Australia’s private health system is “hurtling towards an existential crisis”, according to the country’s peak medical body.
In a new position statement, the AMA has warned a lack of regulation of contracts between insurers and medical practitioners may lead to doctors and hospitals being limited in the services they provide.
The Association highlighted a number of shortfalls with the existing arrangements.
National AMA President Dr Danielle McMullen said regulation to limit the power differential between private health insurers and doctors had been put in the “too hard basket” by successive governments. The Association is once again calling for a private health system authority to be established.
“The AMA is increasingly concerned about the lack of regulation governing contracts between insurers and medical practitioners, particularly their potential impacts on patient choice and quality of care, the clinical autonomy of doctors in private practice, private hospital case mix, and other health professionals involved in the patient’s care,” the position statement reads.
Dr McMullen said there was nothing in the current Private Health Insurance Act or the Competition and Consumer Act to prevent the top five health insurers, which collectively control more than 80% of the Australian private health insurance market, from abusing their market power in contracting with individual medical practitioners.
She said no-gap and known-gap contracts were effectively take-it or leave-it propositions.
“If a doctor does not sign because the insurer’s remuneration is too low or charges just $1 more than the insurer is willing to pay, the insurer will then slash the medical benefits they would pay to patients and blame it on doctors’ fees,” Dr McMullen said.
“Yet for most insurers, medical benefits haven’t been indexed and the ‘known gap’ contract limit of $500 hasn’t changed for years, meaning that doctors are being asked to sign contracts that do not reflect the current costs of providing care.”
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She described such practice as “deceptive and unfair” and said they led to higher out-of-pocket costs for patients.
“Most insurers require doctors to keep the terms of contracts confidential to prevent government or other scrutiny and may require contracted doctors to only provide treatment at hospitals with which the insurer also has a contract or else they will reduce the benefits the insurer will pay the patient.”
The AMA is calling for the creation of an independent private health system authority to develop a standard set of terms and conditions for private health insurers’ no-gap and known -gap contracts with doctors to ensure contracts are transparent and fair.
“We need an independent body to oversee regulation of private health insurance to ensure both a level playing field in private health and the sustainability of the system, which is hurtling towards an existential crisis,” she said.
The federal government is working on introducing a private national efficient price (PNEP) as a framework for pricing private hospital services. But the AMA opposes the proposal unless it is implemented under a credible private health system authority.
While the draft has not been released publicly, details were provided to key industry stakeholders including the AMA, Catholic Health Australia (CHA), and major private health insurers as part of a consultation process which began late in 2025.
CHA, which represents 63 non-profit hospitals, has endorsed the proposal.
CHA’s senior executive forum chair and St John of God Health Care Group chief executive Bryan Pyne said for too long private hospitals had been constrained by an opaque and inefficient contracting system that risks the future delivery of essential health care services.
“A private national efficient price will provide clarity and lay the foundations for a fairer and more sustainable health care system.”
Mr Pyne said short-term stabilisation measures were required to prevent further service closures while the PNEP is developed.
“We need immediate, short-term investment that reflects the real cost of care to keep services open, maintain critical capacity and ensure hospitals can continue supporting the public health system.
“Short-term stabilisation and long-term pricing reform must be pursued together, as one protects the system now, and the other secures its future.”
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The Australian Private Hospitals Association did not support the current PNEP proposal.
“It drives a ‘race to the bottom’ based on cheapest costs and trades-off the innovation, quality and safety, and choice and access, and undermines any reason for patients to opt for private healthcare and will have dire implications for public hospitals,” APHA chief executive Brett Heffernan said.
While it has been reported the Federal Department for Health, Disability and Ageing intends to develop an indicative pricing guide by July 2026, when asked about potential reform Health Minister Mark Butler’s office refused to provide any detail.
Instead his office provided a statement that said: “These proposals are not government policy. They are part of a series of options being considered by the CEO Forum.”
The Private Health CEO Forum has been tasked with progressing work that was started through the Private Hospital Sector Financial Health Check which focused on addressing sustainability challenges.
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