Public hospital patients with private health insurance are being offered a range of incentives; from payment of their excess to free meals and parking for family, to bill the cost of their treatment to their health funds.

The Queensland government has been forced to admit it now has a policy of paying patient's insurance excess, known as a front end deductible (FED), as cost-shifting within the health system crosses new boundaries.

The numbers involved, revealed for the first time by the Queensland initiative. The health department outlaid $282,944.50 on FEDs in the first year of the policy but achieved a net benefit, or cost-shift to the health funds, of $5.17 million.

Though public hospital patients cannot legally be forced to using their health insurance, the policy documents reveal that staff who are unable to convert patients can offer FED help and other incentives like free TV rental, local phone calls, newspapers, toiletry kits, car parking and meals for family members.

The commonwealth has told private health lobby that the practice will not be stopped, not even under the reforms put forward by Prime Minister, Kevin Rudd which involve new national funding model and health structure.

Michael Roff, executive director of the Australian Private Hospitals Association said, people without insurance were being kept out of public hospital beds by patients who were being coerced to use their insurance - but not in the private sector.

If public hospitals were discussing insurance and payment options with patients, they should also offer treatment alternatives such as a choice of doctor and accommodation in the private system, said Mr Roff.

You've got the ridiculous situation now in Queensland where they're actively chasing private patients in public hospitals at the same time as they're actively delivering elective surgery to public patients in private hospitals, Mr Roff said regarding the commonwealth-backed programs to reduce the blowout of public waiting list, by outsourcing the task to private sector.