The Australian health system Medicare PBS NDIS and private health insurance for VCE Health and Human Development Unit 3 AoS 2
“The role of Medicare, the Pharmaceutical Benefits Scheme, the National Disability Insurance Scheme and private health insurance in promoting health and wellbeing, and how each promotes funding, sustainability, access and equity”
Australia's health system is funded mainly by government (about 70 per cent of the $270.5 billion spent on health in 2023-24) and delivered through four programs you must know. Medicare gives free or subsidised medical and public hospital care; the PBS subsidises medicines; the NDIS funds support for people with permanent and significant disability; private health insurance gives extra choice and covers services Medicare does not. Judge each against funding (where the money comes from), sustainability (whether it can continue as costs rise), access (whether people can obtain care when and where they need it) and equity (whether extra support goes to those in greatest need).
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What this dot point is asking
The key knowledge is "Australia's health system, including Medicare, private health insurance, the Pharmaceutical Benefits Scheme and the National Disability Insurance Scheme and its role in promoting health in relation to funding, sustainability, access and equity". Exam questions (as in 2022 and 2023) ask you to identify what a scheme covers, then discuss or evaluate how it promotes health and wellbeing using the four criteria, often requiring a different dimension of health and wellbeing in each part.
The system at a glance (September 2026)
| Program | Key facts | Latest figures |
|---|---|---|
| Medicare | Universal public insurance: GP and specialist rebates, tests, public hospital care as a public patient | Bulk billing incentives extended to all Medicare card holders from 1 November 2025; 137 Medicare Urgent Care Clinics planned by June 2026 |
| PBS | Subsidised prescription medicines | Maximum general co-payment $25 from 1 January 2026 (was $31.60); concession $7.70, frozen until 2030 |
| NDIS | Individualised funding for people under 65 with permanent and significant disability | 774,456 participants with approved plans at 31 March 2026 |
| Private health insurance | Optional hospital and extras cover, with government incentives | 45.8 per cent of Australians (12.8 million people) held hospital cover at 30 June 2026 |
Total spending (AIHW): $270.5 billion in 2023-24, or $10,037 per person and 10.1 per cent of GDP; governments funded 69.6 per cent.
Medicare
What it is. Medicare is Australia's universal public health insurance scheme, introduced in 1984, for Australian citizens, permanent residents and some visitors from countries with reciprocal agreements.
What it covers:
- consultations with GPs and specialists (a rebate based on the Medicare Benefits Schedule fee);
- tests and examinations such as X-rays and pathology;
- most surgery and procedures by doctors;
- treatment as a public patient in a public hospital, free of charge;
- some eye tests by optometrists and some allied health services under care plans.
What it does not cover: most dental care, ambulance services, glasses and contact lenses, most physiotherapy and other allied health, cosmetic surgery, and treatment as a private patient (hospital accommodation, choice of doctor).
How it is funded: the Medicare levy (2 per cent of taxable income for most taxpayers), the Medicare levy surcharge (1 to 1.5 per cent for higher-income earners without private hospital cover) and general taxation.
Bulk billing means the doctor accepts the Medicare benefit as full payment, so the patient pays nothing. Recent changes:
- From 1 November 2025, the bulk billing incentive (an extra payment to GPs for bulk billing) was extended to every Medicare card holder, not just children under 16 and concession card holders.
- The new Bulk Billing Practice Incentive Program pays practices that bulk bill all their patients an extra 12.5 per cent on eligible Medicare benefits, split between the practice and the GP. The government described the package as a $7.9 billion investment.
- Medicare Urgent Care Clinics provide bulk-billed, walk-in care for urgent but not life-threatening conditions, with extended hours; the network was being expanded to 137 clinics by June 2026, with nearly 3 million presentations since the first clinics opened in June 2023.
