Several questions remain unasked in the ongoing debate about healthcare affordability in Australia.

Why have only private health insurance premiums reliably kept up with inflation among all the major healthcare cost components: doctor’s fees, Medicare benefits, private insurance benefits, government health funding, and public hospital salaries?

Is this true?

Health Insurance Premiums: Always Rising

There’s no debate here: private health insurance premiums have risen almost every single year and nearly always at a rate above the Consumer Price Index (CPI). Over the last 28 years, there have only been six where inflation was higher than the average industry premium increase.

Between 2002 and 2024, private health insurance premiums increased by 5.1% annually, even as inflation averaged almost half that (2.74%) over the same 22-year period. Private insurers justify these increases by pointing to rising treatment costs, increased service use, and an ageing population. While these are all factors, the consistent premium increases have still allowed record profits among the biggest insurers: BUPA, one of Australia's Big Two with Medibank Private, recently reported over AU$ 900 million in profit in the Asia Pacific region.

✅ Conclusion:

Yes, health insurance premium increases have exceeded inflation.

Doctor's Fees and Medicare Benefits: A Growing Gap

Many Australians have noticed it’s getting harder to find a bulk-billing GP. The gap between fees charged and rebates paid continues to widen.

  • From 2014 to 2020, the Medicare rebate was frozen, despite rising costs.
  • While doctor’s fees may have risen, they are not indexed, and vary depending on practice location and cost pressures. In fact, most doctors recognise their patient's cost-of-living pressure and have worked hard to keep their fee increases below inflation even as their own practice costs track above the CPI.
  • The rebate freeze meant that more of the burden was passed on to patients.

❌ Conclusion:

Neither doctor’s fees nor Medicare rebates have reliably kept up with inflation.

Health Insurance Rebates and Benefits: A Two-Speed System

a) Government Health Insurance Rebate (for consumers)

Since 2012, this rebate has: - Been means-tested - Adjusted below inflation

This has reduced its value over time, increasing the cost of private health insurance for many Australians.

b) Private Health Insurance Benefits (payments to doctors/hospitals)

Despite rising premiums: - Benefits paid out by insurers have not kept pace. - Gap payments (out-of-pocket costs) for patients have increased, even as doctors have tried to keep these increases limited while maintaining the financial sustainability of their practices. - Insurers have applied greater scrutiny on what they reimburse.

In my specialty, anaesthesia, most doctors charge well below the AMA's recommended-retail-price for their services. Currently, two-thirds of my own patients receive no out-of-pocket for my anaesthetic care, mostly for high-volume procedures or social circumstances (advanced age, surgical emergencies & complications, miscarriages, financial stress, etc.). The other third of my patients receive a modest out-of-pocket cost, with my total fee still ~50% less than the AMA recommended fee. Because the health insurer benefits paid for anaesthesia services are so low, charging more would dramatically increase the out-of-pocket burden on my patients.

⚠️ Conclusion:

Premiums rise, but the benefits paid rarely match, leading to significant out-of-pocket charges.

Public Funding and Hospital Salaries: Falling Behind

Federal & State Government Funding

Although nominal government spending has increased: - It often lags behind demand growth, inflation, and the growing complexity of care. - Activity-based funding models are frequently criticised for underestimating real costs, although governments favour them because they incentivise efficiency, provide transparency in costs and services, encourage accountability, and align services with health system goals.

Public Hospital Salaries (Doctors & Nurses)

  • Governed by enterprise bargaining, although annual increases often below CPI.
  • Many jurisdictions implemented wage caps (e.g. 2.5% in NSW, Victoria) despite inflation above that rate. The current industrial action by NSW salaried doctors is a direct response to hospital wages lagging behind inflation.

❌ Conclusion:

Public hospital funding and salaries have not kept up with inflation or demand.

Australian Health Costs vs Inflation

Category Kept Up With Inflation?
Health Insurance Premiums ✅ Yes Often exceeded CPI
Medicare Benefits ❌ No Frozen for 6 years
Doctor’s Fees ⚠️ Partially Varies by provider; gaps rising
Government Health Insurance Rebate ❌ No Adjusted below inflation
Private Health Insurance Benefits ❌ No Benefits growth slower than premiums
Government Health Funding ❌ No Not consistently CPI-indexed
Public Hospital Salaries (Doctors) ❌ No Wage growth < CPI
Public Hospital Salaries (Nurses) ❌ No Wage caps in place

In recent decades, Australia's healthcare funding landscape has become increasingly uneven. While health insurance premiums have steadily risen, outpacing inflation, other areas have failed to keep pace. As the crisis in maternity care has shown this has significant implications beyond the cost of care: access, equity, and workforce sustainability.

Patients today face a growing financial burden. Out-of-pocket expenses continue to climb in both the public and private systems. The value of Medicare rebates is diminished and bulk billing is less viable for general practitioners. Simultaneously, private health insurance is becoming harder to justify for many Australians. Annual premiums perpetually rise while perceived value is eroded due to coverage limitations and growing gaps between paid benefits and actual service costs.

On the provider side, the pressures are no less acute. Public hospital doctors and nurses have experienced years of effective wage stagnation, with pay increases often failing to match inflation. Coming off the tail of COVID trauma, this slow erosion in real income further affects morale, hampers recruitment and retention, and threatens the long-term stability of the health workforce. When healthcare professionals are underpaid and overstretched, the consequences ripple outward to affect patient care and system efficiency.

In Australia, among various healthcare cost components, health insurance premiums have most consistently increased at or above inflation. Meanwhile other areas, including Medicare and insurance rebates, public hospital funding, and frontline staff salaries, have lagged significantly behind.

What’s needed is healthcare funding that ensures inflation-adjusted support across the system, restores value for patients, and properly recognises the contribution of healthcare workers. We already have care models in Australia that are both lower-cost and higher-quality than the alternatives – this isn't rocket surgery! Only with more sustainable funding can the Australian health system continue to provide accessible, high-quality care into the future.

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