Growth of private patients in public hospitals—wrong question, wrong problem, weak data

Friday, September 15, 2017

‘The Australian Government is asking the wrong question in seeking to reduce pressure on private health insurance premiums by addressing the growth of private patients using their health insurance in public hospitals’, Alison Verhoeven, Chief Executive of the Australian Healthcare and Hospitals Association, said today.

The Association has provided its submission to the Australian Government’s public consultation on its paper, Options to reduce pressure on private health insurance premiums by addressing the growth of private patients in public hospitals.

‘While we are all concerned about the runaway costs and shrinking benefits offered by private health insurance, we’re not convinced that patients using private health insurance in public hospitals is the real problem’, Ms Verhoeven said.

‘In short, the forest will not be fixed by barking up this one particular tree.’

‘The real problem is that health costs are rising faster than inflation or population growth, and we have a situation that is essentially the result of “vertical fiscal imbalance”—under our federal system, the states and territories have to deliver public hospital and healthcare services, but lack the capacity to raise all of the required funds.

‘When a patient elects to use their private health insurance in a public hospital, that service has to be provided, and has to be paid for. It makes sense for the states and territories to send private health insurance funds the bill, just as a private hospital would do if the patient was treated there.

‘And it makes sense for private patients to use their insurance in these situations when it means they get their choice of doctor, or, if in a rural area, choosing a doctor in private practice at the local hospital rather than travel hundreds of kilometres to the nearest private hospital.

‘The Department of Health has set out five proposed options for reform of the private-patients-in-public hospitals “problem”. But they will all result in limiting the benefits paid to patients, reducing choice, reducing the money paid to public hospitals, and reducing the value of a patient’s health insurance.

‘For most of the options there is a real danger that individuals will drop their health insurance—and it will be the healthier younger people first, meaning that remaining clients will on average be of higher risk, which will ramp up pressure on premiums again.

‘The only winners in the short term will be the private health insurance funds, who are doing very well in terms of profitability and return on equity, including an 18% increase in net profit over the 12 months to March 2017. They could see a saving on the $1 billion they currently pay out to public hospitals, adding to around $6.4 billion they already receive through the Private Health Insurance Rebate.

‘What’s really needed is an overall review of health system funding in Australia, involving all affected parties—a shared problem needs a shared solution.

‘We’ve set out some steps in our submission—including better data on health insurance use, ensuring health workforce retention in rural areas, cost transparency, a public interest test on the Private Health Insurance Rebate, determining appropriate levels of profitability in the private health insurance industry, and moving away from funding based on service volume to funding that rewards better health results’, said Ms Verhoeven.

The AHHA submission is at

For more information on the AHHA, visit


Media enquiries: Alison Verhoeven, Chief Executive, Australian Healthcare and Hospitals Association, 0403 282 501