The association wants private health sector reforms to begin as soon as annual processes allow and remain in place for at least five years. The Australian Medical Association (AMA) has told the federal government that private health insurer rebates and MBS funding must increase significantly if private hospitals, maternity units, and psychiatric care are to remain sustainable. The Department of Health, Disability and Ageing released the first in a set of three consultation papers in July, examining the options to reform the private health sector. The first paper examined mental health care, maternity care, hospital in the home (HITH) programs, regional private hospitals, private health insurance product simplification, and risk equalisation.
Rebates and MBS funding need urgent increases
The AMA’s submission to the Department of Health, Disability and Ageing (DoHDA) highlights that Medicare Benefits Schedule (MBS) funding and private health insurance rebates have not kept pace with rising costs. This mismatch has led hundreds of thousands of Australians to downgrade their private insurance coverage, reducing their access to care. The association frames private healthcare as a choice, not a substitute for an overburdened public system. While the AMA supports recent modifications to second-tier benefits for rural private hospitals, it says gaps remain in mental health and maternity care.
Dr. Danielle McMullen, AMA president, emphasized the need for product simplification in insurance tiers—gold, silver, and bronze—and greater transparency in how these products work. She noted that the current complexity of insurance tiers often confuses consumers, leading to underutilization of available benefits. The balance between public and private health remains critical, McMullen said, as private care exists to provide choice rather than compensate for systemic public health failures.
The submission also calls for a stronger regulator, noting that small changes in the private health insurance (PHI) system can have significant flow-on effects. “One small change to the PHI system can have significant flow-on effects, so we do think there needs to be an overarching authority, and it needs more serious consideration than it’s received.” The consultation paper itself acknowledged the need for a fit-for-purpose regulator, though the AMA argues this must be a priority rather than an afterthought.
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Currently, the DoHDA is reviewing reforms across mental health, maternity care, hospital-in-the-home (HITH) programs, and regional private hospitals. The AMA’s response focuses on areas where the consultation paper fell short, particularly in mental healthcare and maternity services, where funding gaps and structural issues remain unaddressed.
Mental health care: Safety and workforce risks
The AMA criticized the consultation paper for not addressing key proposals to increase MBS and insurer remuneration for psychiatrist inpatient care. It also rejected a proposal that would exempt internationally trained psychiatrists from seeing patients in person within 48 hours of admission to a private hospital. Under current MBS telehealth rules, new patients admitted via telehealth must be seen within 48 hours by the admitting psychiatrist—a safety measure the AMA warns would be undermined by the exemption, particularly in urban areas where most internationally trained doctors practice. The submission questions whether overseas-trained psychiatrists would be adequately indemnified if complications arose, noting that removing the in-person requirement risks diverting specialists from regional and remote areas where workforce shortages are most acute.
Under current rules, psychiatrists must see patients within 48 hours of admission via telehealth. The AMA warns that exempting overseas-trained doctors from this requirement—particularly in urban areas, could lead to fewer psychiatrists serving regional and remote communities. “Who will indemnify the overseas-trained doctor if something goes wrong?” the submission asks. The proposal would create an exception to the 19AB Medicare rule, allowing internationally trained psychiatrists to access MBS items in private hospitals, often in cities, while potentially removing them from underserved areas.
The AMA did support changes to MBS case-conferencing items, such as allowing conferences to include only the psychiatrist and the patient’s GP, to reduce barriers to care. However, it rejected the paper’s claim that a lack of “awareness” of innovative care models is the main obstacle in private maternity care, calling it “the least of the problems.” Instead, the submission directs attention to state governments and public hospital administrators, arguing that systemic barriers, such as the closure of private maternity units, are the primary issue.
Maternity care: Closures and affordability crises
Over the past five years, more than 14 private maternity units across Australia have closed, and the AMA warns that without intervention, private births will decline to unsustainable levels by 2030. The issue isn’t just awareness, the submission argues, it’s the failure of PHI to index hospital rebates to rising costs, leaving many women unable to afford out-of-pocket expenses or access local care. The AMA notes that even high-risk pregnancies may become unaffordable due to these gaps, forcing women to rely on public hospitals where wait times and capacity issues persist. Without action, the submission states, “by 2030 there won’t be enough private births to keep remaining private maternity units open.”
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The AMA proposes mechanisms to help consumers purchase or upgrade maternity coverage at a discount if they unexpectedly fall pregnant, or to buy standalone maternity insurance if they lack prior coverage. It also urges the government to negotiate with states to allow private obstetricians to work in public hospitals, ensuring patients retain choice. The submission highlights that private obstetric care is increasingly concentrated in urban level four and five public hospitals, where state governments must permit private practitioners to operate alongside public services.
While the AMA broadly supports some reforms, such as HITH program changes and new Type C certification exemptions for older patients and certain procedures, it calls for audits of insurer calculations and greater transparency in second-tier rates to prevent exploitation. The association argues that insurers’ cost calculations often lack scrutiny, leading to unfair pricing structures that disadvantage consumers.
The AMA also supported extending Type C exemption criteria to patients aged five and under, those required to travel more than 100 km for a service, adjunct procedures related to the primary reason for admission, and late-day submissions. It also called for audits of insurer calculations and transparency of second-tier rates to prevent exploitation.
The AMA’s submission reflects a broader tension: insurers are profitable, but funding gaps threaten the sustainability of private healthcare. Without reforms, the association warns, critical services risk further decline. The submission shows that private health insurance must evolve to reflect real-world costs, or the sector’s ability to provide choice, rather than just compensate for public system failures, will continue to erode.
