A consultation paper from the Department of Health, Disability and Ageing has put forward options for private health sector reform that are likely to increase revenue for private hospitals and put upwards pressure on private health insurance premiums. According to a submission to the consultation by health policy analyst Charles Maskell-Knight PSM, the options presented in the paper will potentially increase private hospital revenue while increasing private health insurance premiums.
The submission says the Government should do a thorough analysis of the state of the private hospital sector before progressing any of the options in the paper.
Maskell-Knight writes that there needs to be annual mandatory reporting of financial data followed by forensic accounting to understand the true state of the sector.
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The Private Health Sector Reform Consultation Paper 1 includes options that will explicitly provide extra funding to the private hospital sector, resulting in upwards pressure on private health insurance premiums.
Other options are likely to result in additional funding flowing to private hospitals, also placing upwards pressure on private health insurance premiums.
These options would also result in a redistribution of the incidence of premium obligations from higher cost policies to lower cost policies covering a more restrictive range of services.
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Maskell-Knight notes that the private hospital sector has been claiming it is going bankrupt, despite ABS data showing 88.1 percent of private hospital businesses made a profit or broke even in 2024-25, which is the fifth best of the 94 industry sectors reported on by the ABS.
The paper does not provide any modelling, and is generally devoid of helpful data about the current situation, such as information on how many and what proportion of separations in established regional private hospitals are currently paid for under the second-tier benefit.
Without this information, it is impossible to make any sensible judgement about the potential impact of the option to increase the second-tier benefits from 85 percent to 100 percent of the average contracted rate for these hospitals.
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The options presented in the paper are likely to increase revenue for private hospitals, which could lead to higher private health insurance premiums, having significant implications for policyholders.
The submission includes comments on specific options in the consultation paper, such as allowing overseas-trained psychiatrists to practice in private hospitals, increased access and choice to different models of private maternity care, and shorter waiting PHI periods for private provided pregnancy and birth.
Maskell-Knight worked on private health insurance policy in the Department of Health on a number of occasions between 1994 and 2018 for a total of about ten years, and since retiring from the public service in 2021, he has written extensively on private health insurance issues.