Last Updated on 8 October 2020

Your complete guide to private hospital cover


Young girl in hospital : health insurance comparison

By its name alone, you probably have a good idea about what hospital cover is all about. But to get the right cover for your lifestyle, your family size and your needs, you need to get to grips with all the ins and outs of private hospital cover in Australia.

Want the ability to choose your preferred doctor? How about avoiding those huge waiting lists for elective surgery? And what do you need to know to ensure you’re not left out of pocket?

All this and more is included in hospital cover, so read on to find out everything you need to know – from what’s covered and what’s not, the cost of hospital cover, how to avoid paying a gap fee, and much more.

Key Points
  • Hospital cover takes care of all or a portion of your in-hospital bills, including accommodation, meals, doctors’ fees and more
  • How much your hospital cover costs depends on the tier you choose (Gold, Silver, Bronze or Basic), your health insurer and where you live in Australia.
  • By taking out private hospital cover, you can avoid paying the 1.5% Medical Levy Surcharge at tax time for the period of your cover.

What is hospital cover?

As a type of private health insurance, hospital cover essentially helps you cover the large costs that can come with a hospital stay or treatment. It includes things like doctors’ fees, cost of theatre, prescribed medicines and the cost of your hospital stay.

The idea behind hospital cover is that it will take the strain off the public health system. What this means for you, is that you’re able to choose your doctor, where you get treated, and speed up waiting times for elective surgery.

Depending on your cover, you can be protected regardless of whether you’re treated at a public or private hospital.

However, hospital cover does not cover ancillary healthcare services. These are services that aren’t offered in hospital: think dental check-ups, glasses and contact lenses, podiatry, physiotherapy and chiropractic services.

If you want any of these ancillary services, you may need to add extras cover in addition to your hospital cover – this is also known as combined cover. In both cases, you may be left out of pocket without the right cover, so it’s important that you take the time to make sure your health insurance is right for your situation.

Why should I get hospital cover?

While Medicare is a fantastic service for Australians, it does have its limitations. By taking out a private insurance policy like hospital cover, it provides a level of financial protection against medical and hospital costs. Whether you end up in hospital because of an unexpected accident or illness, or you have to stay in the hospital for an elective surgery, you can be covered.

Appropriate hospital cover also gives you peace of mind that you will have control over choosing your preferred doctor, and you can also avoid often-lengthy public hospital waitlists for elective surgeries. In 2019, for example, the average waiting time for elective surgery was 41 days, with some procedures taking significantly longer.

For many Australians, hospital cover is also a smart financial decision because it means you don’t have to pay the Medicare Levy Surcharge (MLS). The MLS is charged for any Australians earning over $90,000 as a single or $180,000 as a couple who don’t take out appropriate private hospital insurance, with a hefty tax of up to 1.5% of your yearly taxable earnings.

What does basic hospital cover include?

Private insurance has different tiers, from Basic cover up to Bronze, Silver and Gold. The higher the category, the greater the coverage. What you end up getting will depend on the level chosen, as well as your provider.

This is important because some of the Basic policies aren’t very useful in a practical sense as they offer very limited cover. Generally, these policies are only good for avoiding the Medicare Levy Surcharge – you won’t be entitled to too many benefits.

So, aside from avoiding the MLS tax, what are you actually covered for? Well, it will differ from provider to provider. Often you’ll see “Plus” policies, which are the Basic, Bronze and Silver packages with a little extra, and where you’ll find the biggest variance in terms of what the health funds offer.

You can generally expect coverage that includes:

Basic hospital cover
Covers hospital rehabilitation, hospital psychiatric services and palliative care in a public hospital. Limited benefits are available in private hospitals.

Covered services include:

  • Hospital accommodation.
  • Meals.
  • Theatre.
  • Medicines.
  • Doctors’ fees.
  • Specialists’ fees.
  • Tests and examinations (e.g. x-rays, blood tests, surgeries).

Bronze hospital cover
Covers everything included in Basic hospital cover plus an additional 18 service categories in private hospitals including:

  • Chemotherapy.
  • Radiotherapy.
  • Immunotherapy.
  • Coverage for surgeries and treatments relating to:
    • the brain and nervous system
    • joint reconstructions
    • ear, nose and throat
    • and more.

Silver hospital cover
Everything included in Bronze and Basic hospital cover plus an additional 8 service categories in private hospitals including surgeries and treatments relating to:

  • Heart and vascular
  • Lung and chest
  • Back, neck and spine
  • Dental surgery
  • And more

Gold hospital cover
Everything included in Silver, Bronze and Basic hospital cover plus an additional 9 service categories in private hospitals including surgeries and treatments relating to:

  • Pregnancy
  • Birth and assisted-reproductive services.
  • Joint reconstructions and replacements.
  • Insulin pumps
  • Dialysis for chronic renal failure
  • All other in-hospital services recognised by Medicare.

What isn’t included under hospital cover?

Exclusions depend on the policy you take out, but unless you purchase the top level of cover (Gold hospital cover), your policy may not include coverage for:

  • Knee and hip replacements.
  • Pregnancy and other birth-related procedures.
  • Pain management with device.
  • Cataract surgery.
  • Dialysis.
  • Weight-loss surgery.
  • Insulin pump.
  • Sleep studies.

It’s worth checking your policy on a regular basis to ensure you’re not paying for cover that you don’t need and are covered for services that you’re more likely to need.

