The Australian health system can seem pretty complicated at times. There are gap fees for this, rebates for that, new schemes for something else and inevitable changes every time a new Government is sworn in. The whole system even has its own language: Medicare Levy, Pharmaceutical Benefits Scheme, Lifetime Health Cover, Schedule Fee, EMSN Benefit Cap and all sorts of other terms thrown into the mix.
But what does it all mean for the average Australian trying to work out the essential differences between public and private health care in this country? Which personal medical situations are better serviced by one or the other (or handled well by both)? What are the most important advantages of opting for private health insurance? What’s the deal with hospital waiting lists? To answer these questions and more, here’s a simplified look at our health system and how it works:
Our health system at a glance
In Australia, health care relies on a mixture of services funded by the Government (both State and Commonwealth) and private health insurance. Our system is based around the National Health Care Act of 1953 which regulates how medical, dental and pharmaceutical services are provided. The Act covers things like registration of health funds, nursing homes and the Pharmaceutical Benefits Scheme.
For Australian citizens and permanent residents, public health care is provided by Medicare, a universal health scheme administered by the Government. It provides access to a range of health services at little or no cost and is funded by a combination of general revenue and the Medicare levy. This levy, paid by taxpayers, is 2% of taxable income. High income earners past a certain threshold must also pay an extra 1% -1.5% surcharge (depending on income) if they do not have private health insurance. This Medicare Levy Surcharge (MLS) was introduced by the Government to encourage Australians on higher incomes to take up private health cover. Medicare (in its present form) has been a feature of the Aussie health system since 1984.
Australians can choose to obtain their health care solely from Medicare or use a combination of Medicare and private health insurance to meet their medical needs.
Private health insurance offers several advantages over the public system: you have the option of being treated by your own physician, you have more control over when and where you receive medical care and the waiting times for elective surgery tend to be considerably shorter
Because Medicare does have limitations in what it covers, private health insurance can provide a number of extra health service options for those who choose to take out a policy.
Private health insurance offers several advantages over the public system: you have the option of being treated by your own physician, you have more control over when and where you receive medical care and the waiting times for elective surgery tend to be considerably shorter. Private health cover also assists with those services not covered by Medicare, including dental, physiotherapy, chiropractic, optical and a number of other specific health care requirements.
When compared to the health systems of most other developed nations, the Aussie version stacks up pretty well. We enjoy impressive life expectancy rates, while our national spending on health is similar to that of other prosperous nations. This is not to say the system doesn’t have serious challenges to face now and into the future, especially in regard to indigenous health issues, rising diabetes rates and an alarming obesity epidemic, to name a few. But in general, our health system serves us well.
How Medicare works
The Medicare system can basically be divided into 3 parts: medical, hospital and pharmaceutical:
Medicare doesn’t cover most of the costs related to glasses and contact lenses, hearing aids and other appliances, cosmetic surgery, clinically unnecessary procedures, ambulance services, the majority of dental services, occupational therapy, dietary advice, eye therapy, speech therapy, podiatry, psychological services, physiotherapy or chiropractic services.
When you pay a visit to a doctor outside a hospital, Medicare provides a reimbursement on the listed MBS (Medicare Benefits Schedule) fee, which amounts to 100% for GPs and 85% for specialists. If your doctor does bulk billing (where they bill Medicare directly), you pay nothing. Medicare covers X-rays, consultation fees, tests, examinations, optometrist eye tests, pathology tests and most doctor-performed surgical procedures, as well as a number of specific treatments relating to the EPC (Enhanced Primary Care) program, Chronic Disease Management Plan and Cleft Lip and Palate Scheme. Specific procedures performed by approved dentists are also covered under Medicare to a limited extent.
Now for the bad news: Medicare doesn’t cover most of the costs related to glasses and contact lenses, hearing aids and other appliances, cosmetic surgery, clinically unnecessary procedures, ambulance services, the majority of dental services, occupational therapy, dietary advice, eye therapy, speech therapy, podiatry, psychological services, physiotherapy or chiropractic services. If you need home nursing or a medical exam for life insurance, superannuation, employer memberships or similar, Medicare doesn’t cover that either. To learn more about the specific health services subsidised by Medicare, go to MBS Online, which has all the latest information.
