Health and Aged Care portfolio

The Health and Aged Care portfolio works towards achieving better health and wellbeing for all Australians, now and for future generations. A total of 19 entities make up the portfolio.

The Department of Health and Aged Care is the lead entity in the portfolio. It is responsible for achieving the Australian Government’s health outcomes in the areas of health system policy, design and innovation; health access and support services; sport and recreation; individual health benefits; regulation, safety and protection; and ageing and aged care. This includes administering programs and services, such as Medicare and the Pharmaceutical Benefits Scheme, and forming partnerships with the states and territories, as well as other stakeholders. Further information is available from the department’s website.

The remaining 18 entities in the portfolio are responsible for the delivery of programs, including aged care accreditation services, digital health reforms, the development and reporting of health and welfare data, nuclear safety, supporting the integrity of sport, funding medical research, managing blood supplies, cancer research, pricing and funding public hospitals, national safety and quality standards and clinical care standards, and food safety.

In the 2022–23 Portfolio Budget Statements (PBS) for the Health and Aged Care portfolio, the aggregated budgeted expenses for 2022–23 total $103.5 billion. The PBS contain budgets for those entities in the general government sector (GGS) that receive appropriations directly or indirectly through the annual appropriation Acts.

The level of budgeted departmental and administered  expenses, and the average staffing level for entities in the GGS within this portfolio, are shown in Figure 1. The Department of Health and Aged Care represents the largest proportion of the portfolio’s expenses, and administered expenses of the Department are the most material component, representing 95 per cent of the entire portfolio’s expenses.

Figure 1: Health and Aged Care portfolio – total expenses and average staffing level by entity

Source: ANAO analysis of 29 March 2022–23 PBS.

In determining the 2022–23 audit work program, the ANAO considers prior-year audit and other review findings and what these indicate about portfolio risks and areas for improvement. The ANAO also considers emerging risks from new investments, reforms or changes in the operating environment.

The primary risks identified for the portfolio relate to the need to learn the lessons from the COVID-19 pandemic with respect to the importance of risk-based planning and the department’s management of service delivery through third parties, in order to ensure that the resources allocated achieve the outcomes that the government is seeking.

Specific risks in the Health and Aged Care portfolio relate to governance, service delivery and grants administration.

Governance

The Department of Health and Aged Care implements a large number of national strategies and will need to further embed strong project management mechanisms that work across the organisation to achieve success. Audit work has identified challenges in recording and assessing implementation progress, delivering value for money on large-scale investments, and monitoring and reporting on the performance of the department’s programs. 

The Department of Health and Aged Care manages the National Medical Stockpile, including procuring and deploying medical supplies, and is leading the rollout of the COVID-19 Vaccine and Treatment Strategy. There are significant risks associated with large logistical exercises that require effective governance, risk management, data analysis, communications and stakeholder management.

The ANAO’s program of audits examining the government’s COVID-19 response have highlighted the risk that inadequate crisis preparedness may result in resources, capabilities and services not being efficiently mobilised and deployed should a crisis occur. Risk-based emergency response planning that incorporates contingencies and considers the full range of service providers and stakeholders can assist an entity to rapidly adapt service delivery to the requirements of an emergency response. There is also a risk that record keeping practices and data quality are not sufficiently robust to ensure transparency, support monitoring and evaluation and provide assurance that public resources are being used properly. 

The distribution of roles and responsibilities in the delivery of Australia’s health services requires ongoing collaboration between Australian Government entities, state and territory entities and a range of stakeholders in the private sector. Ineffective communication and coordination between government and non-government stakeholders can impact negatively on the implementation of programs and activities and on the monitoring of performance and outcome measures under intergovernmental agreements. 

Service delivery

The Department of Health and Aged Care is heavily reliant on other entities for the delivery of programs, including through the administration of Medicare and aged care payments by Services Australia, administration of grants through the Department of Social Services and the National Health and Medical Research Council, and provision of digital health services through the Australian Digital Health Agency.  The risks associated with these arrangements, including fraud risks, need to be actively managed by the department to ensure that service and quality control expectations are agreed and maintained, and that its business is appropriately prioritised, to provide assurance that policy objectives are being met.

The Department of Health and Aged Care is responsible for ensuring service providers comply with requirements for funded programs, including the Medicare Benefits Schedule and Pharmaceutical Benefits Schedule. A recent audit found that the department could take a more risk-based approach to provider compliance and improve its monitoring of outcomes. 