Aside from some dental services, the following out-of-hospital services are not covered under any hospital cover policy. The only way you can get coverage for them is by taking out extras cover:

  • Physiotherapy.
  • Chiropractic.
  • Dental.
  • Optical.

What is a gap fee?

Gap cover is a form of financial assistance that covers what you would normally pay when the cost of an in-hospital medical service, procedure or test is above the combined Medicare and health insurance benefits as specified by the Medicare Benefits Schedule (MBS). If that sounds a bit complicated, we’ll break this down for you.

The government introduced the MBS as a way to subsidise the cost of certain treatments and procedures. These services cover everything from doctor visits to pathology, diagnostic imaging services, surgeries and much, much more.

What does this mean in practice? Medicare and your hospital insurance will generally cover 100% of the MBS fee. But because many procedures are complicated and require the services of seasoned professionals, the costs of those procedures can get very high.

In many cases, your standard health insurance benefit combined with your Medicare benefit won’t fully cover the cost of in-hospital medical services, procedures and tests, leaving a ‘medical gap’ for you to pay. However, with a hospital cover policy that includes medical gap cover, you won’t need to foot the full bill for gap fees.

Essentially, if your private hospital cover stipulates that it includes ‘No Gap’ cover, then that means you won’t need to make any out-of-pocket expenses for medical services performed by doctors who participate in your fund’s No Gap cover.

But if your doctor participates in a ‘Known Gap’ scheme then you will need to pay a gap fee – i.e. out-of-pocket medical expenses – even if you have private health insurance.

Under the ‘Known Gap’ arrangement, your doctor/surgeon will let you know what your gap payment will be before you undergo the procedure.

This is why it’s important to have the ability to choose your preferred doctor, which appropriate hospital cover allows you to do.

It means you can always check whether your preferred doctor is participating in your health fund’s gap-payment arrangements before receiving treatment from them.

What are the waiting periods for hospital cover?

Waiting periods are part of every hospital cover policy. Maximum waiting periods are enforced by the Australian Government. That means you’ll need to wait out the period before you can claim on your cover’s benefits.

The waiting period for your hospital cover will be from 12 months to 20 months or more, depending on the service.

For example, the maximum waiting period for any pre-existing health condition requiring hospital treatment is 12 months, but if you need to go to hospital for psychiatric treatment or palliative care, then the maximum waiting period is only two months.

How does hospital billing work?

Whether you are in a public hospital as a private patient or in a dedicated private hospital, Medicare will cover 75% of your medical costs for services and treatments listed on the MBS.

The remaining 25% of your hospital bills will be charged to you, however these will likely be paid for by your private hospital cover, depending on your plan and the treatment and services rendered.

How much is hospital cover to purchase?

The cost of hospital cover isn’t static across all providers. In fact, how much you pay for hospital cover will depend on where you live, the level of cover you want and the provider you choose.

So, typically, if you’re a young single person your hospital cover won’t be very expensive. This is because you’re covering only one person and may not need the level of cover that a large family would require.

On the other hand, if you are a couple who are planning on starting a family in the next couple of years, then you might want to pay for a more expensive level of cover to get all the benefits of pregnancy and birth-related coverage.

What affects the cost of your health insurance hospital cover

To help give you an idea of what it might cost you to get hospital cover, here’s a few of the variables that might raise or lower your costs.

  • Your state: different Australian states have different associated healthcare costs
  • Your relationship: single premiums are significantly less than family/couple premiums
  • Your family: unsurprisingly, families pay more than singles
  • Your nearest hospital: depending on where you live, your nearest hospital may not have an agreement with your fund of choice. You’ll have to decide whether convenience is worth paying more for.
  • Your-soon-to-be-family: pregnancy services tend to be included in gold cover – the most expensive tier.
  • The health tier: gold cover is more expensive than silver, which is more expensive than bronze and basic. Bronze Plus and Silver Plus policies will usually be more than standard Bronze and Silver cover.
  • Your health needs: this may sound obvious, but the cost will vary depending on what you need. If you’ve read through the section on what’s covered in different tiers, you’ll probably already have a good idea of what level or tier of cover you require.

Everybody’s health needs are different, whether it’s just you, you and your partner or a large family. The important thing is that you’re covered for what you need at an affordable price without overpaying for services that you don’t require.

It’d take a lot of your time to research all levels of cover across all 38 health funds, which is why Health Insurance Comparison can do the heavy lifting for you. Our experts compare across a trusted panel of insurers to find policies that are suited to your needs and budget.

Can I avoid the Medicare Levy Surcharge (MLS) with hospital cover?

The Medicare Levy Surcharge (MLS) is an Australian tax that was introduced as a way to reduce the heavy burden and demand on the public Medicare system. The tax acts as an incentive for Australians who earn above a certain amount to take out private hospital cover. And for young, healthy people who make a good living, it’s the perfect way to save money come tax time.

The MLS tax is from 1% – 1.5% of taxable income and you will have to pay it if/when you don’t have private hospital cover. Note that it’s only payable if you earn $90,000+ as a single or $180,000+ as a couple/family*. The good news is that, yes, you can avoid paying this tax if you take out hospital cover, even at a Basic level of cover**.

Ready to find and compare health cover that gives you exactly what you need? Health Insurance Comparison makes it so easy to compare hospital cover so you can take out the right policy for you and your loved ones.

* The family threshold increases by $1500 for each child after the first.
**If you earn above the MLS thresholds, the MLS will be payable for any part of the financial year that you don’t hold an eligible hospital cover.

This article is opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions.


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