Federal funding for Medicare

IBISWorld expects federal funding for Medicare to increase by 8.6% in 2025-26, to reach $35.2 billion. The Federal Government is investing heavily in Medicare to provide Australians with a more accessible healthcare system. As part of the Federal Budget 2025-26 and the Strengthening Medicare measures, the government has committed to a $7.9 billion package to expand Medicare's bulk-billing incentives to all Australians. The budget also includes a plan to open 50 Medicare Urgent Care Clinics, designed to take pressure off emergency departments, bringing the total number of clinics across Australia to 137. Ongoing demographic trends, like the ageing Australian population and general population growth, are also expected to continue driving funding growth as the volume of patients serviced by medical practitioners increases.

Growth in federal funding for Medicare is determined by the demand for healthcare services and treatment costs. Demand for services is linked to population growth and age demographics. Older people are generally more susceptible to chronic diseases and illnesses, which makes them more likely to visit a GP or specialist than younger, healthier people. The increasing share of the population aged 70 years and over has meant that a greater proportion of the population is relying more heavily on Medicare funding, which has driven significant funding growth. Overall population growth has also increased Medicare funding, as the expanding population has led to more people needing to visit health professionals for various ailments and illnesses.

Private health insurance membership has increased over the past five years, thanks to the Federal Government's incentives for people to take up private coverage, helping alleviate some pressure on Medicare funding. Still, strong patient volume growth has caused Medicare funding to increase rapidly over the past five years. Further, advancements in medical technology have resulted in improved healthcare outcomes. However, these processes are generally more expensive, raising healthcare prices faster than inflation. Programs like the Medicare Safety Net cover a more substantial portion of a patient's costs once an out-of-pocket threshold has been reached, which means that Medicare often funds a high proportion of the rising healthcare costs. Overall, IBISWorld forecasts federal funding for Medicare to rise by a compound annual rate of 5.1% over the five years through 2025-26.