Recently Hobart Private Hospital announced that it would be closing its maternity ward by August this year. Healthscope, the company managing Hobart Private, has also closed its maternity wards in other locations across Australia as well. The company as a whole is facing serious financial challenges.

 

The decision has been prompted by the fact that maternity services are simply not profitable. This, of course, is currently the case for all private maternity services in Australia. In Hobart there are two private providers – Hobart Private and Calvary Hospital, Lenah Valley. Closing down one service means that there is only one alternative available.

Hobart Private provides for some 500 births a year. Calvary Private Hospital currently manages around 390 births a year and would need to increase its services significantly. It has offered to come to the assistance of those seeking the services of a private provider.

The issue remains that the current cost structures would mean that Calvary will face financial challenges as it takes on more maternity requests. The federal government has offered to assist with additional funding. However, some deeper issues remain.

Although it cited the lack of midwives (and that is a very real issue) the decision by Healthscope was principally driven by the need to ensure financial sustainability. Maternity care is simply not profitable. To assist in making maternity services financially viable, among other things, changes need to be made to ensure that insurance is available for those seeking to use the private system. To do this there needs to be changes to what is known as the ‘risk equalisation scheme’. This scheme allows maternity care to be included in the insurance package so that insurers will contribute more to the service.

The risk equalisation scheme supports the community rating system preventing insurers from risk rating premiums. It compensates insurers with riskier demographics by redistributing funds from insurers with lower average benefits.

There is another issue that is of real concern for the future of healthcare in Australia. It is called ‘vertical integration’. Insurers are exploring a model that is the prevailing model in the United States whereby the insurers control both the funding and provision of care. They claim that it leads to greater efficiency and lower costs. However, it results in reduced patient choice, higher costs, and diminished quality of care.

Private health insurers in Australia are increasingly embedding themselves within the healthcare system, shifting from their traditional role as funders to directly providing healthcare services. This is not a good thing.

It is true, as we have often heard, that the health system in Australia is under stress. However, steps can be taken to strengthen the system. We need to preserve the model we currently have which offers choice. There is the option of both public and private services. We also need to ensure that the health funds do not focus on maximising profitability at the expense of the provision of services especially to those who cannot afford top cover.

For couples wishing to have private hospital service for maternity care, current health insurance cover does not assist most couples. Only those on the ‘Gold’ level of cover are able to receive some rebate. It is worth noting that termination of pregnancy is covered by ‘Bronze’ and ‘Silver’ levels.

In addition, expectant parents often encounter significant out-of-pocket expenses for maternity care, particularly for services provided outside the hospital setting that are not covered by their private health insurance. These non-hospital components of the maternity journey include fees for obstetricians and diagnostic imaging and can cost a patient more than $12,000.

Young couples facing a mortgage, grappling with cost-of-living pressures, are not being afforded any assistance in having children. The out-of-pocket costs associated with wishing to have the choice of an obstetrician are daunting for the ordinary couple. In fact, they can feel prejudiced against in their efforts to have a family.

Without high levels of immigration Australia would be facing demographic decline. Australia’s birth rate has reached an all-time low of 1.50 births per woman in 2023 and is below the replacement rate of 2.1 needed for population sustainability.

It is clear that the government needs to support couples having children. Our nation must invest in enabling couples to confidently plan for an increase in their family. This must be a priority if we are to increase our birth rate. We know that we will be facing an ageing demographic in the Australian population in the immediate future. Everything must be done to encourage couples to have children. The starting point must be that they are supported in the provision of affordable maternity services.

What has occurred in Hobart is really the canary in the coalmine of our health system. Calvary Hospital, with its work being mission-driven rather than profit-driven, has stepped up to ensure that those couples who want private services are provided for. They are to be commended for this decision. And the government to its credit has offered to help them meet the extra costs they will incur in positioning themselves to receive more women about to give birth.

However, it is vital for Australia that it invests in support for couples who want to have children. We are simply ensuring our best possible future.