Wizards of Oz? What the UK can learn from Australia’s healthcare system


  • Australia and the UK had very similar healthcare systems until the end of the 1940s, when they diverged. The UK created the National Health Service, while Australia opted for more gradual reforms within its existing system. We can see the Australian system as a plausible counterfactual for how healthcare in Britain might have evolved if the NHS had never been created.

  • The Australian model of today is best described as a multi-layered hybrid system. It is, in the main, a public health insurance system, comparable to the systems in France, Canada, Taiwan and South Korea. A universal insurance programme (Medicare) pays for most healthcare costs, but Medicare does not run any healthcare facilities of its own. Instead, it maintains contractual relations with a range of healthcare providers.

  • On top of universal public health insurance, most Australians have private health insurance (PHI). PHI potentially offers faster access to treatment, greater choice, higher levels of comfort, and additional services not covered by Medicare.

  • Private health insurers in Australia are not allowed to discriminate on the basis of individual health risks. A person in poor health pays the same insurance premium as a person in good health. Thus, private health insurance in Australia is similar to social health insurance (SHI) in Europe or Israel.

  • Australians with PHI tend to use the public system less. This is recognised in the Australian tax and transfer system: people with PHI receive a rebate, which effectively lowers their public insurance premium by around a quarter. This makes PHI more widely affordable.

  • The Australian system is more decentralised than the British one. Australia’s nine regions (the states and territories) are fully responsible for managing their own hospital sectors. The system is also more pluralistic. About one in three hospitals (adjusted for hospital size) are private.

  • Total healthcare spending is lower in Australia, and it has been for nearly two decades. In 2019, it stood at 9.3 per cent of GDP, compared to 10.3 per cent in the UK. Public healthcare spending stood at 6.3 per cent of GDP in Australia, and 8 per cent of GDP in the UK.

  • Australia achieves substantially better healthcare outcomes than the UK. Cancer survival rates are several percentage points higher, while heart attack and stroke mortality rates are several percentage points lower. In terms of Mortality Amenable to Healthcare (a measure of avoidable premature deaths), Australia is about a decade ahead of the UK. Even the Commonwealth Fund study (a study which is uniquely flattering to the NHS) acknowledges the superiority of the Australian system when it comes to outcomes.

  • The NHS, however, appears to have a lead when it comes to avoidable hospitalisation rates for chronic conditions. On average, NHS hospitals also have shorter waiting times for various types of surgery than public hospitals in Australia.

  • We cannot directly compare the two health systems in terms of their Covid-19 performance, because the NHS had to deal with a vastly greater Covid-19 caseload than the Australian system. We can, however, note that the UK still had higher Covid death rates and excess death rates than a number of countries which had to deal with an even greater caseload.

  • The Australian system has its shortcomings, complexities and inconsistencies but it also gets some important things right. The ideas of tax rebates for PHI, and community rating in PHI, are certainly worth looking into, and so is the generally more decentralised nature of the Australian system. If nothing else, the Australian system can teach us to be more relaxed about the benefits of private sector involvement in healthcare delivery, private insurance and decentralisation.

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Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).