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Can you tell the differences between Australia’s private and public health care systems? Don’t feel bad if you’re not sure where one ends and the other begins: you’re not alone in your confusion! You can take full advantage of the Australian healthcare system by learning about just two things: Medicare and private health insurance.

The big question: What’s the difference between Medicare and private health insurance?

There are some significant differences between private and public health insurance in Australia. Where you’re treated, who treats you and how quickly you receive care for non-life-threatening issues can often depend on whether you’re treated through Medicare or private health insurance.

Medicare is a public healthcare program. Its primary goal is to give Australians access to free or low-cost medical and hospital care. Medicare covers a majority of health care costs for hospital, medical and pharmaceutical expenses.

Since 1984, Australian citizens and permanent residents have had access to Medicare – which entitles you to be treated publicly in a public hospital for treatments listed on the Medicare Benefits Schedule (MBS). You don’t get a say on when or where you’re treated and who performs your procedure.

Conversely, private health insurance patients are still entitled to Medicare, but can also be treated in private or public hospitals without the significant out-of-pocket fees public patients would have to pay if they were to be treated in a private hospital.

Runners on a track

You can usually avoid lengthy public health waits and have more say in your treatment, such as where you’re treated and by who (depending on their availability). There are also some treatments and costs that aren’t covered by Medicare, such as physiotherapy and optometry (excluding eye tests which are covered by Medicare), which may be covered by your private health policy.

Australians can take out hospital cover for treatment they receive as an inpatient at hospital, general treatment policies (also known as ancillary or extras) to cover ancillary treatment such as physiotherapy, dental and optical, along with ambulance cover to pay for ambulance costs in some states and territories.

What does private health insurance cover that Medicare doesn’t?

There are many advantages and disadvantages of the Australian healthcare system. While it’s one of the best healthcare systems in the world, it doesn’t cover all treatments and you’re often subject to lengthy hospital waits times. This is where private health insurance may be beneficial.

The table below details some medical costs Medicare will and won’t cover. Depending on the private health policy you take out, your insurer may cover all or part of the cost for services Medicare doesn’t pay for.

Expenses Medicare coversWhat private health covers (depending on your policy)
  • consultation fees for certain doctors and specialist services (e.g. X-rays and pathology tests)
  • some surgical procedures performed by approved dentists
  • eye tests performed by optometrists
  • medically necessary surgery and treatment in hospital, subject to waiting lists
  • medicines listed under the Pharmaceutical Benefits Scheme (PBS).
  • ambulance services (fees are covered by state government for Queensland and Tasmanian residents)
  • private hospital fees such as accommodation or the cost of surgery
  • most dental examinations and treatments
  • payments for glasses and contact lenses (extras)
  • hearing aids and associated appliances (extras)
  • most physiotherapy, chiropractic, psychology and podiatry services (extras).

It also reimburses 100% of your fees under the Medicare Benefits Schedule (MBS) for trips to the GP and 85% of the MBS fee for specialists. What’s more, you may not pay anything if your doctor bulk bills.

The MBS lists costs for medical treatment that the Government deems a fair price for each individual service listed, however, medical professionals, doctors and clinics can set their prices above what’s listed in the MBS.

How does private insurance work with Medicare?

If you choose to be treated as a private patient, Medicare still plays a significant role in your procedure. It will cover 75% of the MBS fee for any treatment listed on the MBS. Depending on the policy you take out, your insurer may pay the remaining 25%.

You may ask, “If Medicare covers such a large percentage of healthcare costs, what’s the point of getting health insurance?” The answer is simple: while Medicare does offer many benefits, it doesn’t cover everything. In a private hospital, you may still be required to pay for:

  • accommodation
  • additional tests
  • theatre fees
  • medication and dressings
  • prosthetics
  • further doctor fees.

Depending on your level of cover, some or all of these costs will be paid for by private insurance. However, you may still pay out-of-pocket if the hospital or doctor charges more than the MBS fee for their services. This is known as the gap payment. Keep in mind that some doctors have gap agreements with insurers and you won’t be left out of pocket if these specialists treat you.
Family standing on beach

Is private insurance better than Medicare?

