Government’s silence is deafening as private hospital CEOs and staff reach breaking point

The Australian Medical Association’s (AMA) latest report delivers yet another damning indictment of the Federal Government’s inaction: Australia’s private healthcare system is in crisis, and the government’s failure to intervene is allowing health insurers to profit while patients and hospitals suffer.

The Private Health Insurance Report Card 2024 exposes an alarming trend – over the past five years, net insurance profits (including investment income) have soared, vastly outpacing the benefits returned to patients.

“While net profits for insurers have increased by almost 50%, the patient rebate for medical services has increased by just over 10%,” AMA President Dr Danielle McMullen said. “There’s no question private health insurers need to make a surplus to be sustainable, but it is clear they should be returning more in benefits to patients as a proportion of premiums.”

Australian Private Hospitals Association (APHA) CEO Brett Heffernan reinforced the AMA’s dire warning, demanding urgent reform.

“The AMA’s call for 90 cents in the dollar to be mandated in returns from premiums to ensure those providing healthcare are fully paid for the treatments and care they provide mirrors our own call for 88 cents in the dollar,” Heffernan said.

The statistics paint a stark picture of health insurer profiteering at the expense of patients and providers. Over 2023-24 the health insurers also increased their management fees by a whopping 18% in just one year – up from $2.82 billion to $3.45 billion a year.

“Urgent reform is needed, as patients are finding it increasingly difficult to access care under their private health insurance policies,” Dr McMullen said. “In the past few years, 70 private hospitals have closed or downgraded their services in critical areas such as maternity, mental health and reconstructive surgery.”

Private Healthcare Australia, however, dismissed the claims, calling them “false and misleading” and accusing the AMA of cherry-picking data that ignored the “givebacks and fluctuations due to the pandemic.”

Heffernan pushed back, saying “Clearly, the system is broken when insurers are gouging all points along the spectrum – their members through phoenix policies and higher premiums that don’t reach providers, while, in our case, demonstrably short-changing private hospitals to the tune of $3 billion over the last three years, despite insurers pocketing over $5 billion in unprecedented profits.”

RACS President Associate Professor Kerin Fielding has also expressed concerns recently saying, “Private health insurance has been going up and up and because the cost of healthcare is increasing, private hospitals are requiring bigger payments for cases, and people are dropping out of the funds.”

At the core of the crisis is the dwindling share of insurance premiums reaching hospitals and healthcare providers. While the APHA and AMA debate whether 88 or 90 cents per dollar should be the benchmark, the harsh reality is insurers are paying out an average of just 84 cents per dollar in premiums, dropping as low as 81.1 cents in early 2024.

“The government can mandate that 88 cents (or 90 cents) in the dollar flows from insurers, via their premiums, to cover hospital care costs. Or the government can re-direct funds from the rebates on health insurance to meet hospital costs in providing care. These have zero impact on taxpayers or patient pockets,” Heffernan explained.

The financial data is damning. The Australian Competition and Consumer Commission (ACCC) identified a 110% net profit increase for health insurance companies in the 2022-23 financial year.

“The Federal Government’s preferred approach of doing nothing is unacceptable. I don’t think the government appreciates the stress the system and the people in it are under. Hospital CEOs and their staff are at their wits’ end. They are doing all in their power, literally daily, to keep hospital doors open to ensure their patients get the care they need and their colleagues still have jobs,” Heffernan stated.

“It is the Federal Government’s job to fix it, especially when the Federal Health Minister is the one approving insurance premium hikes every year. The government has a duty to ensure those higher and higher premiums actually reach those providing the treatments and care.”

The stakes could not be higher. Private hospitals perform 70% of all planned surgeries, 1.6 million medical treatments annually, 54% of all chemotherapy, 62% of mental health hospitalisations, and 80% of hospital rehabilitation.

With health insurers raking in billions and hospitals closing their doors or downgrading essential services, the Federal Government’s silence is deafening.

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