Since 1996, an increasing proportion of federal government expenditure has been directed into Australia’s healthcare system via private health insurance (PHI) subsidies, in preference to Medicare and the direct funding of public health services.
• A central rationale for this policy shift is to increase the use of private hospital services and thereby reduce pressure on public inpatient facilities. However, the impact of this reform process on regional Australia has not been addressed.
• An analysis of previously unpublished Australian Bureau of Statistics data shows that regional Australians have substantially lower levels of private health fund membership. As a result, regional areas appear to be receiving substantially less federal government health funding, compared with cities, than if these funds were allocated on a per-capita basis.
• We postulate that the lower level of membership in regional areas is mainly due to the limited availability of private inpatient facilities, making PHI less attractive to rural Australians.
• We conclude that PHI as a vehicle for mainstream federal health financing has potential structural failures that disadvantage regional Australians.