Budget 2017/18 – Good news for health

By Mark Harrison - May 31, 2017

The 2017 budget has widely been assessed by commentators as apolitical and non-controversial. It sought to respond to electoral concern for housing affordability, stoke the business sector through infrastructure spending and maintain government business as usual. Fortunately, the health and care sector faired better than most within this constrained environment.

Health is one of the larger components of the budget (16.2%),  and  accountability for health disbursements continues to attract attention each year. Forecast federal health expenditures is for spending of $75.3B, up from $73.8B in 2016/7. Health programs account for 3 of the top 10 expense programs of the budget (MBS, Public Hospitals, PBS). Despite this existing prominence, many aspects of health policy attracted  more than average growth.

As to where all the money is being spent, budget papers allocate it as:

 Medical Services & Benefits


 Pharmaceutical benefits 


 Assistance to State for hospitals


 Hospital services


 Health services


 General admin


 Aboriginal & Torres Straits Islanders




The key change announced by the Treasurer that will have the widest impact on the community is an increase to the Medicare levy of 0.5%, effective from 2019/20. The revenue raised is intended to be applied solely to the funding of the NDIS. The need for such an increase is understandable, given the forecast expenditure increase over the next 2 years for providing assistance to people with disabilities is $16.1B as NDIS is rolled out.

Across the government’s sectoral spending plans, the key policy initiatives were:

MBS spend will increase due to the phased re-introduction of indexing of Medicare Benefits, principally after 2017/8. Bulk billing general practitioners will be the first beneficiaries, with non-bulk billing GPs’ specialities and allied health to receive the indexing gains in later years. Interestingly, there is no forecast change in cost of health insurance rebates, that seems to be contrary to popular media that suggests consumers are leaving the health insurance system. Government expects to retain approximately 55% of the population with health cover. The government also notes the cost of maintaining the Childcare Dental Benefits Schedule will slightly increase.

PBS will decrease 4.1% in 2017/18 due to timing of medication expenditure being brought forward to 2016/7. Importantly, government expects further decreases in spending over the forecast period due to the earlier announced Improving Access to Medicines – Cheaper Medicines program.

Public hospital expenditure is to decline as previous capital projects and infrastructure projects come to completion. Surprisingly, there were no new material health projects announced within the infrastructure program that is being used to prime the economy.

Health services expenditure is to increase 5.2% in 2017/18, as the new infrastructure comes on line, and with population growth.

General administration costs will decrease 2.4% as a result of general efficiencies in workforce. Of course, the how and what was not detailed within a savings plan.

There is another push to implement and obtain the efficiencies promised from the electronic health record. Government has allocated a further $374.2 million in My Health Record with the unanimous support at COAG for a national roll-out.  Every Australian will receive a record, or the choice to opt out. The government has also reached agreement with the Australian Medical Association and the Royal Australian College of General Practitioners (RACGP) on the changes to the e-health record system.

Overall, health and care sectors should be pleased with the ongoing investment in the sectors. NDIS continues to be supported in a very meaningful way, retaining its apolitical status, and despite the roll out challenges. Aged care continues to be supported through the growth of home care packages and a stable residential aged care system. Medical benefits indexing is turned back on, allowing for real dollar increases to base fees, rather than the recent erosion.

Mark Harrison is a Business Advisory and Assurance partner and can be contacted on (03) 8610 5000.

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