The NSW government has backflipped on its refusal to cover the gap for privately insured patients in its hospitals, which could have left some patients with a $320-a-night out-of-pocket fee.

Medibank and HCF informed their 5.7 million customers earlier this month that they were slashing the rebate paid for a night in a NSW public hospital as a private patient to bring it in line with other states.

Medibank and HCF had stopped covering the gap for private patients in public hospitals. Credit:Bloomberg

Bupa, the nation's second largest health fund after Medibank, and NIB are both preparing to advise customers they will also be lowering the rebate paid for a single-room overnight stay in a public hospital in NSW.

Private Healthcare Australia previously said NSW public hospitals charged $752 per night for private patients in their own rooms, compared with an average $432 in other states.