Clinicians and patients point to health insurance value decline and eroding trust

Rising out-of-pocket costs are reshaping patient expectations, undermining confidence in private health insurance and placing growing pressure on the private hospital sector. That warning emerged during a panel session at the Australian Private Hospitals Association (APHA) National Congress, where consumer advocates, clinicians and insurers laid bare the growing tensions threatening trust in the private healthcare system.

Providing a health insurer perspective, Nick Bailey, Senior Executive Healthcare Funding and Policy at Medibank revealed figures that highlight the scale of the challenge.

Australia has one of the highest levels of out-of-pocket healthcare expenditure in the OECD, with individuals funding around 15% of total healthcare spending. Drawing on Medibank data covering approximately 1.4 million annual hospital episodes, Bailey said patient out-of-pocket costs had increased by 45% since 2022, while insurer benefits had risen by only 11% over the same period. The sharpest increases were attributed to specialist gap payments, particularly for admitting specialists and anaesthetists.

Meanwhile, consumer confidence appears to be deteriorating. Research commissioned by Private Healthcare Australia (PHA) found that specialist consultations fell 8% over five years, with almost 900,000 Australians delaying or avoiding specialist care in 2024 because of affordability concerns. Without intervention, that figure could rise to 1.2 million by 2030.

“I don’t think there’s a single lever that’s going to fix this problem,” Bailey said. “Transparency [of specialist fees] alone is not going to fix everything. All parts of the sector need to play a role.”

Medibank has expanded no-gap arrangements with private hospitals and specialists, including agreements with more than 700 specialists to provide entire episodes of care without additional patient charges.

But clinicians argue the economics are broken long before patients arrive at hospital.

Dr Peter Sumich, Ophthalmologist and President of the Australian Society of Ophthalmologists (ASO), said stagnant Medicare rebates and limited indexation has made it increasingly difficult for clinicians to participate in no-gap arrangements.

Using cataract surgery as an example, he described growing patient frustration with the gap between treatment costs and insurer contributions. Cataract surgery costs around $2,000, with patients receiving about $200 from their insurer and Medicare contributing $600, leaving an out-of-pocket cost of roughly $1,200.

For many patients the growth in policy exclusions and restrictions is diminishing the value proposition of private health insurance.

Citing Australian Medical Association (AMA) data, Dr Sumich noted that the number of Australians holding policies with exclusions had risen from approximately 200,000 in 2002 to around four million in 2025. He also questioned whether rising healthcare expenditure was translating into better value for patients while health insurer profits and management expenses continue to grow significantly.

Consumer advocate Amy-Lee Jade Weisse provided a deeply personal account of her experience navigating the private mental health system while living with bipolar disorder and obsessive-compulsive disorder.

Long-term access to private psychiatric care had been central to her recovery journey, enabling continuity of care and recovery-focused treatment that helped her avoid further hospital admissions. However, the financial burden associated with accessing private mental healthcare has become increasingly unsustainable due to specialist gap fees, medication costs, hospital excesses and ongoing psychiatric treatment expenses that accumulate over time.

Six months ago, Weisse made the decision to cancel her private health insurance.

“As a single mother raising two children and managing a mortgage, the financial burden has become unsustainable,” she reflected.

The decision has left her facing a future reliant on a public mental health system that often struggles to provide continuity of care and long-term recovery support.

“This will now be my future care system and that terrifies me,” she emphasised.

The debate then shifted to Gold-tier health insurance products, which Bailey described as increasingly difficult to sustain.

Mental health and maternity services remain concentrated within Gold cover, driving claims costs higher and contributing to premium increases that are making the products unaffordable for many younger consumers. It is prompting some insurers to exit the market or discourage new customers.

“We want a sustainable gold offering for consumers. It’s not sustainable the way it’s going,” he said.

The discussion also exposed deep divisions over who should oversee reform.

Dr Sumich advocated for the establishment of an independent private health authority to oversee the sector and facilitate negotiations between health insurers and providers.

Bailey questioned the need for another regulator, arguing that the Department of Health-led Private Health CEO Forum already provides a mechanism for stakeholder engagement.

The CEO Forum was established by the Labor Government in late 2024 to address the financial viability of the private hospital sector and is scheduled to conclude in June 2026. At the same time, the Private National Efficient Price (PNEP) proposal that was criticised by many stakeholders has stalled after rejection by Federal Health Minister Mark Butler.

Dr Sumich was scathing about the CEO Forum, describing it as a “group of CEOs with vested interests, and not a consumer or doctor” invited to contribute to the dialogue.

The exchange reflects broader frustrations simmering across the sector, where many clinicians and consumer representatives believe key decisions are increasingly being driven by institutional interests rather than patient outcomes.

Closing the discussion, moderator Dr Tony Scammelluza warned that transparency failures are feeding a dangerous erosion of trust.

“The lack of transparency contributes greatly to the trust issue and the concerns, which has the risk of undermining the value of private health insurance and has consequences for everybody in the industry,” commented Dr Scammelluza.

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