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News • 24 October 2023

What is the Difference between Medicare and Private Health Insurance?

Understanding the nuances of health care can be a complicated task. When we talk about Health Insurance, two options often come to mind: Medicare and Private Health Insurance.

Both these services are essential, each playing a distinct role in the healthcare system. Let's delve deeper to understand the key differences and synergies between Medicare and Private Health Insurance.  

Medicare is Australia's universal healthcare system, designed to provide a broad range of health services at little to no cost for Australian residents. From general practitioner visits to certain specialist services and prescriptions, Medicare provides the safety net for our health needs. It’s funded by Australian taxpayers, with the goal of ensuring everyone has access to healthcare, irrespective of their financial status.  

In contrast, Private Health Insurance is an additional cover voluntarily purchased from a Private Health Fund. It's designed to provide more choice and flexibility, covering services that Medicare doesn't, such as dental, optical, physiotherapy, and private hospital stays. Private Health Insurance allows policyholders to choose their doctor and potentially reduce wait times for elective surgeries.  

When comparing Medicare VS Private Health Insurance, it’s not a matter of one being superior to the other. They work in tandem to ensure a more comprehensive health cover for Australians. While Medicare offers necessary services, Private Health Insurance fills in the gaps, providing cover for additional services, such as private rooms in hospitals, ambulance cover, and a broader range of therapies.  

In terms of cost, Medicare is funded by the taxpayer, on the other hand, Private Health Insurance requires payment of premiums, the cost of which can vary greatly depending on the level of cover chosen. There may also be a Hospital Excess, which is the amount you agree to pay towards a hospital claim before the insurance kicks in.  

Private Health Insurance also helps reduce additional costs for some services where there's a difference between what the doctor charges and what Medicare will pay.  This amount is commonly referred to as a “gap”.  The amount Medicare will pay is also referred to as the Medicare Benefits Schedule.  Having private health insurance can be a safety net that ensures patients aren't left with a large bill. 

There are, however, some exclusions to consider with both Medicare and Private Health Insurance. While Medicare does not cover services like private patient hospital costs and most dental examinations, Private Health Insurance may exclude certain treatments and services from their policies, often referred to as policy limitations.  

Another consideration is the Medicare Levy Surcharge that is applied to Australians earning over a specific income threshold.  Australian taxpayers contribute to the cost of public health care through the Medicare Levy. If your income is over a certain threshold, you have to pay the Medicare Levy Surcharge, unless you have private hospital cover.  This surcharge encourages those with higher incomes to take out private health insurance and use the private hospital system, reducing demand on the public hospital system. 

While Medicare provides a solid foundation for healthcare in Australia, Private Health Insurance adds an extra layer of assurance and covers a more comprehensive range of health services. Understanding your own healthcare needs and comparing different insurance covers can help you make an informed choice between Medicare and Private Health Insurance. They are not competitors, but collaborators working towards the objective of a healthier Australia. 

24 October 2023