Aboriginal and Torres Strait Islander Health Performance Framework - 2010

3.19 Expenditure on Aboriginal and Torres Strait Islander health compared to need

Page last updated: 26 May 2011

Why is it important?:

A basic equity principle is that health expenditures should be targeted to reflect relative needs for health services. Health expenditures for population groups with higher levels of need should be proportionately higher. For Aboriginal and Torres Strait Islander peoples, the principle means that the demonstrable higher levels of need should be accompanied by higher levels of health expenditure. If health expenditures are not sufficiently matched to need, then this fundamental principle of equity will not be met and services for Aboriginal and Torres Strait Islander peoples will struggle to be sustainable and effective. There are many challenges in working through how this principle can be defined and assessed (Commonwealth Grants Commission 2001; SCRGSP 2007). However, a broad assessment of how well the principle is given effect is provided by comparing broad differentials in health status with differences in per capita health expenditures.

Findings:

On a per person basis, average health expenditures for Aboriginal and Torres Strait Islander people in 2006–07 were estimated to be $5,569, which was 31% higher than the expenditure for other Australians ($4,247). Including high care residential aged care (which was incorporated in health expenditure estimates prior to 2006–07), total expenditures were estimated to be 25% higher for Indigenous Australians compared with non-Indigenous Australians. This increased from 17% in 2004–05, indicating expenditures for Indigenous Australians increased at a greater rate than for non-Indigenous Australians over this period. When first estimated in 1995–96, the ratio was 1.08. Some of the change since that time will reflect methodological issues, rather than actual expenditure increases.

Governments provided an estimated 93% of the funding used to pay for health goods and services for Aboriginal and Torres Strait Islander peoples during 2006–07 compared with 68% for other Australians. Per person funding provided by the Australian Government for Aboriginal and Torres Strait Islander peoples was $2,336 compared with $1,872 for other Australians, a ratio of 1.25:1. Excluding grants from the Commonwealth Government per person funding provided by state and territory governments for Aboriginal and Torres Strait Islander peoples was $1,930 compared with $563 for other Australians, a ratio of 3.4:1 (AIHW 2009).

Estimated expenditures per person by state and territory governments vary across jurisdictions, with the highest expenditures per person in the Northern Territory. Most variation between jurisdictions is explained by differences in the proportion of Indigenous people in the state living in remote and very remote areas. For the main programs, in 2006–07, expenditures were an estimated $4,597 per Aboriginal and Torres Strait Islander person in remote and very remote areas compared with $3,316 in outer regional, $2,394 in inner regional areas and $2,564 in major cities. The higher expenditures in rural and remote areas are largely related to hospital services and OATSIH grants to ACCHOs. The higher expenditures partly reflect higher costs of delivering health care services in rural and remote areas.

MBS expenditure per person was higher for non-Indigenous Australians across all remoteness areas. The gap between Indigenous Australians and non-Indigenous was greatest in major cities and inner regional areas and smallest in remote areas. PBS expenditure per person was highest in remote areas for Indigenous Australians and highest in major cities and inner regional areas for non-Indigenous Australians. The cost per hospital separation was higher for Indigenous Australians than non-Indigenous Australians (AIHW 2009).

In 2006–07, expenditures for primary health care services were $2,599 per person for Aboriginal and Torres Strait Islander peoples compared with $2,007 for other Australians. Primary health care expenditures on medical services including those paid through the Medicare Benefits Schedule were $342 per Aboriginal and Torres Strait Islander person compared with $525 for other Australians. Per person expenditures on pharmaceuticals in the primary care sector were also much lower for Aboriginal and Torres Strait Islander peoples ($224 versus $509—see measure 3.13). Per person expenditures on community health services were seven times higher for Indigenous Australians—$1,187 per person compared with $182 per person for other Australians. Community health expenditures accounted for $620 million in 2006–07 or 46% of total primary health care expenditures for Indigenous Australians. Per person expenditures on dental services for Aboriginal and Torres Strait Islander peoples were half that for other Australians.

Australian Government Indigenous specific health program expenditure has increased from $115 million in 1995–96 to $586 million in 2009–10, a growth in real terms of 255%.

In 2006–07, expenditures for secondary and tertiary health care services (excluding residential care) were $2,753 per person for Aboriginal and Torres Strait Islander peoples compared with $2,007 for other people. Hospital expenditure is the largest single expenditure item in secondary/tertiary accounting for $2,199 per Indigenous Australian. Expenditures on secondary/ tertiary care medical services (mainly specialist care) were estimated to be $81 per Aboriginal and Torres Strait Islander person compared with $288 per person for other Australians.

