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

Key facts

78%

of Aboriginal and Torres Strait Islander health funding was from Australian governments (40% state and territory and 38% Australian Government) in 2015–16

The total health expenditure per person for Indigenous Australians was 1.3 times non-Indigenous Australians in 2015–16

Hospital expenditure was $2,856 per person for Indigenous Australians in 2015–16, compared with $2,135 per person for non‑Indigenous Australians

Expenditure on potentially preventable hospitalisations totalled $392 per person for Indigenous Australians compared with $176 per person for non-Indigenous Australians in 2015–16

Australian Government Indigenous-specific health program expenditure, through the Department of Health, has increased from $115 million in 1995–96 to $899 million in 2018–19, real growth of 355%

Why is it important?

A basic principle of equity is that health expenditure should reflect the relative needs for health services (Braveman & Gruskin 2003; Whitehead 1991). Health expenditure for population groups with higher levels of need should be proportionately higher. A broad assessment of how well this principle is implemented is provided by comparing differentials in health status with differences in per capita health expenditure.

Health expenditure encompasses government, non-government, private and individual expenditure on health and medical services, hospital services (admitted and non-admitted patients), community health services, dental services, aids and appliances, pharmaceuticals, patient transport and public health programs (AIHW 2013a).

The objective of the health care system is to meet the health care needs of the Australian population and produce positive health outcomes not only for individual Australians but also for the population as a whole. Expenditure is one measure of the needs met. It does not tell us about the unmet need (gaps) or the quality or appropriateness of care.

Four interacting factors within Australia’s health system potentially have major consequences for the health of many Aboriginal and Torres Strait Islander people, namely limited Indigenous-specific primary health care services; Indigenous Australians’ underutilisation of many mainstream health services and limited access to government health subsidies; increasing price signals in the public health system (such as co-payments) and a low Indigenous private health insurance rate; and failure to maintain real health expenditure levels over time (Alford 2015).

Findings

What does the data tell us?

Total health expenditure

In 2015–16, the average health expenditure per person for Indigenous Australians was estimated to be $8,949, which was $1.3 for every $1.0 spent per person for non-Indigenous Australians. Of this, $4,436 (50%) was spent on hospital services. For non-Indigenous Australians the average health expenditure per person was estimated to be $6,657 (Table D3.21.1).

During 2015–16, governments provided an estimated 78% of the total funding used to pay for health-related goods and services for Indigenous Australians, compared with 69% for non-Indigenous Australians (Table D3.21.2).

Australian Government expenditure

From 2010–11 to 2016–17, Australian Government health expenditure per person for Indigenous Australians grew by 5.6% per annum in real terms, from $2,590 per person to $3,585 per person (Table D3.21.4). Over the same period, total Australian Government health expenditure per person for all Australians grew at 1.3% per annum in real terms, from $2,828 per person to $3,058 per person (Figure 3.21.1).

Figure 3.21.1: Australian Government health expenditure per person, by Indigenous status, 2010–11 to 2016–17

Source: Table D3.21.4 and AIHW analysis of the AIHW Health Expenditure Database (unpublished).

Expenditure by state and territory

From 2010–11 to 2016–17, state and territory government health expenditure per person for Indigenous Australians grew by 4.5% per annum in real terms, from $3,278 per person to $4,259 per person (Table 3.21.4). Over the same period, total state and territory government health expenditure per person for all Australians grew at 2.3% per annum in real terms, from $1,777 per person to $2,033 per person (Figure 3.21.2).

Figure 3.21.2: State and territory government health expenditure per person, by Indigenous status, 2010–11 to 2016–17

Source: Table D3.21.4 and AIHW analysis of the AIHW Health Expenditure Database (unpublished).

Estimated expenditure per person for Indigenous Australians by state and territory governments (before offsetting states’ revenue from Australian Government and non-government sources) varies across jurisdictions. Expenditure was highest in the Northern Territory ($11,108 per person) and lowest in Tasmania ($2,193 per person) (Table D3.21.3, Figure 3.21.3). The variation between jurisdictions may be explained in part by differences in the proportion of Indigenous Australians within the jurisdiction living in Remote and Very remote areas.

Figure 3.21.3: State and territory health expenditure per person, by Indigenous status and jurisdiction, 2015–16

Source: Table D3.21.3. AIHW Health Expenditure Database.

From 2010–11 to 2016–17, community health/public health was the area of expenditure with the highest rate of growth for state and territory government funding. It grew by 13% annually in real terms, from $356 to $738 per person for Indigenous Australians (Table D3.21.4).