Safety nets. The Medicare Safety Net and Extended Medicare Safety Net increase rebates for out-of-hospital services once a person or family reaches an annual threshold of out-of-pocket costs.
| Criterion | How Medicare performs |
|---|---|
| Funding | Shared across taxpayers through the levy and general taxation, so cost is based on capacity to pay rather than illness |
| Sustainability | Pressured by an ageing population, chronic disease and new technology; bulk billing incentives add cost; prevention and primary care (such as urgent care clinics reducing emergency department demand) help |
| Access | Universal; bulk billing removes cost barriers; urgent care clinics add after-hours access; but access is weaker in rural and remote areas with fewer doctors |
| Equity | Everyone is covered regardless of income; higher earners pay more through the levy and surcharge; safety nets and bulk billing help those with greatest need |
The Pharmaceutical Benefits Scheme (PBS)
What it is. The PBS subsidises the cost of prescription medicines listed on the scheme. The Pharmaceutical Benefits Advisory Committee recommends which medicines to list based on their effectiveness and cost-effectiveness.
Co-payments (2026):
- General patients: maximum $25 per PBS script from 1 January 2026, down from $31.60.
- Concession card holders: $7.70, frozen until 2030.
- The government pays the rest, which for some modern medicines is many thousands of dollars per script.
PBS Safety Net (2026 thresholds): once a person or family's PBS spending reaches $1,748.20 (general) or $277.20 (concession) in a calendar year, further PBS medicines cost $7.70 (general) or are free (concession).
60-day dispensing. Since 2023, many stable long-term medicines can be prescribed for two months' supply at a time, halving the number of co-payments for those patients.
| Criterion | How the PBS performs |
|---|---|
| Funding | Funded by general taxation; patients contribute only the co-payment |
| Sustainability | New high-cost medicines and rising demand increase costs; the PBAC's cost-effectiveness assessment and price negotiation help control spending |
| Access | Lower co-payments and 60-day dispensing make medicines affordable and reduce trips to the pharmacy |
| Equity | Lower concession co-payments and Safety Net thresholds direct extra help to low-income and chronically ill people |
The National Disability Insurance Scheme (NDIS)
- What it is
- The NDIS provides individualised funding to Australians aged under 65 (when they apply) with a permanent and significant disability, so they can buy the "reasonable and necessary" supports they need, such as therapy, equipment, home modifications and support workers. It also provides information and links to community services for people with disability who are not participants.
- Scale
- 774,456 participants had approved plans at 31 March 2026, an increase of 13,014 in the quarter.
- Funding and sustainability
- The NDIS is funded by the Commonwealth and state and territory governments, including revenue from the Medicare levy (which was increased from 1.5 to 2 per cent in 2014 partly to help fund it). Rapid growth in participants and costs has made sustainability a major policy issue, leading to legislation in 2024 that changed how plans and supports are defined in order to slow cost growth.
| Criterion | How the NDIS performs |
|---|---|
| Funding | Government funded through taxation and part of the Medicare levy, so participants do not pay for their supports |
| Sustainability | Costs have grown faster than expected; reforms aim to control growth while maintaining support |
| Access | Funds equipment, therapy and support workers; access can be limited by complex applications, waiting times and provider shortages in rural and remote areas |
| Equity | Directs extra resources to a group with greater need, helping reduce the health gap between people with and without disability |
Private health insurance (PHI)
What it is. Optional insurance bought from private health funds.
- Hospital cover pays for treatment as a private patient in public or private hospitals: choice of doctor, possibly shorter waits for elective surgery, and a private room where available. Since 2019, hospital policies are classified as Gold, Silver, Bronze or Basic according to the treatments covered.
- Extras (general treatment) cover helps pay for services Medicare does not cover, such as dental, optical, physiotherapy and chiropractic.
Coverage: 12.8 million people, or 45.8 per cent of Australians, had hospital cover at 30 June 2026 (APRA).
Government incentives:
- Private health insurance rebate: an income-tested government contribution to premiums (larger for lower incomes and older people).
