Grattan Institute health economist Stephen Duckett said the industry seemed to be "looking for a Santa Claus response" from the government and expected that "money would fall from the sky" to help fix its problems.

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Dr David said insurers were battling rising costs, including for medical devices, with manufacturers of items like surgical sponges and glues "continuing to drive up the volume of sales of their products to offset government measures to reduce inflated prices".

Medical Technology Association of Australia chief executive Ian Burgess hit back, saying health funds should dip into their $1.8 billion of before-tax profits to slash the price of premiums.

The bulk of the membership fall, 22,769 people, was in the 30 to 34-year-old age bracket - those Australians who would be expected to have signed up for health insurance to avoid being penalised through the taxation system under lifetime health cover rules.

Australian Private Hospitals Association chief executive Michael Roff said the latest fall in membership showed the current regulatory approach was not working, calling for the entry age and penalty levels of lifetime health cover to be "be adjusted to ensure they are not acting as a deterrent".

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The association wants the age at which the penalty kicks in to be raised, with 35 seen as a "reasonable" alternative to the current rules - which add a 2 per cent loading to health insurance premiums for every year a member is aged over 30.

Mr Roff said a major opportunity for health funds to sign up members was when they started a family - but the median age at which a woman gave birth had increase from 29 when lifetime health cover was introduced, to 32 today.

"If childbirth is a trigger for private health insurance take-up, the older average maternal age means lifetime health cover may be locking these people out of the market - rather than enticing them in," he said.