Grants administration

Accuracy and occurrence of grant payments is a key risk, considering the significant number of grant programs that are administered by the Department of Health and Aged Care and other portfolio entities.  Audit activity has highlighted risks where: grant funding was not informed by an appropriate assessment process and sound advice ; and there were shortcomings in value-for-money assessments classification of grant opportunities , and performance monitoring and reporting arrangements. 

Overview

Entities within the Health and Aged Care portfolio, and the risk profile of each entity, are shown in Table 1.

Table 1: Health and Aged Care portfolio entities and risk profile

Department of Health and Aged Care

The Department of Health and Aged Care is responsible for achieving the Australian Government’s health and ageing policy priorities through evidence-based policy, program administration, research, regulatory activities, and partnerships with other government entities, consumers and stakeholders.

The department’s budgeted personal benefits and subsidies for 2022–23 account for around 84 per cent of total budgeted expenses and 76 percent of total budgeted liabilities. Total budgeted assets are just over $6.7 billion, with 28 per cent attributable to inventories and 17 per cent attributable to receivables (Figure 2).

Figure 2: Department of Health and Aged Care’s total budgeted financial statements by category ($’000)

Source: ANAO analysis of 29 March 2022–23 PBS.

There are seven key risks for the department’s 2021–22 financial statements that the ANAO has highlighted for specific audit coverage, including four risks that the ANAO considers potential key audit matters (KAMs).

• The payment of aged care subsidies as the assessment of residents’ ongoing care needs is performed by the residential aged care provider. Aged care subsidy payments are also calculated by multiple, complex information technology systems and are underpinned by complex regulatory requirements. (KAM – Accuracy of personal benefits and subsidies)
• The payment of personal benefit health care entitlements  as these payments are based on information provided by the payment recipients and may be significantly impacted by delays in recipients providing correct or updated information and/or provision of incorrect information resulting in invalid payments. (KAM – Accuracy of personal benefits and subsidies)
• The calculation of payables and provisions for outstanding claims for medical services and pharmaceuticals and pharmaceutical services due to the uncertainty associated with claim experience and patterns. (KAM – Valuation of personal benefits provisions and payables)
• Accounting for transactions related to the National Medical Stockpile due to the nature, size and complexity of the inventory transactions. (KAM – Existence and completeness of Inventory)
• The complexity of pharmaceutical benefit scheme drug recoveries due to the diversity of the risk sharing arrangements entered into with pharmaceutical companies. The risk sharing arrangements differ in respect to the entitlements for recovery and the calculation of the amount recoverable.
• The estimation of subsidy provisions and payables due to the significant professional judgement applied in the selection and application of key assumptions related to the nature of claim, claim patterns and experience.
• The management of grant payments due to diversity of the grant programs administered by Health with differing eligibility and reporting requirements.

National Blood Authority

The National Blood Authority (NBA) is responsible for securing the supply of safe and affordable blood products, including through national supply arrangements and coordination of best practice standards within agreed funding policies under the national blood arrangements.

The NBA’s total budgeted assets for 2022–23 are just under $545.6 million, with almost 18 per cent of these assets attributable to inventories, as shown in Figure 3.

Figure 3: National Blood Authority’s total budgeted financial statements by category ($’000)

Source: ANAO analysis of 29 March 2022–23 PBS.

The key risk for the NBA’s 2021–22 financial statements relates to significant judgements and assumptions involved in the valuation of blood and blood products, which are reported as assets.

National Health and Medical Research Council

The National Health and Medical Research Council (NHMRC) is the Australian Government’s key entity for managing investment in, and integrity of, health and medical research. NHMRC is also responsible for developing health advice for the Australian community, health professionals and governments, and for providing advice on ethical practice in health care and in the conduct of health and medical research.

NHMRC’s total budgeted expenses for 2022–23 are $973.0 million, with 92 per cent of these expenses attributable to grants, as shown in Figure 4. Budgeted intangible assets are just under $19.1 million accounting for around 8 per cent of total budgeted assets.

Figure 4: National Health and Medical Research Council’s total budgeted financial statements by category ($’000)

Source: ANAO analysis of 29 March 2022–23 PBS.

There are two key risks for NHMRC’s 2021–22 financial statements.

• The management of, and accounting for, a range of grant payments, which constitute a significant expense reported in NHMRC’s financial statements and are susceptible to fraud.
• The judgements and assumptions involved in the management of non-financial and intangible assets, due to the development of a new grants management system.