By Dr Rachel David
If you’re one of the 15 million Australians paying for health insurance, you’ve probably wondered at some point whether it’s really worth it.
That’s understandable. Health insurance can feel like a grudge purchase when you’re healthy and life is going smoothly. But Australia’s private health system was never designed to be about claiming back more on your glasses every year.
Its real value is much bigger than that.
Australia has built something rare: a healthcare system that combines universal Medicare with one of the highest rates of health insurance coverage in the world. Unlike Britain’s overwhelmingly public model or America’s heavily private one, Australia’s mixed system spreads responsibility across taxpayers, governments and individuals who can afford to contribute towards their own care.
About 55 per cent of Australians do exactly that through health insurance, and membership has been growing consistently for five years. Their contributions help fund billions of dollars in additional hospital capacity, infrastructure and specialist care every year.
The result is one of the world’s best-performing health systems.
Australians enjoy among the highest life expectancies in the world, strong cancer survival rates and relatively low rates of avoidable death. That success is not accidental. It reflects decades of bipartisan support for a model where public and private healthcare work together rather than compete.
Private hospitals perform about two-thirds of essential non-emergency surgery in Australia and deliver more than half of all mental health inpatient care. During the pandemic, they also provided critical surge capacity when public hospitals came under enormous pressure.
Far from undermining Medicare, health insurance helps sustain it.
Every time someone who can afford insurance chooses to use the private system, it eases pressure on public hospitals and frees up taxpayer-funded care for Australians who rely on it. That is why governments of both political persuasions have long supported private health insurance through rebates and other policies designed to encourage participation.
Importantly, Australians who invest in health cover also receive meaningful benefits themselves.
Health insurance gives you greater choice and faster access to care. It means you can choose your own doctor who is fully responsible for your care, choose your hospital and avoid lengthy waits for treatment, including surgery, that can leave you living in pain or unable to work.
If you need a knee replacement because arthritis has stopped you walking properly, insurance can mean having surgery within weeks rather than waiting months or even more than a year in the public system.
If you receive a cancer diagnosis, it can provide rapid access to your choice of treatment and specialist care at one of the most frightening moments of your life.
That reality often only becomes fully apparent when serious illness strikes you or someone close to you.
As SMH finance commentator Nicole Pedersen-McKinnon wrote after facing breast cancer at 45, health insurance allowed her to move quickly to the treatment she wanted, including reconstructive surgery, so she could focus on getting well.
Health insurance is not designed to ensure every customer gets back exactly what they paid each year. No insurance works that way.
Home insurance can seem unnecessary until your house floods. Income protection can feel expensive until illness stops you working. Health insurance is similar. Its value lies in protection against the potentially enormous financial, physical and emotional costs of major illness or surgery.
And modern healthcare is extraordinarily expensive.
As Australians live longer and medical technology advances, health funds are increasingly paying hospital claims exceeding $10,000 per patient for complex procedures and treatment. Common illnesses such as cancer, diabetes and heart disease can ultimately cost hundreds of thousands of dollars to manage across surgery, rehabilitation, hospital admissions and ongoing care.
That shared funding pool is one of the strengths of Australia’s system. Millions of Australians contribute so that when people experience catastrophic illness or require major surgery, care is available when they need it.
The broader community benefits too.
Independent reviews* have repeatedly found government support for health insurance saves taxpayers money overall. Without a strong private system, millions more Australians would depend entirely on already stretched public hospitals.
Affordability matters, particularly as households face cost-of-living pressures. Consumers rightly expect better value and lower out-of-pocket costs, and health funds, hospitals, doctors and governments all have work to do to keep the system sustainable.
But Australians should be careful about taking for granted a healthcare model that most countries would envy. Our system works because millions of people who can contribute towards their own care choose to do so, helping to create more capacity, more choice and shorter waits across the system for everyone.
Most people only fully understand the value of health insurance on one of the worst days of their life when a loved one is diagnosed with a serious disease, when chronic pain becomes unbearable, or when surgery suddenly cannot wait. By then, the value is no longer theoretical. It is deeply personal.
Dr Rachel David is CEO of Private Healthcare Australia, the peak body for health insurance funds
* A 2023 report by Finity for the then Department of Health and Aged Care concluded there are net savings from the PHI Rebate because offsets to public hospital costs are larger than the subsidy costs.
In 2023, University of Newcastle researchers found that on average, the Australian Government saves $554 for each person it helps with its health insurance subsidies per year.