Australia achieves universal coverage through Medicare, a tax-funded public insurance program that covers most medical care, including physician and hospital services and prescription drugs. Most health services are financed and regulated by the federal government, although the states and territories have responsibility for public hospital care. Besides Medicare, roughly half of Australians receive additional coverage through private insurance, which the government subsidizes and which covers such services as dental care and private hospitals. Most doctors operate in private practice and are paid on a fee-for-service basis, and GPs act as gatekeepers to specialized care. Roughly two-thirds of hospital beds are in public hospitals and the rest in private, although private patients can be treated in public hospitals. Physicians in public hospitals either earn a salary and can receive additional fees for seeing private patients, or are in private practice and receive hourly compensation for treating public patients. Current policy goals include developing a new management structure for public hospitals around local area networks, increasing the federal government’s contribution to public hospitals, introducing performance reporting, and strengthening primary care.

Pharmaceuticals 

Australia’s Pharmaceutical Benefits Scheme (PBS) is a comprehensive, publicly-funded program that reimburses community pharmacists for the costs of dispensing medicines prescribed in accordance with a comprehensive national formulary. It is a key element in Australia’s comprehensive system of universal health insurance coverage for both outpatient and hospital services called ‘Medicare’.  In establishing the Pharmaceutical Benefits Scheme (PBS) more than 60 years ago, Australia signaled affordable access to medicines as a national health policy priority. The PBS, which operates under the umbrella of Australia’s National Medicines Policy, has as its objective  “to provide timely access to the medicines that Australians need, at a cost individuals and the community can afford”.  In 1992 the PBS became the first national pharmaceutical reimbursement program to introduce an explicit consideration of ‘value-for-money’ as a prerequisite for formulary listing. In Australia a new medicine may only be added to the PBS formulary on the recommendation of an expert advisory panel, the Pharmaceutical Benefits Advisory Committee (PBAC), who in turn, may only recommend the addition of a medicine to that formulary after an explicit consideration of comparative clinical effectiveness and cost effectiveness against the medicine (or non-drug therapy) likely to be replaced in practice. The system is underpinned by the principle of “purchasing outcomes,” meaning that unless a new drug offers an additional clinical benefit relative to current alternatives, then it will not receive a higher subsidy.

The PBS evaluation process does not set prices, nor does it constitute a cost containment mechanism. In general, drugs recommended by the PBAC on the basis of acceptable cost effectiveness are recommended for listing at the price requested by the sponsor. Moreover, the program is demand-driven so while expenditure is certainly scrutinized, it is not capped.  While the PBS may have an uncapped budget, government resources are necessarily finite, and therefore any drug that is recommended but which would cost more than $10 million annually must be approved by the government.