Do I need private health insurance?

Hospital cover contributes towards the cost of your treatment as a private patient in a private or public hospital. It pays benefits for hospital accommodation, theatre and surgery fees, patient meals, prostheses, medical supplies and nursing care for services and treatments provided in hospital that are included in your policy.

Hospital cover is categorised into four tiers (Basic, Bronze, Silver and Gold). The higher levels of cover include more treatments.

Also known as ancillary cover, an extras policy helps cover the cost of out-of-hospital services and products like dental care, physiotherapy, prescription glasses, occupational therapy and many other services that Medicare doesn’t cover.

Ambulance cover is included in many hospital or extras policies, but some insurers will offer it as a standalone policy. Standalone ambulance policies can be more comprehensive than the ambulance cover that may be included on your hospital or extras policy. Depending on your circumstances and where you live, you may be eligible for free ambulance services through your state government.

Medicare guarantees access for eligible public patients to medically necessary health services at no cost in a public hospital. Medicare will also pay towards out-of-hospital services that are listed on the Medicare Benefits Schedule (MBS), such as GP appointments, diagnostic imaging and public emergency departments.

When you’re treated in a private hospital, Medicare will also help with some of your healthcare costs, but you’ll have to pay for the rest of your treatment yourself or with private hospital insurance.

Medicare isn’t a substitute for private health insurance and vice versa. In fact, the two systems are designed to work together to contribute towards eligible medical costs.

While Medicare will pay all the costs for a public hospital admission, the public healthcare system doesn’t offer you a choice of doctor or a private hospital room, and you may not get to choose when you’re admitted to hospital. On the other hand, private patients can select a preferred doctor or surgeon, recover in a private room (if available) and avoid the public waiting list.

There are also few things other things Medicare won’t cover, such as:¹

• Private hospital theatre and accommodation fees
• Dental care and examinations
• Ambulance services
• Home nursing or custodial care
• All physio and occupational therapies like chiropractic, podiatry and psychology services
• Prescription glasses and contact lenses
• Hearing aids.

Whether or not you should get private health insurance will depend on your own personal circumstances. Private hospital cover allows you to receive medical treatment in a private hospital and choose your own doctor and surgeon if they’re available. Waiting times for elective surgery are also typically shorter for private patients in the private system compared to the public system. With hospital cover, you may even get your own private room if there’s one available.

Extras insurance also provides rebates towards general treatments outside of a hospital which aren’t covered by Medicare, such as dental, optical and physiotherapy.

To avoid the Medicare Levy Surcharge (MLS), you and your family need to hold a hospital policy from a registered Australian insurer with an excess of $750 or less.

The MLS is an Australian Government initiative that charges high-income earners an additional tax when they don’t hold a valid hospital cover policy for the full financial year.

While it can be tempting to take out a low level of cover purely to avoid the MLS, you might want to consider some of the benefits that you could get access to by simply paying a slightly higher health insurance premium. For example, taking out a Bronze tier policy instead of a Basic policy gives you access to an additional 18 clinical categories.

Whether or not private health insurance is affordable will depend on your own financial situation and medical needs. However, there are a few factors that will affect how much you’ll pay for your health insurance:

• Lifetime Health Cover loading. The LHC loading is a percentage amount that may be added to your health insurance premiums based on the age you took out cover.
• Private health insurance rebate. The rebate is designed to make health insurance more affordable for older people or those on a lower income.
• Age-based discount. This discount may be applied to your policy based on the age you were when you took out cover as an incentive for younger people to sign up and maintain cover.

When you take out hospital or extras cover for the first time, or if you upgrade your policy, you’ll most likely need to serve a waiting period before you can claim on your new benefits. The waiting periods on an extras policy vary between insurers, while hospital cover waiting periods are standard across the industry. These are:

• 12 months for hospital treatment relating to a pre-existing condition
• 12 months for pregnancy and birth-related services
• 2 months for all rehabilitation, psychiatric or palliative care treatments
• 2 months for everything else.

There are situations where doctors and specialists decide to charge more than the MBS fee for certain services and treatment. This means that while you may receive some reimbursement from Medicare and private health insurance, you may still have to pay a portion of the cost yourself.

However, depending on your health fund, they may have ‘gap cover’ arrangements for some or all the difference between the doctor’s fee and the combined Medicare and health insurance benefit.

Your health fund may also have a list of allied health professionals and agreement hospitals, where you’ll have lower out-of-pocket costs. Before surgery, you can also get multiple quotes to determine which doctor is the most cost-effective.