Policy reforms fail as Australia slips to the bottom for health outcomes

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.

The widening divide between lifespan and ‘healthspan’ raises questions on the government’s investment of taxpayer dollars in healthcare and how escalating patient costs are compounding the problem.

Australians pay $44 billion annually in out-of-pocket healthcare costs. At the same time, three in five consumers live with at least one chronic condition, while two in five live with two or more chronic conditions. Against this backdrop, the Australian Medical Association (AMA) has launched a new campaign arguing that public debate has focused on the wrong culprit when it comes to rising out-of-pocket gaps facing patients.

AMA President Dr Danielle McMullen said the The Medicare Gap campaign seeks to help patients understand the patchwork and piecemeal nature of Medicare funding across general practice, specialist consultations and surgery.

“Doctors have become a handy target for some people in discussions about the cost of healthcare,” Dr McMullen said. “But the reality is that the system is failing us, including in general practice, with a woefully out-of-date rebate structure that does not support GPs to provide the care they need to provide to patients.”

The financial burden facing patients is now translating directly into delayed care. Research by the Australian Bureau of Statistics, La Trobe University and Patients Australia shows up to 20% of Australians are delaying or skipping specialist appointments because of cost. The Grattan Institute estimates more than one million Australians each year miss out on seeing a specialist because they simply cannot afford to do so.

The trend is already visible in Medicare data. Despite GP attendances increasing by 4% over the past five years, initial specialist consultations have fallen by 8%, leaving around 400,000 fewer Australians accessing their specialist appointment after receiving a referral.

As affordability deteriorates, the Federal Government is pursuing reforms on two parallel fronts.

The Department of Health has opened its second consultation in a specialist-affordability series, ‘Fee Transparency in Health Care’, examining informed financial consent (IFC) and split billing, with submissions closing on August 5. The consultation paper argues that informed financial consent is not currently established as an enforceable patient right, with existing obligations fragmented across professional standards and general consumer law. Reform options range from expanding the Professional Services Review to creating a dedicated regulator.

Split billing by specialists has emerged as a particular concern for private health insurers. The consultation describes the practice as separating a single episode of care across multiple billing arrangements, often through administration or booking fees, in ways that can circumvent no-gap and known-gap arrangements. Private Healthcare Australia (PHA) cites research finding where 29% of patients were charged administration or booking fees, with consumers potentially paying $20 million in hidden fees and deposits.

Running alongside the consultation is the Health Legislation Amendment (Improving Choice and Transparency for Private Health Consumers) Bill 2026, which would require publication of individual specialists’ fees on the Medical Costs Finder using Medicare, hospital and insurer billing data. The Senate’s Community Affairs Legislation Committee reported on the Bill on April 15, and the legislation remains before the House of Representatives.

Federal Health Minister Mark Butler has argued that voluntary disclosure failed, noting that only around 88 of more than 6,000 eligible specialists chose to display their fees on the first iteration of the Medical Costs Finder.

“Specialists and private health funds have been given the opportunity to be upfront about patient costs and out of pocket expenses but frankly, have failed to do so,” said Minister Butler.

Yet transparency itself is not without controversy. There are legitimate concerns that publicly displaying specialist fees could produce unintended consequences by encouraging specialists to align their fees, potentially at the upper end of the market, driving overall costs even higher. Equally problematic is the risk that patients may interpret higher prices as a proxy for better quality, despite there being no evidence to support such an association.

Independent Member for Kooyong, Dr Monique Ryan, has argued that fee transparency should therefore be accompanied by measures of clinical outcomes, including complication rates and patient-reported outcomes, allowing consumers to assess value rather than price alone.

The legislation also targets private health insurers directly. It would prohibit ‘product phoenixing’, the practice of closing an insurance product before reopening a near-identical version at a higher price, and require insurers to obtain ministerial approval for premiums on new products and for changes that reduce the value or level of cover offered under existing policies.

The Department’s Impact Analysis estimates the reforms would impose additional regulatory costs averaging around $17,000 annually for each of the 28 insurers, while identifying reduced flexibility to respond to weaker-than-expected product margins as the most significant consequence for the sector.

While governments focus on transparency, the AMA argues they are overlooking the structural funding failure underpinning specialist affordability.

“Sadly, what’s been missing from the ongoing debate about specialist fees is a clear explanation about why the gaps are so much higher for specialist consultations relative to say, GP consultations or surgeries and procedures,” Dr McMullen said. “This is a policy area that’s been forgotten by successive governments. In stark terms, Medicare funds about 89% of general practice, and Medicare and Medicare-supported private health insurance provides about 80% of private health funding. But for specialist consultations outside the hospital, it’s at best 53%.”

Yet funding shortfalls tell only part of the story.

Evidence also suggests some medical specialists are charging exorbitant fees amounting to price gouging in certain cases. Data released last year shows some psychiatrists are charging up to $950 and obstetricians up to $650 for a first appointment. There have also been credible reports of anaesthetists and surgeons charging patients hidden out-of-pocket costs up to $5,000, disguised as ‘booking’ or ‘administrative’ fees with no corresponding MBS item number attached.

Dr McMullen acknowledged that patients face a bewildering maze of funding arrangements even when they hold private health insurance.

“Our Uncovering the Gaps in Private Health resource highlights the many permutations and combinations that can lead to a gap. Every insurer has a different rebate, despite being labelled with the same government-endorsed gold, silver or bronze stamp,” she explained. “As we show, a $7 dollar fee variation can lead to an $863 increase in the out-of-pocket cost for a patient, and huge windfall for the insurer. Doctors need dozens of different fees for the same service, as insurers can’t agree on a single rebate. Meanwhile the Medicare rebate never varies. No wonder everyone’s confused.”

The economics of private health insurance further complicate the debate. Only a fraction of consumers’ premiums actually pays for doctors’ care. Management expenses and profits account for 16% of insurer costs, compared with just 12% spent on doctors’ services claimed by patients. Between 2019 and 2025, insurers’ net profits increased by 40%, while management expenses rose by 51%.

For the AMA, these figures reinforce a broader argument that successive governments have layered complexity onto an already fractured system without addressing its underlying weakness.

“Rather than continue to add more complexity, additional programs and more ribbon cutting outside new models of care, let’s do the right thing and fix the root cause of the problem, a lack of investment in patient rebates,” Dr McMullen said.

Yet the debate ultimately extends beyond Medicare gaps, specialist fees and insurer transparency. Australia’s growing ‘morbidity gap’ or ‘sickspan’ poses a more profound policy challenge. If Australians are spending nearly 14 years in illness or disability, the central question becomes not simply how healthcare is funded, but what the system is designed to achieve.

How should governments reward keeping people healthy rather than simply treating disease? And how should the health system capture meaningful data showing whether illness is prevented, people remain healthier for longer, and treatment genuinely leaves patients feeling and functioning better?

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