Minister fumbles insurance funding fix

Wrong numbers... Health Minister Mark Butler has some recalculating to do.

FEDERAL Health Minister Mark Butler's claim that health insurers are stepping up to pay more to private hospitals is wrong. We now know it is based on false data and flawed analysis. The government needs to fess up and address this blunder quickly.

On 25 June 2025, during a Parliament House press conference, Minister Butler declared:

"I'm pleased to report that there has been a material increase in the benefits ratio, the amount of money that private health insurers have been paying to hospitals, and that the benefits ratio is likely to reach around 87% in the financial year".

"At the time, the Minister did not provide any evidence for this claim. After a survey of APHA members found no improvement in contract/indexation rates or ex gratia payments, we then wrote to Minister Butler seeking an explanation," APHA CEO Brett Heffernan explained.

"What we got in response was truly bizarre. On 23 July the Minister's office advised in writing:

"Based on information provided by insurers, the benefits ratio is expected to continue to increase, from 85.5% in 2023-24 to around 87% in 2024-25. I note the benefits in this ratio are inclusive of the net risk equalisation special account and state ambulance levies".

"In fact, neither the net risk equalisation pool nor state ambulance levies have ever been included in calculating the ratio of payments because neither is paid to private hospitals.

"Risk equalisation partially compensates insurers with a riskier demographic profile by redistributing money from this account to insurers paying higher than average benefits. It's an insurance pool for insurers. It does not add to patient or hospital payments it just spreads the load for insurers. Including it is a classic case of double counting.

"The state ambulance levy is paid by insurers to state and territory governments. Ambulance cover features in many insurance policies so it is actually paid by policyholders, while private hospitals pay ambulance service fees for patient transfers. The levy is not paid to private hospitals.

"Further, the benefits ratio in 2023-24 was 84%, not 85.5%. We raised these errors with the Minister's office on 30 July. As yet we've had no response.

"It's pretty clear the Minister has been sold a pup by the insurers. In reality, payments to private hospitals have not improved as the Minister claimed. Rather, the goalposts have been clumsily and deceivingly shifted to include unrelated items that distort the figures.

"Fudging the numbers won't cut it. The Minister's public ultimatum to health insurers in March to increase the benefits ratio to private hospitals within three months could not be clearer and has failed to deliver. The Minister must act swiftly to fix this glaring error and hold insurers to account."

Minister Bulter's public comments on this need have been unambiguous:

• On 4 March 2025, via The Australian newspaper, he put the health insurance industry on notice "to take action on payments to private hospitals within the next three months, directing they increase funding to a greater proportion of benefits". If not, he "threatened regulatory action".
• On 7 April 2025, he reiterated the call at the AFR Health Summit, saying: "There is no question there's been a structural shift of where the money is going in the system and there is a structural shift downwards for private hospitals. There has been a shift up in profitability and management expenses of insurers". Which is why I've said I think there needs to be a lift in the benefits payments ratio from insurers to hospitals".

"The Minister's ironclad commitment insisting health insurers pay more from their growing coffers, boasting profits and management fees of $5.5 billion a year, to private hospitals or be regulated into doing so, has failed to get his stated result," Mr Heffernan said.

"This error in the government's funding analysis exposed, Minister Butler needs to regulate insurers to reinstate the 88% benefits funding ratio as he promised more than five months ago."

-ENDS-

Next Media Centre:
15/8/2025 PC supports reforms to strengthen healthcare

Previous Media Centre:
18/7/2025 Why bundled payments fail maternity patients