Is Australia’s health spending striking the right balance?

Australia spends more on health each year. Yet our new research, published in the Medical Journal of Australia, shows that primary care — the GP visits, preventive care and care coordination that most Australians rely on — has been receiving a shrinking share of the pie. This pattern sits alongside recent expansions in bulk billing incentives, not yet visible in the data, and more modest investment relative to a broader trajectory of spending.

The 2026-27 federal budget, handed down last month, will see Commonwealth funding for public hospitals reach a record $220 billion over five years, including $25 billion in new funding. That scale of investment reflects both rising demand and a political reality: hospital funding is highly visible.

New beds, shorter emergency department waits and major capital projects are tangible signals of action, but they may reflect a structural imbalance. Systems that direct more resources to acute and specialist care can reinforce the pressures they aim to relieve by underinvesting in primary and preventive services that reduce avoidable hospital use.

Some investment outside hospitals, such as ongoing commitment to Medicare Urgent Care Clinics, may improve access and ease demand on emergency departments, but it is not a substitute for longitudinal, comprehensive primary care, which provides the continuous, coordinated care needed to prevent deterioration and avoid hospitalisation, and which international evidence shows is the most efficient way to structure health care delivery.

What the numbers show

We analysed health expenditure data from 2002–03 to 2022–23 using a framework that separates primary care into three tiers. The broadest covers all community-based care services including GPs, allied health, and public health. A second tier captures direct GP-type services only — delivered in Australia’s 7000+ general practices and Aboriginal Community Controlled Health Organisations (ACCHO). The third consists of enhanced primary care: planned, coordinated care for people with complex conditions, including care plans, health assessments and medication reviews.

All three tiers have grown in dollar terms but not in share. Over twenty years, broad primary care fell from 36% to 33% of the health budget, while GP/ACCHO funding declined from 8% to 5.5%. Enhanced care has remained below 1% throughout.

In other words, the system has grown, but hospitals and specialist care have grown faster, leaving primary care behind.

This pattern is consistent with a system where spending growth is concentrated downstream. As more resources flow to hospitals and specialist services, relatively less is available for care that keeps people well in the community. The issue may not be how much money is allocated to healthcare in Australia, but rather, how it is allocated across different types of health care.

Who is missing out

We also looked at whether primary care spending reaches the people who need it most, comparing funding across more than 300 communities.

Public funding does flow more to disadvantaged areas — but that advantage has been shrinking. A decade ago, the most disadvantaged communities received around 50% more per person in enhanced care funding for complex health conditions than the most advantaged. By 2023–24, that gap had narrowed to 35%. For general GP funding, the gap has effectively disappeared.

This is more likely to reflect reduced access to care in the years before recent reforms than any improvement in health inequality.

Remote communities face a further disadvantage: even accounting for older and sicker populations, they consistently receive less GP funding per person than cities.

What this means going forward

Recent reforms are not insignificant. Expanded incentives have increased access to bulk-billed general practice services, while continuing commitment to Medicare Urgent Care Clinics have been a large investment, which is welcome but is yet to show solid evidence of easing pressure on emergency departments.

The question is whether these changes will be matched by a shift in funding — and whether that funding supports one-off visits or ongoing, coordinated care. Two decades of data suggest that policy intent and spending have not always aligned. This matters in a system increasingly shaped by chronic disease, multimorbidity and rising demand for mental health care, where need is driven less by acute episodes than by ongoing care and management.

Not all primary care investment serves the same function. The underlying drivers of demand lie in how well the system supports continuity, care planning and multidisciplinary management for people with more complex needs, including those with chronic and mental health conditions.

One test will be whether the enhanced care layer grows as a share of spending. Without sustained investment here, increases in primary care funding risk acting as partial substitutes for hospital care rather than shifting the system toward prevention and early management.

Better data will be essential to track this. Constructing this analysis required combining multiple sources. More consistent and transparent reporting, aligned to a clear primary care framework, would make it easier to understand where resources are going and whether reforms are changing the balance of care.

Dr Rafal Chomik is a Senior Research Fellow at the International Centre for Future Health Systems at UNSW. He is an economist with experience in public, private, and academic sectors and specialises in health systems research and the geographic and demographic dimensions of health inequality.

Dr Shona Bates is a Senior Research Fellow at the International Centre for Future Health Systems. Her transdisciplinary research focuses on health and social service systems - how systems are organised and interact, how the way services are organised affects outcomes, and how different cohorts experience services.

Dr Michael Wright is Sydney based GP, health economist and health services researcher. Dr Wright is Associate professor at the International Centre for Future Health Systems at the University of New South Wales, and President of the Royal Australian College of General Practitioners.