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For prospective Australian immigrants (or emigrants – depending on your perspective)

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Health Insurance in Australia

In Australia, as in many other countries, there is a dual system of public and private health insurance. As elsewhere, the whole system is quite complicated and not easy to understand.

Medicare

The state health insurance, Medicare, is partially funded through the Medicare levy under income tax and is therefore not a social security fund such as e.g. the statutory health insurance in Germany. The medicare levy is low.

Once you have a permanent right of residence (permanent visa) or have requested the permanent residence within Australia, you are automatically insured with Medicare.

Medicare gives you access to:

  • a range of medical services for free or at a lower cost
  • lower cost prescriptions, and
  • free care as a public patient in a public hospital

However, Medicare cover is often limited. Dental and ophthalmologist visits and ambulance services (except Queensland) are not included at all, for other services you often have to pay significant amounts.

Medicare usually covers most of the costs of visiting a GP (General Practitioner). With a specialist only 85% of the costs will be refunded. When paying for hospitalization, a distinction must be made between a public hospital and a private hospital. If you have private hospital cover, the share that Medicare pays changes. Furthermore, one has to consider whether the attending physician bills according to the normal Medicare Benefits Schedule.

When visiting a physician in Australia, there are two main ways in which medical expenses are billed

  1. Bulk billing – here the Medicare card is sufficient and the costs are billed directly with Medicare by your doctor (only the billable costs).
  2. Patient account – you pay the costs incurred and later claim the reimbursable costs with Medicare.

General private health insurance may also be useful to Medicare beneficiaries. For all others, private health insurance is the only option anyway.

Medicare levy

Medicare gives Australian residents access to health care. It is partly funded by taxpayers who pay a Medicare levy of 2% of their taxable income.

Your Medicare levy is reduced if your taxable income is below a certain threshold. In some cases you may not have to pay the levy at all.

If you don’t have private hospital health insurance, you may have to pay the Medicare levy surcharge (MLS) in addition to the Medicare levy. This depends on your income for MLS purposes.

If you do have an appropriate level of private hospital health insurance, you won’t have to pay the MLS, and depending on your income you may be eligible for the private health insurance rebate. This rebate is an amount the government contributes towards the cost of your private hospital health insurance premiums.

The Medicare levy and MLS and any reductions are calculated from information provided in your tax return.

Depending on your circumstances, the Medicare levy, the MLS or variations to your private health insurance rebate may affect the refund you receive or the tax you owe.

Appropriate level of private hospital cover

Private patient hospital cover is provided by registered health insurers for hospital treatment provided in an Australian hospital or day hospital. You must arrange and pay for your cover directly with the insurer.

For singles, an appropriate level of cover must have an excess of $500 or less. Couples or families must have an excess of $1,000 or less.

General cover, commonly known as ‘extras’, is not private patient hospital cover. It covers items such as optical, dental, physiotherapy or chiropractic treatment.

Lifetime Health Cover (LHC)

Lifetime Health Cover (LHC) is an Australian Government initiative designed to encourage people to get their hospital cover early and keep it up.

Once you turn 30, a 2% loading is added to your hospital cover premium for every year you are without hospital cover. This is called the Lifetime Health Cover (LHC) loading.

To avoid this loading, just take out hospital cover by July 1st following your 31st birthday, which is called your base day.

For example, if you wait until 35 to get hospital cover, your loading will be 10%. Therefore, a $100 monthly hospital premium would become $110 with the added loading.

If you are on a combined cover, the LHC loading is only applied to the hospital portion of your premium.

On a couple or family cover? The loading is calculated by taking an average of the loadings applied to the adults on the hospital cover. So, if one person has 18% loading and their partner has no loading, or 0%, the loading applied is 9% overall.

What if one just migrated to Australia?

If you are a new migrant to Australia, then you have until the later of 1 July following your 31st birthday or the first anniversary of your full Medicare registration to take out private hospital cover without incurring a Lifetime Health Cover loading.

If the latter applies to you, your Lifetime Health Cover base day is the 12 month anniversary of your registration for full Medicare benefits (i.e. when you are eligible for a blue or green Medicare card).

However, if you are subsequently overseas on your Lifetime Health Cover base day and if you registered with Medicare on or after 1 July 2009, then you will not have to pay a Lifetime Health Cover loading if you purchase hospital cover within 12 months of your return to Australia. The anniversary of your return to Australia becomes your new Lifetime Health Cover base day.

If you miss your Lifetime Health Cover base day or delay purchasing private hospital cover for more than 12 months after registering, you will have to pay 2% more in addition to your hospital cover premium for each year you are aged over 30 when you take out private health insurance.

You can confirm the applicable date by requesting a letter from Medicare – contact Medicare (Department of Human Services) or visit the local Medicare branch.

If you decide not to take out private hospital cover, you will have to pay the Medicare levy surcharge (MLS). If you have a regular taxable income, it is also a mathematical consideration, whether an additional hospital cover is worthwhile for you.

Comparison of Medicare and private health insurance:

There is a good general comparison of Medicare and private health insurance on the pages of the Australian Federal Government https://www.privatehealth.gov.au/healthinsurance/whatiscovered/

Useful links