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Federal Budget 2017- 2018:
Health Check



"The Treasurer has surprised with a budget that presents as one with ambition. Security, fairness and opportunity have been sold as the key themes of a budget intent on building — be it infrastructure projects, confidence in the housing system or the future in the form of education reform — on the back of expected robust growth.

Balanced with this spending is a creative search for revenue—one likely to hit consumers as increases to the Medicare levy and a new ‘bank tax’ fund future plans. Indeed, how the push for new revenue marries with the view of an uninterrupted path to trend growth will be a challenge.

So is it a good budget? Ambitious underlying cash figures—a $7.4bn surplus due by 2020-21—are tempered by current realities of a $29.4bn deficit in 2016-17. 

The expected return to the black comes despite the jettisoning of $13bn worth of measures mothballed from previous budgets. Yet while signs of improved conditions offer comfort, much of the forecast pins its hopes on the back of rising tax revenue rather than disciplined spending. 

Receipts are set to rise to 25.4% of GDP by 2020-21 from 23.2% of GDP in 2016-17, budget papers show. Payments on the other hand are expected to stay broadly stable at 25% of GDP in 2020-21 from 25.1% in 2016-17. 

A reassessment will be required should revenues disappoint.” 

Text above was originally published by ANZ as part of Budget2017: growth ambition,” Richard Yetsenga ANZ Chief Economist, Published 10 May 2017. Visit https://bluenotes.anz.com/ for more macro coverage of Budget 2017-18



The Budget 2017-18 reflects ambitious aspirations for a Long-Term National Health Plan by including measures to secure funding for the Medicare Benefits Schedule (MBS) and the Pharmaceutical Benefits Scheme (PBS) as well as funding for public hospitals, mental and preventive health, and investment in medical research. Other significant measures include the lifting of the freeze on MBS rebate indexation and the introduction of an increase in the Medicare Levy to address funding shortfalls in the National Disability Insurance Scheme (NDIS).


Medicare Benefits Schedule (MBS)

Budget 2017-18 introduces the gradual lifting of the freeze on MBS rebate indexation, which has been in effect since 2013. With total expenditure on Medicare of $22.9bn in 2017-18, the budget includes $1bn to restore indexation over the next three years. The lifting of the freeze is staged progressively, starting with (1) General Practitioner (GP) bulk-billing incentives, 1 July 2017; (2) standard GP and specialist consultations, 1 July 2018; (3) specialist procedures and allied health consultations, 1 July 2019; and (4) selected diagnostic imaging items from 1 July 2020. 

Other MBS-related measures include spending of $44.2m over three years in continued funding for the MBS review; $44.5m for the Medical Services Advisory Committee to amend and revise MBS item listings to ensure their relevance; and targeted savings of $103.8m from greater Government power to recover debts in cases of inappropriate Medicare claiming. 

The Royal Australian College of General Practitioners has welcomed the lifting of the freeze on MBS rebate indexation as a “first step towards a commitment to reinvesting in preventative health.”[i] As the recently released ANZ-Melbourne Institute Health Sector Report showed, MBS revenue per full-service equivalent GP has declined since the introduction of the freeze with practices supporting earnings growth through some combination of increased efficiencies and income from other sources. The report also highlighted declines in job satisfaction and work-life balance among GPs since the introduction of the freeze. 

Although practice circumstances may vary considerably, conservative back-of-the-envelope estimates suggest that the dollar uplift resulting from lifting the freeze for GPs could potentially range somewhere between $6-10k per GP per annum. Hence, the ‘early’ lifting of the freeze on the GP bulk-billing and standard consultations should at least partly reduce some of the pressure that GPs practices may have encountered in finding further efficiencies or alternative income—as well as help lift practitioner morale.

Medicare Guarantee Fund

Treasurer Scott Morrison also announced the introduction of legislation to establish a Medicare Guarantee Fund to fund expenditure on both the MBS and the Pharmaceutical Benefits Scheme (PBS). 

On face value, the establishment of the Medicare Guarantee Fund supports the Long-Term National Health Plan ‘Pillar one’: guaranteeing the MBS and PBS. Contributions to the fund are slated to come from the Medicare Levy—excluding allocations from a 0.5% increase to the Levy reserved for funding the NDIS (see below)—with supplementary funding out of income tax revenue. 


The Budget 2017-18 makes funding available for $1.2bn in new and amended medicines, which includes new treatments for patients with hypertension and chronic heart failure; a total of $955m is allocated to maintain PBS co-payment and safety net threshold arrangements.

The Pharmacy Guild of Australia has welcomed those PBS and other pharmacy–related measures including $210m in funding for community pharmacies to cover lower than projected script volumes under the under the Sixth Community Pharmacy Agreement (6CPA).