Medicare covers treatment as a public patient in a public hospital. This is provided free of charge, but you don’t have a say in the doctor that treats you – he or she will be assigned to your case depending on availability. Even if you have private health insurance, you can still choose to be treated as a public hospital patient. However, in the public system you don’t often get a lot of choice as to when you’ll be admitted to hospital.
A wide range of pharmaceutical medications are subsidised under the PBS (Pharmaceutical Benefits Scheme). This means that for most prescription medicines bought at pharmacies you’ll only pay a portion of the cost, with the PBS picking up the tab for the remainder. A valid Medicare card is required to access this benefit. The amount subsidised varies depending on the type of medication.
Medicare doesn’t cover you for health costs incurred while travelling overseas (that’s what travel insurance is for). However, the Australian Government has Reciprocal Health Care Agreements with a handful of countries that do provide some health services and subsidised medications for Australians travelling in the designated countries. The current list of nations involved in the agreements includes New Zealand, the UK, Netherlands, Finland, Norway, Slovenia, Italy, Malta, Belgium, Sweden and the Republic of Ireland.
These agreements help Australians with the costs of essential medical treatment while visiting these countries and also provide reciprocal help for overseas visitors to Australia. Eligibility is restricted for certain types of visa holders (those on retirement visas, for example) and students from certain countries. It cannot be stressed enough that these agreements have obvious limitations and are in no way a substitute for a journey-appropriate travel insurance policy.
Private health insurance
In many cases, Medicare can work extremely well. If your appendix is about to burst or you’ve just had a heart attack and need to be rushed to your nearest public hospital for emergency treatment, you’re assured of urgent care of high quality without major financial outlay. And being able to find a doctor that bulk bills through Medicare is certainly a huge advantage for families on low incomes.
Medicare does have its downsides, however. You can face lengthy waits for elective surgery. You’re still required to pay the gap amount (when applicable) and your choice of facilities, treatments or hospital physician are more limited than with private health cover.
in 2013-2014, around 700,000 patients were admitted to public hospitals in Australia after being on waiting lists for elective surgery. Half of these patients were admitted to surgery within 36 days of going on the waiting list, and 90% were admitted within 262 days1.
With private health insurance, you may choose to be treated in either a public or private hospital as a private patient, and Medicare will cover 75% of the Medicare Benefits Schedule fee. Remaining costs are paid by you. Depending on your individual health insurance policy, these costs may be partially or fully covered by your insurer.
Private health insurance is not compulsory in Australia, nor does it affect your ability to access Medicare. The Government actively encourages us to take out private health cover by applying the Medicare levy surcharge to higher income earners who elect not to have hospital cover.
The Government also encourages Australians to obtain private hospital cover earlier in life (and maintain it) through its Lifetime Health Cover scheme. This allows for lesser premiums for those who take out hospital cover before the 1st of July following their 31st birthday. Aussies who fail to take out hospital cover by this deadline must pay an ‘LHC loading’ of 2% for each year that they’re over 30. So, if you wait until the age of 40 to take out hospital cover you will pay an additional 20% for your hospital cover. If you wait until you’re 50, it’s 40% more. Maximum loading is 70%. The Lifetime Health Cover scheme only applies to hospital cover – not to extras (also called ancillary) cover. After you have paid LHC loading on your private hospital cover for 10 continuous years, the loading is removed.
One of most noticeable benefits of having private health cover is that waiting times for elective surgery are greatly reduced. The media seems to love stories about ‘pensioners waiting a year or more for hip replacement surgery’, but what do the statistics really say? Well, in 2013-2014, around 700,000 patients were admitted to public hospitals in Australia after being on waiting lists for elective surgery. Half of these patients were admitted to surgery within 36 days of going on the waiting list, and 90% were admitted within 262 days.
Because public hospital waiting lists operate on a priority basis, with Medicare you may face the situation where after waiting over a month for your operation, you’re told that your procedure has to be postponed because of the more urgent needs of other patients. With private health cover, however, you’re given a definite date for your op that’s locked in (and usually a whole lot quicker). Plus you get to pick your own doctor or specialist to do the job.
