account for 15% of total healthcare expenditure, with many households forced to choose between essentials such as rent and medical care.

Further to this, in 2021/22, Australians spent a total of $241 billion on healthcare, with $36 billion (14%) borne directly by patients. On average, households spent $1,300 annually on OOP costs, but this figure can exceed $1,000 per year for 43% of individuals over 56 years of age, and rise significantly further for those managing chronic illnesses such as cancer or diabetes.

Specialist consultations are the key driver of these cost increases. Only 35% of specialist visits were bulk-billed in 2020/21, compared to 88% of GP services. This leaves patients paying substantial 'gap fees', which can range from $104 to $206 annually depending on geographic location.

Inequities in access

People in rural and remote areas of Australia are 10% more likely to experience longer GP wait times than those in cities, while high gap payments for specialist services disproportionately affect low-income earners.

The truth is, the financial burden of healthcare is not evenly distributed. 1-in-3 low-income households spends over 10% of their income on healthcare, creating significant economic hardship. For individuals with multiple chronic conditions, OOP costs can be 5x higher than those without such conditions, consuming a disproportionate share of household resources.

This financial pressure leads to delayed, or foregone care.

Comparative inefficiencies

While Australia's healthcare spending per capita - $9,365 in 2021/22 - is comparable to other OECD nations, its reliance on OOP contributions is significantly higher.

For example, in 2010, Australians paid an average of $1,075 annually in OOP expenses - almost $100 above the OECD average. Despite this statistic being from a while ago, this situation has held 14 years on.

Countries such as Germany and France cap patient contributions relative to income, mitigating financial barriers. By contrast, Australia has no such cap, leaving patients exposed to escalating costs.

Broader economic costs of rising OOP costs

Rising OOP costs also strain the broader healthcare system.

Patients delaying primary or specialist care often end up requiring more expensive emergency interventions, leading to increased emergency department (ED) use.

Financially stressed individuals are more likely to experience poorer health outcomes, reducing workforce participation and productivity.

Rising premiums and gap payments discourage the uptake of private insurance, increasing reliance on public hospitals.

A new vision for Medicare

To address these challenges, the Australian Medicare system needs targeted reforms rooted in global best practices and local research.

Below are three evidence-based approaches to healthcare with proven outcomes for patients and the broader health system:

Model 1: Capping OOP expenses

The introduction of income-based caps on OOP expenses for essential services, similar to Germany's model would be a step forward for Medicare.

Research indicates that high OOP fees deter access to care, particularly for vulnerable populations. Caps would ensure that no Australian is forced to delay treatment due to financial constraints.

To do this, the Medicare Safety Net thresholds could be expanded, with their structure simplified to make it more predictable and accessible for Australians.

Model 2: Investing in multidisciplinary care

Chronic diseases account for 87% of deaths in Australia and drive much of the healthcare burden. Shifting toward multidisciplinary care - where GPs collaborate with specialists, allied health professionals, and mental health providers - can improve outcomes while reducing costs.

Trials in Australia have shown that integrated care models improve the management of chronic conditions, and reduce hospital admissions on average.

To do this, the Government can scale up their current investment commitment in allied health services, by embedding multidisciplinary teams within primary care settings nationwide.

Model 3: Incentivising preventative care

Preventative care reduces long-term costs by addressing health issues early. Yes, only a small fraction of Australia's healthcare budget is allocated to prevention.

This can be attributed to Medicare ultimately incentivising volume over quality of services delivered.

Countries such as Canada have successfully implemented preventative health programs that reduced hospitalisations by up to 25%. Similarly, Australia's own initiatives - like the MyMedicare patient registration model - show promise but need broader adoption.

To do this, a portion of private health insurance subsidies could be redirected toward preventative programs, such as community-based screenings and lifestyle interventions early on.

The path forward

The Albenese government has taken steps toward affordability with bulk billing incentives and cheaper medicines, saving Australians $370 million annually.

However, these measures are piecemeal solutions to a broader, systemic issue. A reimagined Medicare system must prioritise equity by capping costs, integrating care teams, and investing in prevention.

As we navigate rising cost-of-living pressures, the question remains:

Will we continue patchwork fixes - or build a healthcare system that truly leaves no one behind?