The quiet erosion of fairness in our hospitals

There is a quiet scandal unfolding in Australia’s hospitals. It doesn’t make the nightly news, but it strikes at the moral and human heart of our system: the idea that public hospitals exist for those who have nowhere else to go. Increasingly, that idea is being undermined by a creeping, bureaucratised sleight of hand: the treatment of private patients in public hospitals.

Under the National Health Reform Agreement, when a privately insured patient is treated in a public hospital, the Commonwealth’s Activity Based Funding is discounted to reflect the money expected from Medicare and the private insurer. On paper, this ensures financial neutrality, as the hospital should receive roughly the same total revenue whether the patient is public or private. In practice, the neutrality is an illusion. Because the Commonwealth offsets its funding through Medicare while the state’s share simply shrinks with the discount, the states save real money (collectively, around a billion dollars a year) every time an insured patient opts for public care. The result is a system that quietly rewards states for drawing private patients into public hospitals, not for serving those most in need of care.

To grease the wheels, many hospitals now employ “Patient Liaison Officers” whose job descriptions are explicit: to maximise private revenue. These staff roam the wards and emergency bays, approaching insured patients at their most vulnerable to sign on the dotted line. Some even offer perks, such as private rooms, free parking, perhaps a voucher or two, to “sweeten” the decision.

There is also growing evidence that privately insured patients in public hospitals are sometimes seen or operated on sooner than public patients, despite official denials. It’s a quiet hierarchy of access inside a system that was meant to treat everyone according to need, not insurance status.

When public hospitals are forced by state and territory governments to chase profit, patients pay the price

This all might sound technical, even dull. But the implications are profound.

A decade ago, only about seven per cent of patients treated in public hospitals were classified as private. Today, that figure has climbed to nearly 12 per cent nationally, and almost 20 per cent in New South Wales.

Meanwhile, private hospitals are struggling. Their admissions fall, their revenues shrink, and their ability to invest in staff and technology is compromised. The private system, which provides nearly a third of Australia’s hospital care, is being hollowed out from within by a funding distortion masquerading as fiscal cleverness.

When privately insured Australians are encouraged to use their cover in public hospitals, they erode the very rationale for private insurance. The result is a slow-motion collapse of private cover, particularly among the young, which is the very cohort needed to keep the insurance pool sustainable. As private membership falls, premiums rise, and the spiral tightens.

The public system, in turn, groans under the added demand. Public hospitals were founded on the principle of need, not entitlement. Yet increasingly, they are being treated as revenue engines for state treasuries rather than sanctuaries for the sick. The casualties are those who can least afford to wait: the patients without insurance, without influence, and without alternatives.

Reforming fairness to a system built on balance

Australia’s mixed health system works best when its parts work in harmony. Public hospitals should be funded to meet public need. Private hospitals should offer choice and innovation, relieving public pressure. The two sectors are not enemies but allies, bound by a shared vocation of healing the whole person: body, mind, and spirit.

Catholic Health Australia’s position is clear and principled: public hospital care should be determined by clinical need, not insurance status, and the incentives drawing private patients into public wards must be wound back. The remedy is not complex. Public hospitals and state governments should no longer receive Commonwealth funding under the National Health Reform Agreement for private-in-public activity. That way, if public hospitals and States decide to admit private patients, they would shoulder the gap between what Medicare and insurers pay, instead of passing it quietly onto the taxpayer.

We built a health system on the promise that care would follow need, not wealth. That promise has deep poral roots and reflects the belief that every human being carries equal dignity, especially in illness and vulnerability. If we let quiet distortions replace fairness, and balance yield to opportunism, we will wake to find both public and private care diminished.

The cure is simple: honesty in funding, clarity in purpose, and the courage to say that need, not revenue, should decide who is treated first. Because a health system that forgets compassion soon forgets justice — and when justice fails in our hospitals, it falters everywhere else.

Read CHA’s position on private patients in public hospitals.