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Medicare and private health insurance – the basics

What's the difference between Medicare and private health insurance?

Medicare is Australia’s public health scheme that guarantees Australian citizens, permanent residents and some overseas visitors access to a range of health services at a reduced cost or no cost. It’s funded by both federal and state governments, and by the Medicare Levy (a fee charged to every taxpayer’s taxable income, with an additional levy for high-income earners who don't have private health insurance).

Private health insurance is not compulsory for Australian residents, but the government does run some incentives to encourage younger Australians and high earners to take out cover which also reduces the pressure on the public system. If you're planning to get pregnant, earning over $90k, or simply want the freedom of choice over your doctor and hospital - it could be worth a look.

Keep reading to find out how Medicare and health insurance can work together to protect your healthcare needs.

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What is covered by Medicare?

Medicare covers many costs associated with hospital treatment, general medical treatment and pharmaceuticals. It provides free treatment and accommodation as a public patient in a public hospital or 75% of the Medical Benefits Scheme (MBS) fee as a private patient.

Those wishing to receive treatment as a private patient will need to have private health insurance to cover the remaining 25% of the MBS fee not covered by Medicare. Depending on the state in which you live, you may also need to take out ambulance cover, as Medicare doesn’t cover emergency ambulance services.

Medicare also pays 100% of the MBS fee for out-of-hospital treatments such as GP visits (85% for specialist visits) and, in conjunction with the Pharmaceutical Benefits Scheme (PBS), it subsidises the cost of a wide range of pharmaceuticals.

Medicare v Private: at a glance:

MedicareHealth insurance
Public hospital
  • Yes
  • Yes
Ambulance
  • No
  • Yes
Private room or hospital
  • No
  • Yes
Everyday health (dentist, physio, glasses)
  • No
  • Yes

What hospital costs are covered by Medicare?

Medicare provides free hospital accommodation and treatment as a public patient in a public hospital. While private health insurance allows you to choose your own hospital and doctor and often your time of admission, if you choose to go into hospital as a public patient under Medicare you are not afforded these choices. Additionally, quite often you’ll be put on a waiting list for treatment.

Medicare does not cover private patient hospital costs such as theatre fees and accommodation, hospital treatment received outside Australia, cosmetic surgery not deemed medically necessary and emergency ambulance services.

What medical costs are covered by Medicare?

Medicare covers a range of out-of-hospital treatments and services including:

  • 100% of the MBS fee for a visit to a GP
  • 85% of the MBS fee for a visit to a specialist
  • X-rays and pathology tests
  • Some approved dental surgical procedures
  • Optometrist visits (consultation only)
  • Most surgical and therapeutic procedures performed by GPs

Medicare doesn’t cover ancillary services such as optical, dental, physiotherapy and chiropractic services, which is why many people opt to take out extras-only health insurance.

What does the Pharmaceutical Benefits Scheme (PBS) cover?

Through the Pharmaceutical Benefits Scheme (PBS), Medicare pays part of the cost of most prescription medicines purchased at pharmacies. The percentage you pay depends on the type of medicine and is capped at a standard maximum limit.

This limit is lower for those with a concession card and if you need a lot of medicine and are registered with the Safety Net Subsidy scheme, the amount you pay per prescription is reduced even more once you reach a certain annual threshold. Medicare won’t pay for medicines that aren’t on the PBS list and won’t pay more than the specified limit for those that are.

Ambulances

Medicare doesn’t cover emergency ambulance services and this is one area of health care where private health insurance is important. A ride in an ambulance can be very expensive.

Most Australian states and territories provide free ambulance services to specific groups such as veteran and concession card holders, but only two states (Queensland and Tasmania) provide free ambulance services to all residents. Cover doesn’t apply while travelling interstate, so even in those "free" states, private ambulance insurance may be a wise idea.

Pathology

Medicare covers most or all of the costs of pathology tests that qualify for a rebate under the Medicare Benefits Scheme. In order to qualify, they must meet certain criteria:

  • They must be requested by a treating practitioner registered with Medicare
  • There must be a medical reason for them
  • The pathology sample must be sent to a Medicare-approved pathology laboratory
  • The tests must be supervised and quality-assured according to Medicare accreditation rules
  • They must not exceed a certain number in a 12-month period

Medicare won’t pay for pathology tests associated with elective cosmetic surgery or insurance testing or for a number of genetic tests. It will also only pay for tests up to the maximum MBS fee, so if a pathology laboratory charges more than this, you will need private health insurance to cover the gap or pay it out of your own pocket. If pathology tests are required in-hospital, there is no direct cost to public patients, but private patients are privately billed and must recover the cost from Medicare and their health fund.

