Comparison between the Australian and US Healthcare System Aussie Features US Features

Comparison between the Australian and US Healthcare System


Aussie Features US Features

Australia has moved through numerous approaches to health care financing:

  • Private insurance with public subsidies (pre-1974)
  • Publicly financed national universal health insurance (Medibank, 1974–1976)
  • Predominantly private insurance with public subsidies (1976–1984)
  • Publicly financed national universal health insurance (Medicare, 1984–1996)
  • Publicly financed national universal health insurance with publicly subsidized private health insurance (1996–2013)
  • Publicly financed national universal health insurance with means testing for private insurance subsidies (2013 to present)
O Similar to Australia, U.S. system is fragmented between central and state governments. 


U.S. publically funded Medicare only applies to certain populations, in Australia, there is universal insurance.


The national government, the Commonwealth of Australia, holds the major revenue-raising powers, so states rely on financial transfers to provide services. The states operate public hospitals (which account for about two thirds of all hospitalizations and provide emergency department visits without charge), though funding them is a joint responsibility of both levels of government. The Commonwealth has responsibility for paying benefits through Medicare (for out-of-hospital medical care and in-hospital private medical services) and for the Pharmaceutical Benefits Scheme (covering most prescribed drugs), but funding arrangements for other services often involve both levels of government. The result is a complex set of overlapping and fragmented responsibilities.

US similarities 

States (or local government) operate public hospitals.

Mix of federal and state government financing, similar to U.S. Medicaid


Similar: complex set of overlapping and fragmented responsibilities.


Innovations have contributed to health system performance in terms of access, improved quality, and reasonable costs. These include requiring evidence of cost-effectiveness as a basis for public funding (for pharmaceuticals beginning in 1993 and medical procedures beginning in 1998), funding public hospitals on the basis of case-mix–adjusted volume (first introduced in the State of Victoria in 1993), and national strategies for immunization, cancer screening, and reducing tobacco use. These successes have addressed specific public health problems or efficiency within particular funding streams rather than taking a systemwide perspective. A recent review concluded that “the complex split of government roles means no single level of government has all the policy levers needed to ensure a cohesive health system” and that the people who suffer the most from the lack of coordination are “patients with chronic and complex conditions, such as diabetes, cancer and mental illness, who regularly move from one health service to another.”3

Different from US: more central authority. Requiring evidence of cost effectiveness (US FDA cannot consider cost) 

US Medicare: has been slow to consider cost or outcomes as basis of payment.


Primary care physicians (general practitioners, or GPs) play a central role as gatekeepers to the rest of the system; all specialist care requires a GP referral. More than 80% of all GP consultations are paid for by government with no out-of-pocket costs for patients (“bulk billing,” in Australian parlance). Patients whose care is most likely to be bulk billed are those receiving government welfare payments, children, low-income groups, and people living in urban areas where there’s no GP shortage. Although this system would seem to place primary care in a strong position to coordinate and manage care, such coordination has not been achieved. GPs work mainly in private practice, receiving fee-for-service payments that are an incentive to maximize volume rather than continuity and integration. Although government payments have recently been introduced for telehealth consultations, some services provided by allied health professionals (e.g., physiotherapy, psychology, speech pathology), and multidisciplinary case conferences, such government-funded services, continue to contribute little to overall service volume and provider incomes. Australians are not linked to any one provider or group of providers through registration, although most feel that they have a regular place of care.


Such a fragmented system can be reformed through cooperative arrangements and negotiation or through unilateral action by the Commonwealth or the states. The National Health Reform Agreement, the outcome of 3 years of negotiations, was signed by all states and the Commonwealth in 2011. It established a new basis for the Commonwealth’s contribution to public hospital funding, based on organizations’ case mix and known as activity-based funding. A new independent authority was established to determine the National Efficient Price for each case type, deriving prices from detailed cost reports from public hospitals in all states. Previously, the Commonwealth share had been negotiated with each state — a process driven more by politics than by evidence. The agreement also attempted to strengthen primary care by establishing 61 new entities called Medicare Locals. These entities (which have since been replaced by new agencies) were to facilitate access to allied health care, identify underserved groups in their community (particularly those with chronic diseases), and ease transitions between hospital and community