Dr Rachel David spoke to 6PR radio about the viability of private hospitals

Well, look, we read the report that was put out by the APHA, which is a group that represents some of the private hospitals. And our first reaction was really that it was a bit tone deaf. What they’re doing is they’re asking people who have paid their premiums and paid top dollar for their health insurance to start paying extra fees to be treated in a private hospital, right in the middle of a cost of living crisis. Now, the health funds are not going to let that happen, and the federal government’s not going to let that happen. In fact, the federal government has just done a viability review of private hospitals which showed that on average their profits, even in what was a pretty tough year for everyone, ’22-’23, was a margin of 7 to 8 per cent. And what they seem to be asking for in this proposal is a margin of 25 per cent, which absolutely no business is getting out there in the economy at the moment.

And we understand that they’ve done it tough, like in the pandemic and in the inflationary environment after like every other business has in Australia. But the answer is not to grab more money out of consumers’ pockets. It just won’t work. People will drop their health insurance, they’ll stop using the private sector and they’ll be no better off.

Look, I just want to address this issue about profit. And I think I heard the word $5 billion worth of profit come out. But the reality is that when the health funds did start to accumulate a lot of cash during the pandemic when there were lockdowns, there was a formal agreement made with the government that money would be paid back to members that was overseen by the ACCC, that had a very clear view that if people were paying their premiums and they couldn’t use the hospital or an allied health service, that was a fee for no service and the money had to be returned to members.

Now, $4.73 billion was returned to customers as a consequence of that process. Now, for every dollar that people spend on premiums, 88 cents is returned in claims, which is the normal rate. It’s happening right now.

And in addition to that, that’s far higher than any other form of insurance that you can possibly buy whether it’s car insurance, home and contents or whatever, that’s about as high as you can get in terms of a return on premium spend. So look, there’s no money left for large above inflation increases to providers unless it comes out of the pockets of consumers. And we will be extremely reluctant to do that any more than is absolutely necessary in a cost of living crisis.

Well, Oly, this is where I’m also a little confused because we have more private hospital beds now than we did before the pandemic. There have been some hospital closures, but at the same time as those hospitals have closed, others have opened, and some of the hospitals that have been listed in the media as having closed are actually still open, but they’ve been taken over by another operator. Now, that’s not to say that there are some particular services that are struggling. One of them was mentioned and that was maternity. But the reason that maternity services are struggling in private is unrelated to private health insurance. It’s for a few reasons: a lack of workforce, the fact that people are having far fewer babies as a consequence of the cost of living crisis, and the fact that the cost of managing a pregnancy in the doctor’s rooms, which the health funds can’t cover – that’s the Medicare side – has become unaffordable for a lot of young families during the cost of living crisis.

Now, that’s something that everybody needs to work together to address, but it’s not something that private health insurance can fix on its own.