Expenditure by remoteness

In 2015–16, expenditure per person, for Indigenous Australians for selected health services was highest in Remote and Very Remote areas ($9,005 per person), followed by Inner and Outer regional areas ($4,503 per person) and lowest for Major cities ($3,976 per person) (Table D3.21.7, Figure 3.21.4).

Figure 3.21.4: Health expenditure per person on selected health services, by Indigenous status and remoteness area of patient’s residence, 2015–16 ($)

Source: Table D3.21.7. AIHW Health Expenditure Database.

Expenditure on Medicare Benefits Schedule and Pharmaceutical Benefits Scheme

In 2015–16, Medicare Benefits Schedule (MBS) and Pharmaceutical Benefits Scheme (PBS) expenditure per person was approximately $1,341 per Indigenous Australian, which was comparable with $1,288 per person for non-Indigenous Australians (Table D3.21.8).

MBS expenditure for Indigenous Australians was 1.3 times the rate for non-Indigenous Australians ($1,196 and $899 per person, respectively). The rate of PBS expenditure for Indigenous Australians was 37% of that for non-Indigenous Australians ($145 and $389 per person, respectively).

In 2015–16, MBS and PBS expenditure per person was highest in Remote and Very remote areas, followed by Inner and Outer regional areas, and lowest in Major cities (Table D3.21.8, Figure 3.21.5).

Figure 3.21.5: MBS expenditure per person, by Indigenous status and remoteness area of patient’s residence, 2015–16 ($)

Source: Table D3.21.8. AIHW Health Expenditure Database.

Primary and secondary/tertiary health services

In 2015–16, for Indigenous Australians, expenditure for primary health care services was $3,864 per person, compared with $2,775 per person for non-Indigenous Australians. Expenditure for secondary/tertiary health services (mainly specialist care) was $4,696 per person, compared with $3,501 for non-Indigenous Australians (Table D3.21.6).

Primary health care expenditure on medical services, including those paid through the MBS, was $643 per person for Indigenous Australians compared with $389 for non-Indigenous Australians. Expenditure on pharmaceuticals in the primary care sector was lower for Indigenous Australians ($507 per person compared with $857 per person). Expenditure on community health services for Indigenous Australians was 3 times the rate for Indigenous Australians ($1,000 compared with $331 per person) than for non-Indigenous Australians (Table D3.21.6). Community health expenditure accounted for $782 million in 2015–16 or 26% of total primary health care expenditure for Indigenous Australians (Table D3.21.5).

Australian Government Indigenous-specific health program expenditure through the Department of Health has increased from $115 million in 1995–96 to $899 million in 2018–19: a growth in real terms of 355% (Table D3.21.9, Figure 3.21.6).

Figure 3.21.6: Expenditure by the Australian Government on Indigenous-specific health programs 1995–96 to 2018–19

Source: Table D3.21.9. AIHW Health Expenditure Database.

In 2015–16, expenditure for secondary and tertiary health care services was $4,696 per person for Indigenous Australians compared with $3,501 per person for non-Indigenous Australians. Hospital expenditure (including admitted and non-admitted patient services) is the largest single expenditure item in secondary/tertiary health care services, accounting for $3,726 per Indigenous Australian. Expenditure on secondary and tertiary care medical services (mainly specialist care) was estimated to be $689 per person for Indigenous Australians compared with $848 per person for non-Indigenous Australians (Table D3.21.6, Figure 3.21.7).

Figure 3.21.7: Health expenditure per person on primary and secondary/tertiary health services for Indigenous and non-Indigenous Australians, 2015–16

Source: Table D3.21.6. AIHW Health Expenditure Database.

Expenditure on hospital separations

Expenditure on hospitalisation separations by disease is available for 2015–16. Hospital expenditure (when a diagnosis was recorded) was $2,856 per person for Indigenous Australians compared with $2,135 per person for non-Indigenous Australians.

For Indigenous Australians, expenditure was highest for mental and behavioural disorders ($350 per person), followed by injury, poisoning and other external causes ($300 per person). Expenditure per person was higher for Indigenous than non-Indigenous Australians for hospitalisations in almost all diagnosis categories, with the highest differences for:

• mental and behavioural disorders ($350 per person compared with $151 per person)
• factors influencing health status and contact with health services (for example, examinations) ($294 per person compared with $142 per person)
• certain conditions originating in the perinatal period ($155 per person compared with $42 per person)
• pregnancy, childbirth and the puerperium ($225 per person compared with $118 per person)
• respiratory diseases ($213 per person compared with $115 per person)
• injury, poisoning and other external causes ($300 per person compared with $223 per person).

However, expenditure for non-Indigenous Australians was higher than for Indigenous Australians for treatment of musculoskeletal and connective tissue disorders ($137 per person compared with $237 per person) and neoplasms (including cancer; $116 per person compared with $204 per person) (Table D3.21.10, Figure 3.21.8).