Whether or not private insurance is better than Medicare depends entirely on your circumstances. Medicare provides many fantastic benefits to all Australians and treats many common issues. Meanwhile, private health insurance goes further by covering additional treatments, reducing wait times and giving you more control. Here are some of the benefits of private cover when weighing up Medicare vs private health insurance.

  • be seen quickly. When you’re a private patient, you may avoid lengthy waits that public patients could be subjected to for the same surgery or procedure;
  • save money on out-of-hospital treatments. Dental checkups? New glasses? Extras cover can be excellent value for money when you take full advantage of your policy’s claimable benefits;
  • choose your own doctor/specialist. Have you been treated before by someone you trust? Private hospital cover ensures you can select this person again as your healthcare specialist (subject to availability);
  • enjoy your own private hospital room. Provided that a room is available, you can enjoy the perks of being a private patient by keeping guests – both other patients and visitors – to a minimum;
  • avoid paying the Medicare Levy Surcharge (MLS). If you’re a high earner ($90,000 for singles and $180,000 for families), you may avoid being taxed up to 1.5 per cent of your income by taking out private health insurance. Read more about the Medicare Levy Surcharge;
  • benefit from private health insurance rebates. The Australia Government Private Health Insurance rebate may cover some of the costs for your private cover. The rebate is income- and age-tested and can be claimed through hospital, general and combined policies. Depending on how much you earn, chances are you’ll be able to claim back a portion of your health insurance premium. You’ll be partly reimbursed for your premium payments so long as you hold a hospital, extras or ambulance policy.

An example of private health insurance in action

You injure your leg while hiking and saw your GP. Your GP informs you that your leg requires surgery. Your life isn’t in danger and it may not be considered ’medically urgent‘, no matter how much pain you’re in. Without private health insurance, you’re placed on a public waiting list for your procedure. Depending on how long the list is, you could be out of action for weeks or even months.

While every private health policy is different, taking out the right level of cover for this scenario could mean you’re treated quicker and avoid lengthy public hospital waits, as well as the other perks that come with being a private patient, such as getting to choose the specialist your GP refers you to for treatment.

Advantages and disadvantages of Medicare and private health insurance

There are pros and cons to consider when it comes to Medicare and private health insurance. Of course, your individual circumstances will be an important factor when it comes to deciding which path you want to take. Always consider these when weighing up your options.

Private vs public health insurance: The pros and cons

Advantages of private health insurance

  • peace of mind if you, your partner or family members unexpectedly require surgery in hospital;
  • more choice when it comes to the treatment you receive, where you receive it and who performs surgery (subject to availability);
  • depending on your policy, you may be covered for additional health conditions that aren’t offered through Medicare. These range from dental examinations to psychology and podiatry services;
  • cut wait times by avoiding lengthy public hospital waitlists;
  • the option of recovering in your own room at a private hospital; and
  • the choice of being treated at either a public or private hospital without significant out-of-pocket expenses.

Disadvantages of private health insurance

  • premiums can increase yearly, so it may become more expensive;
  • depending on the policy you take out, you may not always be covered for the treatment you require;
  • still subject to waiting periods before you can make claims. Waiting periods for hospital treatment range from two months (for palliative care, rehabilitation and psychiatric care) to 12 months (for pre-existing conditions and pregnancy and birth services;
  • you may still incur further out-of-pocket costs in addition to the premium you pay every month; and
  • you’ll pay an excess (agreed upon when you take out your policy) if you go to hospital.

Advantages of Medicare

  • receive treatment with no up-front bills or at a reduced cost;
  • could save money if your surgery is not life-threatening and you’re prepared to wait;
  • most common health conditions are listed on the MBS therefore will be covered up to 75% by Medicare;
  • still seen immediately for emergencies; and
  • no yearly premiums or excess to pay for insurance.

Disadvantages of Medicare

  • the treatment you require may not be covered such as dental treatment or physiotherapy;
  • you’re subject to longer wait times which continue to increase;[i]
  • no choice of when and where you’re operated on and who performs surgery;
  • will have to pay more out-of-pocket fees if you are treated privately; and
  • may be subject to paying the Medicare Levy Surcharge.

Now that you know the big and the small when it comes to Medicare vs private health insurance, you can decide what works best for you.

[i] Australian Institute of Health and Welfare (2018) – ‘Elective surgery waiting times 2017-18 Australian hospital statistics’ Accessed October 2019

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