Over a series of articles, Canadian Affairs has been exploring what Canada can learn from Australia’s health-care system.
Canadian Affairs chose Australia as the focus for its series for two reasons: Australia ranks first in the Commonwealth Fund’s latest ranking of 10 high-income health systems, and Canada shares numerous structural similarities with Australia.
A defining feature of Australia’s system is its hybrid model: Australia has a robust public system for most medical services and drugs. But its private sector also plays a key role.
Experts say the success of this hybrid model depends on how the balance between public and private care is managed.
“A strong public system is important, because then the private sector has to work out what its value proposition is, rather than people just being pushed into it,” said James Gillespie, a professor of health policy at the University of Sydney.
Two health-care models
In Australia, the government funds a robust system of public hospitals and primary care. A parallel, private system of hospitals and clinics is funded through private insurance, out-of-pocket payments and government subsidies.
About half of Australians purchase private health insurance that primarily covers elective procedures. The government incentivizes individuals to purchase insurance with subsidies and penalties.
Australia also has a universal pharmacare scheme that funds all drugs.
In Canada, by contrast, governments are the sole funder of most hospitals and primary care. Health-care providers are prohibited from providing medically necessary services privately.
Canada does not have universal pharmacare. Drugs are funded through a fragmented mix of public schemes, private insurance and out-of-pocket payments. Mental health care is similarly structured.
The Commonwealth Fund’s 2024 report shows Australia is a world leader in several key areas.
It ranks first for health outcomes and equity, which means it showed the smallest differences in health-care access and experiences based on residents’ income. The system still has weaknesses. It ranked ninth for access to care, and lags in mental health care.
Australia achieves these outcomes while spending the least on health care, at 9.8 per cent of GDP. This figure represents all public and private spending on health care.
Canada, by contrast, ranked seventh overall in the fund’s 2024 report. It ranked fourth for health outcomes, and seventh in both equity and access to care.
At 11.2 per cent of GDP, Canada also spent considerably more than Australia to achieve these worse outcomes.
The private sector
Despite Australia’s comparatively strong performance, the role of the private sector remains contested.
Stephen Duckett is a health economist and policy maker who has occupied leadership roles in health services and universities in both Australia and Canada. He says governments should “exhaust” all ways of improving public health care before pursuing privatization.
“Obviously people who benefit from privatization will argue that the answer is privatization,” he said.
“That is another way of putting more money into the health system — this time from private patients directly, rather than patients as taxpayers — and of course, if you do it that way, it is way more inequitable than if you increase spending through taxation.”
Duckett pointed to a 2000 study showing governments can reduce pressure on public hospitals more efficiently by providing direct funding to hospitals than by subsidizing private health insurance.
He also pointed to a 2005 analysis of Australian hospital data showing increased private sector activity is associated with increased public sector waiting times.
“The evidence that I’ve produced is that … more private sector involvement is associated with longer waiting times, not shorter waiting times,” he said in an interview.
But others say increased wait times are a necessary price to pay for a system that delivers better outcomes overall.
Dr. Aaron Carroll, a U.S.-based physician and health policy researcher who has studied five countries’ health-care systems, wrote in a 2023 New York Times op-ed that private options can function as a “release valve.” They allow patients to seek faster or alternative care while preserving universal access for all.
A mix of public and private “is a feature, not a bug,” wrote Carroll, pointing to systems in Australia, the U.K. and France as examples. Carroll did not respond to multiple requests for an interview.
“The care delivered in these public systems is often just as good, in terms of outcomes, as what is delivered in the private system. The same doctors often work in both settings. …. Most often, the wait doesn’t lead to worse outcomes, and people accept it because it’s much cheaper than paying for private hospital care.”
In Carroll’s view, framing the health-care reform debate as a simple binary between private or public ignores better options.
“Discussions of reform here in the United States seem to focus on two options: Either we maintain the status quo of what we consider a private system or we move toward a single-payer system like Canada’s.
“That’s always been an odd choice to me because true single-payer systems like that one are relatively rare in the world, and Canada performs almost as poorly as we do in many international rankings,” he wrote.
A strong public system
Others note that hybrid models can incentivize the private sector to innovate in areas where the public sector lags.
James Gillespie, of the University of Sydney, says a strong public system forces private providers to compete on speed, convenience or specialized services.
“[P]rivate hospitals have moved towards … specializing in things that are harder to do in the public system,” he said.
That same logic can extend to drug coverage, says Colleen Flood, dean of the Faculty of Law at Queen’s University and a leading scholar in health law and policy.
“A public plan covers a core of essential medicines and so on, then the private sector can still cover those more expensive prescription drugs, if they want to,” Flood said.
By concentrating public purchasing power on essential medicines, the system pushes firms away from developing what she calls “me-too” drugs — drugs that offer only incremental improvements on existing options.
Instead, they are incentivized to develop novel treatments that meet unmet needs, such as new cancer therapies.
“You should reward real innovation and try to provide incentives to not just do the ‘me-too’ stuff,” she said.
How to achieve reform
Australia’s current hybrid system is the product of decades of political bargaining.
After early reliance on subsidized private insurance left many Australians unable to afford coverage, the system shifted toward universal public insurance in the 1970s and 1980s.
By the 1990s, declining private insurance enrolment raised concerns about instability in private hospitals and added pressure on the public system, says Australian health economist Andrew Wilson, a professor at the University of Sydney.
In response, governments introduced targeted measures to incentivize Australians to purchase private health insurance.
Experts say this period marked a turning point.
“There was a very high level of partisan difference when [Medicare] was brought in,” said Gillespie, of the University of Sydney.
But then “the system became popular … [and] once it’s in place, people get used to it, even the doctors who opposed it.”
Over time, political opposition faded as the system became embedded in everyday life.
Gillespie says Australia’s federal structure also helped lock in the current model, making it harder for governments to dismantle it once established.
“[Universal care has] been much easier to run in a national system,” he said.
Other experts emphasize that reform is a function of political opportunity.
Andrew Longhurst, a senior researcher and political economist at the Canadian Centre for Policy Alternatives, says policy change is typically a product of who has access to power.
“I don’t know that I would see [reform] so much as political consensus,” he said. “I would see it more as a reflection of who has access to elected representatives, who has access to lobby political parties, who is spending inordinate amounts of time in ministers’ offices, talking about what they see as the solutions.”
Corporate and for‑profit actors dominate that access, says Longhurst.
Carolyn Tuohy, professor emeritus at the University of Toronto who has spent more than three decades conducting comparative health policy research, says health systems shift only when political conditions align — not simply when problems worsen.
“What matters is rather whether the governing party has an incentive to take on major change … and whether it believes that it is in a strong enough position to mobilize a coalition of support,” she said.
“I do not see that any government in Canada currently has such incentives.”
But incentives shift, she adds, so reform advocates should be prepared for the winds of change.
“I always advise them to stay primed for when the spotlight at the heights of government turns to health care, and to be ready with proposals then.”
