Butler pledges fix for funding mess Dutton must follow

THREE weeks ago Federal Health Minister Mark Butler issued a public ultimatum to health insurance companies to pay more to private hospitals or he will instruct his department to regulate to make it so within three months. Today he doubled-down on that commitment, saying:

"There has been a structural shift of where the money is going in the system. There is a shift downwards for private hospitals. There has been a shift up in profitability and management expenses of insurers." Mr Butler told a health forum today. "There needs to be a lift in the benefits payments ratio."

Despite there being no detail around the proposal, we very much support the commitment.

Over the last three years the Australian Prudential Regulation Authority (APRA) has revealed that the health insurance industry has short-changed private hospitals by more than $3 billion. That is, that the gap between what the insurers pay hospitals and the actual cost of treatment has blown-out each year.

The insurers' catch cry is they cannot keep pace with the rising cost of health care. But APRA also reports that over the same period the insurers reaped record profits of over $5 billion. That's $2 billion a year in just the last two years.

Quite separately, in 2023-24 the insurers awarded themselves an 18% increase in 'management fees' – reaping another $3.5 billion from the annual premiums Aussies pay.

The result has seen some 20 private hospitals close entirely, while 70 services in other hospitals have been permanently cancelled, including maternity and mental health units. That means less choice and access for insured patients and longer and deeper public hospital waiting lists.

Addressing the record profits and exorbitant management fees of health insurers who are shortchanging private hospitals with historically low funding ratios mirrors APHA's calls for the last six months.

It has come two-and-a-half years too late for many hospitals... and will come too late for those now on the brink of collapse. But it is important recognition by the Minister that the system needs fixing.

Private hospitals shoulder a massive part of Australia's hospital burden. Some 70% of planned surgeries, 62% of acute mental health care, 80% of rehabilitation hospitalisation and much of the many medical treatments Australians rely on every day, like 54% of all chemotherapy.

So far, the Coalition appears unwilling to grasp the nettle of funding reform. Peter Dutton must, at least, match the commitment made by Mr Butler. The issues affecting private hospitals are not volume-related as we suspect the Opposition sees it. When you're being underpaid for the treatment you provide, then performing 10, 100 or 1,000 procedures doesn't matter... you're just compounding the funding shortfall.

Given the depth and breadth of private hospital activity, the healthcare system is too important to abandon to the take-it-or-leave-it negotiation tactics of insurers and their abuse of market power.

Whether that's legislation, regulation or a code of conduct to hold the insurers to account for the premiums they receive from 15 million Australians, we're open to the discussion.

Regardless of who forms government after May 3, private hospitals need a government committed to holding the health insurance industry to account. So in this election campaign, both sides of politics must accept the critical need to reform the funding mess that allows insurance companies to rake in unprecedented profits while dictating pricing in hospital treatments and care.

Anything less will not stop more hospitals from shutting down services or, indeed, closing entirely.

-ENDS-

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