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Last Updated on 27 April 2018

Medicare vs Private Health Insurance


Medicare serves a valuable purpose in our healthcare landscape. It provides basic coverage for people who can’t afford to buy private coverage.

Young people who don’t spend much time in the doctor’s office often choose Medicare over private health insurance to save some money. For them, basic coverage might be all they need to protect against potential injury.

As you get older, though, the need for private health cover increases. Doctors visits become more frequent, and you’ll start to recognise the faults in our Medicare system.

Ahead, we’ll explore why private health insurance may be a suitable option for you, if you can afford it.

Key Points
  • While Medicare covers the basics, there are essential places where Medicare falls short for some people.
  • Private health insurance offers a variety of benefits, including enhanced coverage, the ability to choose your doctor, the opportunity to avoid long wait times, and more.
  • The government has multiple systems in place to incentivise people to buy private health insurance, as an addition to Medicare.

What Does Medicare Cover?

Medicare covers the essentials of health care. The system won’t make you pay for lifesaving and necessary treatment, which is extremely beneficial for those who can’t afford expensive procedures.

If you’re someone who doesn’t have enough money to pay for a private health insurance premium, Medicare is a satisfactory alternative. It’s not ideal for everyone, but it’s far better than no healthcare at all.

All public Medicare recipients are entitled to the following coverage:

  • Public hospital treatment
  • Free or subsidised treatment from doctors and specialists
  • Tests that are necessary to treat illnesses or injuries: x-rays, pathology tests, etc.
  • Some dental surgeries
  • Vision tests
  • Most surgeries performed by a doctor
  • Some therapies performed by doctors
  • Discounts on certain prescription medications through the Pharmaceutical Benefits Scheme

When Do You Need More Than Medicare?

Although the above list might seem comprehensive, there are some substantial benefits that Medicare may not cover. Medicare covers vision tests, for instance, but not the glasses or contact lenses you may need once you receive your results.

Some of the notable benefits Medicare often doesn’t cover are as follows:

  • Cosmetic surgeries
  • Hearing aids
  • Home nurses
  • Glasses and contact lenses
  • Ambulance services
  • Dental exams and other dental treatments
  • Most elective therapies
Avoiding Wait Times

Wait times are the biggest incentive when choosing private health cover over Medicare, especially if you’re older.

There is a long list of “elective” surgeries that Medicare will cover, but you may have to wait a long time to receive treatment.

These elective surgeries include joint replacement, which is far from “elective” if you suffer from chronic joint pain. A knee or hip replacement could have you agonising for months or even a year until you finally see a doctor.

When you can go under the knife, you’ll have very little flexibility regarding the timing of the procedure and where you receive treatment.

Public Hospital Waiting List Calculator

Our Public Hospital Waiting List Calculator gives you an idea of how long you'll need to wait to have a procedure done through the public healthcare system. Data is sourced from the Australian Institute of Health and Welfare.

Admissions The number of people admitted to hospital for Cystoscopy in QLD in 2013. 4855
Days waited at 50th percentile The 'median' number of days waited for this procedure to be carried out. In other words, out of 100 people, 50 people will wait more days for this procedure, and 50 people will wait fewer days. 23
Days waited at 90th percentile 90% of people will have their procedure complete in this number of days or fewer. 98
Per cent waited more than 365 days The percentage of people waiting over a year for their procedure. 0.9
Choosing Your Doctor

One of the most attractive benefits of private health insurance is the ability to choose your doctor and the location at which they treat you.

You’ll have far more flexibility with private health cover as opposed to Medicare. With private health insurance, you can make sure you receive the best care on a schedule that works for you.

Private Hospital Rooms

If you own hospital cover, the staff will treat you as a private patient in either a public or private hospital. This means that you’ll usually have a private room when you visit the hospital.

Those who have Medicare alone are public patients, and they’ll almost never have their own hospital room. If this is an important element to you, private health insurance may be the way to go.

Government Incentives for Private Insurance

Medicare provides health coverage for people who can’t afford to buy their own plans. Under the Australian system, the Medicare system makes sure no one is left without necessary health care.

In an ideal world, only those who can’t afford private health insurance would use the Medicare system. Those who could afford to spend a bit of extra money would, leaving Medicare free and clear to help everyone who needs the support.

Unfortunately, this ideal scenario is not the reality. Some people decide to use Medicare, even when they can afford private health insurance.

To help dissuade people from doing this, the government offers three incentives to push people toward private health care if they are financially able. These incentives are: The Medicare Levy Surcharge (MLS), Lifetime Health Cover, and a tax rebate.

Medical Levy Surcharge (MLS)

Most Australian taxpayers pay a 2% Medicare Levy to help subsidise the Medicare system for everyone. The MLS is an additional fee, dependent upon your age, family status, and income.

If you don’t have private health insurance and earn over $90,000 a year by yourself or $180,000 as a family, you’ll need to pay the additional surcharge. If your household income is over $180,000, but you earn less than $21,655, however, you won’t have to pay the MLS.

This fee is one of the ways the government encourages people to purchase private health cover. Those who earn over $90,000 annually usually shouldn’t be adding to the already heavy Medicare burden.

Medicare Levy Surcharge Calculator

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

Another way the Australian government incentivises people to buy private health insurance early is through the Lifetime Health Cover.