Enrolling for Medicare

To enrol for Medicare, you must fill in an application form (available online) and forward it to Medicare, along with the required supporting documentation. This may include:

  • Copy of current Australian passport, permanent resident visa or proof of application for permanent residence
  • Proof of relationship with an Australian citizen or permanent resident if not on a work visa
  • Copy of passport indicating your eligibility for the Reciprocal Health Care Agreement

Your application will be assessed by Medicare in conjunction with the Department of Human Services (DHS) and once your documentation has been verified you will receive approval or your application will be denied, in which case you have the option of lodging an appeal.

Who is eligible for Medicare?

To be eligible for Medicare benefits, you must be either:

  • An Australian citizen residing in Australia
  • A New Zealand citizen residing in Australia
  • A permanent resident or applicant for permanent residence residing in Australia
  • A visitor from a country with a Reciprocal Health Care Agreement with Australia (New Zealand, UK, Ireland, Italy, Malta, Finland, Sweden, Netherlands or Belgium)
  • A Resident Return visa holder who resides in Australia

What is bulk-billing?

Bulk-billing is where a healthcare professional such as a GP or specialist agrees to accept the Medicare benefit as full payment for their service. In this case, the cost of their service is paid by Medicare and there is no charge to you.

However, not all healthcare professionals bulk-bill, with some only bulk-billing those who hold a concession or health care card. In those cases, you will need to pay upfront for the service and then claim a portion of it (usually 85%) back from Medicare at a later date. There are a lot of clinics that don’t bulk-bill these days, so it’s important to check when making your appointment if you think you might have difficulty paying upfront.

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Picture: Shutterstock

Richard Laycock

Richard is the Insurance Editor at finder, and has been wrangling insurance Product Disclosure Statements for the last 4 years. When he’s not helping Aussies make sense of the fine print, he can be found testing the quality of Aperol Spritzes in his new found home of New York. Richard studied Journalism at Macquarie University and The Missouri School of Journalism, and has a Tier 1 certification in General Advice for Life Insurance. He has also been published in CSO Australia and Dynamic Business.

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4 Responses

  1. Default Gravatar
    alastairApril 30, 2018

    I have ‘Single Silver Hospital 500’ with Health Partners at $121.80/month.
    Have I been wasting my money for the past 20 years?

    I had an imminent dental surgical procedure planned where the GAP would’ve been $850. But then, that dentist referred me to another one. I am asked to now make an appointment. I don’t understand if the new referral/treatment is to paid by Medicare or…

    This maybe the 2nd time of using my insurance.

    Is private health insurance the same as hospital cover?

    • Staff
      NikkiApril 30, 2018Staff

      Hi Alastair,

      Thanks for your message and for visiting finder – the leading comparison website & general information service built to give you advice in your buying decision needs. How are you doing today?

      In general, insurance is never a waste of your money.

      Regarding the referral for your dental surgery, firstly, you’d have to check if the dentist referral is covered by your Medical Insurance before proceeding with the surgery.

      Private Health Insurance is a type of insurance while hospital cover is one of the privileges given by your insurance.

      Hope this helps! Feel free to message us anytime should you have further questions.

      Regards,
      Nikki

    • Default Gravatar
      April 30, 2018

      Hi Nikki,

      I’m alright thanks but bewildered with this concern.
      How are you ?
      What is my Health Partners deal ?
      Is it health insurance, hospital cover or what ?
      I want to understand the terminology
      Am I asking the correct questions to clearly decide how to proceed with the advised surgery ?

    • Staff
      NikkiMay 1, 2018Staff

      Hi Alastair,

      Happy to hear from you again! I’m doing well, thanks! How’s your day today?

      To answer your questions:

      What is my Health Partners deal?
      If you are having issues or have certain concerns about Health Partner, you’d have to contact them directly.

      Please note that we’re a product comparison website and we hold no affiliation with any company we feature on our site. We provide general information on products to assist you in your buying decision process hence we cannot recommend product / service that is rightfully fit for you.

      Is it health insurance, hospital cover or what ?

      Health Partner is a health insurance company. A health insurance is a company that covers you for privileges such as hospital cover, dental cover, and package cover. Since you mentioned previously that you are on the Silver with Health Partners, this is what you should have in the plan:

      Designed to offer mid-level hospital cover, this standalone policy option provides an extensive range of services and benefits. It covers accident treatment, cardiac procedures, psychiatric services, rehabilitation, pregnancy and birth-related procedures, assisted reproductive services, home nursing, and emergency and non-emergency ambulance transport. Silver Hospital also provides a choice of excess payment amounts to help you reduce your premiums.

      There is a waiting period for Single Silver Hospital which is: 12 months for Major dental, orthodontics & apparatus.

      Silver Hospital Cover is available in two forms. Silver Hospital 250 features an excess of $250 and a daily co-payment of $50, while Silver Hospital 500 features a $500 excess and a $50 co-payment. Which one is yours?

      Am I asking the correct questions to clearly decide how to proceed with the advised surgery ?

      Yes, you are. :) You have to check your insurance policy on the cover you have before actually proceeding with the surgery.

      For more information, you can review this page.

      Hope this clarifies!

      Best Regards,
      Nikki

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