The Federal Government has announced a major private health shakeup, but some say it should go further.

Health minister Greg Hunt has unveiled changes that will allow private health funds to offer discounted private hospital cover to people under the age of 29, while jacking up hospital insurance excesses from $500 to $750 for singles and from $1,000 to $1,500 for couples or families.

Discounted premiums for under-29s will take effect from April 2019.

Consumers aged under 30 will be offered discounts on hospital cover of up to 2 per cent a year for each year under 30, up to 10 per cent for 18 to 25-year-olds.

Those discounted rates while phase out gradually from the age of 40.

Also from April 2019, insurance products will be offered in new categories - rated gold, silver, bronze and basic, and extras cover gold, silver and bronze.

Insurance with a combination of hospital and extras cover will have their components rated separately.

Other changes cover people with mental health conditions, who will be able to upgrade their cover to access in-hospital treatment without a previous waiting period.

Private health insurers will not be able to limit the number of mental health sessions or treatments patients can access as much.

The insurers will also be able to offer travel and accommodation benefits under hospital cover, instead of just general treatment policies.

The reforms include changes to expenditure on prostheses, whose prices are generally inflated when compared with the equivalent prices in the public sector.

The change on prostheses represents the largest savings in the package, with the agreement with manufacturers to cut costs by $1 billion a year.

Mr Hunt said private health insurers have already agreed to pass that saving on in full.

Defence Health chief Gerard Fogarty said the reforms “are far from complete or sufficient to immediately reduce the pressure consumers are experiencing”.

“The headlines are simply wrong when they state that the changes will result in significant premium reductions,” he said.

The Australian Medical Association (AMA) has questioned the extent of consumer savings too.

AMA president Michael Gannon says the reforms are “a start in the right direction”, but will not solve the broader affordability problem in private healthcare.

“The one thing the minister is up against ... is the inevitable increase in the cost of healthcare,” he said.

“Health [cost inflation] runs at 4, 5, 6 per cent per year. We’re interested in some of the one-off savings that the minister is going to be able to achieve but it’s going to require ongoing work.”

Dr Gannon said it was generally a good idea to “increase the size of the insurance pool”, but that just adding healthy people to the pool was not a “magic wand”.

“We need serious reform which addresses the simple fact that the costs will continue to increase year on year,” he said.

The AMA president said the government should also look at hospital costs, “inconsistent and tricky product definitions” and exclusions from health cover.

“Doctors’ fees are not the problem – 95 per cent of services in Australia are currently provided at a no-gap or a known gap of less than $500,” he said.

CEO of the Consumers Health Forum of Australia, Leanne Wells, said providing discounts for younger members “threatens to undermine the community rating principle fundamental to Australian health insurance, which is meant to treat everybody equally regardless of age or health status”.

“Health funds presumably are hoping that more young members will help subsidise the more costly demands of older members,” she said.

“Given the cost burdens and modest wages many young people have, it would seem likely that this measure is only likely to be taken up by a minority of young adults who have the means, with the result that the two-tiered health system emerging in Australia is entrenched at an even earlier time of life.”