INTRODUCTION Jaw reconstruction is among the most resource-intensive surgical procedures, yet no Australian study has compared micro-costed direct results with private health insurance (PHI) reimbursement. This study aimed to quantify the funding gap between true costs and PHI reimbursement and identify factors contributing to any discrepancy. METHODOLOGY A retrospective cost-reimbursement analysis was performed for 61 patients undergoing mandibular and/or maxillary reconstruction with microvascular free tissue transfer at a tertiary referral hospital between December 2020 and June 2023. Direct costs were estimated using micro-costing methodology, with overhead costs modelled at 20-40% of total costs. Reimbursement data were obtained from hospital invoices. Univariate and multivariable regression analyses identified factors associated with reimbursement amount and funding gap. RESULTS The mean direct cost for the total admission (excluding overheads) was A$43,066 ± 15,772, with virtual surgical planning representing the largest component (29.2%). Mean PHI reimbursement was A$45,505 ± 18,421. Excluding overheads, 64% of cases were profitable (mean surplus +A$2,439). When overheads were included at 20–40%, 92–100% of cases became loss-making, with mean deficits ranging from A$26,066 to A$49,540. On multivariable analysis, fee-for-service reimbursement was associated with a A$10,825 larger deficit compared to per-episode models (p = 0.003). CONCLUSION This study indicates that current PHI reimbursement is inadequate for jaw reconstruction patients. If this reflects a systemic issue, hospitals providing complex reconstructive surgery may face under-recovery of costs, potentially impacting patient access to treatment. Further research across multiple institutions and funding contexts is needed to evaluate whether these findings are generalisable.