What is Medicare?

Medicare is Australia's universal health insurance scheme. It ensures that all Australians, permanent residents and some overseas visitors have little or no out of pocket expenses when they need to go to the hospital or visit a doctor.

But there's a catch. Medicare doesn't cover you for everything — in particular, it won't pay for lots of out of hospital services like dental, optical and physio. It's why most Australians also take out private health insurance.

What does medicare cover?

Medicare benefits can be categorised into three main groups which are cover for hospital treatment, cover for treatment outside a hospital and subsidies for prescription medications.

Hospital treatment

Medicare provides you with free treatment at a public hospital. You should be aware that:

• The hospital will appoint a doctor. All medical staff at Australian public hospitals are qualified, and in most cases have years of experience. Private hospital insurance allows policy holders to select who treats them, so its something to consider if this is important to you.
• Ambulance costs aren't covered. Medicare doesn’t pay a benefit to cover the cost of ambulance transportation and treatment on the way to a hospital. Most health insurers and state ambulance services offer affordable policies or subscriptions to cover these costs.

Out-of-hospital services

Medicare will cover the cost of going to see a doctor or general practitioner. If you need to see a specialist, Medicare will pay a benefit up to a percentage of the specialist’s fee. The non-hospital related services that are eligible for benefit payments are outlined in more detail below rather than listing answers to questions like does medicare cover dentist or does medicare cover surgery down the page.

Pharmaceutical Benefits Scheme (PBS)

Medicare also covers the cost of some prescription medications under the Pharmaceutical Benefits Scheme. Like the MBS Fee Schedule, the PBS Schedule outlines which medications are subsidised by the government and the price of the drug. Dentists and optometrists have a schedule for patients too.

Even with the PBS, you may be responsible for paying part of the cost of the medication. The amount that’s covered by the PBS varies depending on the medication. In many cases, you will be able to choose between two versions of the same drug, although the benefit will remain the same so if one is more expensive than the other you will have to make up the difference.

You’re eligible for further concessions on the price of medication under the Medicare Safety-Net if your out-of-pocket expenses reach the safety-net threshold.

What doesn't medicare cover?

The following items, broken down into hospital and non-hospital related services and treatments, are excluded from the public health system. Most of these treatments and services can be covered by private hospital and extras insurance.

How does medicare work?

Medicare will pay a percentage of the schedule fee listed under the Medicare Benefit Schedule (MBS). Medical services are covered by Medicare in accordance with the MBS Quality Framework. The MBS Quality Framework's purpose is to ensure covered items are in line with best medical practices. The rebate percentage for each service is as follows:

• Hospital. 100% rebate for eligible health care at a public hospital
• General practitioner. 100% rebate for GP's consultation fees at a medical centre or private practice
• Specialist. 85% rebate for the consulting specialist's service fee at a hospital, medical centre or private practice

If you are covered by private hospital insurance and are admitted to hospital Medicare will cover 75% of your associated medical costs instead of 100%, with the remainder being covered by your health fund. Also be aware that theatre fees, costs of medicine and hospital accommodation expenses will not be covered by Medicare.

The gap, out-of-pocket expenses and the safety-net

A common misconception is that Medicare will always cover your entire doctors bill, which is understandable since it states that its rebate is 100%. What some people don't realise is this means 100% of the cost defined by the MBS fee, and that doctors and specialists are not required to charge the same amount. The following scenario should make it easier to understand how this process works.

Out-of-pocket expenses are a very important thing to be aware of when visiting the doctor, and even more so when getting treatment from a specialist. In these cases the Medicare benefit for getting specialist treatment only covers 85% of the schedule fee. So not only will you have to pay the gap amount, but also out-of-pocket expenses if the consulting specialist charges more than the schedule fee, which they often do.

To avoid out-of-pocket expenses you can either restrict your doctors visits to medical centres and practices that offer bulk billing (be aware that specialists rarely bulk bill), or take out private health insurance, which reduces or in some cases fully covers these extra costs. It's also worth noting that being treated at hospital can also incur out-of-pocket expenses which can only be covered by a private health fund policy.

• What does bulk billing mean?

  This is where the doctor sets his fees according to the benefit costs outlined in the MBS, so if you are treated by him or her there won't be any out-of-pocket expenses or gap payments, it will all be covered by Medicare.

The Medicare Safety-Net

If you are unable to afford private health insurance and require complex or extensive out-of-hospital medical services, the gap payments can be very expensive. The Medicare Safety-Net increases your Medicare benefit once your out-of-pocket expenses reach certain thresholds to ease the financial burden these extra costs can put on you or your family.

This chart displays the gap payment threshold that must be reached for each eligibility category before the Medicare Safety-Net benefit increase is applied.

_{Source: Australian Government Department of Human Services, Medicare Safety-Net Thresholds 2021}

• Important changes to how out-of-pocket expenses are calculated by the Medicare Safety-Net

  The amount of out-of-pocket expenses that count toward the Medicare Safety-Net are now capped at 150% of the MBS fee per treatment or services minus the Medicare rebate.

  For example, if your doctor charges you $200 and the Medicare benefit is $100, only $50 of the extra $100 you pay will count towards the Medicare Safety-Net threshold.

Lodging a Medicare claim?

Health care professionals can bill you for medical services in two ways:

• Bulk billing. Your doctor accepts the MBS fee as payment for their service and charges Medicare directly. Bulk billing doctors are most common in cities and less so in rural areas where there may be a shortage of health care professionals. Be aware that specialists rarely offer bulk billing, and will usually charge a fee higher than that listed in the MBS.
• Patient account. If your doctor doesn't bulk bill you will be required to pay your fees before claiming your benefit back from Medicare.

