“The government policy of having a significant part of the Australian population in private health, to take the pressure off the public system, starts to unravel," says Savvides. "If that gets out of balance you end up with a very expensive public system with long queues and pretty unhappy customers." The rate of hospital insurance coverage has dropped from 47.3 per cent of the population to 44.1 per cent over the past five years, according to the latest data from the Australian Prudential Regulation Authority. And the amount funds have to pay out in benefits is rising faster than their premium revenue from members (3.6 per cent versus 2.6 per cent for the year to September) according to APRA, which has raised concerns about funds' financial stability. Rachel David, from health insurance lobby group Private Healthcare Australia, says the challenges the private system faces are real but "absolutely fixable". "And it’s essential that we do fix them because without the people who are able to afford it paying something, our health system is not sustainable,” David says.

But like a patient being bounced between doctors, the private system is receiving a different diagnosis and prescription at every stop, and Health Minister Greg Hunt is under pressure from the industry and the public to produce answers. Hunt came down firmly on the side of consumers last week when he rejected 20 insurers' requests for an average 3.5 per cent rise to their annual premiums, saying he was determined to keep a lid on premium rises to 3 per cent this year, even as funds say they're struggling to meet rising costs. "We did it last time, they said it would be impossible to get them down," he tells The Sydney Morning Herald and The Age. Health minister Greg Hunt says he's determined to keep funds' premiums increases to 3 per cent this year. Credit:AAP But he has also backed one of the health funds' core ideas to bring down their hospital spending, by allowing them to fund some hospital treatments in patients' homes where costs are lower. The first stage of Hunt's policy - for mental health and orthopaedics - will launch by mid-2020 to allow funds to factor the changes into their 2021 premium rises.

Labor, which positions itself as "the party of Medicare", has seized on the crisis in private health to attack the government as being "devoid of leadership" on the issue, and called for a Productivity Commission review into the sector. But Labor's position is not wildly different to the Coalition's; the Opposition wants to keep Australia's dual public-private health care system and ensure that private health insurance is sustainable. "It would be a fundamental change in the health system if nobody had private health insurance," Labor health spokesman Chris Bowen said this week, calling “hospital-in-home” reforms "a worthy enough suggestion". Leanne Wells, chief executive of Consumers Health Forum of Australia, which advocates on behalf of patients and customers, also backs a Productivity Commission inquiry to examine how to ensure health insurance provides "value for consumers who use insurance and for the taxpayers who subsidise it”. Private Healthcare Australia wants insurers to be able to pay for longer GP consultations for patients with mental health and chronic illnesses, and is pushing for the health insurance rebate to be restored to 30 per cent for all people under 40. The government has pledged to bring back the full means-tested rebate - which currently ranges between zero and 25 per cent - as soon as it achieves a "sustainable" budget surplus.

Hunt has already made it possible for insurers to offer discounts of up to 10 per cent to members under 25, and all funds have to move to a simplified membership model (split into categories of basic, bronze, silver and gold) to make policies easier to understand. Bowen says increasing the government rebate is not "a sustainable solution" and describes an insurer push for a fringe benefits tax to enable employers to pay for workers' health insurance premiums as "an Americanisation of the system". According to the Grattan Institute's Duckett, the $6 billion a year spent subsiding the private sector through the insurance rebate is only money well spent if private hospitals are being run more efficiently than public hospitals and, on his analysis, they aren't. In a major report into the sector released this week, the Grattan Institute identified $2 billion in annual savings in the private system which, if passed on to customers, would cut 7 to 10 per cent off insurance premiums and “save private health care”. That would come from cutting insurance payments for “low-value” or unnecessary care, such as caesareans and knee arthroscopies which are more common in private hospitals, and reducing the longer stays on average compared to public hospitals.

After the cost of premiums, large out-of-pocket expenses when patients go to hospital are the second most common reason that people cancel their health insurance. Duckett is calling for hospitals to negotiate with all medical practitioners involved in a hospital stay on the patient's behalf before handing "a single bill" to their insurer (an idea Private Healthcare Australia supports), with hospitals having to absorb any excess cost. But Craig McNally, the managing director of Australia’s largest private hospital operator, the $15 billion ASX-listed giant Ramsay Health Care, rejects the suggestion that there is easy fat to cut. He says rising health care costs are a fact of life as the population ages and medical technology advances - improving lives but bringing considerable new expenses. “The whole industry needs to be looking at how we can make it more efficient. But the reality is, in this country as in every other country around the world ... health care costs rise at a faster rate," he says. “If Australia wants to start to rationalise services - not provide some services that the community expects - sure, that’s a way we can save costs in the system, but I don’t think the population will find that acceptable." McNally, who runs 75 hospitals and surgery units across Australia, says the average annual increase in health insurance premiums of 3 to 4 per cent could be used as a proxy for cost growth in the private sector. That compared favourably to the public system where federal and state governments have recently agreed to a 6.5 per cent annual increase for the next five years, he says.

McNally says the Grattan's suggested model of “bundled billing” is inefficient and would add costs to the system. And while he supports the idea of “hospital-in-home” treatment, he says it should not be left in the hands of health funds, who could end up dictating what kind of treatment patients get. Robert Cooke, a 40-year health industry veteran who was CEO of private hospital operator Healthscope for six years until 2017, agrees with insurers that there are savings to be made by reining in how much they pay for medical devices. Loading Funds are pushing the government to change its "prostheses list", which dictates how much funds must pay for everything from replacement hips through to surgical sponges; the funds say the prices can be double what is paid in the public system or in other countries. Cooke recalls a Boston-based investor telling him about four years ago that Australia was like “Treasure Island” for device manufacturers because of the prices they command here. "They were … interested in how could Australia pay so much, and the margins be so much, and whether that as an investor that would continue," he says.

While government should try to stop the manufacturers' gravy train, Cooke says it wouldn't be a permanent fix to health funds’ woes. The nation's ageing population and hospital salaries are having a far greater effect, he says. “Hospitals will get you at some stage of your life. So all the other well-meaning attempt to control costs … a lot of it is about delaying the inevitable.” Desperate to try to reach younger customers, Private Healthcare Australia invited futurologist and Millennial expert Rocky Scopelliti to address its annual conference in Sydney on Thursday. Loading He says that trying to sell Millennials, aged 20 to 36, a traditional health insurance product was a doomed venture because their concept of life stages had been turned upside down. "This generation's views of healthcare are very different from the ones before," he says. Longer life expectancies combined with an unpredictable job market meant that young people were not able to conceptualise their older years in the way their parents did. Scopelliti says that if insurers want to convince young people to sign up, they must move away from trying to sell them a "generic product".