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Medicare and health insurance

How health insurance and Medicare can work hand-in-hand to protect your health.

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 (currently 1.5% of every taxpayer’s taxable income, with an additional levy for high income earners who don't have private health insurance).

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.

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.

Ambulance cover and Medicare

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.

Is pathology covered by Medicare?

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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Richard Laycock

Richard is the senior insurance writer at and is on a mission to make insurance easier to understand.

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