Federal Health Minister criticises ‘brinkmanship’ between health insurers and private hospitals amid growing crisis

The escalating dispute between private health insurers and private hospitals has drawn sharp criticism from Federal Health Minister Mark Butler MP, who called for an end to the “brinkmanship” that has led to Healthscope to sever contracts with Bupa and the Australian Health Service Alliance (AHSA).

Minister Butler emphasised the responsibility of both parties to prioritise patients over profits.

“At the end of the day, they receive a lot of taxpayer money and obviously a lot of money from their members to do the right thing by patients. I expect them to sit down and do a deal,” he asserted.

Despite the mounting pressure and detrimental patient impact, Minister Butler reiterated that the government would neither intervene in commercial negotiations nor offer taxpayer-funded bailouts.

The Australian Private Hospitals Association (APHA) CEO Brett Heffernan weighed in, criticising both private health insurers and the government for their inaction.

“For more than a year, private hospitals have been raising viability issues with the federal government. Many have taken the unprecedented measure of opening their books for federal government scrutiny, laying bare the parlous state of hospitals as a result of being underfunded by health insurance companies,” Heffernan said.

He described the government-proposed CEO talks as a stalling tactic, stating, “Private hospitals are less than impressed, seeing it as a bid to kick critical issues into the long grass in the hope no-one notices.”

Bupa APAC CEO, Nick Stone, deflected blame onto Healthscope, claiming, “We are shocked and deeply disappointed by Healthscope’s action. They appear to be disregarding the interests of our shared patients and customers by seeking to impact their access to healthcare.”

Financial data adds fuel to the controversy. Health insurers recorded a staggering $1.1 billion in after-tax profits in 2021-22, which doubled to $2.2 billion in 2022-23 following an average 3% premium hike. In just the first quarter of 2024, insurers pocketed $800 million in profit. Reports now suggest insurers may pursue premium increases of 5–6% in 2025.

Healthscope CEO Greg Horan said “There is a viability crisis impacting private hospitals across the country. Hospitals are losing money, and cannot attract new investment. Private Health Insurers are banking record profits – Bupa, in particular, has delivered enormous profits to its UK parent, while refusing to pay fairly for the care of its Australian members at Healthscope hospitals.”

Dr Danielle McMullen, Australian Medical Association (AMA) President, warned that patients could face significant financial consequences if a resolution is not reached before the contracts are terminated in early 2025.

“This places doctors in difficult positions as their patients start asking them for advice on switching funds – but our focus as a profession is on providing the best possible clinical care, not becoming de-facto financial advisors,” she asserted.

Dr McMullen reiterated the AMA’s ongoing call for a Private Health System Authority to address systemic issues.

“An independent authority can drive long-term reform and ensure the sector is appropriately regulated, ensuring patients get real value for money from their private health insurance,” she added.

Heffernan echoed the urgency for reform, pointing to the closure of 20 private hospitals and more than 70 services that have ceased in recent years.

“That private hospitals have closed and others are barely hanging on while insurance companies accumulated over $4 billion in profit in just over two years, is evidence the system is out-of-whack. Without a mechanism that ties premium increases to payments for care in private hospitals, any premium increase next year is just lining insurance company coffers,” he emphasised.

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