The Cost to Care

Preparing for the Out of Pocket Cost Burden for serious sickness and injuries facing Australian families Preparing for the Out of Pocket Cost Burden for serious sickness and injuries facing Australian families

The Cost to Care

How do you make an informed health decision if you don't have the right health information?

This is the tough question thousands of Australian’s are suddenly forced to answer when they, their child or a member of their extended family is suddenly faced with the reality of a serious medical condition or injury - and the enormity of the out of pocket expenses it can bring.

The problem of living in a 'Lucky Country'

Australia – as the saying goes – is a ‘lucky country’.

Our standard of living, our climate, and our health care and social security systems are often enviable when compared with international comparisons.

That's meant that for many of us, the ‘she’ll be right’ approach to life in Australia has left us exposed to the harsh realities that life doesn't always work out the way we expect.

Living a long and healthy life can become surprisingly expensive.

The cost of a false sense of security - $30 billion pa

Who pays the cost of good health

In 2015/6 the total national health care expenditure was $170.4 billion.

  • While the majority of this cost was met by the government,
  • the out of pocket cost to individuals in that year was estimated at $30 billion and upwards.
This is the cost of the false sense of security many Australian families live with in terms of their health, and their capacity to cope financially, in the event of ill health.

The practical cost of improved survival rates

Whilst advances in medicine and treatment techniques are improving the survival rates across most conditions, there's a cost burden to acknowledge.

As good as our safety nets are, the out of pocket (OOP) cost impact to those affected by ill health can be crippling.

  • Depending on the condition, these direct costs can range from hundreds to many thousands of dollars each year.
  • Often these are compounded by the indirect costs – such as foregone income – impacting the sufferers and their carers.

Responding to this financial reality, the Sapience Cost to Care series looks at two major issues facing our clients:

  1. The incidence of serious illness or injury conditions in Australia, and
  2. The average size of the Out of Pocket costs, (direct and indirect) individuals and their families can face in the event of a serious illness or injury.

What does this mean for families?

While you may recover from cancer, you may be financially crippled and facing a bleak financial future.

Medical advances also mean we facing the reality that some diseases also have a greater chance of reoccurring while other opportunistic ones will trigger a future need for additional funding too.

  • Depending on the condition, these direct costs can range from hundreds to many thousands of dollars each year.
  • Often these are compounded by the indirect costs – such as foregone income – impacting the sufferers and their carers.

Out of pocket expenses

There are two main ways to categorise the Out of Pocket Cost people can face.

  • Direct costs are direct out of pocket expenses are direct to the individual, usually have to be paid upfront and not reinbursed by either the healthcare system or private health insurance.
  • Indirect costs are those families and carers alike may face as they care for the individual (like loss of personal wages or reduced spending power)

These out of pocket expenses can impose an often unaffordable burden upon an individual and their family.

And this is usually at a time where people are facing unexpected serious medical conditions where their decisions will cause equally significant emotional consequences for all concerned.

Typical questions people face include;

  • How will they afford the out of pocket expenses?
  • Do they try and go into debt to pay for early surgery or out of pocket medical costs?
  • Do they try and access medications or rehabilitation treatments not listed on the government’s subsidised Pharmaceutical Benefits Scheme and how will they pay for them?
  • Do they wait in lengthy public hospital lines hoping the illness don’t progress quickly?
  • Do they make major lifestyle decisions about selling the family home to pay for treatments?

In some circumstances, many families and friends turn to organising a GoFundMe online charity crowdfunding campaign asking for public donations to pay private medical expenses.

'One in 3 GoFundMe campaigns are asking for help with medical expenses' - Forbes Magazine

Where to from here?

Our aim is to help people;

  • make a better-informed choice about what key health risks they face, and
  • learn how insurance options, such as Medical Crisis or Trauma insurance, can provide a cash lump sum

to help them if they or their children, suffer a significant medical illness or injury.

Below you can read either the quick summary of The Cost to Care by category of illness or read on further for more detail.

Key findings:

The Growing Cost of Healthcare

  • Ongoing advancements in diagnosis and treatment of disease have seen life expectancy continue to increase
  • As we see more people live with – rather than die from – serious health conditions, the cost burden on our healthcare system grows.
  • In 2015/16 total health expenditure in Australia was $170.4 billion [1]
  • Whilst State and Federal Government pick up the lion’s share of this burden, individual Australians – and their families and carers – still accounted for paying around $30 billion of this annual cost [2]
  • This is nearly twice the amount funded by private health insurers
  • This amount relates to direct expenditure only, and doesn’t account for any indirect costs in the form of income foregone by the individual and/or their caregivers
  • Approximately two thirds of health expenditure by individuals relates to primary health care (ie: unrelated to visits to hospitals or specialists) [1]
  • Approximately one third relates to medications.

The Growing Out of Pocket Cost burden

Whilst Medicare is universal, and can cover hospital, medical and pharmaceutical benefits, more than 11 million Australians choose to ‘supplement’ their healthcare funding with private hospital cover and around 13 million had private ancillary cover [2]

  • Notwithstanding the contributions of Medicare and private health insurance cover, the individual is often left with a ‘gap’ between the amount covered and the total cost of the medical services
  • This gap can arise for several reasons, including where service providers choose to charge more than the ‘notional fee’ for a service, as calculated by health authorities (the free market in operation)
  • This gap translates to an ‘out of pocket’ cost, borne by the individual
  • These out of pocket costs can create a barrier to individuals seeking suitable treatment for their conditions
  • An Australian study investigating the effects of healthcare costs on individuals found that 14% of adults didn’t receive the recommended care due to costs; for those living with chronic health conditions, the proportion was higher, at 24%3
  • Further research suggests that over 40% of individuals with depression, anxiety and other mental health conditions skip treatment and other care needs because of the cost [4]

The Growing Indirect Costs to families and carers

Indirect costs to the individual, such as time spent off work and time spent traveling to and from medical appointments, as well as indirect costs to families and carers also pose a significant burden.