Figure 3.21.8: Expenditure per person on hospital separations in public and private hospitals, by disease group and Indigenous status, 2015–16

Source: Table D3.21.10. AIHW Health Expenditure Database.

Expenditure on potentially preventable hospitalisations totalled $392 per person for Indigenous Australians compared with $176 per person for non-Indigenous Australians. For expenditure on potentially preventable hospitalisations, the greatest difference is attributable to diabetes (a gap of $33 per person), influenza and pneumonia (a gap of $21 per person), gangrene (a gap of $19 per person) and convulsions and epilepsy (a gap of $17 per person) (Table D3.21.11).

Expenditure per person for Indigenous Australians for potentially preventable hospital admissions was:

• $169 per person for chronic conditions
• $155 per person for acute conditions
• $87 per person for vaccine-preventable conditions (Table D3.21.11).

Usage patterns

In 2015–16, for Indigenous Australians, expenditure on hospital services was 3.3 times the expenditure for medical services (e.g., MBS services provided by a medical practitioner), compared with 2.2 times for non-Indigenous Australians (Table D3.21.1). This reflects different service usage patterns and costs.

In the same year, funding per person for community health services for Indigenous Australians was 3 times the amount for non-indigenous Australians ($998 per person compared with $331 per person). Per person expenditure for Indigenous Australians for public health services was 2 times the amount for non-Indigenous Australians ($219 per person compared with $108 per person) (Table D3.21.12).

What do research and evaluations tell us?

Research has shown that those on lower incomes rely more on publicly provided services and spend less money on private hospital services than people with higher incomes, and are much more likely to present to hospitals, even for primary health care (Deeble 2009).

Evidence suggests that the higher expenditures in rural and remote areas are largely related to hospital services and grants to Indigenous health services, and partly reflects higher costs of delivering health care services in those areas (AIHW 2013b).

Data shows that government health funding is critically important for funding health care to Indigenous Australians. Australian governments provide 78% of all Indigenous Australian health expenditure, compared with 70% for non-Indigenous Australians. Indigenous Australians rely on and need government financial support for a strong community health sector (AIHW 2020).

Evidence indicates that up to two-thirds of Indigenous Australians rely on Indigenous-specific primary health care services. Yet, three-quarters of all government Indigenous health expenditure is on mainstream services, and nearly half (48.4%) of all expenditure is on hospitals (Alford 2014; SCRGSP 2012). This can partly be explained by greater intensity of service use (more services per capita because of greater need), plus additional costs of providing mainstream services to Indigenous Australians, for reasons such as location, culture and language. There are also costs for Indigenous-specific services that complement mainstream services, for example, Indigenous liaison officers in hospitals (SCRGSP 2012).

A study into the differences in primary health care delivery to Australia’s Indigenous population developed the Indigenous Health Service Delivery Template for use in economic evaluations. The study noted that health economics is increasingly used to inform decisions on resource allocation. However, there is comparatively little evidence relevant to minority groups, mainly due to the lack of cost and effectiveness data specific to these groups upon which economic evaluations can be based. Hence, the study suggested that resource allocation decisions often rely on mainstream evidence that may not be representative, resulting in inequitable funding decisions. The Indigenous Health Service Delivery Template developed in the study revealed significant differences in the way health interventions are delivered by Aboriginal Community Controlled Health Services (ACCHSs) compared with mainstream GP practices. The study noted that it is essential that these differences are included in the conduct of economic evaluations to ensure results are relevant to Indigenous Australians, and to allow decision-makers access to economic evidence that accurately represents the needs and context of disadvantaged groups, which is particularly important for addressing health inequities (Ong et al. 2012).

The Australian Government Department of Health’s Indigenous Australians’ Health Programme (IAHP) Economic Evaluation Phase One was published in mid-2018. It focused on the return on investment of the IAHP as measured by potentially preventable hospitalisations and the relative costs of an Indigenous-specific compared with a non-Indigenous specific primary health care service. The report showed that higher attendance at ACCHSs reduced the likelihood of hospital admission, as well as providing health gains, and there was a preventative effect upon hospitalisations from ACCHSs care. While the provision of care through mainstream services may be cheaper, it is likely to be associated with worse health outcomes due to less comprehensive and integrated care that may not be culturally competent and may not meet patients’ needs and expectations. This was used to demonstrate the cost-effectiveness of ACCHSs, although there were some methodological limitations. For more information, see measure 1.24 Avoidable and preventable deaths (Dalton & Carter 2018).

