What is commonwealth Government?

Funds Medicare rebates for medical services, the Pharmaceutical Benefits Scheme (PBS) for subsidised medicines, the Medicare Benefits Schedule (MBS), private health insurance rebates, and a share of public hospital funding through National Health Reform Agreements.

What are state and Territory Governments?

Operate and co-fund public hospitals, public dental services, public mental health, ambulance services in most jurisdictions, and many public health and prevention programs.

What is private health insurance?

Funds private hospital admissions, ancillary services (dental, optical, physiotherapy) and a portion of medical fees above the MBS rebate. Coverage is incentivised through the Lifetime Health Cover loading, the Medicare Levy Surcharge and the private health insurance rebate.

What are out-of-pocket payments?

Households pay gap fees for non-bulk-billed GP and specialist visits, PBS co-payments, dental and allied health that fall outside Medicare, and elective private hospital extras.

NSWHealth and Movement ScienceSyllabus dot point

How is Australian health care structured, funded and delivered?

Examine the structure, funding and roles of Australia's health care system, including Medicare, the PBS, public and private hospitals, primary care, allied health, and Aboriginal Community Controlled Health Services

A focused HSC Health and Movement Science answer on the structure and funding of Australia's health care system. Covers Medicare, the PBS, public and private hospitals, primary care, allied health, and Aboriginal Community Controlled Health Services with their funding flows and respective roles.

Generated by Claude Opus 4.79 min answerUpdated 2026-05-25

Reviewed by: AI editorial process; not yet individually human-reviewed

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What this sub-topic is asking
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What this sub-topic is asking

NESA wants you to describe how Australian health care is organised (who delivers it), how it is funded (who pays), and what role each major component plays (primary care, hospitals, pharmaceuticals, community services). Strong responses link structure to outcomes: who can use what, at what cost, and why that pattern shapes equity.

The answer

Australia operates a mixed public-private health system with universal coverage. The Commonwealth, the states and territories, private insurers and households all contribute funds; services are delivered by a mix of public, private and community-controlled providers.

Funding flows

Commonwealth Government: Funds Medicare rebates for medical services, the Pharmaceutical Benefits Scheme (PBS) for subsidised medicines, the Medicare Benefits Schedule (MBS), private health insurance rebates, and a share of public hospital funding through National Health Reform Agreements.
State and Territory Governments: Operate and co-fund public hospitals, public dental services, public mental health, ambulance services in most jurisdictions, and many public health and prevention programs.
Private health insurance: Funds private hospital admissions, ancillary services (dental, optical, physiotherapy) and a portion of medical fees above the MBS rebate. Coverage is incentivised through the Lifetime Health Cover loading, the Medicare Levy Surcharge and the private health insurance rebate.
Out-of-pocket payments: Households pay gap fees for non-bulk-billed GP and specialist visits, PBS co-payments, dental and allied health that fall outside Medicare, and elective private hospital extras.

Medicare

Medicare is the national universal health insurance scheme, funded primarily through a 2 percent Medicare Levy on most taxpayers' income. It covers:

Free treatment in public hospitals as a public patient.
Subsidies for out-of-hospital medical services on the Medicare Benefits Schedule.
Bulk-billing arrangements where the doctor accepts the Medicare rebate as full payment (most common in general practice).

The bulk-billing rate for GP services has historically sat in the mid-to-high 80 percent range nationally, although the rate varies by region and has shifted in recent years.

The Pharmaceutical Benefits Scheme (PBS)

The PBS subsidises a defined list of prescription medicines. Patients pay a co-payment (concessional rates for pensioners and Health Care Card holders); the Commonwealth pays the remainder to the pharmacist. The Safety Net reduces co-payments once an annual threshold is reached. Listing decisions are made on advice from the Pharmaceutical Benefits Advisory Committee (PBAC) on grounds of clinical effectiveness and cost-effectiveness.

Public versus private hospitals

Public hospitals are co-funded by Commonwealth and state governments and treat public patients free of charge. They run most emergency departments, most complex trauma care, most teaching and most research.

Private hospitals are funded through private health insurance, out-of-pocket fees, Department of Veterans' Affairs arrangements and (for some procedures) Medicare. They handle a significant share of elective surgery in Australia.

Primary care and allied health

General practice is the front door of the system. GPs provide first contact, continuity of care, chronic disease management, referrals to specialists and access to MBS-funded care plans (e.g. Chronic Disease Management plans that subsidise a limited number of allied health visits per year).