This ‘true-up’ measure along with committed funding for $600m in new and expanded programs (Dose Administration Aids, Staged Supply, MedsCheck, Home Medicines Review, and Health Care Homes-related medication management) reaffirms the continued strong commitment to the role of community pharmacy.


An additional $2.8bn for public hospitals over four years; and funding for the transfer of Tasmania’s Mersey Community Hospital back to the state government on 1 July 2017.

Mental health

$173m in funding including $80m for community mental health services helping those with severe mental illness resulting in psychosocial disability who are ineligible for assistance through the NDIS; $58.6m for mental health services for current and former Australian Defence Force members and veterans families; $9m in funding for rural telehealth psychological services, $15m for mental health research and $11m for suicide prevention programs.

Mental Health Australia has welcomed Budget 2017-18 mental health-related measures as they are expected to help close gaps in services that have arisen since governments diverted resources to fund the NDIS. These measures, on top of the 2016-17 Mid-Year Economic and Fiscal Outlook Strengthening mental health care in Australia measure, are at an encouraging sign that mental health will gain greater attention—alongside preventive health—as ‘Pillar three’ of the Long-Term National Health Plan. 

Medical research

As part of Government’s aim to significantly increase its spending on medical research, the Budget 2017-18 sees the first disbursements from the Medical Research Future Fund (MRFF): disbursements of $1.4bn are slated over the next five years, with $65.9m allocated this year to support initiatives including research into children’s cancer, other clinical trials, preventive health and research translation projects.

National Disability Insurance Scheme (NDIS):

A 0.5% increase in the Medicare Levy effective from 1 July 2019 will be directed to the NDIS Savings Fund to underwrite the NDIS; $209m for the establishment of an independent NDIS Quality and Safeguards Commission charged with overseeing service quality and safety for NIDS participants. 

The Productivity Commission had recommended the establishment of a unified, national system to replace a fragmented, underfunded disability care and support framework back in 2011. Since rolling out from 2016, while the NDIS has been welcomed by consumer advocates for delivering greater choice, concerns have been raised regarding implementation and funding for the scheme.

Previous estimates of NDIS’ funding requirements increase roughly fivefold from around $4.2bn in 2016–17 to $21.6bn in 2019–20.[ii] Within the Federal Government’s share of the total required in 2019 estimated at around $11.2bn, $6.8bn is expected to come from redirected funding and the DisabilityCare Australia Fund, leaving $4.4bn essentially unfunded. Hence, the 0.5% increase in the Medicare Levy establishment of the NDIS Savings Fund is expected to fill the projected gap in funding.

Stakeholders may take some encouragement from this measure addressing the funding gap while they await the Productivity Commission’s review into the costs of the NDIS. Meanwhile NDIS participants and their families may also be encouraged by the establishment of the NDIS Quality and Safeguards Commission; though, as experience in sectors such as childcare and vocational education and training has shown, bodies charged with monitoring service quality and standards face considerable challenges. Nevertheless, as National Disability Services suggests, full focus should now be on ensuring the successful implementation of the NDIS.

Aged Care

The Health Portfolio Budget Statement 2017-18 notes $99.3bn is allocated to support aged care services over five years; $5.5bn to extend funding arrangements for the Commonwealth Home Support Programme (CHSP) of for a further two years until 30 June 2020; $3.1m to improve support for the My Aged Care platform.

After the significant changes to the ACFI instrument raised in last year’s budget, the Budget 2017-18 is perhaps more noteworthy for measures that it does not contain: there are no new silver bullets on funding redesign for the system or radical cuts to the existing funding framework. At least on the latter, industry may feel some partial relief even if the budget measures fell far short of the peak bodies’ wish lists


Funding of $374.2m over two years supporting the national rollout of the My Health Record (MHR).

The transition to an opt-out system had been expected as national expansion and take-up of (MHR) is a necessary prerequisite to progress the National Digital Health Strategy and achieve the Australian Digital Health Agency’s priorities. Measures such as delivery of secure messaging and interoperability and data quality across the sector should ultimately deliver efficiencies to the system and benefits in terms of patient outcomes—a work in progress 

Download the Federal Budget 2017-2018 Health Check (PDF, 120kb)

[i] RACGP Media Release 9 May 2017

[ii] Commonwealth of Australia The National Disability Insurance Scheme: a quick guide, 3 March 2017 

© Australia and New Zealand Banking Group Limited (ANZ) 2017 ABN 11 005 357 522 AFSL 234527. The information in this article is provided for information purposes only, it is general in nature, does not take into account the objectives, financial situation or needs of any person and is subject to the ANZ General Disclaimer which is available on the ANZ website [http://anzlive.force.com/ANZGeneralDisclaimer].

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