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Australian Government Coat of Arms

Budget | 2014-15

Budget 2014-15
Australian Government Coat of Arms, Budget 2014-15
  1. budget.gov.au
  2. 2014‑15
  3. Health
  4. The case for change

The case for change

An unsustainable budget position

The Government has inherited a budget position that is unsustainable.

From 2007‑08 to 2013‑14, Government real spending has outgrown the growth in the economy by over 13 per cent.

Firm and decisive action is required to put the budget back onto a secure and sustainable footing. To delay action would only exacerbate the problem, imposing an ever increasing financial burden on future generations.

Growing demand for health care

Health is a key area of spending growth. Health spending is currently 4.1 per cent of GDP, but the Productivity Commission recently estimated that, without changes to Government policy, over time this would rise to 7.0 per cent.

In particular, high growth in spending on Medicare and public hospitals is projected to place the Budget under increasing pressure.

Medicare Levy and Medicare Levy Surcharge revenue will not be enough to offset the increasing cost of health care. The combined revenue from these sources is less than 20 per cent of total Commonwealth health spending.

Advances in medical technology mean that demand for medicines and health services is expected to grow for all age groups.

Demand is also expected to grow faster as Australia's ageing population increasingly relies on the health system for care.

Between 2010 and 2050, the number of people aged 65 to 84 is expected to more than double and those aged 85 and over to more than quadruple.

Given these pressures, Government spending on many health programmes will continue to grow at an unsustainable rate unless fundamental changes are made.

The Medicare Levy and Medicare Levy Surcharge provide less than 20 per cent of the revenue needed to fund health spending
This chart shows that projected revenue from the Medicare Levy and Medicare Levy Surcharge will make up a low proportion (less than twenty per cent) of total Commonwealth health expenditure in every year of the medium term (from 2013-14 to 2024-25). In 2024-25, the Medicare Levy and Medicare Levy Surcharge is projected to be less than $20 billion, as compared to around $105 billion in Commonwealth total health expenditure (including 2014-15 Budget changes).