Press conference with Minister Butler, Parliament House – 25 June 2025

MARK BUTLER, MINISTER FOR HEALTH AND AGEING, MINISTER FOR DISABILITY AND THE NDIS: Thanks for coming this morning. For Labor, a strong viable private hospital sector is always a critical driver of a stronger Medicare. About 70 per cent of elective surgery in Australia is conducted in private hospital settings, and still, although this has been reducing a bit in recent years, still about 1 in 4 births are conducted in a private hospital setting. We know that a failing private hospital sector would mean Australians wouldn’t get the care that they need, particularly in areas like elective surgery. It will put more pressure on our public hospital system, which is already deeply stressed. Importantly, Australians would not get the returns that they deserve for the hard earned cash that they pay every single fortnight or month in private health insurance premiums. That’s why improving the viability of the private hospital sector has been a really strong focus of our government’s work over the last 12 to 18 months and will remain an important focus over the course of this term.
 
There are a number of different pressures on the private hospital system here in Australia, some of which are shared right across the world. But a big driver of the reduced profitability that we’ve seen in the private hospital sector in recent years has been, frankly, a cut in the payments that they receive from private health insurers, which after all are their predominant funders. The so-called benefits ratio is a critical ingredient here, and that essentially is the percentage of income that private health insurers earn from the millions of hard-working families who pay their cash in insurance premiums, the percentage of that income that ends up being paid to hospitals actually to deliver care.
 
Now, before the pandemic, about 90 per cent of private health insurance revenue was paid out to private hospitals, and that had been pretty stable for some years. There was obviously a big drop during the COVID pandemic as private hospital activity reduced substantially, and some of that gap was filled by the former government’s Private Hospital Viability Payment, which was essentially a transfer of funds, about a billion dollars from the Commonwealth to the private hospital operators. Also, some of the income that private health insurers were receiving was paid back to members to reflect the lower activity, the lower access to services that they had during the shutdowns and such like during the COVID period, essentially what they described at the time as give backs to members.
 
But behind that, behind the impact of COVID, there has been a structural drop in the benefits ratio, the amount of money that insurers have been paying to private hospitals. That is reflected in what you can see with insurers having increased profits and in some cases quite substantial increases in their management expenses. Money that at the end of the day is not going to deliver the care that Australians expect when they fork out their hard-earned cash to pay their private health insurance premiums.
 
Now, three months ago, I made it crystal clear to insurers that this was unacceptable. This structural drop in the benefits ratio was unsustainable, and that I expected insurers to start lifting those payments back up to something closer to historical averages, or that I would act.
 
Our department, my department, has been working closely with the sector in those three months since I made that statement to monitor the response from private health insurers. I'm pleased to report that there has been a material increase in the benefits ratio, the amount of money that private health insurers have been paying to hospitals, and that the benefits ratio is likely to reach around 87 per cent in the financial year. With that in itself, leaving aside the flow through of increased insurance premiums to the private hospital sector, just that increase in the ratio that we've seen in the past several months will mean somewhere between $250 and $350 million additional dollars going into the private hospital system.
 
Now, I make the point that this is not uniform across all insurers. There are some insurers that have increased their benefits payments quite substantially and others that haven't quite as much. I also make the point that there is more to do. The trend is going in the right direction again but there still is more to do to underpin the viability, the strength of this critical sector of our health system. But I have taken the view that three months on there is no cause right now for me to take regulatory action against private health insurers. We will continue to monitor this closely. I've made it very clear to private health insurers and their representatives that I expect that trend to continue. Today's position is not sufficient but the trend over the past three months has been welcome.
 
I'm also going to continue to take advice from my department on options that I have to include expectations around these issues, the private hospital viability, the return that private health insurance members or consumers get for their money, to make more explicit these issues as we head into the next premium round, which will start towards the end of calendar 2025.
 
I also make the point, though, this is a private sector. This has significant taxpayer funding support through the private health insurance rebate that amounts to about $8 billion in a year, but it is at the end of the day a private sector and its leadership, whether they are the funders in insurance companies or the deliverers of service in the private hospitals, have to take responsibility for driving change in this sector. That's why I asked some time ago the secretary of my department, Blair Comley, to convene a forum of CEOs. CEOs of the big insurers, of the big hospital groups, but also groups like the AMA, to start working through together a range of short-term and long-term reform options that bring this sector into the 2020s and make sure that over coming years and decades, it delivers the best possible care for Australians who, as I've said before, fork out their hard-earned cash every fortnight, every month for their private health insurance premiums.
 
