Hospital cover – a complete guide
Private hospital cover starts at less than $75 a month and can cut your tax bill too. Here’s how it works.
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Hospital cover is great if you prefer using the private healthcare system, rather than relying on Medicare. But it's also a handy money-saving hack for anyone who earns over $90,000.
That's because you won't get hit with the Medicare Levy Surcharge if you have private hospital cover. Get it before you're 31, and you'll also avoid Lifetime Health Cover loading later in life. That's a triple win if you ask us.
Looking for cheap hospital cover?
If you earn over $90,000, hospital cover is a great way to cut your tax bill. Check out some options in the table below. They'll all exempt you from the Medicare Levy Surcharge.
What you should know about cheap cover
Cheap cover is great if you want to avoid the Medicare Levy Surcharge or Lifetime Health Cover loading later in life. However, it does have its drawbacks.
- Not a lot is covered
The cheapest policies will usually only give you access to three restricted services, out of a possible 38. They're rehabilitation, hospital psychiatric services and palliative care.
- There may be high excesses
Cheap policies may come with a high excess, so you'll have to pay a big lump-sum before you get any help from your insurer.
- You'll have waiting periods to serve later
If you get a low level of health insurance now, then decide to upgrade later, you'll still have to serve the waiting periods for any benefits that weren't included in your initial policy.
How hospital cover helps cut your tax bill
The Medicare Levy Surcharge
If you earn over $90,000 and don't have hospital cover, you'll be taxed between 1% and 1.5% of your wage due to the Medicare Levy Surcharge. Get a cheap policy, and you can avoid the tax.
For a lot of people, the cost of a hospital policy can actually be less than what they'd be taxed if they didn't have it. So even if you don't plan on using private health insurance, it can make financial sense to get a policy anyway.
Lifetime Health Cover loading
Lifetime Health Cover loading kicks in on the 1 July, immediately following your 31st birthday. For every year you don't have health insurance from that date, you'll be charged an extra 2% when you eventually do decide to get a policy.
That means if you wait until you're 41, your premiums will be 20% higher than they would have been if you took out a policy before the deadline. Get life insurance before the deadline, and you won't be hit with the penalty.
Gold hospital cover
If you're looking for premium-level hospital cover, a gold-tier policy is the best you can get. It's the only type of policy that has to offer unrestricted access to all 38 categories and covers treatments related to pregnancy, weight-loss surgery and joint replacements.
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How does hospital cover work?
To understand how hospital cover works, you need to understand the Medicare Benefits Schedule (MBS) first. The MBS is basically a list of all the healthcare treatments and procedures that are subsidised by the government. These are usually called "items" and there are over 5,700 of them.
For every item on the MBS, there is a fee attached to it. This is the price that the government has defined as a fair fee for that particular service or treatment. However, your doctor isn't obliged to stick to this fee.
Now, here's why it matters. If you receive an in-hospital service as a private patient, Medicare will cover 75% of the MBS fee. Your private health cover will cover the remaining 25%.
However, if your doctor charges more than the MBS fee – which is pretty common – then you'll have to cover that amount yourself. These are called out-of-pocket costs.
Don't forget, hospital cover only helps with items that are on the MBS. If the treatment you want isn't on the MBS, you won't get help from private hospital cover.
How do the hospital cover tiers work?
Hospital cover comes in four tiers: basic, bronze, silver and gold. Each tier has a minimum number of hospital categories that it must include.
As you've probably guessed, basic offers no-frills cover while gold gives you all the bells and whistles. As you go up through the tiers, more treatments will be covered by your policy.
If a policy exceeds the minimum requirements of one tier but doesn't meet the requirements of the next, it will be referred to as a "plus" policy. For example, silver policies must cover 26 specific categories plus 3 restricted categories, while gold must cover all 38 categories. If a policy covers 30 categories, it would be referred to as a "silver plus" policy.
If you only want hospital cover to avoid the Medicare Levy Surcharge, basic might be the best place to start your search. If you want hospital cover to help with pregnancy or childbirth costs, a gold policy is the only type that will cover it.
What does private hospital insurance cover?
If you are treated in a hospital as a private patient, hospital insurance will cover 25% of the MBS fee and Medicare will cover the remaining 75%. If your doctor charges more than the MBS fee, you will have to cover that amount yourself.
