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The 2014 Budget: A Health Insurance Post Mortem

Sally Aquire July 29th, 2014 0 comments
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From a health-related perspective, there were some important changes highlighted in the recent 2014 Budget. These will be introduced over the next couple of years and will have a knock-on effect on how much the average Australian family pay for their health care – notably for GP consultations and prescription medications. Income thresholds for the Medicare Levy Surcharge and the Health Insurance Rebate are also set to move again.

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GP Consultation Charges

From July 1st 2015, bulk billed patients can expect to pay $7 for GP consultations and out-of-hospital pathology and imaging services. This is capped at a maximum of 10 services per calendar year for concessional patients and children aged under 16. Patient contributions are not anticipated for GP services relating to specialist health needs such as Chronic Disease Management items and Health Assessments. These contributions will not count towards the Medicare Safety Net.

The Medicare Safety Net is Changing

The Medicare Safety Net will continue to support Australian families with out-of-pocket costs for out-of-hospital services that are eligible for Medicare benefits. However, from January 1st 2016, things will be changing somewhat.

The current system of having multiple Medicare Safety Nets will be replaced by a simplified version, which will have lower thresholds for the majority of patients. The new Medicare Safety Net will see the government contribute towards out-of-hospital costs for the remainder of the calendar year once the threshold has been met.

Safety Net benefits will be calculated at 80 per cent of out-of-pocket costs, with the total benefit being capped at 150 per cent of the Medicare Benefits Schedule fee.

The thresholds are anticipated as being $400 for concessional patients, $700 for General Singles and families eligible for FTB Part A, and $1,000 for General Families.

It is estimated that the Extended Medicare Safety Net will be $654.30 for concessional patients and families eligible for FTB Part A and $2,050 for all other Medicare cardholders.

PBS Prescription Charges Will Rise

The Australian government subsidises the costs of many prescription medicines, for which patients pay a set amount. In 2014, this has been $36.90 for general patients and $6 for concession card holders. With the costs of prescription medication on the rise, this is set to change.

From January 1st 2015, patients will pay $5 more for each PBS prescription that needs to be filled. This will be a rise of $0.80 per PBS prescription for concession card holders.

This will impact on the PBS Safety Net, which is designed to protect patients who need lots of medications through reduced co-payments once the relevant threshold has been reached in a calendar year. Once the PBS Safety Net threshold has been passed, General patients pay the lesser concessional rate for PBS prescriptions and Concessional patients pay nothing.

The current PBS Safety Net threshold is $1,452.50 for General patients and this will rise to $1,597.80 from January 1st 2015. For Concessional patients, 62 PBS prescriptions will be available for 2015 and will rise to 68 by 2018. The changes mean that general families will be $145.30 further away from the Medicare Safety Net compared to before, while concession families will be affected by $61.80.

Medicare Levy Surcharge and Rebate Income Tiers Will Change

The income tiers for the Medicare Levy Surcharge (MLS) and the Health Insurance Rebate are set to change again and this will be effective through to 2017/18. Income thresholds will rise slightly across all tiers. If this means that you will be moving into a different income tier, it could mean a higher MLS payment if you do not have appropriate hospital cover to exempt you. It may reduce your Health Insurance Rebate.

Base

Tier I

Tier 2

Tier 3

Singles

$0 to $90 0000

$90 001 to $105 000

$105 001 to $140 000

$140 001 +

Families/Couples

$0 to $180 000

$180 001 to $210 000

$210 001 to $280 000

$280 001 +

Base

Tier I

Tier 2

Tier 3

MLS %

0%

1%

1.25%

1.5%

From July 1st 2015 to June 30th 2018, the MLS income thresholds will not be indexed. Previously, the income thresholds have been indexed annually by average weekly ordinary time earnings. This will free up more money to be invested into the $20 billion Medical Research Future Fund.

The Context and Why These Changes Will Happen

The Australian government has repeatedly insisted that they are in an “unsustainable position”, with health care costs being a prominent factor in spending outgrowing economy growth by 13 per cent in the last few years.

The Medicare Levy and the Medicare Levy Surcharge do not make enough of a difference to redress this imbalance, which means that changes need to be made across the board. Rising costs of health care and a growing and ageing population with a greater number of chronic health conditions are being blamed for the increase in health-related spending.

Spending on medicines exceeds $9 billion and is expected to continue to rise due to an ageing population – many of whom suffer from chronic illnesses – and the increasing costs of new medicines.

The government has pledged to continue to support vulnerable Australians and has called on the public to contribute more towards their own health care through the proposed changes.

Conclusion

Key changes in the 2014-15 Budget include planned contributions towards GP consultations and PBS prescriptions and changes to the Medicare and PBS Safety Nets. There is a strong focus on addressing “unsustainable” health care costs by encouraging a greater contribution from the Australian public to address this problem.

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