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Federal Budget 2026
THE existential crises facing private hospitals and their 5.14 million patient admissions each year have largely manifested, and only worsened, due to the neglect of the Albanese Government. It has lacked the courage to address the causes of collapsed viability in the private hospital sector and its 2026 Federal Budget is no exception. Healthcare in Australia is now set to get much worse.
Despite awarding annual premium hikes, the Albanese Government has been MIA allowing health insurers to underpay private hospitals for treatments and services by more than $4 billion since 2022. Private hospital utilisation has risen above pre-Covid levels for the last two years, but the payment ratio from health insurers is well below the pre-Covid 90% at just 86%.
The Albanese Government has its head in the sand, choosing to ignore the realities impacting hospitals on top of the systemic insurer funding shortfall:
- The worsening cost-of-living crisis with runaway inflation impacting power and all hospital supplies and services;
- Additional and protracted fuel crisis costs, extra delivery surcharges and higher costs for plastic and rubber items like syringes, IV bags and gloves, and the shortage and exorbitant cost of diesel which is critical for hospital back-up generators;
- Looming nurse wage increases of up to 35% from 30 June 2026, applicable to 60,000 nurses employed across private hospitals;
- Breaking faith with older Australians by cutting the private health insurance rebate for those aged 65+. A couple aged 70 can expect to see their premiums increase by over $1,600 a year. This cohort accounts for over 2.5 million private hospital admissions each year.
The <strong/>
Failure to Address 90% Payout Ratio
In March 2025, the Albanese Government insisted health insurers lift their payout ratio to private hospitals or be forced to do so. The government cited 90% as its expectation.
More than a year later and the government has, again, side-stepped its own ultimatum to allow health insurers to pocket record profits from the premiums people pay, while private hospitals face higher costs they cannot recoup, leading to more closures and service cancellations.
Every private hospital service closure means more pressure on already overwhelmed public hospitals and longer waits for Australians needing surgery, acute mental health care and rehabilitation.
Health insurers should be held to account with a Mandatory Code of Conduct for contracting with private hospitals. An arbitration model with price transparency, overseen by the ACCC, is essential in-tandem with the 90% guarantee to ensure consistency and fair terms across the sector. It is a system rife with insurer abuses.
Public Patients in Private Hospitals
With 940,000 Australians languishing on public hospital waiting lists, dedicated funding to alleviate this patient load through private hospitals should have been a priority. It's time to do away with the ad hoc use of private hospital services and replace it with a dedicated long-term program to ensure timely care for patients. Some 20,000 patients are waiting beyond the threshold for their clinical condition. This is another missed opportunity to fix the failing hospital system.
Private Patients in Public Hospitals
There are a disproportionate number of private patients taking public hospital beds. Private patients in state-run public hospitals account for 11% or 805,000 admissions. NSW is the standout with 19% of patients being privately insured in its public hospitals. When states are hooked on private patient dollars, the federal government needed to put the squeeze on the funding drip.
Excluding Private Hospitals as Critical Infrastructure
Despite the leading role played by private hospitals during the Covid pandemic, the government has failed to classify all private hospitals (not just those with ICUs) as critical infrastructure. This would enhance capacity for surge response, including during disasters, while ensuring all hospitals have access to government assistance to meet emerging challenges.
Excluding Private Hospitals from the Net Zero Transition Fund
Australian hospitals account for 2.4% of Australia's total greenhouse gas emissions. Unlike public hospitals, private hospitals do not have access to funding for climate sustainability and are excluded from the government's Net Zero Transition Fund. This fund should have been expanded to capture climate mitigation opportunities in private hospitals.
Specialist Training Programs
Specialist training programs, which provide a suite of mentored, practical training for surgeons, psychiatrists and other practitioners, are under threat. A review by the Federal Government risks slashing this vital, comprehensive surgical and clinical training for the future medical workforce. It must be saved. Meanwhile, the Psychiatry Workforce Program is failing to keep pace with mental health needs. There was no mention of funding these vital training places in the Federal Budget.
Moratorium on Overseas-Trained Psychiatrists
For more than three years private hospitals have urged the government to ease the antiquated moratorium that prevents overseas-trained doctors, especially psychiatrists, already living in Australia from working in acute private hospitals. It would cost government nothing, but free-up psychiatrists to practice where severe-needs mental health patients are falling through the cracks, in turn, easing the burden on GPs and reducing public hospital Emergency Department traffic.
During a deep, protracted national mental health crisis, the Albanese Government should be pulling out all stops to address the needs of mental health patients, especially those at the severe end of disorders and take pressure off public hospital Emergency Departments. The government has, again, failed to ensure mental health patients get the care and attention they need.
Nurses Award Hikes
No recognition of the looming (from 30 June 2026) nurse wages increases of up to 35% across the 60,000 nurses private hospitals employ. Unlike public hospitals, where these costs are simply picked up by taxpayers, there is no capacity for private hospitals absorb this massive increase to around 60% of their cost base.
Hospital in the Home
No recognition that private hospitals can, and should, provide Hospital in the Home services for patients. This is a much-needed reform. Changes to make health insurers cover these services would cost the government nothing, but provide innovative care options for patients. Another reform gone begging.
<strong>The Ugly
Cutting PHI Rebates for People Aged 65+
This major impost on older Australians will have dire consequences for their healthcare and the public hospital system. It breaches faith with older Australians for whom private health insurance rebates are baked into household budgets.
We reject the throwaway line that there is 'no policy intent' for the higher rebate for those aged 65+. It always recognised that they are typically on fixed incomes and high users of hospital services. Keeping them in private health insurance takes massive pressure off public hospitals.
Some 3 million Australians aged 65 and over currently holder health insurance. Over 2.5 million admissions in private hospitals last year were people aged 65 or over. Any portion of that load shifting to public hospitals sees patient wellbeing, waiting lists and the public health system even worse off than the current entrenched rolling disaster.
Some estimates put the exodus of people dumping their insurance entirely at 60,000. But even more are likely to downgrade their cover from Gold to Silver. This would see those patients denied cover for many conditions, including cataracts and joint replacements, which older people need.
It means they'll have nowhere to go but onto a public hospital waiting list. Public hospital waiting times for cataract surgery already run to two-and-a-have years, while joint replacement surgery is typically three years. That's a long time to have your sight impaired of be immobile and in pain. These waits cause co-morbidities and detrimentally impact patient mental health. These will only get worse.
It is also false economy. This measure will likely cost government more than it saves as older patients with high-end needs flood public hospitals where the taxpayer picks up 100% of their treatment costs, rather than paying most of their own way as insured patients in private hospitals.
-ENDS-
Previous Media Centre:
21/4/2026 Hospitals warn patients will suffer without budget reform