No real appetite from government to fix the private health sector

The Federal Government’s much-anticipated attempt to rescue the private health sector is ending with more questions than answers, as the secretive Private Health CEO Forum concludes its final scheduled meeting under the current terms of reference.

Established by the Labor Government in late 2024, the CEO Forum was created to confront the growing financial pressures threatening the viability of private hospitals and develop solutions to support the sustainability, affordability and future structure of the private healthcare system. But almost two years later, critics argue the process has delivered little more than consultation fatigue, with meaningful reform still elusive.

As previously reported by Health Industry Hub, the proposed Private National Efficient Price (PNEP) model, which faced significant resistance from patients whose care would have been impacted and from stakeholders whose business models would have been fundamentally altered, stalled after rejection by Federal Health Minister Mark Butler.

“We said the government’s CEO Forum was a dud and set up to fail when it was formed. Unfortunately, not only has that view not changed, but it has been vindicated,” stated Australian Private Hospitals Association (APHA) CEO Brett Heffernan. “The mail from frustrated participants is the government is set to drag this schmozzle out for another year, but that it will meet just twice over that period. Despite the goodwill of participants, who have no decision-making function but are a sounding board for government, the government continues to stall, obfuscate and avoid taking any action at all.”

The private health sector has faced mounting threats to its financial viability, caught in what has been described as the “jaws of death”, where operational costs rise faster than revenue, and workforce shortages and evolving models of care further intensify the challenge.

The CEO Forum was intended to develop short-term and long-term measures to protect the private health system. Instead, critics say the process has become another example of government delaying difficult decisions.

Federal Health Minister Mark Butler has previously stated, “Primary responsibility for addressing any immediate pressures in the system belong with the private hospital operators and insurers, and these groups must work together in a way that serves patient interests as well as their own commercial interests.”

Sources indicate the government will now progress a number of minor items to broader public consultation, although no timelines have been confirmed. Meanwhile, a parliamentary inquiry is already underway examining specialist fees and product phoenixing.

Tinkering at the edges, critics argue, has become a substitute for meaningful action.

“Apparently there are no limits to how far a government can kick the can down the road to avoid decision-making responsibility, despite a crisis it recognised in its November 2024 Private Hospital Viability Health Check. It’s a remarkable feat for government to achieve absolutely nothing and avoid scrutiny, despite signing off on annual premium increases for insurance companies,” Heffernan stressed.

The criticism comes as billions of taxpayer dollars continue to support private health participation through government subsidies. The health insurance rebate is costing taxpayers about $8 billion a year, while the Medicare Levy Surcharge Exemption is costing about $3 billion a year. The $11 billion are subsidies transferred from taxpayers to fund private health insurance.

At the same time, questions are intensifying over whether consumers are receiving value from the private health insurance system.

The AMA’s latest Private Health Insurance Report Card has found that 360,000 consumers have dumped their gold-tier policies since 2020 while insurers’ profits rose by 50% over six years compared to patient benefit payouts increasing only 18%. Australians holding policies with exclusions had also risen from approximately 200,000 in 2002 to around four million in 2025.

The latest APRA data also shows the benefits ratio paid by health insurers remains below expectations, sitting at 83% for the quarter and around 85% year to date, well short of the 90% benchmark the government previously indicated it expected.

Heffernan said stronger accountability measures are essential to restore confidence and ensure insurers and hospitals operate on fairer terms.

“Health insurers must be held to account with a Mandatory Code of Conduct for contracting with private hospitals. An arbitration model with price transparency, overseen by the ACCC, is essential in tandem with the 90% guarantee to ensure consistency and fair terms,” Heffernan emphasised.

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