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Medicare in Australia covers treatment at public hospitals, x-rays, pathology tests, and immunisations. It does not provide treatment in private hospitals, nor does it cover out-of-hospital treatments like dental care and chiropractic services. Most people purchase health insurance to supplement Medicare so they can receive broader cover for serious illnesses and won’t have to pay out-of-pocket for many non-emergency expenses. When purchasing additional insurance, there are two primary types: Hospital cover and Extras cover.
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Health funds providing Hospital cover may pay for:
Purchasing Hospital cover makes it possible for you to get more comprehensive care for serious medical illnesses. You will have a broader choice of doctors and hospitals than if you have Medicare alone, and you may have significantly reduced costs when seeking treatment for serious illnesses.
If you only purchase Hospital cover, however, you will still need to pay out-of-pocket for almost all routine expenses.
Extras cover pays for some or all of the routine care you require in order to stay healthy. Policies can include cover for:
This does not mean that every Extras policy will offer all of these different kinds of cover.
Health funds differ in the types of services and treatments they cover. There are a few other differences to consider, as well. For example:
The Private Health Insurance Act set limits on waiting periods for hospital cover, mental health services, obstetric care, rehabilitation and palliative care. The waiting period may be no more than 12 months for obstetrics care. It can be no longer than two months for psychiatric care, palliative care and rehabilitation.
There are no rules for waiting periods for Extras cover. You need to compare waiting periods from different health funds.
Benefit limitation periods are a characteristic of some health funds. Benefit limitation periods impose a limit on certain types of cover for a set period of time, usually between one and three years. For instance, you may receive only $500 the first year you are eligible and then this could increase to $1,200 after three years with your health fund. Benefit limitation periods apply to Hospital cover.
Rebates are available for the purchase of Hospital cover for those with incomes less than $140,000 as individuals or $280,000 as families. The rebate depends upon age. This calculator explains the rebates you can expect.
Purchasing hospital cover is a personal decision, but it’s worth noting that if your income is $90,000 or higher, you’ll need to pay a Medicare Levy Surcharge (MLS). However, the MLS does not apply to Extras cover. Below, you can enter in a few details to determine what your MLS charges will equate to.
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.
Singles | ≤ $90,000 | $90,001 - 105,000 | $105,001 - 140,000 | ≥ $140,001 |
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Families | ≤ $180,000 | $180,001 - 210,000 | $210,001 - 280,000 | ≥ $280,001 |
Medicare Levy Surcharge |
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Standard | Tier 1 | Tier 2 | Tier 3 | |
All Ages | 0.0% | 1.0% | 1.25% | 1.5% |
Lifetime Health Cover loading also applies for the purchase of Hospital cover if you are over 30 for the first time when purchasing. LHC adds on additional costs for cover for someone who waited to buy Hospital cover. Lifetime Health Cover does not apply to Extras cover. The cost of your Extras cover will not automatically be higher if you wait until age 31 to buy it.
Many health funds offer combined policies that provide you with both Hospital cover and Extras cover. Buying one policy can be simpler since you only need to interact with one health fund. It can also save you money to combine your policies. However, you may be more limited if you shop for combined cover instead of shopping separately for Hospital cover and Extras cover.
Some Hospital policies are better than others in terms of covering the gap and providing other perks. Some Extras policies are better than others in terms of what Extras are specially covered. If you buy a combined policy, you may need to compromise on either your Hospital or Extras cover. If you buy separate policies, you can get the best Hospital policy AND the best Extras cover that you need.
When you need to shop for health insurance, the first thing to do is to determine whether you want Hospital cover, Extras cover or both. You should then look at different policies including both combined and independent policies to find the cover that is right for you. Be sure to carefully compare Extras cover as there may be more variation from policy to policy for Extras versus Hospital cover.
Buying both Hospital and Extras cover allows you to plan ahead for family medical needs so you can rest easy and not worry that going to the doctor can lead to financial devastation.
Confused? Not sure if this applies to your situation? Phone us on 1300 163 402 for some free, no obligation advice.
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