The specific treatments that are covered by your health insurance will depend on which tier you get. The higher the tier, the more treatments that will be covered.
The table below shows which clinical categories are covered by each tier of health insurance.
|Hospital psychiatric services||R||R||R|
|Brain and nervous system|
|Eye (not cataracts)|
|Ear, nose and throat|
|Tonsils, adenoids and grommets|
|Bone, joint and muscle|
|Kidney and bladder|
|Male reproductive system|
|Hernia and appendix|
|Miscarriage and termination of pregnancy|
|Chemotherapy, radiotherapy and immunotherapy for cancer|
|Breast surgery (medically necessary)|
|Diabetes management (excluding insulin pumps)|
|Heart and vascular system|
|Lung and chest|
|Back, neck and spine|
|Plastic and reconstructive surgery (medically necessary)|
|Podiatric surgery (provided by a registered podiatric surgeon)|
|Implantation of hearing devices|
|Dialysis for chronic kidney failure|
|Pregnancy and birth|
|Assisted reproductive services|
|Weight loss surgery|
|Pain management with a device|
Public vs private comparison
Private health insurance has its benefits, but it isn't for everyone. Use the table to compare the public system – that's Medicare – to the private system and see which sounds right for you.
|Cost||2% of your taxable income (you'll pay this even if you get private cover)|
If you earn over $90K a year, you'll be taxed at least $75 a month extra if you don't have private cover
|As little at $70 a month, but can cost over $200 a month|
|Doctor and hospital||No choice||Your personal preference|
|Accomodation||Public hospital, ward||Private room|
|Waiting time||Based on urgency, but could take many months||Usually a matter of days or weeks|
|Hospital and medical costs||Free||Medicare pays 75% of the amount it would have paid if you had gone public. The remaining 25% is paid by your insurer. Anything else is your out-of-pocket costs.|
|Specialist services||Specialised services like weight-loss surgery, IVF and medically-necessary cosmetic surgery can be covered but are tricky to access.||Some higher-level hospital policies will cover these procedures|
|Emergencies||You may have to pay for your ambulance, depending on what state you live in||Ambulance costs are covered|
How long would I wait for treatment using public or private?
The time you'll spend waiting for surgery varies depending on what procedure you're booked in for and where the hospital is. However, private patients generally face much shorter waiting periods compared to public patients.
|Public (Medicare) waiting times|
|State||Median waiting time||10% waited longer than|
|NSW||56 days||330 days|
|VIC||28 days||146 days|
|QLD||40 days||282 days|
|WA||41 days||220 days|
|SA||40 days||277 days|
|TAS||57 days||343 days|
|ACT||48 days||322 days|
|NT||29 days||229 days|
|TOTAL||41 days||279 days|
It's also important to be aware that these waiting periods refer to the length of time you have to wait once you've been added to the list. They don't take into account the time you've waited to see a specialist, or specialists, which could add months onto your overall waiting time.
It's a little bit harder to track wait times with private hospital cover because you can usually book a day which suits you. However, a 2018 report by HBF found that the average time between booking and receiving surgery is just 14-28 days.
What isn't covered by private hospital insurance?
No matter what level of health insurance you get, there are certain things that won't be covered. They include the following:
- Pre-existing medical conditions within the first 12 months
- Out of pocket costs (that's when your doctor charges more than the MBS item fee)
- Fees for any specialists you see outside of hospital
- Any services you receive outside of hospital
- Any medical treatment that does not have an MBS item number
- Hospital stays that are longer than 35 days
- Cosmetic surgery for non-medical reasons
There are also some treatments that aren't covered by private hospital cover but can be covered by extras insurance. These include the following:
- Routine eye exams
- Dental exams
- Physical therapy
- Hearing aids
How long do I have to wait before I can claim on my hospital cover?
For accidents and ambulance trips, you'll usually be able to claim on your hospital cover within 0-2 days of buying the policy. However, most other hospital categories do come with either a 2-month or 6-month waiting period.
For pre-existing medical conditions, the waiting period is even longer. In fact, most health insurance policies will apply a 12-month waiting period before you can claim for pre-existing medical conditions.
Tips for finding cheap hospital cover
Regardless of what tier you're on, it's worth trying to get a good deal on price. These tips will hopefully help you do just that.
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