A 2014 independent report commissioned by the National Aboriginal Community Controlled Health Organisation was the first detailed health economics study of ACCHSs and related resource and funding issues in Australia. The report included an assessment and evaluation of the economic and health value derived from the ACCHS sector and an evaluation of government policy and expenditure on ACCHSs and Indigenous health more generally. The report also investigated any additional cross-sector benefits to the Australian economy provided by ACCHSs such as employment, economic independence and education. The report asserted that as Indigenous Australians comprise 3% of the Australian population and have a relative need of at least twice the rest of the population because of much higher levels of illness, it is important for funding to be more commensurate with need (Alford 2014).

Implications

In 2015–16, 78% of Indigenous health funding was from Australian governments (40% State and Territories and 38% Australian Government). On a per-person basis, the average health expenditure for Indigenous Australians in 2015–16 was 1.3 times that for non-Indigenous Australians (Table D3.21.1). However, Indigenous Australians are currently experiencing a burden of disease and injury 2.3 times the rate of non-Indigenous Australians (AIHW 2016).

Issues of equity are particularly important in this performance measure. The understanding of equity must also acknowledge that the conceptual construct of health is different for Indigenous Australians from non-Indigenous Australians and therefore the outcomes sought may be different (Mooney 2003).

There are a number of aspects of access to care that relate to health inequities and need to be recognised in analysing health expenditure per person. These aspects of geography, discrimination, affordability and availability are dealt with in detail in measure 3.14 Access to services compared with need. These are issues that affect equity and quality of care and the level of need for health care of Indigenous Australians.

Services and systems need to continue to be strengthened to meet the health needs of Indigenous Australians effectively. It is suggested this should be through:

• investment in known effective care at a level commensurate with need
• addressing gaps in service provision for Indigenous Australians (e.g., investments in infrastructure and workforce development, particularly for remote area service development) (DoH 2013).

An additional issue in interpreting per capita expenditure is the degree of variation between the jurisdictions. Variations in expenditure by jurisdiction will be influenced by a range of factors, including the additional costs of delivering services in remote areas, the size of the Indigenous Australian population in remote areas and differences in health needs, health services and health structures. Australia’s constitution and intergovernmental financial transfer arrangements result in differences between the funding and expenditure levels in jurisdictions.

Data on health expenditure by smaller areas of geography would be particularly useful as other health data by smaller geographies become increasingly available. This will aid in an understanding of the extent of unmet health need for Indigenous Australians and will help to better target areas of greatest need.

There is a need for more cost and effectiveness data specific to Indigenous Australians upon which economic evaluations can be based to assist in the goal of addressing health inequalities (Ong et al. 2012). More research is required into the cost-effectiveness of ACCHSs to provide evidence for advantages, health gains and strategies that improve health outcomes (Dalton & Carter 2018), as well as gaps and barriers that need to be addressed (Alford 2014).

The policy context is at Policies and strategies.

References

• AIHW (Australian Institute of Health and Welfare) 2013a. Expenditure on health for Aboriginal and Torres Strait Islander people 2010-11. Canberra: AIHW.
• AIHW 2013b. Expenditure on health for Aboriginal and Torres Strait Islander People 2010–11.
• AIHW 2016 Australian Burden of Disease Study: Impact and causes of illness and death in Aboriginal and Torres Strait Islander people 2011. Canberra.
• AIHW 2020. Expenditure on Aboriginal and Torres Strait Islander health, 2015-16, unpublished. Canberra.
• Alford K 2014. Economic value of aboriginal community controlled health services.
• Alford KA 2015. Indigenous health expenditure deficits obscured in Closing the Gap reports. The Medical Journal of Australia 203:403.
• Braveman P & Gruskin S 2003. Defining equity in health. Journal of Epidemiology and Community Health 57:254-8.
• Dalton A & Carter R 2018. Economic Evaluation of the Indigenous Australians’ Health Programme Phase I.
• Deeble J 2009. Assessing the health service use of Aboriginal and Torres Strait Islander peoples. Canberra: NHHRC.
• DoH (Australian Government Department of Health) 2013. National Aboriginal and Torres Strait Islander Health Plan: 2013-2023. Department of Health.
• Mooney G 2003. Here's a recipe for a more equitable health care system in Australia. Online Opinion.
• Ong KS, Carter R, Kelaher M & Anderson I 2012. Differences in primary health care delivery to Australia’s Indigenous population: a template for use in economic evaluations. BMC health services research 12:1-11.
• SCRGSP (Steering Committee for the Review of Government Service Provision) 2012. Indigenous Expenditure Report 2012. Canberra: Productivity Commission.
• Whitehead M 1991. The concepts and principles of equity and health. Health Promotion International 6:217-28.