Now, that forum will be meeting again tomorrow, chaired, as I said, by Blair Comley. It will receive a report on the benefits ratio in the sense that I've just given to you today. But I also want to see progress on some of the other ideas I have put on the table for reform. They need to agree to it, they need to drive it, but I want to see reform to the way in which mental health services are delivered in the private sector, particularly in private psychiatric hospitals. I want to see a better deal for families who pay their private health insurance premiums and want the choice of a birth in a private hospital. Too often now, families, mums are not getting that choice in the way in which we would all want them to. I want to see the private hospital sector be supported to shift to more modern models of care like Hospital in the Home, cutting the overnight stays that patients have to endure. It's more effective and efficient for the private hospitals and it's a better way to receive care for patients. But our private health insurance and private hospital sector frankly, haven't kept pace with those best practice models of care we see right around the world.
 
But also this is a two-way street. A lot of the claims for change have been made by the private hospitals on the funders of their system, which are private health insurers. I'm sure that insurers also have very clear views about the way in which private hospitals can become more effective, more efficient and more modern about the way in which they deliver their services. I expect this discussion to be constructive, but I expect it also to be a two-way street. Happy to take questions.
 
JOURNALIST: Health insurers have said if they’re forced to pay private hospitals more, they'll have to lift their premiums. Is the government worried about that? And is there any way around that?
 
BUTLER: I just don't accept that. I've tried to lay out what is the historical position. There was a pretty stable historical position before COVID that saw a pretty stable benefits ratio, the percentage of their income they paid out to hospitals actually to deliver care. There's been a structural drop in that. What we see as a result is reduced viability of private hospitals and increased profitability and management expenses by private health insurers. We've got to get back to a better balance there, and that might mean some reduced management expenses for private health insurers and better care in the hospital system for those hardworking families who pay their premiums.
 
JOURNALIST: What do you mean by you don't accept that, because that won't change?
 
BUTLER: I don't accept that shifting back closer to the historical average of benefit payments to hospitals is going to drive an increase in premiums. What it should drive is a rebalancing of private health insurer profitability and money going into management expenses against hospital services. That’s been the shift here. It’s not about the amount that families are paying private health insurers, it’s a question of what happens after the families pay that private health insurance money. The fact is, over the last several years it’s been clear insurers have been keeping more of the cash for themselves and paying less of it to the hospitals. That’s what’s got to change.
 
JOURNALIST: Minister, you mentioned that 90 per cent figure. Is the Government treating that as a firm target? If we don’t get to that trajectory, is that considered a threshold for government intervention?
 
BUTLER: No. I’ve deliberately not put a particular figure on it. I’m open to suggestions or arguments that there have been changes in the way in which hospitals work between the pre-COVID period and now. That conceptually is arguable, but clearly the trend’s got to change. The gap between the historical average and where we ended up at the end of the pandemic was completely unsustainable, and it was there in black in white. The viability of private hospitals, their profitability reduced substantially, the profitability of insurers, the money they were paying to their own managers increased substantially in some cases; getting that balance is right. But I’ve deliberately avoided putting a particular figure as my expectation. I want that to be a more open discussion with the sector broadly.

JOURNALIST: There's nothing to stop insurers from slipping these payments again once the eye moves off of them. You say so far that improvement is not uniform, you say there's more to do. So what is the argument against regulating if that's the picture?
 
BUTLER: When I say there's more to do, the department will continue to work with insurers and the sector to see that trend continue and to make it more even, frankly, between insurers. I've also said, I think in my opening remarks, that I will continue to ask advice from the department about ways in which I can make sure this is incorporated into the next premium round. That could happen in a range of ways. A ministerial statement of expectations would be one way to make sure that insurers are on notice. That as they come to government, and through government to families, saying that they want, say, a particular increase in premiums next year, that they would be required to demonstrate goodwill in this area, which is the question of how much of the money that families end up paying actually goes to deliver hospital services.
 
