Australians are paying more for cover. But the funding flowing to patient care is not keeping pace with the real cost of delivering surgery.
Over the past three years, more than 400,000 Australians have downgraded from top-tier (“gold”) hospital cover to lower levels of insurance. Many policies now come with exclusions, meaning patients discover they are not fully covered when they need treatment.
“Bronze", "silver" and "gold” labels hide huge differences in exclusions, excesses and clinical coverage, meaning two people on the same tier can face wildly different bills. Australians need real transparency and standardisation so consumers can compare value and know what they’re actually paying for before they need surgery.
At the same time, insurers are returning a smaller share of premiums directly to care than in previous years. Industry data shows benefits paid as a proportion of premiums are sitting in the mid-80% range – down from around 88% historically.
RACS welcomes legislation introduced this week that would ban “product phoenixing” – a practice used by some private health insurers to rebrand or replace policies in ways that drive up premiums without delivering additional value to consumers. But wider reform is needed.
RACS believes Australians deserve stronger guarantees that the vast majority of every premium dollar goes to patient care.
Surgeons are also dealing with a system where:
- Medicare rebates have not kept pace with inflation for decades.
- Private health insurers pay different benefit amounts for the same procedure, sometimes differing by hundreds of dollars. Surgeons are forced to work across dozens of varying fee schedules to reduce patient gaps.
- No-gap payments have failed to keep up with rising healthcare costs for decades.
When Medicare and private insurance benefits fall behind the real cost of operating theatres, staff, equipment and compliance, the shortfall does not vanish. It is either absorbed by hospitals and doctors or passed on to patients. This funding gap is the key driver behind rising out-of-pocket costs. RACS recognises the need to improve the affordability of specialist care. At the same time, we understand many surgeons are already prioritising their patients' needs at personal financial cost and are struggling to keep up.
Fee reform is a two-way street.
If government expects fee restraint, then Medicare must be properly indexed and insurers must ensure a higher proportion of premiums go directly to clinical care. RACS supports a minimum 90% payout ratio so Australians can be confident their premiums are funding treatment, not overhead.
Transparency measures such as the Australian Government's mandatory Medical Costs Finder system can help patients understand fees. But transparency alone will not fix an underfunded system.
Private healthcare plays a critical role in keeping pressure off the public hospital system. If private surgery becomes financially unsustainable, waiting lists in the public sector will inevitably grow.
Australia delivers strong surgical outcomes by international standards. That system has been built on high standards and a functioning public–private balance. Rising premiums must translate into real value for patients – not reduced coverage and higher out-of-pocket costs.
RACS stands ready to work with government and insurers to modernise Medicare, improve consistency in insurer payments, and ensure patients are not left carrying the burden of a funding model that no longer reflects the real cost of safe surgical care.