- Lifetime Health Cover loading: people who take out hospital cover after the 1 July following their 31st birthday pay 2 per cent extra per year over 30 (up to 70 per cent) for 10 years, encouraging people to join young.
- Medicare levy surcharge: 1 to 1.5 per cent extra tax for higher-income earners without appropriate hospital cover.
| Criterion | How PHI performs |
|---|---|
| Funding | Funded by members' premiums, with a government rebate; spreads some health costs away from government |
| Sustainability | Reduces demand on public hospitals; but rising premiums and younger people dropping cover threaten the risk pool |
| Access | More choice and faster access to elective surgery for members; extras cover improves access to dental and allied health |
| Equity | Weakest area: premiums and out-of-pocket gaps favour higher-income people; the income-tested rebate partly offsets this |
A question asks you to discuss, in relation to funding and equity, how the PBS promotes health and wellbeing, referring to a different dimension in each part. Build a 4 mark answer.
Step 1: Address funding
The PBS is funded through general taxation, and patients pay only a set co-payment (at most $25 for general patients from 1 January 2026) while the government pays the rest. Because the cost is shared across taxpayers, expensive medicines become affordable, reducing the financial stress of paying full price; this promotes mental health and wellbeing by lowering worry about money (about 2 marks).
Step 2: Address equity with a different dimension
The PBS charges concession card holders a lower co-payment ($7.70) and applies a Safety Net, directing extra support to low-income and chronically ill people who have greater need. This lets disadvantaged groups afford medicines that treat illness, improving physical health and wellbeing (about 2 marks).
Step 3: Use a different dimension in each part
Check you have named two different dimensions (here, mental for funding and physical for equity). VCAA penalises reusing the same dimension when the question asks for different ones.
Funding: where the money comes from and whether it is enough. Sustainability: whether the system can keep meeting needs into the future, given the ageing population, chronic disease and rising costs. Access: whether people can obtain the care they need, when and where they need it, regardless of cost or location. Equity: whether resources are allocated according to need, so disadvantaged groups receive extra support. Use these four words as the backbone of any evaluation answer.
Medicare does not cover most dental, ambulance, glasses or private hospital care. Medicines are the PBS, not Medicare. Disability supports are the NDIS. Mixing up the boundaries is a guaranteed mark loss.
Access is about being able to obtain services (cost, location, waiting times). Equity is about fairness: allocating resources according to need so disadvantaged groups get extra help. Treat them as separate criteria.
The PBS general co-payment is $25 from 1 January 2026 (not $31.60), and bulk billing incentives apply to all Medicare card holders from 1 November 2025. Dated figures show currency.
How this dot point appears in the VCE exam
- Short answer (1 to 3 marks): identify services covered by Medicare, aspects of the NDIS, or reasons for buying private health insurance.
- Explain or discuss (3 to 4 marks): how a scheme promotes health and wellbeing in relation to one or two of funding, sustainability, access and equity, often with different dimensions required.
- Evaluate (5 to 8 marks): the effectiveness of a scheme or recent change, using data from a stimulus and a clear judgement.
Exam-style questions
Questions in the style of VCAA exam questions on this dot point, each with a worked answer. They are written by ExamExplained unless tagged "Past paper"; the year shows the paper a question is modelled on.
2023 VCAA-style8 marksa. Identify two services covered by Medicare. (2 marks)
b. In relation to funding and equity, discuss how Medicare promotes the health and wellbeing of Australians. Refer to a different dimension of health and wellbeing in each part of the answer. (4 marks)
c. Private health insurance can be expensive. Outline two reasons why Australians may choose to purchase private health insurance. (2 marks)
Show worked answer →
Part a (2 marks): Name any two, for example consultations with a general practitioner, and tests/examinations needed to treat illness such as X-rays and pathology (1 mark each). Public hospital treatment as a public patient is also acceptable.
