Premiers and chief ministers will lobby the federal government to reform Australia’s “broken” healthcare system when leaders gather on Friday for national cabinet’s first meeting of 2023.

The leaders argue that Medicare — which is almost 40 years old — is placing a burden on state budgets and they want the way it is funded overhauled.

However, where do our taxes go when it comes to health? Who pays for our care? And what changes could be made?

A large chunk of funding goes to Medicare, but doctors say it’s ‘broken’

The nation’s healthcare spending is like a complicated maze and working out exactly where our money goes can be difficult to navigate.

Australia spent $220.9 billion dollars on healthcare last financial year — or $8,617 per person — according to the Australian Institute of Health and Welfare.

That’s less than the $17,000 the US spends on health per person, but more than the $6,000 per person that New Zealand invests.

About 17 per cent of the federal government’s entire spending goes to our healthcare system.

More than a third of that is for Medicare, which covers some GP appointments as well as tests and scans.

However, the ageing system has some faults.

Bulk-billing rates have dropped in recent years and workforce shortages have made it harder than ever to see a GP.

Dr Umber Rind has had her own medical practice in Campbellfield, in Melbourne’s north, for seven years.

She made the decision to leave her job as a GP earlier this month because, she said, running the clinic was no longer financially viable.

“[Medicare] is broken. It is definitely not working,” Dr Rind said.

“I really think universal healthcare is threatened at the moment and in one to two years there might not be any bulk-billing GPs left.”

Public hospitals are stretched across the country

Dr Rind is one of many GPs who want the Medicare rebate to be increased, after a decade of freezes that provided patients with financial assistance on the cost of medical services.

“GPs are very burnt out, the pressure on us is immense,” she said.

The Medicare rebate has increased just $6 over the past 14 years.

Evidence shows that, when people cannot get in to see a doctor, they go to a hospital emergency room, which is putting our public hospital emergency departments under enormous pressure.

Public hospitals are the biggest expense for the taxpayer. They cost $70.5 billion last year, and are jointly funded by the federal and state governments.

Under the current system, the Commonwealth picks up about 45 per cent of the bill and the states and territories pay for the rest.

The federal government has set up a $750 million taskforce to improve Medicare, with a report due within weeks.

Federal Health Minister Mark Butler said primary health care systems around the world had been redesigned, but Australia was lagging.

“It just doesn’t make sense that — at a time of skyrocketing demand for healthcare and workforce shortages — not to be utilising all the skills of our nurses and allied health professionals and our doctors,” he said.

“What we will see is more of a shift to a blended system … more wraparound care is needed for people with ongoing, complex needs that’s just not delivered on a fee-for-service basis.”

Health funding is a long-running area of contention

Even before the pandemic, health funding was a point of financial tension between governments.

Under the agreement, Canberra funds hospitals according to how many patients and what type of patients they treated the previous year.

However, it caps annual funding growth at 6.5 per cent on the previous year, and that includes inflation. 

So, if the cost of running hospitals increases by more than that, the state and territories pick up the rest of the bill.