An alternative approach to projecting health expenditure in Australia

Objective: To introduce a large body of work that explores the modelling of expenditure on health services per person living with major causes of disease or injury as a valid basis for conclusions regarding future health expenditure in Australia. Methods: Separate projections were calculated for important health conditions (or groups of conditions) by type of expenditure (hospital care, medical services, pharmaceuticals, aged care homes and other health services). Analyses accounted for expected changes in the number of affected cases, the proportion of cases treated, the volume of health services per treated case and excess health price inflation. Results: Total health expenditure in Australia is expected to increase from 9.4% of GDP in 2002-03 to 10.8% of GDP in 2032-33. This represents a 15% increase in the "health: GDP" proportion over the projection period, or an annual growth of 0.5%. Two-thirds of this growth is accounted for by expected increases in population size and population ageing. Conclusions: The lower annual growth in the "health: GDP" proportion compared with other estimates for Australia (range, 0.9% to 1.7%) was attributed to different assumptions regarding nondemographic growth factors, particularly volume per case. Explicit modelling of these factors separately for each condition ensured that assumptions remained within plausible limits.