Allied health (physiotherapy, psychology, dietetics, podiatry, occupational therapy, speech pathology) is largely privately funded, with limited Medicare access through GP-coordinated care plans, the Better Access initiative for mental health, and the NDIS for participants. Out-of-pocket cost is a significant barrier for many users.

Aboriginal Community Controlled Health Services

Aboriginal Community Controlled Health Services (ACCHSs) are primary health care services planned and governed by the local Aboriginal community they serve. The peak body is NACCHO (the National Aboriginal Community Controlled Health Organisation). The model integrates clinical care, cultural safety, Aboriginal and Torres Strait Islander workforce development and community governance. ACCHSs are funded through a combination of Commonwealth Indigenous-specific funding, Medicare, and state grants.

Other key components

Community health and public health units (state-funded) provide vaccination, sexual health, drug and alcohol services and community nursing.
Mental health spans GP-led care, Medicare-funded psychology under Better Access, state-funded acute and community mental health, and Commonwealth-funded Headspace centres for young people.
Aged care and disability sit largely outside the acute system: the National Disability Insurance Scheme (NDIS) funds disability supports, and aged care is Commonwealth-funded under separate legislation.

Worked example

A regional patient with Type 2 diabetes. Initial diagnosis at a bulk-billed GP visit (Medicare). The GP writes a Chronic Disease Management plan, giving the patient a subsidised allied health pathway (limited dietitian and exercise physiology visits per year through Medicare). Medication (metformin) is dispensed under the PBS with a co-payment. An acute hyperglycaemic episode results in a public hospital admission (state-funded emergency department, Commonwealth-state shared inpatient funding). If the patient holds private insurance, planned eye screening could be done privately; if not, the public ophthalmology clinic operates with longer waits. Each component (Medicare, PBS, public hospital, allied health) is funded by a different mix of payers, with different gaps and waits at each step.

Common traps

Calling Medicare "free health care": Medicare covers public hospital care and a fixed schedule of medical services; many services (most dental, most allied health, most specialist gap fees) sit outside it. Universal does not mean comprehensive.
Confusing the PBS with Medicare: Medicare is for medical services; the PBS is for medicines. They are separate Commonwealth schemes with separate eligibility and co-payment rules.
Ignoring state government roles: Public hospitals, ambulance, public health and community mental health are largely state-funded and state-operated; an answer that treats the system as Commonwealth-only misses half of the funding flow.
Treating ACCHSs as just another GP clinic: The community-controlled governance model is the defining feature; it is what allows the model to address cultural and structural determinants alongside clinical care.

Examples in context

Example 1. Medicare bulk-billing and access to GP care. Bulk-billing rates for GP services have historically been high in Australia by international standards, but the rate is not uniform: it is generally higher in urban areas with more practices competing on price, and lower in regional and remote areas. Recent Commonwealth initiatives (e.g. tripling the bulk-billing incentive for children, pensioners and concession card holders, announced in 2023) target the populations most sensitive to a gap fee. This shows how a universal scheme still produces uneven access in practice and how policy levers (incentive payments) can reshape that pattern.

Example 2. ACCHSs and the NACCHO network. NACCHO is the peak body for over 140 Aboriginal Community Controlled Health Services across Australia. The model combines clinical primary care with cultural safety, an Aboriginal and Torres Strait Islander workforce, and community governance. Evaluations have shown stronger continuity of care and better engagement with chronic disease management compared with mainstream services in many sites. This is the canonical Australian example of a health service designed around a priority population's determinants of health rather than added on after the fact.

Try this

Q1. Identify the four major sources of funding for Australia's health care system. [4 marks]

Cue. Commonwealth Government (Medicare, PBS, hospital share, private insurance rebate), state and territory governments (public hospitals, public mental health, ambulance, community health), private health insurance, out-of-pocket household payments.

Q2. Distinguish between the roles of public hospitals, private hospitals and primary care in the Australian health system. [5 marks]

Cue. Public hospitals = free at point of care, most emergency and complex care, teaching and research, Commonwealth-state co-funded. Private hospitals = insurance and out-of-pocket funded, significant share of elective surgery. Primary care = GP-led, Medicare-rebated, first contact and continuity, chronic disease management, gateway to specialists and allied health.

Q3. Explain why Aboriginal Community Controlled Health Services are considered better placed than mainstream services to address Aboriginal and Torres Strait Islander health needs. [6 marks]

Cue. Community governance addresses cultural safety, the Aboriginal and Torres Strait Islander workforce model addresses trust and continuity, integrated care addresses multiple determinants together, and the NACCHO network shares evidence and advocacy. Mainstream services frequently miss the cultural and structural elements that drive disengagement.