Private health reform: A lifeline for a stronger future

Australia’s private health system stands at a crossroads. Private hospitals in Australia are grappling with a perfect storm of financial woes, driven by soaring costs and insufficient funding from private health insurers. These challenges are compounded by wage hikes, unfunded capital expenditure, latent capacity, and outdated private health insurance policy that has been left on set-and-forget for far too long. Without urgent reforms, the sustainability of private hospitals — and their ability to provide essential healthcare services — hangs in the balance.

These challenges faced by the private system are even more exacerbated in the not-for-profit space. Unlike for-profit hospitals — which can focus on high-volume, low-cost procedures — not-for-profits shoulder a bigger burden for complex and essential care. As a result, they often operate with tighter margins and fewer resources, making it more difficult to maintain financial sustainability.

The government’s proposed reforms, announced by the Minister for Health and Aged Care in December last year, present a unique opportunity to strengthen the sector and ensure a resilient future for all Australians. The proposed changes aim to enhance access to healthcare by improving hospital-in-the-home care, expanding maternity coverage across more insurance policies, and increasing the supply of internationally educated psychiatrists to address mental health needs. Additionally, the reforms seek to make contract negotiations fairer between hospitals and insurers through updates to the “default benefits” system, while also reducing red tape and boosting productivity to strengthen the long-term health of the private health sector.

CHA’s submission on the proposed reforms expresses support for the changes but highlights that more is needed to address long-term solutions beyond short-term fixes. This includes:

• leveraging private hospital capacity to support public hospitals

• incorporating current and future hospital costs into the private health insurance premium round process, including enterprise agreement wage growth

• adjusting capital reserve requirements for private health insurers

• ensuring the entirety of the private health insurance rebate is allocated to patient benefits.

With proactive reforms, private healthcare in Australia can remain an essential and viable option for all, rather than a privilege for the few. The government has a golden opportunity to implement meaningful, lasting change. The time to act is now.

Dr Katharine Bassett is Director of Health Policy at Catholic Health Australia