Part b (4 marks): Funding (about 2 marks) - Medicare is funded mainly through the Medicare levy (2% of taxable income) and general taxation, which spreads the cost across the population so that treatment is affordable; this reduces stress about medical bills, promoting mental health and wellbeing. Equity (about 2 marks) - Medicare gives all eligible Australians access to bulk-billed or subsidised care regardless of income, so disadvantaged groups can still see a doctor and treat illness, improving physical health and wellbeing. Use a different dimension in each part.
Part c (2 marks): Two reasons, for example avoiding long public waiting lists for elective surgery, and choice of doctor and private hospital, plus avoiding the Medicare Levy Surcharge or Lifetime Health Cover loading (1 mark each).
2022 VCAA-style6 marksa. Outline two aspects of the National Disability Insurance Scheme (NDIS). (2 marks)
b. Describe how the NDIS promotes health and wellbeing in terms of both equity and access. (4 marks)
Show worked answer →
Part a (2 marks): Two aspects, for example the NDIS provides funding and support to eligible Australians under 65 with a permanent and significant disability (1 mark), and it is individualised, with participants receiving a tailored plan to fund supports that help them pursue their goals (1 mark).
Part b (4 marks): Equity (about 2 marks) - the NDIS directs extra resources and individualised funding to people with disability, a group with greater need, helping to reduce the health gap between them and the rest of the population, which promotes fairness and improves their health and wellbeing. Access (about 2 marks) - by funding aids, equipment, therapy and support workers, the NDIS removes financial and practical barriers so participants can obtain the services they need, when and where they need them, improving physical and social health and wellbeing. Address both equity and access explicitly.
Original6 marksEvaluate the extent to which recent changes to Medicare and the PBS have improved access and equity in Australia's health system.Show worked answer →
- Marks guide (Original, modelled on VCAA criteria)
- 5-6 marks: identifies specific recent changes, explains their effect on access and on equity with evidence, and makes a clear judgement about the extent, noting limitations. 3-4 marks: explains changes and their effects with limited evaluation. 1-2 marks: describes Medicare or the PBS.
- Medicare
- From 1 November 2025 the bulk billing incentive paid to GPs was extended from children and concession card holders to every Medicare card holder, and a Bulk Billing Practice Incentive Program pays practices that bulk bill all patients an extra 12.5 per cent on eligible Medicare benefits. More GP visits with no out-of-pocket cost improves access for people who delayed care because of cost, and improves equity because low-income people who are not concession card holders benefit most. Medicare Urgent Care Clinics (137 planned by June 2026) add bulk-billed, walk-in care for urgent but not life-threatening conditions.
- PBS
- From 1 January 2026 the maximum general co-payment for PBS medicines fell from $31.60 to $25, and the concession co-payment stays at $7.70 until 2030. Cheaper medicines improve access, especially for people with chronic conditions who need several scripts, and the lower concession rate and Safety Net thresholds direct extra support to those in greatest need.
- Extent and limitations
- The changes improve access and equity, but participation by practices is voluntary, so bulk billing still varies by location; specialists, dental care and allied health remain outside Medicare or carry gaps; and rural and remote Australians still face distance and workforce shortages. Overall, the changes have improved access and equity to a significant but incomplete extent.
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Sources & how we know this
- Bulk Billing Practice Incentive Program — Services Australia (2025)
- PBS co-payments — Australian Government Department of Health, Disability and Ageing (2026)
- PBS Safety Net thresholds — Services Australia (2026)
- About Medicare Urgent Care Clinics — Australian Government Department of Health, Disability and Ageing (2026)
- NDIS Quarterly Report Q3 2025-26 — National Disability Insurance Agency (2026)
- Quarterly private health insurance membership and benefits summary, June 2026 — Australian Prudential Regulation Authority (2026)
- Australia's health expenditure hits 270.5 billion dollars in 2023-24, 10% of GDP — Australian Institute of Health and Welfare (2025)
- VCE Health and Human Development Study Design (from 2025) — VCAA
- VCE Health and Human Development: examination specifications, past examinations and reports — VCAA