Failed accountability

APHA's column in the March-April edition of Australian Doctor.

DESPITE the series of scandals engulfing private health insurance the Albanese Government has seemingly washed its hands of holding the industry to account. Meanwhile, patients, private hospitals and their employees, and the healthcare system, are plunged into chaos.

The Australian Prudential Regulatory Authority (APRA) reports that over the last three years, health insurance companies have short-changed private hospitals on patient payments by more than $3 billion.

In 2021, the cost of care and the payments from insurers to hospitals matched. But from 2022 there has been an exponential blowout.

The funding shortfall in 2022 was $659 million, then $1.135 billion in 2023 and last year a whopping $1.254 billion. The insurers' response is they cannot afford to pay the rising costs of healthcare.

However, APRA also reports that over the same three years, health insurance companies pocketed record profits of over $5 billion. On top of that, in 2024 insurers' 'management fees' skyrocketed by 18% in just one year, from $2.82 billion to $3.45 billion.

You'd think it might stir ministerial action. Alas not.

Then last year the Commonwealth Ombudsman lifted the lid on phoenix policies. This loophole-exploiting practice sees health insurers scrap existing products, replace them with near-identical services and sell them at a higher price.

The Federal Health Minister's response was to hold a press conference where he essentially asked if the insurers would please stop it.

No inquiry into how widespread the practice is, how many people have been ripped-off in this way or by how much, nor any mention of recompence for the unwitting victims.

At the very least, the Australian Consumer and Competition Commission (ACCC) might be asked to cast an eye over it regarding potential unconscionable conduct?

Insurers are essentially diddling both ends of the spectrum – gouging members at one end and short-changing hospitals at the other.

But wait. There's more.

Media have reports exposed that, during the contract dispute between BUPA and hospital group Healthscope, BUPA was offering doctors up to $500 per patient to take their business to non-Healthscope hospitals.

Is there a question here as to potential unconscionable conduct or anti-competitive behaviour? In any case, surely it warrants more than a shoulder-shrug from the Federal Government?

In recent weeks the Federal Health Minister, who approves insurance premium increases every year, announced that he has told the insurers to revise down their 2025 premium asks.

This charade plays out annually. Health insurers submit initial ambit claims, the Minister tells them to 'sharpen their pencils'. In the end, the insurers get what they expected.

With last year's average 3.03% premium hike, the insurers pocketed their second biggest profit-ever of $1.85 billion. This was only eclipsed by 2023's record $2.2 billion. Remember, the underpayment for hospital treatments for those years was a staggering $1.135 billion and $1.254 billion, respectively.

It's not hard to bank unprecedented profits when you're flogging dodgy policies and not paying your bills in full.

The Federal Government has a duty to ensure that, as a result of its decisions, consumers are not ripped-off and hospitals are properly paid for the treatments they provide.

The government can mandate that 88 cents-in-the-dollar flows from insurance premiums to hospital care or it can re-direct funds from the rebates on health insurance to meet hospital costs. Either way, there is zero impact on government coffers or patient pockets.

Since 2022 almost 20 private hospitals have closed their doors entirely, 70 services in other private hospitals permanently cancelled, consumer choice has eroded, investment in quality compromised and public hospital waiting lists are longer and deeper.

It causes a cascading run of calamities. Patients' clinical needs are disrupted, having to relocate to another private hospital, often much further away, to get the care they need, or go public.

Local communities lose much-needed healthcare assets. It compounds in regional areas where public and private hospitals often tag-team to provide complementary care.

The jobs of the 69,000 people private hospitals employ, including 38,000 nurses, are at risk. They are often in places where relocating to another private or public hospital is, at best, problematic.

There's a lot at stake. Private hospitals perform 70% of all planned surgery – 1.7 million operations – each year, including hip and knee replacements, malignant breast cancer procedures, hysterectomies and eye surgeries.

They account for 1.6 million medical treatments each year, including the majority (54%) of chemotherapy, as well as 62% of mental health hospitalisations and 80% of in-hospital rehabilitation. Further demise of the sector will be devastating for patients, local jobs and healthcare delivery, while adding more pressure to struggling public hospitals.

Despite years of recognising this deepening crisis, the Federal Government has done nothing to address it. That's not a figurative nothing... it's actually nothing. It begs the question. Why?

The 12.2 million Aussies with hospital insurance deserve an answer.

Brett Heffernan is CEO for the Australian Private Hospitals Association. Published in the March-April Edition of Australian Doctor magazine (available by subscription only).

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5/3/2025 Private hospitals bearing the brunt of bad decisions