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Can we sustain health spending?

Australian governments currently spend relatively little on health. Are cutbacks really what’s needed?

The assertion that health spending is unsustainable has been made with remarkable regularity, most recently by the Federal Minister for Health, Peter Dutton.1 Despite publication of a major review by the National Health and Hospitals Reform Commission2 less than 5 years ago, the Minister has called for a far-reaching debate about the health system.3 Consistent with the rhetoric, the recent federal Budget has introduced copayments and foreshadowed cutbacks that are expected to reduce federal health spending by $8.6 billion over the 4-year forward estimates.4

The evidence usually cited to demonstrate the unsustainability of health spending is its impact on government finances. Between the 2001–02 and 2011–12 financial years, health expenditures by all levels of government rose from 19.8% to 25.6% of total tax revenues,5 and projections by the National Commission of Audit prior to the recent Budget suggested that federal spending alone could rise from $65 billion in 2013–14 to over $120 billion in 2023–24.6 These trends are commonly linked to the ageing of the population to conclude that significant structural reforms are needed…