Last Updated on 12 February 2020

Your Guide to Hospital Cover in Australia

Medicare is fantastic for those who can’t afford or do not choose to purchase private health cover. In saying this, purchasing hospital cover may be beneficial for you or your family.

Hospital cover comes with several medical and financial benefits that you won’t receive if you use Medicare alone.

Key Points
  • Hospital cover can be thought of as the ‘base policy’ private health insurers provide their customers.
  • Carefully compare hospital cover policies to avoid gap charges, exclusions, and restrictions. It’s essential to get a policy that covers all of your potential medical needs.
  • There are several government incentives that push people toward buying private hospital cover, including the Medicare Levy Surcharge, Lifetime Health Cover, and a rebate.

Private Health Insurance

There are several blind spots in the Medicare system for which you can only find coverage in the private system.

The three types of private health cover are: hospital cover, ambulance cover and extras cover. Some insurers may include ambulance cover in your hospital policy or as an added benefit you can choose.

Medicare doesn’t cover ambulance trips, so you should check with your insurer if you think you’re at risk of needing an ambulance.

Risk Related Factors

Unlike many other forms of insurance, your perceived risk has nothing to do with how much you’ll pay for health insurance. The government ensures that everyone can purchase private health insurance regardless of age or health risk.

Similarly, everyone will pay the same premium rate for the same level of coverage. The only price difference you’ll find is in the tax rebate you receive, which increases as you get older.

Hospital Cover

Hospital policies cover any hospital treatments or surgeries you may require, as well as your stay at hospital. Insurers often provide a variety of hospital cover tiers from which you can choose.

For example, you can choose a basic plan that only covers necessities or a more advanced policy that will cover advanced surgeries and medical treatments related to pregnancy.

All private hospital cover will allow you to:

  • Choose your own doctor
  • Select the hospital where your doctor will treat you (from an approved list)
  • Become a private patient in both private and public hospitals
  • Avoid lengthy weight times for elective surgeries
  • Gain more flexibility in when you receive treatment

When you check yourself into a hospital as a private patient with hospital cover, the Medicare system will pay for 75% of your Medicare Benefits Schedule (MBS) fee. Assuming you have appropriate hospital cover, the private insurer will handle the last 25% of the MBS fee.

If your doctor charges a rate above the MBS fee, you’ll have to pay the remaining balance. If your hospital plan doesn’t cover some of the services or procedures you’ve received, you’ll also have to pay those charges.

Depending on the type of hospital cover you purchase, you might be on the hook for the following:

  • Hospital Accommodations: Some hospital policies will cover your accommodation cost if you’re in a shared room, but not a private room. The hospital staff will likely let you know if this is the case for you.
  • Extended Hospital Stay: If you spend more than 35 days in the hospital at a time, your insurer will consider you an extended stay patient. Health insurers aren’t required to cover full accommodations after this time.
  • Benefits Limitation Period: A period of reduced medical benefits that follows the waiting period.
  • Optional Surgery: Medicare doesn’t cover optional (elective) surgery (such as cosmetic surgery), and your health fund might not either.
  • Restrictions and Exclusions: Services or treatments that your insurer covers in a limited fashion or doesn’t cover at all.
Gap Cover

A gap in coverage commonly occurs in one of two ways:

  • Your doctor or specialist charges more than the Medicare Benefit Schedule fee
  • You visit a hospital that doesn’t have an agreement with your private health insurer

Some health funds offer gap cover to protect your pocket in case your doctor charges more than the Medicare Benefits Schedule limit.

If your health fund offers a “No Gap” cover, it means they’ll cover any differences that may appear when your doctor charges more than the MBS. If not, you’ll have to cover these expenses on your own.

If you don’t have partial or complete gap cover, your doctor should let you know what your out-of-pocket cost will be before performing a procedure. Still, it’s important to ask your doctor questions to avoid surprise expenses.

Navigating Exclusions and Restrictions

One of the biggest hurdles you’ll come across when signing up for private health insurance is exclusions and restrictions. It’s essential that you read and compare the exclusions and restrictions of each policy carefully before making your decision.

It’s often difficult to envision what services you’ll need in the future, which is why you also need to pay attention to the waiting period in your insurer’s plans.

The waiting period is a specified time before your benefits kick in. You’ll experience this if you buy new coverage or upgrade existing coverage.

Waiting periods and benefit limitation periods exist to prevent people from purchasing insurance right before they need a procedure. It protects the fund from immediately having to pay a high hospital fee, only to have the policyholder cancel soon after they receive the procedure.

