Health Care in Australia Medicare and Private Health Insurance

Medicare – What is it? Medicare provides eligible Australian residents with affordable, accessible and high quality health care. Medicare provides access to free treatment as a public patient in a public hospital and subsidised treatment by medical practitioners such as GP’s specialists and optometrists.

Medicare – Who pays? Medicare was established based on the principle that all Australians should contribute to the cost of health care according to their ability to pay. It is funded through the Australian Government who raise the money through taxes. Almost everyone (except those on welfare payments or low incomes) pays 1.5% of their earnings towards the medicare levy. For those who don’t have private health insurance and earn an income above the medicare levy surcharge threshold they pay an additional 1-1.5% of their earnings towards the medicare levy (2.5-3% total).

Medicare – How does it work? Medicare covers the cost of services provided inside a public hospital and reimburses 85% of scheduled fee for services provided outside of hospital. The remaining 15% is paid by the individual and is referred to as the ‘Gap’. Some practitioners ‘Bulk Bill’ which means the individual pays nothing and the practitioner bills medicare to receive 85% of scheduled consultation fee.

Medicare Safety Net If you see a doctor often, or have tests regularly, your medical costs may be high. The Medicare Safety Net may help you with this. Once you reach a Medicare Safety Net threshold, visits to your doctor or having tests could cost you less for the rest of the calendar year. The Medicare Safety Net covers a range of out of hospital doctor visits and tests listed on the Medicare Benefits Schedule.

Pharmaceutical Benefits Scheme Many medicines cost much more than you pay – some costs thousands of dollars. The pharmaceutical benefits scheme is funded by the government and subsidises the cost of pharmaceuticals for all eligible Australian residents. This aims to keep health care affordable for all people.

PBS Safety Net If you or your family need a lot of medicine the PBS safety net helps you with the costs. Once you or your family reach your own Safety Net threshold, you can get a PBS Safety Net card from your pharmacist. With this card, your PBS medicine will be cheaper or free, for the rest of the calendar year. If you choose a higher-priced brand of medicine, or your doctor prescribes one, you may need to pay more.

Private Health Insurance – What is it?

Private Health Insurance – what is it? Private Health insurance provides additional cover to Medicare It includes hospital cover, extras cover and ambulance cover. It provides cover for services such as treatment in private hospitals, dental, optical, physio, accupuncture etc.

Private Health Insurance – Who pays? The individual pays a premium for private health insurance. Contributions are usually paid either monthly or annually. The federal government provides some funding through the 30% rebate for eligible people (means tested).

Private Health Insurance – how does it work? Medicare will still cover some of the costs of hospital treatments and selected specialist services. However, private health insurance will cover additional expenses for those choosing to be treated as a private patient – either in a public or private hospital. Private health insurance will also pay some of the costs of services not covered by Medicare such as physiotherapy, massage, accupuncture etc.

Medicare Vs Private Health Insurance Discuss the advantages and disadvantages of each system

Medicare Vs Private Health Insurance Type of CoverAdvantagesDisadvantages Medicare Affordable Ensures equal access to treatment regardless of income Longer waiting lists No choice of doctor Patients pay a ‘gap’ for services above the scheduled fee Increased strain on the public health care system Private Extra cover for services such as dental, optical and physio Choice of hospital Private rooms (when available) Choice of doctor Shorter waiting lists Decreased demands on public services Higher annual costs May have to pay an excess

Private Health Insurance - Incentives Having more people in private health funds reduces the pressure on the public health system and therefore decreases the costs to the government which allows funds to be redirected to other government priorities and initiatives. To cope with the future expected increased demands of an ageing population, the government has used several strategies to encourage people to invest in private health insurance.

Private Health Insurance - Incentives These strategies have led to increased levels of cover:  Incentive scheme: Those with appropriate private health cover and who earn over a certain amount will not have to pay the additional medicare levy surcharge  Lifetime health cover scheme: If an individual takes out private health insurance before the age of 30 they will be charged a premium at a penalty rate. Those who wait to take out private health insurance later in life where there is a higher risk of illness will be charged an additional 2%for every year after the age of 30. eg. A 50 yr old would be charged and additional 40% above the premium making a $2000 premium cost $2800.

Private Health Insurance - Incentives  30% Government rebate: the government pays for 30% of the premium to reduce the cost of health insurance. Since 2012 this has been means tested. Only individuals earning less than $84000 will receive the full 30% rebate phasing out with individuals earning more than $ receiving none of the rebate.

Inquiry Questions 1)Medicare is based on the principles of universality, equity and simplicity. Provide evidence of how these principles incorporated into the medicare system. 2)Explain the Medicare Safety Net and the PBS Safety Net, who are these designed to protect? 3)Define the term ‘Bulk Billing’ 4)Describe what is meant by the ‘gap’ 5)Describe strategies for attracting people to private health insurance 6)Visit iselect.com.au and find out how much cover for you would cost (based on you being 18)iselect.com.au

HSC Practice Question 2007: Explain why some Australians may choose to take out private health insurance (5 marks)