Ramsay wants reform. But is private healthcare delivering value?

A recent Ramsay Health Care report has attracted criticism over the way Australia’s private health system is being framed, exposing an important question about what private healthcare is actually delivering.

The nation has a two-tier health system where access is determined, to a significant extent, by the ability to pay. However, it underperforms on perhaps the most important metric of all, keeping people healthy for longer.

Australians can expect to live to 83 years of age, yet a new international study reveals that almost 14 of those years are now spent living with illness or disability. That equates to around one-sixth of life and is the second worst result globally, behind only the United States.

That should make the debate over private hospitals considerably more uncomfortable than a familiar argument about who gets paid what.

Around 45% of Australians have private hospital cover, and private hospitals are responsible for about 70% of elective surgeries. Private healthcare is therefore not some marginal adjunct to Medicare.

The private health insurance rebate means that premiums are subsidised by taxpayers. The total cost of the rebate is about $12 billion a year. The rebate itself is around $8 billion. But the cost of this policy also includes the direct revenue foregone through the rebate, around $1.5 billion, and exemptions from the Medicare Levy Surcharge, estimated at $2.5 billion.

Yet despite that substantial public investment, the effect of private health on public waiting lists is negligible because increases in private patient volume is offset by comparable reductions in public patient volume.

That is precisely why the latest position from the country’s largest private hospital operator has attracted attention.

Ramsay Health Care’s report, developed with Deloitte Access Economics, argues that private hospital margins have collapsed while insurer profits have surged 28% since the pandemic. The report calls on the federal government to overhaul contract negotiations and establish public-private partnerships to utilise private capacity for public patients.

If private healthcare is receiving substantial public support, is the central problem really just that private hospitals are not being paid enough or is Australia failing to extract enough value from the entire system?

Former Grattan Institute health-policy expert Stephen Duckett publicly responded to the report, taking aim at its opening premise. He quotes the report’s claim that “Australia’s high-performing health system relies on a structured public–private model… Private hospitals relieve pressure on the public system, support patient choice and timely access, sustain regional services, enable specialist practice, and contribute to workforce development and clinical innovation” and asks how many errors are contained in that framing and how it should be rewritten to be accurate and fair.

Ramsay Health Care has experienced a powerful operational turnaround and stock price surge in FY2026. Driven by an aggressive internal efficiency overhaul led by new CEO Natalie Davis, the private hospital operator has strongly rebounded from previous bottom-line margin constraints. The business delivered a materially stronger financial year, with revenue increasing 8.0% to $5.25 billion and underlying EBIT rising 11.2% to $639.8 million. Ramsay described the result as benefiting from cost-management initiatives alongside higher activity, greater patient acuity, improved theatre utilisation and better private-health-insurance indexation.

The private health model is obsessed with activity, but far less interested in whether patients actually get better. Hospitals are rewarded for doing more procedures, health insurers for managing costs and governments for keeping waiting lists down. But none of those measures answers the question that should sit at the centre of healthcare: did the intervention improve the patient’s health, quality of life or ability to function?

The paradox is that a system paid primarily when people are sick has limited incentive to keep them healthy.

Australia does not have to choose between an entirely public system and the status quo. Taiwan shows how a single purchaser can negotiate with public and private providers, Beveridge-style systems put far greater emphasis on aligning public funding with public delivery, and the Netherlands demonstrates that private insurers can operate within a tightly regulated system built around universal coverage and stronger accountability.

The lesson is not to copy another country wholesale. It is that Australia has choices and simply putting more money into the existing public-private machinery without demanding better patient outcomes risks preserving the system that is focused on treating illness rather than delivering better health for taxpayers.

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