The falling growth in the use of private hospitals in Australia

Melbourne Institute Working Paper No. 18/20

Date: October 2020

Author(s):

Tianshu Bai
Susan Méndez
Anthony Scott
Jongsay Yong

Abstract

Australia has a rich public-private mix of financing and provision of healthcare. Since mid-2015, the higher growth in out of pocket costs relative to the growth in wages began to reduce the affordability of private healthcare and marked the start of the drop in private health insurance coverage. Using publicly available data, this paper describes the decline in growth in the utilisation of private hospital care before and after 2015. Growth in the use of elective surgery in private hospitals fell with some indication of increased waiting times in public hospitals, and evidence of doctors spending more of their time in public hospitals rather than in private practice. Private hospitals’ profitability declined, share prices of for-profit private hospital operators fell, and there is evidence of reduced capacity and a fall in long-term investment in the private hospital sector. In 2020, COVID-19 has accelerated these trends and the economic recession is likely to exacerbate reduced affordability of private healthcare. Policy responses should depend on how these changes influence access, cost and quality of care for patients.

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