Health services are the biggest budget burden

AUSTRALIANS forked out more than $12 billion on health services and medicines in 2010-11, but that was just 30% of the whopping $130 billion health bill the nation footed during the year.

A recent report by the Grattan Institute found the cost of delivering health services, including Medicare and the Pharmaceutical Benefits Scheme, was the biggest burden on the state and federal budgets.

It also found that while the federal budget was facing several structural problems - evidenced by the $12 billion shortfall in tax revenue - health was the biggest drain on federal funds.

Despite states and federal governments paying 70% of the health bill - or more than $115 billion in 2010-11- out-of-pocket health spending by Australians was growing faster than government spending.

Data from the Australian Institute of Health and Welfare showed more than a third of out-of-pocket expenses were for medicines not listed under the PBS; 18% on dentistry, 10% for aids and appliances and 11% on doctor services.

In the past 10 years, out-of-pocket spending on health grew 6.2%, compared with growth in the total health spend of 5.3%.

On top of the out-of-pocket spend, Australians contributed about $9 billion in 2011-12 via the 1.5% Medicare levy, about half the cost of Medicare.

The Consumer Health Forum estimates average people pay about $1075 each year on health expenses not covered or reimbursed by government.

Among the factors driving the growth in out-of-pocket health spending were the growth in private health insurance; the gap between insurance cover for expenses and the real cost; the cost of non PBS-subsidised medicines and patient co-contribution for PBS medicines and other non-medical services such as physiotherapy and alternative therapies.