Catholic Health Australia Submission: Pre-Budget Submission 2026–27: Health

Executive Summary

Australia’s health system is facing mounting and interconnected pressures across private health insurance, private hospitals, and public hospital capacity. Rising costs, workforce shortages, constrained funding arrangements and opaque pricing mechanisms are undermining affordability, sustainability and access to care. Without targeted Commonwealth action in the 2026–27 Budget, these pressures will intensify, placing further strain on hospitals, the health workforce and patients.

Catholic Health Australia’s (CHA’s) Pre-Budget Submission 2026–27 outlines four priority reforms to stabilise the health system, strengthen value for consumers, and protect national hospital capacity across both public and private sectors.

Priority 1: Introduce a minimum benefit-payout ratio for private health insurance

Private health insurers currently return around 85 per cent of premiums to members, with rising management costs undermining confidence, hospital viability and value for money. In 2024–25, private health insurers reported $2.7 billion in profits, and $3.4 billion in management expenses. This has contributed to declining consumer confidence, pressure on hospital viability, and concerns about value for money. International experience and domestic insurance regulation demonstrate that higher minimum benefit-payout expectations are both achievable and appropriate. CHA proposes a 90 per cent minimum benefit-payout ratio to better direct premiums to patient care, improve transparency and rebalance insurer–provider relationships, injecting around $1.2 billion per year into hospitals and supporting workforce sustainability. The reform would involve minimal administrative costs and no direct Commonwealth outlays, with increased rebate payments largely offset by reduced public hospital funding, resulting in a net Commonwealth fiscal cost of approximately $69 million over the forward estimates.

Priority 2: Provide targeted support for nurse wage increases in private hospitals

Enterprise Agreement wage increases for nurses, driven by public-sector bargaining and Fair Work Commission decisions, represent an immediate risk to private hospital viability. CHA estimates nurse wages in the private sector will rise by 12–15 per cent by 2027, increasing labour costs by up to $940 million per year and, without intervention, driving higher insurance premiums, reduced services and greater demand on public hospitals. CHA proposes a one-off, time-limited Commonwealth contribution of 50 per cent of the incremental wage increase, phased over the forward estimates, at an estimated cost of $445 million over four years to protect viability, moderate premium pressures, and preserve national hospital capacity.

Priority 3: Establish the foundations for a Private National Efficient Price

Opaque pricing and incomplete cost data undermine efficiency and sustainability in the private hospital system. CHA proposes establishing a government-determined Private National Efficient Price (PNEP) to improve transparency in insurer–provider negotiations and support more disciplined funding arrangements. CHA recommends targeted Commonwealth investment to fund the establishment phase of the PNEP, including expanded data collection, financial disclosure, independent assurance, and regulatory oversight. An investment of $16 million over four years would build the data, pricing and governance capability needed for a credible national benchmark and enable a staged, low-risk transition to PNEP-informed pricing.

Priority 4: Address access block in public hospitals

Public hospitals are facing sustained pressure from rising demand, workforce constraints, and funding arrangements that have not kept pace with activity growth, resulting in limited access to care, elective surgery backlogs, and worsening patient outcomes. CHA proposes a coordinated reform package to strengthen public hospital capacity by increasing Commonwealth funding through an 8 per cent NHRA growth rate and a 50 per cent funding share, improving hospital transitions to aged care, funding disability and home-based supports through dedicated discharge roles and transition accommodation, and clearing elective surgery backlogs by using private hospital capacity with time-limited Commonwealth funding. The package is estimated to cost $24.5 billion over four years, reflecting the scale of system pressures and shared Commonwealth–state responsibility for timely access to hospital care.