Government kicks the can down the road with yet another private health consultation

The Department of Health has launched yet another consultation on private health reforms, marking the first in a suite of papers that will stretch the reform process through to mid-2027, three years after the sector’s sustainability crisis was formally identified.

The latest consultation follows two years of reviews, sector engagement and the CEO Forum that have so far produced little tangible results. The paper seeks stakeholders’ views on proposed reforms, including contemporary models of care for mental health, maternity care and Hospital in the Home (HITH), alongside reforms aimed at delivering better value for consumers through improved access to regional private hospitals, health insurance product simplification and updates to risk equalisation.

Australian Private Hospitals Association (APHA) CEO, Brett Heffernan, said the latest consultation represented a frustrating repeat of a process that has already failed to deliver.

“This is the governments third consultation process in two years addressing the very same issues identified in may 2024,” stressed Heffernan. “That’s two years, two processes, promises of solutions within six months but zero outcomes. Now we’re headed into year three dealing with the exact same issues, none of which address the reason this fiasco was started in the first place, namely the viability of private hospitals.”

Private Healthcare Australia (PHA) CEO, Dr Rachel David, said the consultation paper recognised many of the challenges the sector had been highlighting, including growing pressure on Gold hospital cover and the need to better support contemporary models of care.

“The way healthcare is delivered has changed dramatically over the past decade, but many aspects of the regulatory framework have not kept pace,” Dr David said. “Australians increasingly expect to receive safe, high-quality care in their homes and communities where clinically appropriate, rather than always in a hospital bed. Reforms that support more home-based and community care have the potential to improve patient experience while helping manage rising healthcare costs.”

However, Dr David said every proposed reform should be tested against one fundamental question: will it help keep private health insurance affordable?

“Affordability must remain the guiding principle throughout this reform process,” she said. “Any proposal that increases premiums risks making health insurance less affordable for Australian families. If people can no longer afford private health insurance, participation falls, pressure shifts onto the public hospital system, and the sustainability of the entire private healthcare system is undermined. For that reason, every significant reform proposal should be supported by robust independent modelling of its likely impact on premiums before any decisions are made.”

Day Hospitals Australia’s (DHA) budget-neutral reforms agenda has not been included in the consultation paper. The package aims to unlock underutilised day hospital infrastructure, slash public hospital elective surgery waiting lists and deliver millions in savings to private health insurers that could be passed on to consumers or reinvested into complex care and emergency services.

“The Government is actively looking at our suggested reforms which will provide immediate access for over 400,000 public and private patients and is the only reform that will put downward pressure on private insurance,” Jane Griffiths CEO of Day Hospitals Australia told Health Industry Hub. “We are negotiating directly with the Government on these important reforms.”

Yet, the measures in the consultation paper tinker at the edges rather than delivering any significant reform.

“To be clear, the measures up for discussion for a third time are ones the APHA supports, because it was APHA that first raised them back in 2023. But none of them, even collectively, address the funding shortfall from insurers that created the viability crisis across private healthcare,” Heffernan added. “We will engage constructively and be forthright in holding the government to account for solutions.”

The consultation also lands at a particularly sensitive time for the sector, following the Federal Government’s controversial proposal to reduce the private health insurance rebate for Australians aged 65 and over.

“Older Australians are the group most likely to rely on their health insurance to access timely hospital care. Reducing the rebate for seniors will make cover less affordable for many people and is expected to result in tens of thousands of people dropping their cover, and hundreds of thousands downgrading their policies,” Dr David said. “That makes it even more important that the broader reform agenda strengthens, rather than weakens, incentives for Australians to maintain health insurance.”

While the Department of Health says it wants to hear from consumers of the private health sector, it also acknowledges that many of the questions throughout the consultation paper are technical in nature and directed at insurers, hospitals and health professionals. It suggests consumers, patients and their advocates focus on whether the proposed reforms will reduce out-of-pocket costs, improve access to safe, high-quality contemporary models of healthcare, and make private health insurance products easier to understand.

The Department of Health has indicated that “to the greatest extent possible, reforms can be factored into the 2027 Premium Round” which commences in mid-late 2026.

For a sector that has spent years warning of an escalating viability crisis, the launch of yet another consultation reinforces concerns that while the problems have long been identified, decisive action remains elusive.

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