New data analysed by Money.com.au reveals that private health insurance benefits have dropped to their lowest point since APRA began tracking the industry in 2008. While these policies are intended to share the burden of hospital, general and specialist treatments after Medicare contributions, the latest figures show insurers now reimburse only 66.7% of the remaining cost. This is down from 75.7% five years ago and 70.7% in 2008.
These diminishing benefits have resulted in unprecedented out-of-pocket expenses for Australians. In 2024, total medical costs reached $7.7 billion, with Medicare covering a portion to bring the bill down to $4.1 billion for patients and insurers. However, private funds covered just $2.75 billion, leaving individuals to foot a $1.37 billion gap — a jump from $779 million five years prior, and $523 million back in 2008.
Money.com.au’s General Manager of Health Insurance, Chris Whitelaw, describes the situation as a crisis: “The gap between what insurers should be covering and what they actually cover is growing. Five years ago, private health funds picked up three-quarters of the bill after Medicare — now, it’s closer to two-thirds,” he says.
“Many Australians take out private health insurance expecting it to protect them from big medical bills, but the reality is they’re still left holding the bag. Medical costs are rising, health insurance coverage is shrinking, and patients are paying the price — all while premiums keep going up each year.”
In 2024 alone, medical costs rose by 9%, outpacing the 8.1% increase in Medicare coverage and 7.1% climb in private insurer benefits. This shortfall has led to a 15.4% surge in out-of-pocket costs — a record spike. At the same time, the proportion of Australians with private health coverage has ticked up slightly, from 44% to 45.2%, suggesting that the rising expenses are not due to fewer insured people.
Despite a greater insured population, premiums have outpaced reimbursements. Over the past five years, premiums rose 15.1%, while insurer contributions to hospital and general treatments grew only 13%. On 1 April 2025, premiums will rise again by an average of 3.73%, meaning Australians could pay at least $3.73 extra for every $100 they currently spend on private healthcare coverage.
Ritchelle is a Content Producer for Healthcare Channel, Australia’s premier resource of information for healthcare.
