INTRODUCTION

The Centre for Health Economics Research and Evaluation (CHERE) has been commissioned by the Australian Healthcare and Hospitals Association (AHHA) to write two papers as part of the Association’s series on Pathways to Reform. The series will contribute to public debate during the development of the Australian Government’s White Papers on Reform of the Federation, and Reform of Australia’s tax system. This is one of two papers produced by CHERE – the other considers policy options for the new Primary Health Networks (PHNs).

This paper examines the financing of Australia’s health care system. It describes the sources of revenue that pay for health care services and products. In doing so, the paper discusses the extent to which Australia’s health care funding arrangements support the efficient and equitable delivery of health care services. In particular, we examine these issues in light of the changing demographic nature of the Australian population which will have substantive implications for the financing, demand and delivery of health care services in the future. The paper seeks to address the question of how (rather than how much) we raise our health care revenue and whether the sourcing of revenue has an impact on the performance of the health system.