Implications:

On a per person basis, average health expenditures for Indigenous Australians are 31% higher than for other Australians. However, measures of health status show mortality rates (measures 1.23 and 1.25), infant mortality (measure 1.19) and the occurrence of a broad range of diseases (measures 1.04, 1.05, 1.06, 1.07, 1.08, 1.09, 1.10, 1.11 and 1.12) are 200%–300% times higher in Aboriginal and Torres Strait Islander peoples. Were expenditure commensurate with need, rates of expenditure on Aboriginal and Torres Strait Islander Australians should be significantly higher compared with the non-Indigenous population. For other Australians, use of health services rises with level of illness. For example, people with one significant medical condition have MBS and PBS usage 4 times the national average and for those with five conditions, expenditure is up to 12 times higher (Dwyer et al. 2004). Therefore, per person health expenditures for Aboriginal and Torres Strait Islander peoples are not sufficient to match needs.

Various estimates have been made of the level of expenditure that would be required to equitably address Aboriginal and Torres Strait Islander health needs. Dwyer et al. (2004, p. 71) reviewed a range of studies and concluded that ‘total health spending on Indigenous populations would need to be increased to a level between 3 and 6 times the current national average per capita expenditure to achieve equitable access to effective care’.

Current expenditures on primary care services fall well short of these benchmarks, although there have been important recent increases. Experience over recent years has demonstrated increased funding can lead to significantly improved level of service provision in Aboriginal and Torres Strait Islander primary care services. Targeted government spending has increased significantly in recent years and there are further significant increases committed over the next three years (COAG 2008c). Across the Health and Ageing portfolio, funding of almost $1.2 billion has been allocated in 2010–11 for health programs specific to Aboriginal and Torres Strait Islander peoples. These recent investments equate to an 87% increase in Indigenous health funding across the Portfolio since 2007–08.

It is vital to ensure increased investments in services for Indigenous Australians:
  • are directed to effective interventions and approaches, including an effective system of primary health care
  • enable Aboriginal and Torres Strait Islander peoples to access health services including Aboriginal and Torres Strait Islander, mainstream and specialist services
  • are allocated appropriately to reflect need and costs of service delivery across regions and recognise costs of service delivery, particularly in remote areas
  • are used efficiently and strategically to build capacity in the services and the workforce providing for the needs of Aboriginal and Torres Strait Islander peoples.
Aboriginal and Torres Strait Islander peoples have yet to reap the full benefits of primary health care that their Indigenous counterparts overseas have achieved. The evidence points to the need for further and sustained investment in primary health care, along with action on the social determinants, as a crucial strategy for closing the gap in life expectancy between Indigenous and non-Indigenous Australians (Griew 2008). Working towards targets to close the gap in Indigenous health is challenging, and requires substantial investment in the determinants of health such as housing, education and employment, improved access to health services, and support for individual behaviour change.

Figure 182 – Estimated per person health expenditure Ratio of Indigenous to Non-Indigenous Australians, Australia, 1998–99, 2001–02, 2004–05, 2006–07


Figure 182 – Estimated per person health expenditure Ratio of Indigenous to Non-Indigenous Australians, Australia, 1998–99, 2001–02, 2004–05, 2006–07
Source: AIHW 2005, AIHW 2008, AIHW 2009
Text description of figure 182 (TXT 1KB)

Figure 183 – Estimated state and territory health expenditure per person, by Indigenous status, 2006–07


Figure 183 – Estimated state and territory health expenditure per person, by Indigenous status, 2006–07
Source: AIHW 2009
Text description of figure 183 (TXT 1KB)

Figure 184 – Estimated health expenditure on selected health services per person for Aboriginal and Torres Strait Islander, by remoteness, 2006–07


Figure 184 – Estimated health expenditure on selected health services per person for Aboriginal and Torres Strait Islander, by remoteness, 2006–07
Source: AIHW 2010d
Text description of figure 184 (TXT 1KB)

Figure 185 – Expenditure by the Australian Government on Indigenous-specific health programs, 1995–96 to 2009–10


Figure 185 – Expenditure by the Australian Government on Indigenous-specific health programs, 1995–96 to 2009–10
Source: Australian Government Department of Health and Ageing
Text description of figure 185 (TXT 1KB)

Figure 186 – Average health expenditure per person for Primary health care and Secondary/Tertiary health care services, by Indigenous status, Australia, 2006–07


Figure 186 – Average health expenditure per person for Primary health care and Secondary/Tertiary health care services, by Indigenous status, Australia, 2006–07
Source: AIHW 2009
Text description of figure 186 (TXT 1KB)

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