JOURNALIST: During the election campaign, one of your principal criticisms or attacks against Peter Dutton was he was a threat to Medicare and the concept of universal healthcare. In the ACT yesterday, a Labor Government has introduced a $250 hospital tax on every household annually as a co-payment for public healthcare for hospitals. Do you accept it's now Labor that has violated the principle of universal healthcare and not the Coalition?
 
BUTLER: I'm aware of the decision taken by the ACT Government yesterday. At the end of the day, that government is accountable to the burgers of the ACT for decisions they take in their budget. I did notice, though, some commentary around from the ACT Government about the question of the Commonwealth's contribution to their public hospitals system as being a driver of that decision to impose a fee on every household or some households – I'm not quite sure which it is in the ACT. I will make the point that next week the Commonwealth will increase its funding to the ACT hospital system by 16 per cent. I'm not sure there's ever been a bigger increase in Commonwealth funding to the ACT hospital system than the one that we will deliver next week, just next week. And that's not particularly about the ACT. Right across the country, the one-year funding deal that we signed with states and territories earlier this year will deliver double-digit increases to every jurisdiction in the Commonwealth contribution that we make to the public hospital system.
 
JOURNALIST: But does it trouble you as a Labor Health Minister that a Labor government has introduced a co-payment for public hospitals in Australia?
 
BUTLER: I just make the point -
 
JOURNALIST: Would you be as forgiving if it was a Liberal government that had done it?
 
BUTLER: I make this point; each government, state, territory and the Commonwealth, will decide the way in which they raise funds. We raise funds through the Medicare levy to help, not entirely, but to help fund our Medicare system, which is partly private sector and primary care, and partly the Medicare principles underpin the public hospital system. I'm not sure I agree there's necessarily that direct connection between a revenue measure. The ACT Government has taken to have ratepayers put money, which I imagine will just go into general revenue as the Medicare levy does. You could make the same argument about the Medicare levy. But I do want very forcefully to say the Commonwealth is putting its shoulder to the wheel when it comes to the ACT public hospital system. As I say
 
JOURNALIST: Minister -
 
BUTLER: A 16 per cent increase on 1 July.
 
JOURNALIST: That’s not the argument that they’re making, at least. And we've heard other states grumble about this. If the Commonwealth is comfortable with its level of payments, are you suggesting that perhaps other states should follow the ACT, going their own way, raising money for their hospital system?
 
BUTLER: No, I make no commentary on the way in which the ACT Government raises the revenue they need to deliver all of their services. Some of them are health, some of them are policing, some of them are education. I imagine this money is going into general revenue, not hypothecated particularly to public hospital systems. I also understand, I've been involved in health policy for a long time, that state and territory governments are constantly asking for more money from the Commonwealth, Liberal or Labor, at Commonwealth or at state level, constantly arguing for more money to fund their public hospital system. Today is no different, and we're about to move into a negotiation process for a longer-term funding agreement for public hospitals. I'm sure the same claims will be made.
 
JOURNALIST: Minister, on another topic, if I can, Sussan Ley is going to order a second sweeping review of the Liberals' core purpose. How important is it to democracy to have a functioning opposition?
 
BUTLER: Very important. I think ours is a great democracy, and when we have a federal election like the one we had in May, the one thing Australians can all be utterly confident about is that whatever the outcome, there will be a smooth, peaceful transition of power. One of the things I've found, having endured nine years as a shadow minister myself in opposition, is that civil society, the business community, support the idea of a vibrant opposition. They are open with the opposition in sharing ideas and sharing their experiences as businesses or as non-government organisations. I’ve always thought that that was a terrific demonstration of the power of freedom in our democracy. I’m obviously glad we won the election, but I think from a national interest perspective, of course we want a strong opposition.
 
JOURNALIST: Do we have one currently, do you think?
 
BUTLER: It's not for me to comment on the state of the Opposition. But I know, having been through a significant election loss myself in 2013, it takes a while for parties to get back off the canvas.
 
