If you're young and seeking to avoid the Lifetime Health Cover loading, Public Hospital Cover is the most cost-effective health insurance solution for you
Public Hospital provides around the same level of bare essentials cover that basic hospital offers, while only entitling the policyholder to admittance as a private patient in a public hospital. It is, however, the cheapest form of private health insurance offered by health funds, with the other three being basic, medium and top. The two types of basic hospital cover are private and public hospital cover and it is the latter that we will be looking at in greater detail here.
While medium and top hospital cover may be more appropriate for those with families or for an older demographic with chronic health issues, public hospital cover is often taken out by young people who have no health issues and no immediate need for hospital services. It is also taken out by those wishing to avoid government penalties such as the Medicare Levy Surcharge and the Lifetime Health Cover loading, both of which penalise those who don’t have adequate hospital cover.
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A typical public hospital cover policy will provide a benefit for basics such as:
- A shared room as a private patient in a public hospital
- Theatre fees in a public hospital
- Emergency ambulance
- Accident-related treatments
- Removal of tonsils, adenoids, appendix, kidney stones and gallstones
- Surgical treatment of a hernia
- Digestive disorder procedures (eg, bowel surgery)
- Cancer related services (eg, chemotherapy)
Because you are a private patient you may get to choose your own doctor, but because you have public hospital cover, the benefit limits will be lower and you will likely have to pay an excess ($400 - $500). As a private patient in a public hospital, you may also be put on a waiting list for treatment, as are those in the public system.
Exclusions that may apply to public hospital cover (circumstances in which a benefit will not be paid) include:
- Cover for a private room in a public or private hospital
- Pregnancy and obstetrics
- Assisted reproductive services
- Cataract and eye surgery
- Cardiac-related services
- Non-cosmetic plastic surgery
- Gastric banding
- Hip and joint replacements
- Renal dialysis
- Palliative care
- Psychiatric care
Exclusions that normally apply to all levels of private health insurance, including public hospital cover, are:
- Cosmetic surgery not deemed medically necessary
- Treatments or services performed outside of Australia
- Long-stay accommodation (longer than 35 days)
- Treatments for which Medicare does not pay a benefit
Because of its basic nature (and lower cost), public hospital cover is often taken out by those who do not envisage needing hospital services in the foreseeable future, such as the young and healthy. It is also attractive to those wishing to avoid government penalties such as:
- The Medicare Levy Surcharge (MLS). Those who earn more than $90,000 for singles or $180,000 for families and do not have basic hospital cover with a maximum excess of $500 for singles or $1,000 for families will pay additional tax of 1-1.5%, depending on their income.
- Lifetime Health Cover (LHC) loading. For every year after your 31st birthday that you don’t have private hospital cover, it will cost you an additional 2% to take out cover. This increase is capped at 70% and the loading is removed after you have held hospital cover for 10 years.
In both cases, having a basic level of hospital cover can help you avoid paying these extra levies and many insurers offer basic policies designed expressly for this purpose.
Some final points to keep in mind if you are considering public hospital cover:
- Because it is a public hospital, you may be subject to public hospital waiting periods.
- Because you are a private patient, you may still be able to choose your own doctor.
- Only those treatments listed in the policy are covered, and if you need treatment for restricted conditions in a private hospital, it will be at your own expense.
- If your doctor charges more than the Medical Benefits Schedule (MBS) fee, you will have to pay the gap yourself, unless your doctor has a No Gap agreement with your insurer.
- You will probably be required to pay an excess (payment towards your treatment), so make sure you will be able to afford it at the time.