It seems that there’s no let-up in the debate about the necessity of private health insurance for Australians, no thanks to the yearly increase in premium payments. Starting April 1, 2016 private health insurance premiums increased by a weighted industry average of over 5%. Come to think of it, do Australians really need private health insurance considering that they are already enjoying the benefits of Medicare?
Medicare was established on February 1, 1984. Funded by the federal government, it is a public health program that gives Australians access to low-cost medical, optical and hospital care.
As stated in the Medicare Benefits Schedule (MBS), Medicare basically covers:
- free or subsidised treatment by health professionals (e.g. doctors, specialists, optometrists and, in specific circumstances, dentists), and to a certain extent allied health practitioners (e.g. exercise physiologists and physiotherapists);
- free treatment and accommodation for public Medicare patients in a public hospital; and,
- 75% of the Medicare Schedule fee for services and procedures if you are a private patient in a public or private hospital (this does not include hospital accommodation and items such as theatre fees and medicines).
Unfortunately, Medicare does not cover the cost of services which you may require, some of which are:
- ambulance services
- prescription pharmaceuticals (non-PBS)
- dietary advice
- most dental examinations and treatment
- most physiotherapy services
- glasses and contact lenses
- hearing aids
On the other hand, depending on the type of private health insurance, you may be fully covered or in part with the abovementioned services and perhaps more.
Other benefits of private health insurance
1. Elective Surgery & Waiting Periods
Records show that in the years 2014-2015, 698,000 patients from the elective surgery (conditions that aren’t life-threatening) waiting lists were admitted in Australia’s public hospitals. It is disheartening to know that 90% of these patients admitted had an average waiting time of 253 days.
If you were one of these patients, your travails did not end there. After being admitted, you may have found that you were still required to pay a gap amount and your choices of facilities, treatments or hospital physicians were limited.
On the other hand, if you had private health insurance, you may have found that:
- your waiting period was shortened,
- you had the option of choosing your medical team and treatments, and
- Medicare covered 75% of the Medicare Benefits Schedule fee and, depending on your individual health insurance policy, the remaining costs may have been partially or fully covered by your insurer.
2. Medicare Levy Surcharge (MLS)
When you’re admitted to a private hospital and you don’t have private health insurance, you need to pay an additional surcharge – the Medicare Levy Surcharge (MLS). For example, if you are single and your taxable income is over $90,000 ($180,000 for families), you will be charged an extra 1% surcharge on your taxable income. And this increases to 1.25% if you earn over $105,000 ($210,000 for families) and 1.5% if you earn over $140,000 ($280,000 families). On the other hand, if you have private health insurance, you may save on your total tax payable.
3. Lifetime Health Cover (LHC)
If you’re considering to purchase private health insurance, it’s wise to start early. Here’s why.
The Lifetime Health Cover (LHC) is a financial loading that can be payable in addition to the base rate premium payment for your private health insurance hospital cover. If you join after 1 July following your 31st birthday, you may be required to pay a 2% loading in addition to your premium payment per year for every year you are aged over 30 and do not have private hospital cover.
For example, if you wait until you are 40 to get private health insurance, you could be paying an extra 20% on the cost of your hospital cover. And if you wait until you are 50, you could pay 40% more; and so on, up to a maximum of 70% more*. As a result, you could end up paying more for private health insurance for the rest of your life if you don’t take out hospital cover before 1 July following your 31st birthday.
At the end of the day, Medicare’s coverage may be good enough for you. But once you consider the many benefits of a private health insurance, notably the tax incentives and savings on premium loadings, having one as part of your life’s plan can put your mind at ease as you weather the unexpected.