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Medicines take biggest bite out of family health budget

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Australians paid an average of $1100 on out-of-pocket health expenses in 2011-12, with the major share being spent at pharmacies on medicines, medical aids and appliances.

Doctors, by contrast, held medical costs down, with patients forking out an average of just $131 for medical services in 2011-12 – up just $2 from the previous financial year – and accounting for less than 12 per cent of overall out-of-pocket spending on health care.

The figures were contained in a national snapshot of health expenditure compiled by the Australian Institute of Health and Welfare, which found that, overall, health is consuming a steadily increasing proportion of the nation’s wealth.

In 2011-12, total health spending reached $140.2 billion, a 7.6 per cent jump from the previous year, and accounted for 9.51 per cent of gross domestic product – up from 8.4 per cent a decade earlier, reflecting the growth in demand for medical care from an ageing population, as well as the proliferation of increasingly effective but expensive drugs, equipment and treatments.

More telling for those with the task of managing the Federal Budget, the AIHW has for the first time reported on health spending as a proportion of tax revenue.

Its figures show that, in the seven years leading up the global financial crisis in late 2008, health spending as a proportion of Commonwealth tax revenue hovered between 21.4 and 22.4 per cent before jumping to almost 29 per cent in 2009-10 as the economic upheaval battered tax collections while leaving demand for health care untouched.

The ratio has eased lower since then, down by 0.6 of a percentage point to 26.4 per cent in 2011-12, but remains well above pre-GFC levels.

In a discomfiting outlook for the Government, there seems little prospect of a return to the speed of tax revenue growth experienced through the early to mid-2000s, suggesting that health expenditure is going to continue to consume a hefty share of taxes collected.

The report shows that spending on public hospitals grew by $2.1 billion in real terms in 2011-12, with little shift in how the burden was shared between the Commonwealth and the states.

In an insight into where the burden of out-of-pocket health expenses for families lies, the AIHW report shows that more than 39 per cent of such spending was for medications (amounting to an average of $358 per person), followed by 19 per cent for dental care, 11.9 per cent for medical services, 10.1 per cent for medical aids and appliances, and 7.8 per cent for other practitioner services.

Adrian Rollins