In 2017–18 the Australian Government budgeted $75.3 billion on healthcare representing around 16 per cent of all expenditure. Key drivers of health expenditure are Australia’s growing and ageing population, as well as the increasing prevalence of chronic disease and the use of new, but costly technologies in the treatment of illness. In recent years, the Government has pursued a range of strategies to manage the growth in costs of health services and to increase the efficiency of health administration.
Following the 2013 election, the Australian Government established processes to examine the appropriate role and scope of government activity as part of its Smaller Government Reform agenda. A series of ‘portfolio stocktakes’ were undertaken across government under the Efficiency through Contestability Programme instigated by the Minister for Finance. A Functional and Efficiency Review (FER) of the Department of Health (Health or the department), conducted between January and March 2015, made 90 recommendations for clarifying the roles and responsibilities of the department and increasing the efficiency of its operations. The review formed the basis of significant Budget savings.
he Department of Health is responsible for implementing the Australian Government’s health priorities. The role of the department is to provide high quality advice to the Minister for Health on how the Government’s objectives can be met and to action the Government’s decisions in line with its overall policy agenda. Within the context of the annual Budget this involves developing policy options for the allocation of funding to give effect to the Government’s priorities.
In the 2014–15 and 2015–16 Budgets, the health portfolio committed to deliver $1.2 billion in savings over the forward estimates through a number of measures aimed at achieving the Government’s objectives for fiscal constraint. The measures encompassed:
- election commitments to reduce duplication in spending by abolishing two small agencies established under the previous government;
- administered program measures where funds were to be returned to Budget or reallocated to other health policy or program priorities; and
- departmental measures which were to increase the efficiency of the department’s activity.
Health’s management of savings measures was selected for audit because of the scale of health expenditure and the importance of sound financial management for the Australian Government’s overall fiscal position. Sound decision-making and the effective implementation of health savings supports the ability of the Government to maintain service provision into the future. Health has not reported on the impact of the savings measures on its delivery of programs through its annual reports or other means. The audit therefore provides information to Parliament about the status of the Budget measures and has the potential to inform the management and reporting of savings measures by other entities.