Hospital and extras cover
It’s easy to go online and compare hospital cover options from different insurers. The important thing is to take out cover that’s appropriate for your needs.
Private health insurance essentially falls into two categories: hospital cover and extras cover. Hospital cover is frequently available at differing levels to accommodate your needs and budget, and is designed to cover you for expenses resulting from a visit to hospital as a private patient, including treatment, medications and room costs.
Hospital cover varies a lot from one insurer to the next and comes with assorted limitations, waiting periods, designated excess amounts, etc. It’s easy to go online and compare hospital cover options from different insurers. The important thing is to take out cover that’s appropriate for your needs. By law, health insurers must provide a Product Disclosure Statement that outlines the details of their policy benefits, so make sure you read this when you’re working out your choice of cover.
Depending on your policy, hospital cover might cover you for surgery, overnight accommodation, special care unit accommodation (such as Intensive Care), doctor’s surgical fees and in-hospital consultations, allied health services (occupational therapy, physiotherapy, etc.), patient meals, nursing care, operating theatre fees, investigative procedures, sundry medical supplies, government-approved prosthetic devices, treatment-specific prescription medications and more.
Extras cover (sometimes called ancillary cover or general treatment cover) is designed to cover you for the sorts of essential health services you might need on a regular basis. Many health funds offer extras cover as an optional ‘add-on’ to existing hospital cover. What you’re covered for depends on the level of extras cover you select, and may include (but is not necessarily limited to) the following services or treatments: dental, optical, orthotics, osteopathy, chiropractic, podiatry (both general and surgery), physiotherapy, hydrotherapy, various natural therapies (acupuncture, homeopathy, naturopathy, remedial massage, etc.), psychology and travel vaccinations.
Ambulance cover may also be part of extras cover, but ambulance services operate differently in every state, so you’ll need to check what you need to do for ambulance services within your state of residence.
What about dental care?
High dental costs are one of the best reasons to seriously consider private health cover – if you’ve ever needed a couple of crowns put in or had 4 wisdom teeth removed at the same time, you know it hurts your bank balance just as much as it hurts your jaw!
If you need to visit a dentist in this country, here are your choices: you can pay the total dentist bill yourself in full, you can take out health insurance (Extras cover) that will cover you (partially or fully)
for your required dental needs, or you can attempt to access public dental services if you’re eligible. Unfortunately, the latter option isn’t always terribly practical – the number of people on waiting lists for dental treatment across this country is considerable. According to Carol Bennett, CEO of the Consumer Health Forum of Australia (CHF), this situation constitutes a national embarrassment. She points out that within the past two years, nearly 2 million Australians had to forego badly needed dental care because they couldn’t afford it. It’s estimated that untreated dental issues cost around $2 billion each year in lost productivity.2
With private health insurance, you can get various levels of dental cover to suit your needs. Types of cover include General Dental (basic dentist visits, teeth cleaning, minor fillings and X-rays) and Major Dental (dentures, crowns, bridges, braces, etc.). High dental costs are one of the best reasons to seriously consider private health cover – if you’ve ever needed a couple of crowns put in or had 4 wisdom teeth removed at the same time, you know it hurts your bank balance just as much as it hurts your jaw!
Making the right choices for your health
Both public and private health care in Australia have their pluses and minuses, and it’s not necessarily a matter of having to choose one over the other – you can choose to use both to ensure your family has access to the widest range of available health services.
The public health system in Australia has a lot to offer, but those who want to take a more proactive approach to their health and expand their choices will find that private cover gives them extra options.
Private health insurance is extremely competitive in Australia at the moment, with discounts and incentives being the order of the day. When checking out private health insurers, look for (a) reputation, (b) value for money, (c) quality of customer service and (d) a good range of useful benefits.
The public health system in Australia has a lot to offer, but those who want to take a more proactive approach to their health and expand their choices will find that private cover gives them extra options. Either way, it’s important to remember that the best way to stay healthy is to look after yourself. Australia suffers from many of the same ‘lifestyle diseases’ that afflict other prosperous nations, but by making healthier lifestyle choices we can not only benefit ourselves but take some of the strain off our overburdened health system.