Several options are available for lodging your claims with Medicare:

• In person. Your doctor sends your claim to Medicare via Eftpos when you pay your bill, and the benefit is paid directly into your bank account. This is the most efficient way to claim, although not all medical centres and practices offer it.
• Smartphone app. You can link your Medicare Online Account to the Express Plus Medicare Mobile App and claim from your IOS, Android and Windows 10 devices.
• Over the phone. Make a claim over the phone by providing your Medicare number, your bank details and your doctor's receipt.
• Medicare online claim. Rebates for some services can be claimed through the Department of Human Services website using your Medicare Online Account. Be aware that you can't claim online if you have been bulk billed or if your claim is for a service provided by a hospital. Additionally you can't lodge claims for persons who are not listed on your Medicare card or lodge claims that are more than two years old.
• Traditional mail. Complete a Medicare claim form and return it by post to Medicare, GPO Box 9822 'your capital city', or drop it off at your nearest Medicare Service Centre. Your doctor can provide you with the claims form or you can get it in PDF format from the Department of Human Services website. People with private health insurance can drop their claim forms off at their nearest health fund office if they are Medicare Two-way participants.

Who can apply for Medicare?

• Australian citizens and permanent residents. Medicare is available to all permanent residents (including holders of Resident Return visas) and Australian citizens living in Australia.

• Citizens of other countries. Citizens from other countries are eligible for cover under Medicare if they are:
  • A citizen of New Zealand living in Australia
  • Currently applying for Australian permanent residency (must also have permission to work in Australia OR provide proof of a relationship to an Australian citizen, permanent resident or New Zealand citizen currently residing in Australia)
  • A citizen of a country that has a Reciprocal Health Care Agreement with Australia

How to apply for medicare

To apply for Medicare membership you must fill out an enrolment form and submit that, along with your supporting documents, at your nearest Medicare Service Centre. You can obtain the form at the Service Centre or download it in PDF format from the Department of Human Services website. Australian citizens can use their passport or birth certificate as their supporting document while eligible overseas visitors can use their passport.

The Reciprocal Health Care Agreement

Reciprocal Health Care Agreements (RHCA) are made between other countries and the Australian Government to allow citizens of both nations access to cover and subsidies on essential medical services under their public health systems. Countries who currently participate in the RHCA are:

If you are planning to come to Australia and are wondering how to get medicare, please keep these two points in mind:

• The medical cover you receive under the RHCA is very limited and the rules differ for each participating country. In some cases you will be required to complete and submit documentation before you're eligible for benefits.
• It's highly recommended for both Australians and citizens of these countries to take out some form of travel insurance policy and think of the cover offered by the RHCA as an emergency backup. If you are visiting Australia for an extended period of time you can take out an Overseas Visitors Health Cover policy which is available from most Australian health insurers.

Medicare or private health insurance?

Having access to top quality health care for free, or at a subsidised price, is not something that is available everywhere in the world, and the Australian public health system does a good job if you need urgent medical treatment. However, if you require cover for non-emergency care you will find the public health system can be quite limited.

This is where private health insurance steps in, fulfilling two purposes that benefit both individuals and the wider Australian community by:

• Offering policies that allow people to get cover for medical treatments, services and procedures that are either excluded or limited under Medicare.
• Taking pressure off the public health system, allowing more Government funds and resources to be allocated to the health care needs of people who may not be able to afford private health cover.

There are three main types of private health insurance policy; hospital, extras and ambulance. Below you can learn more about the specific Medicare excluded treatments and services that you can get cover for under these policies.

Want to know more about private health insurance? Head to our comprehensive FAQ

Levies, loadings, rebates and private health insurance

As mentioned before, one of the positive aspects of private health insurance is easing the burden on the public health system. To encourage more people to get private cover, the Australian Government has adopted a carrot-and-stick approach by implementing tax levies and loadings for not being insured by a health fund while offering rebates for taking out a policy. These rewards and penalties are explained in more detail below.

Private health insurance rebate

The government offers you an income-tested rebate if you take out private insurance and you’re eligible for Medicare. The benefit comes in the form of reduced private health insurance premiums or a rebate on the cost of your private cover at the end of the financial year.

The rebate has four tiers, the base tier pays more than Tier 3, with the amount being determined by your income, your number of dependent children and your age.

The rebate levels applicable from 1 April 2019 to 31 March 2020 are:

Medicare Levy Surcharge exemption

The Medicare Levy Surcharge (MLS) applies if you’re a high income earner and you don’t have private hospital insurance. In addition to the Medicare Levy, you’re required to pay up to an extra 1.5% of your taxable income. The justification is simple; if you earn more, you’re expected to contribute more to the public health system. If you have private hospital cover, you’re exempt from paying the MLS no matter your income.

Like the Private Health Insurance Rebate a tier system dictates how high your levy will be based on your income.

Lifetime Health Cover loading

Unlike the MLS, the Lifetime Health Cover (LHC) loading penalises you with higher private health insurance premiums when you take out cover rather than taxing you. It applies a loading surcharge of 2% to your premium every year after your 30th birthday, up to a maximum cap of 70%.

Loading fees can cost you hundreds of extra dollars every year. For example, if you wait until your 40th birthday to take out private cover you’ll pay 20% more compared to getting cover on your 30th birthday. A minimum weekly premium of $20 will cost you $24 with loading. The surcharge will expire after you’ve held private hospital cover for 10 consecutive years.

You can avoid this by simply taking out private health insurance by the 31st of July before your 31st birthday. Many health funds offer affordable budget policies, albeit with limited cover, that are designed for young and healthy people who are just seeking insurance to avoid this penalty.

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