  • As an example, average people with back pain or problems are absent from work almost 21 days per year as a result of their illness [6]
  • A report investigating the impact on carers of people who have experienced stroke found that:
    • 58% of primary carers of people with stroke and disability spend 40 hours or more per week in their caring role [5]
    • 21% report a decrease in income due to their caring role
    • 24% incur extra expenses due to their caring role
    • 31% have difficulty meeting everyday living costs.

These indirect costs are often hidden and difficult to estimate and therefore budget for, ahead of time.

The Research

Quick summaries

The research is designed to help clients, friends, and supporters better understand;

for the categories of serious illness listed below.

The Health Conditions


  • The average lifetime cost for cancer sufferers aged 15 years and older, can range from $20,360 for melanoma to $95,460 for head, neck and thyroid cancers
  • The average cost paid by the Pharmaceutical Benefits Scheme (PBS) per anticancer prescription has increased far in excess of inflation and is currently (@ 2019) $786

Diseases of the heart and arteries

  • Over 128,000 cardiac angiograms are performed in Australia every year. The cost of an angiogram is approx $13,247
  • Whilst the out of pocket costs for heart attack and stroke can be smaller than other conditions (as a higher proportion is covered by Medicare), the indirect costs can be more significant. For example: 58% of primary carers of people with stroke related disability spend 40 hours or more per week in their caring role 21% report a decrease in income due to their caring role, 24% incur extra expenses due to their caring role and 31% have difficulty meeting everyday living costs

Respiratory conditions

  • In 2015, there were an estimated 1.45 million Australians with chronic obstructive pulmonary disease (COPD)
  • Of Australians with lung disease, COPD contributes to almost one-third of all deaths and costs patients an average of $9,020 in out-of-pocket (OOP) costs per year.
  • 78% of people living with advanced COPD experienced economic hardship from managing their illness and 27% were unable to pay their medical expenses.

Gastrointestinal diseases

  • In most cases, IBD starts before the age of 35 years. People with a family history have a much higher risk than those in the general population; around 25% of people with IBD have a first-degree relative with the disease.
  • On average, individuals with IBD spend $750 per year in out-of-pocket (OOP) costs to treat their condition.
  • There are also significant indirect costs associated with IBD, with many sufferers reporting long-term absence from work (43% report taking time off work due to their condition), a reduction in hours and premature retirement.

Brain and nervous system conditions

  • Conditions of the brain and nervous system include dementia, epilepsy, Parkinson’s disease, multiple sclerosis (MS) and spinal cord injury (SCI).
  • There are approximately 802,416 Australians living with these conditions – more than half (425,416) are living with dementia and one-third (250,000) with epilepsy
  • An individual with dementia can expect to pay $47,811 in the first year and $14,842 each year thereafter to manage their condition.
  • A person with Parkinson’s disease may end up paying $169,060 over a period of 12 years.


  • In 2014–15 there were a total of 483,673 injuries in Australia, equivalent to 1,325 every day
  • Around 20,000 Australians live with spinal cord injuries (SCI)
  • The lifetime direct cost of quadriplegia can exceed $11 million

Endocrine system disorders

  • Diabetes is the fastest growing chronic condition in Australia There are estimated to be 1.7 million sufferers
  • The average time off work for CKD sufferers is 18 days per annum
  • The average out of pocket cost of CKD is around $4,000 per annum

Musculoskeletal conditions

  • In 2014–15, there were 534,187 hospitalisations due to musculoskeletal conditions – most were for back problems
  • More than 2 million Australians suffer osteoarthritis, making it the most common form of arthritis in Australia
  • Two thirds of osteoarthritis sufferers take time off work for their condition, with the average being 72 days per annum
  • Rheumatoid arthritis is less common - with half a million sufferers in Australia – but can be more expensive, with some people spending up to $30,000 per annum managing their condition

Vision impairment

  • In 2016, there were an estimated 384,000 cases of vision
  • The average cost of a vision disorder or blindness is $5,760 per year

Mental health

  • Almost half of the total population (45.5%) experience a mental health condition at some point in their lifetime.
  • The cost of depression averages $17,190 per individual Individuals spend an estimated $1,350 per year in out-of-pocket (OOP) costs for mental health conditions, with medications accounting for one-third of this cost
  • Individuals with mental health conditions lost an average of 38 working days annually

Prevalence and Cost of serious illness by Category

More detail

Contact us today here to see if we're the type of people you'd like to work with. We'd love to expain how Crisis and Medical Trauma insurance could play a powerful protective place in your financial life.

Data sources

1. Australian Institute of Health and Welfare 2013. Health expenditure Australia 2011–12. Health and welfare expenditure series no. 50. Cat. no. HWE 59. Canberra: AIHW, p. 117.

2. Australian Institute of Health and Welfare 2017. Health expenditure Australia 2015–16. Available from:

3. Essue B et al. Out-of-pocket costs of health care in Australia. Submission to the Senate Standing Committee on Community Affairs. Submission 28.

4. Callander EJ, et al. Out-of-pocket healthcare expenditure and chronic disease — do Australians forgo care because of the cost? Aust J Prim Health. 2016;23(1):p.15–22.

5. 15 Australian Institute of Health and Welfare (2013). Stroke and its management in Australia: an update. Cardiovascular disease series
no. 37. Cat. no. CVD 61. Canberra: AIHW.

6. Australian Institute of Health and Welfare (2017). Back problems. Available from: reports/arthritis-thermusculoskeletal-conditions/ back-problems/ what-are-backproblems [Accessed May 2018].

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