Private vs Public Health Insurance
Private Vs Public Health Insurance
Every Australian has a level of health cover through the Medicare System, but as young adults we ask ourselves whether or not it is a good idea to go private. We are often bombarded with an overload of information and it can be difficult to work out the exact coverages, costs, and value for money between public and private cover. Today we are getting to the bottom of health insurance and what might be the best option for you. Featuring on this episode is Andrew Davis, CEO of Health Insurance Comparison.
What is Medicare and who is it run by?
Medicare is a government run system which provides all Australian residents access to core medical services. It includes free or subsidised visits to doctors, specialists, optometrists and at times dentists. It also covers the cost of treatment in public hospitals and lowers the cost of prescriptions.
What is the Medicare Levy and the Medicare Levy Surcharge?
The levy is an amount that we pay through taxes to fund medicare. The surcharge is an additional tax paid by high income earners who don’t have private health insurance. The government is essentially saying that Medicare is universal however people who are earning high incomes should also access private health insurance and thus if they don’t they should pay a bit more for Medicare (through the levy). Generally, the base income threshold (where you don’t have to pay the MLS) is $90,000 for singles and $180,000 for families (find out more here).
So you have your Medicare Card, when/where can you use it?
Firstly you can use your medicare card when you are visiting a doctor (e.g. GP or specialist). It covers the amount that the government has agreed to pay for that service (may or may not be the full amount depending on what the doctor is charging). If the doctor is bulk-billing than the government has subsidised the whole amount and there won’t be a gap. Your medicare card is also used if you are a public patient at a public hospital.
What is the Medicare Safety Net?
If people are having very high out of pocket expenses, once the gap you are paying reaches a certain amount (based on your income) the medicare safety net kicks in, meaning you get a higher benefit back.
What is the Pharmaceutical Benefit Scheme?
The PBS essentially subsidises chosen pharmaceuticals so people pay less for them. Most of the medicines subsidised are ones given out at pharmacists and used by regular people like us. Find more out here.
What is the Lifetime Health Cover loading?
If private health is just full of old people (who have higher medical costs), the system would be unsustainable...So the government aim to encourage young people to take it out early. If you don’t take private health out before you are 31, then there is a loading applied to your cover (you pay more- 2% for every year). This only relates to hospital cover however.
What are the benefits of going private compared to public?
The main benefit of going private is choice. Rather than seeing any attending doctor, you get to choose which doctor you want to see. You also have access. Public hospitals have to prioritise based on how long people are waiting for where as private has the capacity for people to be seen very quickly. Sometimes this can be a major player if an injury or medical condition is really hindering your ability to work or undertake daily activities and you don’t want to be at the end of a huge waiting list.
What does Private health insurance cover?
Besides the private hospital cover, it includes ambulance cover (which can be incredibly expensive otherwise), as well as extras (rebates on services not performed by doctor e.g. dentist, physiotherapist, prescription glasses). Extras are generally capped at an amount, for example you might have a $200 max for optometrists.
How do you compare insurers?
Andrew explains that you don’t start with the fund, you start with the person and their needs. So firstly establish what is important to you. Is there a particular dentist you’ve been going to forever and want to continue to? Then you might want to look for a provider which covers that. Also consider what you are concerned about. What kind of things could happen to you that you need cover for? Then do your research into funds based on these requirements.
Despite a lot of talk about the discounted massage your mate might have scored.... At the end of the day the core things millennials are typically looking to cover are around dentists, glasses, physio etc.
If you are on your parents private health insurance, how long can you stay on their for you ask?
Generally, if you are a full time student you can be on the cover until you are 25. If you are not a full time student it can be anywhere from 18-23 depending on the fund (sometimes funds let you parents pay a loading to let you stay on it until you are 25). If you are in a defacto or married however you will have to come off it.
How often should you reassess your cover?
It’s important to reassess your cover if there’s any major life change or health scare. Other than that approximately every 3 years just to check in that you are getting the right value for your needs. It’s a bad idea to set and forget as you may be overpaying or your needs may have changed.
What is the Private Health Insurance Rebate?
It’s a government incentive to take out private health insurance (acts as the carrot luring you in), helping cover the cost of premiums. We often don’t see this however as we just pay the lower amount. The rebate is reduced for high income earners (but most people benefit from it). Take a look here.
How about Self Insuring? i.e. putting money aside instead of paying an insurer
As young people we do definitely find it hard to pay health insurance when we often have very minimal medical expenses. So for now it might seem like a pretty good idea to have a safety pot of money aside instead of paying insurance. This is definitely a very risky option however, you don’t know how much things are going to cost or what kind of medical expenses you will need to be paying in the future.
Andrew recommends a good idea for young people is to get a very low cover of health insurance and then step up your cover when you think your circumstances begin to shift. However you can’t step up straight away, but in 12 months time you could.
Hopefully this episode has answered some of your questions around private vs public health insurance. In April next year Andrew mentioned there will be some changes to the system, the government has said that all policies will need to be labelled (to be easier to understand) and there will be additional opportunities of discounts for younger people. So keep an eye out for these changes! (no doubt we will delve back into this topic then).