The myth of Medicare and the mirage of private health

Despite the promise of universal health coverage, Australians are increasingly forced to foot the bill for essential care. A new systematic review from the Australian National University (ANU) lays bare the widening cracks in a health system once held up as a global benchmark, revealing a disconnect between health policy and lived experience.

Out-of-pocket costs (OOPC) for healthcare and medicines now account for 14% of the nation’s total health expenditure. Combine that with premiums from private health insurance (PHI), and Australians are funding 26% of the total healthcare spend – ranking the country 12th highest among OECD nations.

While PHI is often promoted as a fast-track to elective surgery, the reality is far more sobering. Policies don’t cover medical consultations outside hospitals, and even within private hospitals, exclusions and benefit caps are increasingly common. The number of Australians covered by exclusionary hospital policies has soared from 6.6 million in 2019 to 8.6 million in 2025. In just over five years, exclusion-laden policies have jumped from 57.7% to 67.6% of all hospital cover.

“High and growing insurance membership does not translate into high private hospital use due to inadequate coverage. The complexity and lack of transparency in insurance policies discourage patients from using private care,” said Brett Heffernan, CEO of the Australian Private Hospitals Association (APHA).

“More than two months ago Federal Health Minister Mark Butler publicly put the health insurance industry on notice, citing their higher profits, higher management fees, but that the ratio of benefits paid to hospitals have fallen. He gave them three months to correct it or he’d regulate them to fix it. More than two months on and nothing has changed.”

For many Australians, especially those with chronic or complex conditions like osteoarthritis, type 2 diabetes, insomnia, or chronic kidney disease, the cost of specialist consultations has become an insurmountable barrier. Rural patients and the elderly are also disproportionately affected. The average out-of-pocket cost for an initial specialist consultation has risen by over 40% in eight years, with follow-ups soaring by more than 55%. Meanwhile, the Medicare rebate has increased by less than 16%.

Long public waitlists only compound the frustration.

The government’s answer? A planned upgrade to the Medical Costs Finder website, promising to list average fees by specialists. But while greater transparency may help some plan ahead, the ANU review makes it clear: for many, no amount of information will close a gap they simply can’t afford.

Professor Yuting Zhang, a health economics expert at the University of Melbourne, warned that publishing cost information is merely window dressing unless it’s backed by a concrete plan to bring fees down – something the government has so far failed to deliver. Her team mapped specialist fees in 2023, revealing the highest costs in rheumatology, followed by neurology and immunology.

For patients taking several medications and managing multiple chronic conditions, the burden becomes crushing. For those diagnosed with cancer, the OOPC for medications post-hospital treatment was a key driver of financial toxicity. At the end of life, medication costs were described as the greatest financial burden.

Meanwhile, the cost of necessary medical devices, from CPAP machines for sleep apnoea to incontinence pads and diabetic footwear, was frequently labelled “unaffordable”. Even when a device was subsidised, replacement parts, maintenance, and accessories added up to overwhelming costs for patients.

The ANU review details heartbreaking lived experiences of young people with spinal muscular atrophy unable to afford specialised bedding or enteral formulas; people with cerebral palsy struggling to maintain wheelchairs; end-of-life patients forced to ration continence supplies.

That Australians with chronic illnesses are being forced to choose between food and healthcare in a country consistently ranked among the best healthcare systems in the world is more than an oversight – it’s a policy failure.

Understanding how people make trade-offs between health, income and basic necessities is essential. If Australia is serious about health equity, it must reckon with the fact that universal coverage, in its current form, is increasingly a myth.

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