Australia’s current hospital system is very different to the one that existed in 1982–83, the last full year before the introduction of Medicare. Capped budgets, new technology and rising expectations have seen the public sector lose ground to the private sector, particularly in terms of elective admissions and surgical episodes. In comparing the situation in 2004–05 with that in 1982–83, this paper focuses on hospital efficiency, casemix and the public–private balance.