Over half of insured Australians received a larger medical bill than anticipated, with specialist fees for in-hospital care rising 22% in three years.
A review of patient experiences and industry data indicates that Australians with private health insurance are increasingly encountering high out-of-pocket expenses, unexpected bills, and policy exclusions, prompting calls for reform from consumer groups and health funds.
Escalating Out-of-Pocket Costs
A survey of 4,000 individuals conducted by Private Healthcare Australia (PHA), the peak body for health funds, found that over half of respondents received a larger medical bill than anticipated. The survey reported that specialist fees for in-hospital care increased by 22% over the past three years, with the median out-of-pocket expense reaching $270.
Data from PHA shows that median gap fees for common surgeries have risen significantly between 2018-19 and 2024-25. Examples include:
- Knee replacements: median gap fee doubled from $560 to $1,080, with 10% of patients paying over $5,300.
- Hip replacements: median out-of-pocket fee of $1,240, with 10% paying over $5,500.
- Cataract surgery: two-thirds of privately insured patients now pay gap fees, a rise from fewer than half six years ago. The median cost is approximately $500, with 10% paying $1,800.
- Children's tonsil removal: typical gap fee of $850, with some specialists charging over $2,200.
The survey also found that 38% of patients received an unexpected bill. Additionally, 29% reported being charged illegal 'administration' or 'booking fees' not visible through Medicare.
Patient Case Examples
Tamara Macpherson, a 55-year-old Melbourne mother of two with private health insurance, incurred $35,000 in out-of-pocket costs following a breast cancer diagnosis. Her nine-hour mastectomy and reconstructive surgery resulted in a $22,000 gap fee. Medicare paid $7,000 and her insurer paid $2,000 for that procedure.
Luan Lawrenson-Woods, a private patient, faced over $30,000 in out-of-pocket costs for surgeries, including an unexpected fee from an assistant surgeon.
Marie Cox required an emergency shoulder replacement after an accident. Despite 40 years with her insurer, Bupa, she was informed the day before surgery that her silver plus policy, downgraded in 2018, did not cover the procedure due to a lack of "accident inclusion." This resulted in a $30,000 bill. The family remortgaged their home and borrowed funds. They pursued their case with Bupa and the Commonwealth Ombudsman without success.
Causes and Perspectives
PHA CEO Dr. Rachel David stated that surgeons charge "wildly different fees" for the same procedure and that there is no evidence higher fees lead to better outcomes.
Private Healthcare Australia: Dr. David noted that affordability issues are causing patients to return to the public system or delay care. PHA advocates for increased consumer protections, better utilization of the healthcare workforce, and more competition among specialists.
Australian Medical Association: AMA President Dr. Danielle McMullen stated that Medicare and private health insurance rebates have not kept pace with health inflation, necessitating out-of-pocket fees. She described insurer contracts with preferred provider doctors as complex, with varying rebate amounts for the same procedure. She noted that egregious overcharging is limited to a small minority of doctors and that 97% of in-hospital procedures involve no gap or a known, capped gap fee.
Surgeons and Specialists: Dr. Susan Morris, a Melbourne vascular surgeon, stated that some specialists exploit the system by charging high out-of-pocket fees. The Royal Australasian College of Surgeons acknowledged concerns but stated there is no evidence of widespread systemic overcharging, noting that Medicare rebates have not kept pace with inflation.
Government: Federal Health Minister Mark Butler called non-GP specialist fees "out of control" and stated the government is seeking options to curb out-of-pocket costs, including upgrading the Medical Costs Finder website.
Consumer Groups: Patients Australia CEO Lisa Robins said outdated systems and high fees force people to delay or forgo care. Consumers Health Forum of Australia CEO Elizabeth Deveny emphasized that policies should be easily understandable and that recurrent exclusion issues highlight a need for systemic change.
Policy Exclusions and Industry Context
The incident involving Marie Cox highlights issues with policy exclusions. Experts explain that "accident inclusion" is a key add-on that provides higher-level benefits for accidental injuries, but it may not be explicitly listed on standard Private Health Summary documents. Orthopaedic surgeons report an increase in patients discovering their policies exclude specific procedures.
This occurs amid rising private health insurance premiums, with a 4.41% average increase approved in 2024. Since 2020, approximately 360,000 people have downgraded from comprehensive gold policies to cheaper silver or bronze options, which often include more exclusions. Industry representatives state that nearly 70% of private hospital policies now have restrictions.
Dr. David noted that gold policies are becoming expensive because they are primarily chosen by those most likely to claim, and that the current tiered system might not be sustainable for gold products without intervention.
Calls for Reform
Growing discontent has prompted calls for industry reform, including:
- Price benchmarks for hospital services.
- A mandatory code of conduct for insurers.
- An independent regulatory authority.
The Australian Private Hospitals Association estimates a billion-dollar annual shortfall for hospitals due to uninsured or under-insured patients.
Bupa acknowledged the stressful nature of the Cox family's situation but confirmed their policy did not cover the surgery, advising customers to contact them to understand their coverage.
Context
- About 55% of Australians have private health insurance.
- The private system delivers roughly two-thirds of all planned surgery nationwide.
- Some Victorians wait up to 1,460 days (four years) for a routine appointment at a vascular clinic.