HEALTH INSURANCE

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Health Insurance

As a young Australian, you may have come to the point in your life where you have to decide whether you wish to be covered solely under Medicare, or purchase additional Private Health Insurance. We’ve broken down the basics, so you can get an understanding of what each service provides to you.

How does Medicare work?

Medicare is available for all Australians and is the Government’s way of subsidising health services for everybody. The Medicare Benefits Schedule (MBS) lists all services that are subsidised by the Australian Government under Medicare – you can check out the full list here. If you’re young and not earning much, chances are Medicare has been free for you so far. That’s because if you’re a low income earner, then Medicare services are 100% free!

However, in order to fund the Medicare system, you will be charged what’s called a ‘Medicare levy’ once you start earning over a certain amount (in 2017, every non-pensioner who earnt over $21,655 had to pay the levy). This is a small tax (usually 2%) on your earnings that will go straight back into keeping Medicare up and running.

If you’re a high earner with an income above $90,000, you’ll start paying the Medicare levy surcharge Medicare levy surcharge if you do not have an “appropriate level of private hospital insurance” (you can find out what the heck that means here). This can be done at tax time and is automatically taken out of the tax you pay. Depending on your income, the Medicare levy surcharge works out like this:

    • $90,001 – $105,000: You pay 1% of your taxable income
    • $105,001 – $140,000: You pay 1.25% of your taxable income
    • $140,001+: You pay 1.5% of your taxable income

What does Medicare cover?

What if I have to go to the hospital?

If eligible, Medicare will cover you to visit a public hospital as a public patient in an emergency, enabling you to be treated depending on the severity of your ailment.

However, not everything will be covered. Ambulance fees aren’t covered, you cannot choose your doctor, and you are only covered within Australia.

What if I have to go to the GP?

How much Medicare will cover the costs of visiting a GP depends on whether they use bulk billing or private billing.

Bulk billing means that Medicare will reimburse patients 100% of the Medical Benefits Schedule (MBS) fee - that is, the fee the government decides is a fair price for medical services. This means that if you visit a GP that bulk bills, you will not have to pay a cent. Medicare will cover the costs of the services your GP provides, so you can’t be charged for administrative or booking fees.

Some GPs charge more than the MBS fee – what is known as private billing GPs – as they believe their services are worth more. This means you may have to pay for the services out of your pocket and Medicare will reimburse you for only part of the appointment fee.

If you’re not sure whether your GP bulk bills or charges more than the MBS fee, ring them up and ask!

What about when I need to buy medicine from the Pharmacy?

Under the Pharmaceutical Benefits Scheme (PBS) most prescription medicines are subsidised by the government when purchased at pharmacies. All you need to do is present your Medicare card at the counter and you’ll automatically get the discount!

What doesn’t Medicare cover? ?

Medicare will not cover some medical services. These services include:

    • Dental examinations and treatments
    • Overseas treatments
    • Elective/Cosmetic surgeries
    • Medical and hospital services not deemed clinically necessary
    • Most physiotherapy
    • Occupational therapy
    • Psychology
    • Chiropractic services
    • Acupuncture
    • Cost of glasses and contact lenses
    • Hearing aids

How does Private Health Insurance work?

Private health insurance is for those who want to be covered for treatments or services that Medicare doesn’t cover. Like any insurance – e.g. car or travel – health insurance works in much the same way. It’s important to remember there are different types of health insurance depending on whether you want hospital cover or general treatment (although most health insurance providers offer both in a combined policy).

Essentially, health insurance works like this: you pay a premium, which is the amount the private health provider charges you for your policy, dependant on the kind of cover you have chosen. More comprehensive policies will have a higher premium. If you require medical treatment, then you can make a claim to your private health insurer, who will provide you with financial compensation for the treatment. Usually, you will have to pay some of the costs depending on what excess you have selected for your policy (that is, the amount you agree to pay to the insurer when you make a claim). There is usually some waiting periods before making a claim and limits to the number of claims you can make for specific types of services – for example, with pre-existing conditions, dental or optical cover.

The Government likes to encourage Australians to purchase private health insurance as it puts less of a strain on Medicare and because Medicare can’t cover everything. That’s why people who don’t have a certain level of private hospital insurance and who earn above a certain income have to pay a Medicare levy surcharge). It’s also why you may also be entitled to a rebate (aka. money back) on your private healthcare premium when you submit your tax return, depending on your circumstance. This essentially means the Government will give you a little money to go towards paying for your health insurance.

Assuming you are less than 65 years old, you get a rebate depending on your taxable income:

    • Below $90,000 = 25.934% rebate
    • $90,001 – $105,000 = 17.289% rebate
    • $105,001 - $140,000 = 8.644%
    • $140,001+: 0%

To encourage people to take out private health insurance when they’re young, the government also has something called Lifetime Health Cover (LHC). LHC is a kind of loading that you have to pay on top of your premium if you take out cover after the age of 30. The loading works out to be 2% of your premium multiplied by the number of years over 30 you are. So if you take out cover at age 40, ten years after age 30, you will pay 20% extra on top of your premium (2% x 10).

What are the benefits of private healthcare insurance?

There are many benefits to having private health insurance. Private health insurance holders are covered for services that Medicare users aren’t, and it’s often suitable for people who require a lot of specialist treatments such as dental, podiatry or physiotherapy, etc. On top of this, hospital cover means you get to choose your doctor and get treated in a private hospital (often with nicer facilities and shorter waiting times for treatments). However, it is important to note that many health insurance providers have a ‘waiting period’ before you can actually access any of these benefits. This prevents people from joining and making a large claim, only to cancel when they have received the reimbursement.

You’ve got to do your research and read the fine print to ensure the kind of services or treatments you think you’ll need are covered in your policy. It’ll take a bit of shopping around to find the one that’s right for you, but luckily, there are plenty of comparison websites to help you out with this!

Should I Get Private Health Insurance?

Whether you stick with Medicare or get the extra cover of private health insurance is a personal choice. According to the ABS, 47.2% of Australians aged 18-24 have private health insurance. Most young Australians rely on Medicare because they don’t often need regular access to specialist services, unlike older demographics.

Before making a decision, speak to your parents as you may currently be covered under their private health insurance plan. You can be covered by your family’s health insurance until you turn 18 or up until 24 if you’re a full-time student.

At any rate, you have to make the decision that works for you. Different people have different needs and you may find that private health insurance is a must for you, or something you can live without for now.

This information is intended to be general in nature only and might not apply to your personal circumstances. When in doubt seek professional guidance.
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