The Lifetime Health Cover starts accruing after the 1st of July following your 30th birthday, otherwise known as the Lifetime Health Cover base day.

If you still haven’t purchased health insurance at this time, you’ll start building a loading fee, which you’ll have to pay for the lifetime of your coverage once you decide to purchase private health insurance.

The loading fee rises by 2% for every year (after you turn 30) that you neglect to purchase private coverage.

For instance, if you purchase healthcare for the first time at 50, you’ll pay 40% more than someone who bought private health insurance before they turned 30. The cap on the loading fee is 70%.

After ten years of loading fee payments, your insurer will waive the fee for the duration of your insurance. If you have a substantial gap in coverage after this time, the loading fee may come back.

For couples, the loading fee is the average loading fee of each partner. For example, if you have a 10% loading fee and your partner has a 30% fee, your household loading fee will be 20%.

Tax Rebate

Unlike the previous two government incentives, the tax rebate is a reward rather than a punishment.

Depending on your age and income level, you’re entitled to a discount of a percentage of your private health insurance premium in the form of a tax credit.

If you make over $140,000 as an individual or over $280,000 as a family, you don’t get the discount, but by buying private health cover, you’ll still be avoiding the pricey MLS.

Tax rebates only grow larger as you get older. Seniors – who often need private healthcare the most – have the largest opportunity for tax rebates through this system.

The Unseen Cost of Medicare

As we’ve discussed, relying on Medicare alone may not be ideal option for everyone – especially when you’re over 30. While it’s a necessary health care system in our country, anyone who can afford private health insurance should buy it.

If you can afford private health insurance but decide not to buy it, chances are you’ll eventually pay for it in the form of loading fees, surcharges, and potentially lacklustre healthcare.

Frequently Asked Questions About Health Insurance

There are three types of health insurance in Australia. They are:

  • Hospital Cover
  • Extras Cover (also known as general or ancillary cover)
  • Ambulance Cover

Hospital cover can ensure any unexpected surgeries, treatments or hospital stays you may require will be covered. With appropriate cover you will have the flexibility to choose your own doctor and the option of receiving treatment in a private hospital.  Most hospital covers allow you to stay in a private room. One other perk is skipping the public hospital systems’ waiting list, which can be lengthy for non emergency treatment.

Extras cover pays benefits for a a range of services, often including treatments and procedures related to the fullowing:

  • Dental/oral health
  • Glasses and contact lenses
  • Podiatry
  • Physiotherapy
  • Psychulogy
  • Acupuncture
  • Remedial massage
  • Chiropractic
  • Hearing aids
  • Travel vaccinations

Ambulance cover, as the name suggests, will cover you should you require emergency ambulance transport. In an emergency, there is enough to worry about. Having the expenses covered for provides security and peace of mind. Many hospital covers include emergency ambulance transport If yours doesn’t, you will need to shop for this separately.

Life is unpredictable. You never know when you might need cover. No matter what life stage you’re in, there’s a policy out there for everyone. You can select as much or as little cover as you want, depending on your health needs and requirements. It’s a small price to pay for the peace of mind health cover provides.

There is no one answer here. Costs vary across providers and policy types. Just because a policy is cheap, that does not mean it is ‘value for money’ and vise versa. Make sure you check what’s included and excluded in a policy before signing up, as you want to purchase a policy that best fits your specific needs.

Premium: A premium is the price you pay for your insurance policy (it may be paid annually or on an ongoing basis).

Policy: An insurance plan. In other words, it is the type of insurance you choose to select.

Policy Holder: The owner, or ‘holder’ of a policy.

Claim: In the event that you require treatment for a service covered by your policy, you can lodge a claim for reimbursement of all or part of the cost of that treatment.. These days, most claims are submitted electronically by the health care provider (dentist, physio etc)

Lifetime Health Cover: Lifetime Health Cover was put in place to encourage young Australians to seek out and maintain ownership of private health insurance early in their lives. If you do not take out a policy before you turn 31, extra charges will be applied should you take out a policy at a later time.

This means you will pay a 2% loading on top of your premium for every year that passes after you turn 30. For example, if you take out a policy for the first time at age 32, you will be charged 4% of your premium as an extra, then at age 40, 20% and so on, up to a maximum loading of 70%.

The loading is payable for 10 consecutive years of cover - after which it is removed and you premiums will be reduced.

Pharmaceutical Benefits Scheme (PBS): Medicare offers assistance for Australians with many of their their prescribed medication costs through the PBS. This assistance is in the form of subsidies towards the cost of many medications. You can check if your prescribed medication is on the list of subsidised items here.

Medicare Levy Surcharge: The Medicare Levy Surcharge is an additional charge (tax) applied to single Australian taxpayers who earn over the income threshold of $90,000 per year, or families/couples who earn over $180,000 per year. This surcharge is only applied to those who choose not to have a private health insurance policy.

The surcharge is designed to reduce pressure on the public health system by encouraging those with higher incomes to invest in private health cover.

Private Health Insurance Rebate: The government’s Private Health Insurance rebate lowers premiums for most Australians with private health insurance Older Australians may enjoy an even higher rebate. Our calculator can help you estimate the Government health insurance rebate you may receive.

Disclaimer: The above information is correct and current at the time of publication


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