Out-of-pocket expenses for Australians with private hospital cover have risen by 71% over the past five years, according to new data analysed by Money.com.au.
These gap payments – costs not covered by Medicare or private health insurance – have increased at a much faster rate than overall hospital expenses.
Data showed that the cost of in-hospital services has grown by 22% since 2019, while Medicare rebates have risen by 18%, and contributions from private health funds have increased by just 12%. This has left patients to shoulder a larger share of their medical bills.
The average gap payment for services disclosed upfront (known costs) has risen from $99 to $135 in five years. For undisclosed costs, patients are now paying $685 on average, up from $418.
Rising out-of-pocket costs, coupled with a 15.1% increase in health insurance premiums over the same period, are causing some Australians to question the value of private health insurance.
Money.com.au’s finance expert Sean Callery noted the growing strain on household budgets.
“Aussies are paying higher premiums for private hospital cover but are left covering a much larger share of medical bills than they were five years ago. This is hardly what you’d call a great return on the significant investment individuals and families are making in private health cover,” he said.
Callery recommended measures such as opting for providers with known gap agreements and reassessing health policies to ensure coverage aligns with personal needs and avoids unnecessary extras.
He warned that declining private health insurance participation could increase demand on the public health system, potentially leading to longer wait times for elective procedures.
“It may create a cycle, where longer public wait times push people back to private health insurance, despite the rising costs, to access faster care and more options,” he said.
The increase in out-of-pocket costs has not been uniform across Australia. South Australia recorded the steepest rise, with gap payments growing by 175% over five years, while medical costs increased by 26%.
In the Northern Territory, gap payments doubled, increasing by 102%, while Medicare and private insurer contributions rose by just 7% and 3%, respectively.
New South Wales experienced the smallest rise, with gap payments up 61%, though patients in the state pay 20% of total hospital costs – higher than the national average of 18%.
Despite increasing out-of-pocket costs, private health insurance membership has grown in recent years.
Data from the Australian Prudential Regulation Authority (APRA) showed that as of September 2024, 5.9 million Australians held hospital treatment policies, covering 45% of the population. This represents a net gain of 105,601 people in the last quarter.
General treatment policies, which include dental, optical, and physiotherapy coverage, now insure 14.7 million people – 54.7% of the population – reflecting a quarterly increase of 112,764 individuals.