JOURNALIST: Minister, if I can just go to foundational supports, we’ve now seen all the state and territory budgets come forward. Naturally, the Tasmanian one has its flaw. And in each of them we’ve seen very limited mention of foundational supports. It seems the states and territories are waiting for Federal Government. Naturally, there are negotiations to have first, but we’ve heard that foundational supports are supposed to begin rolling out at the end of the year. Considering none of the states and territories except the ACT have outlined how much it’s going to cost or included it in their budgets, how are they supposed to actually account for this? And what can we actually expect to be rolled out in the next six months?
 
BUTLER: Let's just go back over what has been committed by all governments. All governments, and this is relevant I think to some statements being made by the Queensland Treasurer over the last couple of days. All governments agreed that a long-term funding agreement for public hospitals, which is particularly important to states and territories, would be tied to cooperation around NDIS rules reform and the development of a system of foundational supports. Only earlier this year when all governments, including Premier Crisafulli, signed on to a one-year funding extension for hospitals, they reaffirmed the commitment to cooperate with the Commonwealth on NDIS reform and foundational supports. I might remind the Queensland Treasurer of that point.
 
Governments also committed a dollar amount to foundational supports, which would be $5 billion each committed over a five-year period to develop this system. Now, treasuries will account for that in different ways, given that the way in which that money will be expended, the shape of that expenditure over the five years, is still the subject of negotiation. It’s not surprising not to see it in budget papers, but we regard it still as a clear commitment all governments have made, and we’ll be working on that basis.
 
JOURNALIST: Are you satisfied with the levels of disability support funding in the ACT Budget yesterday?
 
BUTLER: I haven't had a chance to go through all of the details of the ACT Budget, so I’m sorry, I can’t answer that.
 
JOURNALIST: Minister, you mentioned the need for private health reform. We also heard overnight the Productivity Commission say the National Mental Health Agreement isn’t fit-for-purpose, needs a wide-ranging review, effective overhaul of that system. Do you accept that? And if so, what will you do about it?
 
BUTLER: I’m really grateful for the Productivity Commission doing this work, particularly Angela Jackson and Selwyn Button, the two Commissioners who led it. They presented to a meeting of health ministers and mental health ministers the week before last their broad findings, I have a sense of the broad direction of their report. I haven't yet had a chance to go through it. It was only released this morning, as I understand it.
 
But I think the points that they made to mental health ministers and health ministers are points the sector and the community have made as well, and that is, as we know very fully, there is significant unmet need in the community among people who have severe, usually permanent psychosocial disability. There's about 64,000 people with that type of disability who are covered by the NDIS, and they're receiving by and large very good supports. But there's 230,000 Australians, we're told, with severe psychiatric disability who are receiving essentially no supports. That must be a focus of the work of health ministers and mental health ministers over the course of this term, both in terms of how we negotiate a new mental health agreement with states and territories, but also, it is a piece of work for foundational supports.
 
As a result of state requests, really, the first work around foundational supports will be on kids under the age of nine with mild to moderate developmental delay or autism. But the second big piece of work for foundational supports has been identified as those Australians with ongoing, usually quite severe, psychosocial disability who are not getting any support right now. We know that those Australians without support are bumping in and out of emergency departments, in contact with justice and police systems, are vastly overrepresented in our homeless population and, frankly, deserve better.
 
JOURNALIST: Mr Butler, with the state bilateral agreements for the NDIS, you've announced the Western Australian one this morning. When can we expect the other agreements with the other states and territories to be announced?
 
BUTLER: Unlike the hospitals agreement, which is sort of one in, all in, we negotiate with them as a group, the NDIS agreements are negotiated bilaterally like the schools agreement are. That is happening as part of the NDIS reform process, and it really depends when the state agreements drop off because they all drop off at different points as well. What we're trying to do is have a general negotiation with states which, for example, reflects their commitment to increase their escalation rates or their growth rates from 4 per cent to 8 per cent over the next couple of years. But we're going to try and make sure, obviously, that we are able to negotiate those individual bilateral agreements in an orderly way that reflects the nationwide agreement on NDIS reform.
 
JOURNALIST: Given the states are so bust, and are hitting people with new taxes, what hope do you actually think of them ever picking up the tap for those foundational supports, verse sticking their hand out for more dough than you’ve already promised them?
 