Financial Implications of Hospital Cover

The government has introduced a few surcharges and tax benefits relating to private health insurance. They’ve done so as a way to reduce the load on the public system and as an incentive for Australian residents to pay for their hospital cover.

These systems are the Medicare Levy Surcharge (MLS), Lifetime Health Cover (LHC), and a tax rebate. The goal of these incentives is to encourage anyone who can afford private healthcare to do so.

Medicare Levy Surcharge (MLS)

Most Australians pay the Medicare levy when they do their taxes every year. This is a 2% fee to subsidise the universal public healthcare system.

If you earn over a certain income and decide not to purchase hospital cover, though, you’ll also have to pay the Medicare Levy Surcharge. The surcharge is an additional 1% to 1.5% of your income on top of the 2% Medicare levy everyone pays.

The government created the surcharge as a way to push those who can afford private cover out of the public system.

This helps unclog the Medicare pipeline and ensure everyone gets the best care they can manage.

The Medicare Levy surcharge is an additional fee paid on top of the 2% Medicare Levy Surcharge that most Australian taxpayers pay. You can avoid the surcharge if you have Private Health Insurance (Hospital Cover).

The exact surcharge level you’ll need to pay depends on your income level and relationship/family status. Use the slider and dropdown menu below to determine what surcharge you’re liable for if you don’t have private hospital cover.

Your Medicare Levy Surcharge is 0.00% of your income, or $0.00
Singles ≤ $90,000 $90,001 - 105,000 $105,001 - 140,000 ≥ $140,001
Families ≤ $180,000 $180,001 - 210,000 $210,001 - 280,000 ≥ $280,001
Medicare Levy Surcharge
Standard Tier 1 Tier 2 Tier 3
All Ages 0.0% 1.0% 1.25% 1.5%
Lifetime Health Cover

Lifetime health cover is another way the Australian government tries to push people to enrol in private health cover while they’re still young.

If you still haven’t bought private hospital cover by the 1st of July following your 31st birthday, your LHC loading fees will start to accrue. They will grow by 2% for every year you fail to purchase private health insurance.

For example, someone who purchases private health cover for the first time at 50 will pay 40% more on their premium than someone who obtained it at 30.

Once you pay the loading fees for ten years without gaps, your health insurer will likely remove them.

Once you purchase coverage, the government allows you to have gaps in coverage totalling 1,094 days. These days are throughout the life of your insurance, and once you use them, your LHC loading fees will start to accrue once again.

Depending on your age, family status, and income level, you may be entitled to a Government Rebate on your private health insurance policy. Use the sliders and dropdown menu below to calculate your rebate.

Your Rebate is 0
Singles < $90,000 $90,001 - 105,000 $105,001 - 140,000 > $140,001
Families < $180,000 $180,001 - 210,000 $210,001 - 280,000 > $280,001
Base Tier Tier 1 Tier 2 Tier 3
Age < 65 25.059% 16.706% 8.352% 0%
Age 65-69 29.236% 20.883% 12.529% 0%
Age 70+ 33.413% 25.059% 16.706% 0%

Noise pollution is one of the other major factors in hearing loss. Even though the Australian government regulates loud noises from work environments, that doesn’t mean we’re completely safe from environmental noise.

Tax Rebate

The private health insurance tax rebate is the friendliest way the government pushes people towards private hospital cover.

As a private healthcare recipient, you’ll receive a portion of your premiums back in the form of a tax rebate. How much you’ll get back depends on your age, family status and annual income.

Income Threshold
Base Tier Tier 1 Tier 2 Tier 3
Singles < $90,000 $90,001 – 105,000 $105,001 – 140,000 > $140,001
Families < $180,000 $180,001 – 210,000 $210,001 – 280,000 > $280,001
Tax Rebate Breakdown by Financial Tiers/Age
Base Tier Tier 1 Tier 2 Tier 3
Age < 65 25.059% 16.706% 8.352% 0%
Age 65-69 29.236% 20.883% 12.529% 0%
Age 70+ 33.413% 25.059% 16.706% 0%

Final Thoughts on Hospital Cover

If you can afford hospital cover, consider shopping around for a policy. Not only could this save you money and hassle in the long-run, but it will also help to ease the burden on the public system for other patients.

Every hospital policy has its limitations, so we recommend you compare policies before deciding. If you’re worried about gaps, look into extras cover, gap coverage, or comprehensive hospital cover to limit your risk.


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