Introduction by Croakey: Options for private health sector reform put forward in a consultation paper from the Department of Health, Disability and Ageing are likely to increase revenue for private hospitals and thus put upwards pressure on private health insurance premiums.
That’s according to a submission to the consultation by health policy analyst Charles Maskell-Knight PSM, author of The Zap column.
His submission, which can be read in full here, says the Government should do a comprehensive analysis of the state of the private hospital sector before progressing any of the options in the paper.
“There needs to be annual mandatory reporting of financial data followed by forensic accounting to unpick the impact of related-party arrangements so decision makers can understand the true state of the sector,” Maskell-Knight writes.
Below are the submission’s introductory comments.
Charles Maskell-Knight writes:
When commenting on the private health reform consultation paper issued in January last year, I wrote that it did not identify the problem it was trying to address.
Eighteen months later, the Private Health Sector Reform Consultation Paper 1 still does not include a clear statement of the overall objective, other than “improving the private healthcare sector” – a statement so broad as to be devoid of any meaning.
Some of the options it includes will explicitly provide extra funding to the private hospital sector – and hence place upwards pressure on private health insurance premiums.
Others are likely to result in additional funding flowing to private hospitals – and hence place upwards pressure on private health insurance premiums.
Others appear intended to make insurance policies covering a wider range of services more attractive, thus resulting in additional funding flowing to private hospitals – and hence place 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.
Other options can hardly be characterised as reforms at all – “sector education… to raise awareness of models of private sector maternity care available and dispel myths about regulatory barriers to innovation” – and are hardly likely to have any material impact on anything.
Overall, the options in the paper will potentially increase private hospital revenue while increasing private health insurance premiums.
Public vs private interest
I can only assume this is responding to the continued squawking by the private hospital sector that it is going bankrupt – despite ABS data showing 88.1 percent of private hospital businesses made a profit or broke even in 2024-25, compared with 78.7 percent the previous year, and 80.8 percent in 2022-23.
The 2024-5 performance is the fifth best of the 94 industry sectors reported on by the ABS.
It is not often that I find myself agreeing with the Private Healthcare Association. However, I absolutely agree with CEO Dr Rachel David when she said “every significant reform proposal should be supported by robust independent modelling of its likely impact on premiums before any decisions are made”.
I would add that the modelling should also estimate the impact on the private hospital sector.
There is a clear public interest in assessing the relative impact and benefit of imposing premium increases on millions of policyholders in order to deliver increased revenue for a sector in which most entities are already doing fairly well.
Not only does the paper not provide any modelling, but it is also generally devoid of helpful data about the current situation.
For example, it proposes “increasing the second-tier benefits from 85 percent to 100 percent [of the average contracted rate] for established regional private hospitals”.
In assessing this option, it would be helpful to know how many and what proportion of separations in these hospitals are currently paid for under the second-tier benefit. Absent this information it is impossible to make any sensible judgement about the potential impact of the option.
There are many other options where data available to the Department would assist in assessment and evaluation.
Click here to read the full submission, with comments on specific options in the consultation paper, which include:
- Allowing overseas-trained psychiatrists to practice in private hospitals
- Increased access and choice to different models of private maternity care
- Shorter waiting PHI periods for private provided pregnancy and birth
- Review of MBS items for paediatricians
- PHI product simplification.
Author details
Charles Maskell-Knight PSM 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. He was the policy lead in the development of the Private Health Insurance Act 2007, and headed the team providing support to the Private Health Ministerial Advisory Committee in 2016-18. Since retiring from the public service in 2021, he has written extensively on private health insurance issues for Croakey Health Media and the Pearls and Irritations blog.
Previously at Croakey: Private health insurance reform proposals are putting the cart before the horse
See Croakey’s archive of articles on private heath insurance and health reform
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