BUTLER: I'll just make the point again, which I made a few minutes ago, this is all tied up with their claims for more hospital funding. They want more hospital funding from the Commonwealth. They want an increase in the Commonwealth contribution rate. They want an increase in the growth caps that are in place with the current agreement that they say don't reflect the growth in demand for hospitals services in the system. I get that. We're open to that. The Prime Minister has been clear about that since 2023 when he put money on the table. But in return, we expect cooperation around NDIS reform. That is the big fiscal exposure that the Commonwealth has in its budget. What was intended to be a 50-50 share of funding the system, 50-50 share between the Commonwealth and states, is closer now to a 75 per cent contribution from Commonwealth taxpayers and 25 from states and territories. That escalation rate has got to increase. The states have signed on to that. Delivering that is inextricably linked to them being able to get a hospital funding deal from us.
 
JOURNALIST: Minister, with those bilateral agreements as well, does signing those as soon as possible have any link to the 8 per cent growth target you have for the scheme overall? Does achieving that 8 per cent hinge on those agreements?
 
BUTLER: That's right. The agreements will have to reflect that, but the fact that the agreements come off and require replacement at different times means that that's really why the escalation rate to 8 per cent is where it is, so that we will be able to incorporate that commitment into new bilateral agreements for every jurisdiction.
 
JOURNALIST: I just wanted to ask about Healthscope as well, the sale of that. Can you give us an update on how that's progressing? I guess there’s a bit of public commentary about the sale of hospitals to private equity firms. Do you have any concern that the sale could permit it, essentially returning into the hands of another private equity firm?
 
BUTLER: When I think I made my first remarks about Healthscope going into receivership, I made the point, reminded people that when the Brookfield purchase was in prospect, reminding people this is an overseas private equity firm based in North America that Labor, which was then in opposition, raised a series of questions that went to the question of whether really the Foreign Investment Review Board should approve that sale. I've made it very clear that I think this experiment of a private equity play in a very big private hospital asset for the country has gone spectacularly wrong for the private equity firm, but frankly, we are left all picking up the pieces. I would prefer a stable operator with experience in the private hospital system here in Australia was the identified purchaser of this, but ultimately, that is a matter to play out in a proper process being led by McGrathNicol, the receiver.
 
In terms generally of where this is up to, we're staying across this very closely. The department is meeting with the receiver and with other stakeholders in this sector on a weekly basis at least. We are confident, first of all, that there has been no interruption to services or staffing of the 37 private hospitals that Healthscope owns or operates. There's a separate question of the 38th, which is the Northern Beaches Hospital, which the New South Wales Government is dealing with. But in terms of services and staffing of the 37, they're stable, business-as-usual operation. Healthscope has more than sufficient funds available to it to continue to operate for some months into the future, maybe as far into the future as the first half of next year.
 
Things are going as well as they could. I think McGrathNicol is constructing a new expression of interest process. As has been speculated publicly, there's quite a deal of interest in purchasing these assets. We're watching it closely, but that stable transfer of ownership that I talked about being our primary objective as a government appears to be tracking quite well right now.
 
JOURNALIST: FIRB didn’t approve it for sale initially to Brookfield. Do you need to apply more direction or guidance or change to regulatory regime underpinning FIRB’s approval so that it can’t be sold to a PE firm again?
 
BUTLER: I've made my views pretty clear about what I want to see happen. The FIRB process is not a matter within my jurisdiction. We'll cross that bridge if and when we come to it.
 
JOURNALIST: A quick one. There was some reporting recently about more NDIS participants turning to the ED system, hospital system, suggesting that they're not getting the supports they're needing through the NDIS. Are you noticing anything? Are you seeing any sort of consequence of these NDIS savings that I think across the board recognise have to be made having a consequence on the hospital system?
 
BUTLER: It's not something that's been raised with me by health ministers. As I said, we only met a couple of weeks ago. Obviously, a big part of our discussion is pressures at the front door of the hospitals on the emergency departments, which is why we're doing a lot of work to try and relieve some of that pressure through the Urgent Care Clinic network, but also older patients, including patients who might be transferred from aged care facilities. Trying to put in place co-funded systems that divert them from hospitals has been a big focus of cooperation between us and pretty much every state and territory government. But the idea of NDIS participants increasing their presentation numbers at emergency departments hasn't been raised with me. Thanks, everyone.