Pre-Budget Submission 2025–26 Health Policy

Executive summary

A private hospital sector at breaking point

Background

The private hospital sector in Australia is facing significant challenges. Financial performance has been declining, with operating profits and margins decreasing over recent years. This is due to a variety of reasons, in particular cost inflation and lagging premium increases. Additionally, stringent capital reserve requirements for private health insurers have reduced funding flow to hospitals, and wage increases and unfunded capital expenditures are adding to the financial burden. The sector is also struggling with latent capacity, declining viability of psychiatric and maternity services, and a shift in consumer preference from Gold to Silver health insurance products, all of which are impacting sustainability and ability to provide essential services.

Policy priorities

Priority 1: Reduce regulatory burden and red-tape

Priority 2: Fund enterprise agreement (EA) wage growth in private hospitals

Priority 3: Incorporate hospital costs into the annual private health insurance premium round
process

Priority 4: Adjust the capital reserve requirements for private health insurers

Priority 5: Allocate the entirety of the private health insurance rebate to patient benefits

Priority 6: Increase default benefits for regional, rural, and remote private hospitals

Priority 7: Leverage latent capacity on private hospitals to support public hospitals

Priority 8: Introduce default benefits for HITH

Priority 9: Adopt risk equalisation measures to ensure fair financial treatment of health
insurance products covering maternity and mental health services, and review private health
insurance product design

Priority 10: Reduce patient out-of-pocket costs

Priority 11: Expand private hospital mental health capacity

Priority 12: Revise guidelines for mental health day programs

Priority 13: Reform private health funding models