Ageing population and per-person health costs to rise

The blueprint for Australia’s future, the Federal Government’s 2021 Intergenerational Report, predicts a slower population growth, fiscal challenges and an increasingly ageing population.
 
The number of Australians aged 65 and over is predicted to double to 6.9 million by 2060−61, when it is expected to represent 23% of the country’s population.
 
A key driver of aged care spending is the number of people over the age of 70, the report states, and therefore healthcare system costs will grow as aged care services usage increases.
 
Predicted health expenditure per person will rise from $3250 in 2018−19 to $3970 in 2031−32, before reaching $8700 in 2060−61 (adjusted for inflation).
 
This continues the current trend of healthcare expenditure generally growing faster than the rest of the economy over the past 40 years, which the report attributes to demographic and non-demographic factors, including an ageing population, rising incomes and advancements in technology.
 
Total healthcare expenditure is projected to increase faster than ever over the next 40 years, increasing from 19% of total government spending in 2021­−22 to 26% in 2060­−61.
 
According to Consumers Health Forum (CHF) CEO Leanne Wells, the doubling in per-person health expenditure highlights the need to establish more long-term health measures that will deliver better health outcomes for an ageing population.
 
‘The 2021 [report] provides an ideal opportunity to consider where we need to invest for sustainable health and related care that will deliver healthy bonuses into the future and reduce pressure on health and hospital budgets,’ she said.
 
Chronic disease and avoidable hospital admissions are major contributors to health costs, and the CHF echoes the RACGP’s continued calls for better investment in primary care and preventive health initiatives.
 
‘We need to give general practice a much-needed shot in the arm,’ RACGP President Dr Karen Price said of the 2021−22 Federal Budget announcement of $1.8 billion for primary care.
 
‘We are working closely with the Government to develop a model for meaningful investment in general practice care and this will continue. Supporting general practice will improve the health and wellbeing of patients from all walks of life, and reduce the need for more expensive secondary care.’
 
The CHF is also calling for further reforms, as recommended by the National Health and Hospital Reform Commission in 2009.
 
‘[For example] self-care support, sub-acute care arrangements, such as pre-hospital and hospital step-down services are also needed,’ Ms Wells said.
 
‘Measures promoting self-care including social prescribing and improved health literacy … can reduce demand for expensive treatment options.’
 
Funding for public hospitals is projected to be the fastest growing component of government health expenditure, nearly doubling between 2020−21 to 2031−32. Per person, spending is expected to rise from $880 in 2020−21 to $1190 per person in 2031−32.
 
Increases are also set for both MBS and PBS per-person spending. Between 2020−21 and 2031−32, MBS spending will increase from $1110 to $1280, while PBS spending will increase from $540 to $590 over the same period.
 
The previous Intergenerational Report from 2015* projected that Australia’s population would hit 40 million by 2054−55. But the 2021 report instead predicts a smaller population of 38.8 million by 2060−61.
 
Lower migration rates resulting from the COVID-19 pandemic, as well as lower fertility rates contribute to the decrease, and Federal Treasurer Josh Frydenberg said this is the first time there has been a downward revision of the population forecast, with COVID-19 having a ‘profound’ impact on the future of the nation.
 
‘This means the economy will be smaller and Australia’s population will be older than it otherwise would have been,’ he said.
 
The economy is projected to grow at a slower pace over the next 40 years than it has over the past 40 years, though growth per person is projected to be closer to historical averages.
 
The report states that as overseas migration contributes to economic growth and can help offset population ageing, people resettling in Australia are expected to continue to be the main source of population growth into the future.
 
COVID-19’s significant impact on short- and long-term healthcare and related costs has already made its mark on the future, with the introduction of technologies such as telehealth, as well as public health responses and further investment in medical research, continuing to innovate and prepare Australia for the future.
 
Notable increases will also be seen in Government expenditure on the National Disability Insurance Scheme (NDIS), with average spending per NDIS participant projected to increase from $56,620 in 2020−21 to $80,830 in 2060−61. This is compared to the median spend per NDIS participant of around $25,000 in 2020−21.
 
Climate change and the transition to lower carbon emissions are also covered in the report, detailing the Government’s future policies and reforms, and the impact on Australia’s health and economy.
 
*No report was produced in 2020 due to the COVID-19 pandemic.
 
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