Working with The Doctors' Health Fund to offer bursaries to medical students.

Understanding Health Cover

 



How your healthcare is paid for
In Australia healthcare costs are paid for in three ways; by the Australian government through Medicare, by an individual’s private health insurance which is often called private health cover or simply health cover, or by the patient.

Medicare covers Australian citizens and permanent residents for a specified range and amount of medical and hospital services. Medicare provides benefits based on a government set schedule of fees listed in the Medicare Benefits Schedule, this is known as the MBS fee. MBS fees are not the fees doctors charge, they are set by the government to manage the benefits paid by Medicare. Doctors’ fees are not regulated, like all other businesses they can set their own prices. Many doctors refer to the AMA List of Medical Services and Fees to guide them in setting their fees.

For services provided by doctors outside of hospitals Medicare will reimburse 85% of the MBS fee. As a patient you pay 15% of the MBS fee plus any amount charged by the doctor over the MBS fee up to the maximum patient outlay for a professional service. The maximum patient outlay for a professional service is determined by Medicare and is reviewed annually. Private health insurers are not allowed to provide cover for doctors’ fees for out-of-hospital services.

When you go to hospital you can choose to be a public or a private patient. If you choose to be a public patient Medicare will cover the costs of your treatment in a public hospital at no charge, but you cannot choose the doctor who will treat you, you will be accommodated in a public ward, and may have to wait for the treatment you need.

If you go to hospital as a private patient Medicare will cover 75% of the MBS fee for the medical costs of your treatment. Private health insurance offers you a choice of health cover options that can help you pay the costs of your treatment and accommodation in hospital as a private patient. You can choose your doctor and whether you go to a public or private hospital that they attend. You may also have more choice about when you are admitted to hospital. Your choice of private health cover will determine how much choice and how much of your healthcare costs will be covered.

Both Medicare and private health insurers only cover treatments which have been recognised by Medicare. Therefore, some medical treatment may not be covered, for example experimental procedures and treatment chosen for cosmetic purpose.

Medicare does not cover a wide range of non-hospital extras or ancillary medical services. Private health insurance can cover services provided by dentists, optometrists, physiotherapists, psychologists, other specialist types of therapy, home nursing, and medical aids and appliances. Medicare covers part of the cost of many prescription pharmaceuticals under the Pharmaceutical Benefit Scheme (the PBS) and extras cover is available for prescription pharmaceuticals not covered under the PBS.

Cover for ambulance services can also be arranged. It may be part of either hospital cover or extras cover.



Your private health cover options
Private health insurers offer a range of different products to suit the needs of people at different stages in their lives and seeking different levels of financial cover for their healthcare. When you purchase health insurance you need to consider the level of cover that fits your needs, not simply the price or the tax and other government health cover initiatives that affect you.

Always feel free to ask for more detail or to clarify any questions you have about health insurance products.

The health insurance options you are offered will vary in a number of ways. The price of each package or plan will be influenced by the amount of benefits it can provide you with. For example, hospital insurance may allow you to use a private hospital but only cover the costs of accommodation in a shared ward. You need to consider if you would want to share a room or would you want a private room?

Read the descriptions of health insurance packages carefully. Take note of the categories of services that are included in the cover and consider whether they include everything to meet your healthcare needs and expectations.

The price of health insurance varies depending on what services and conditions are included and excluded. Other mechanisms that manage the level of benefits you will receive and the degree of risk you agree to share are described below. Remember that while each of these reduces the up-front cost of your health insurance, they will at the same time reduce the benefits you can claim and increase your out-of-pocket expenses when you do use healthcare services.
 

 

Exclusions

By excluding some medical conditions or healthcare services from the cover provided the cost of a health insurance can be reduced. You will not be able to claim benefits when you have these conditions treated or services performed. Hospital insurance might exclude particularly high cost procedures. Think realistically about your personal situation and the relevance of those procedures to you. If you don’t think you need them covered now consider when in the future you should review or upgrade your insurance.
Co-payments When health insurance includes co-payments it will reduce its cost as you are accepting responsibility for paying some of the costs of the services delivered. An example of a co-payment is that you will pay a fixed amount and your health insurance will pay the remainder of the cost of each day of your accommodation in hospital. You need to be quite sure you understand how much the co-payments might be in total and that you will be able to manage the cost of the co-payments if you need to go to hospital.
Excesses An excess on health insurance will reduce its cost. An excess may also be called a front-end deductible. An excess is an amount you agree to pay before your health insurance starts to pay for your hospital accommodation costs. Health funds apply different rules to the application of excesses. Check whether the excess is paid once a year or per hospital visit. As with co-payments consider whether you will be able to manage the cost of the excess if you go to hospital.
Restricted benefits Some conditions may have treatment restrictions. One example of restricted benefits is when you have a specified condition you may only be treated as a private patient in a public hospital. If the treatment was delivered in a private hospital you would face considerable out-of-pocket expenses. Another example is when plastic surgery is only covered where a medical condition is being treated and not when it is chosen for cosmetic purposes.
Benefit Limitation Period Restricts benefits for a set period of time. For example, for a major procedure you may have to be a fund member for 2 years before you would be eligible for the full benefits for that procedure. Benefit limitation periods commence at the end of any waiting period. Pregnancy services will have a waiting period of 12 months,  if the policy has a 2 year benefit limitation period you would have to wait 3 years to be eligible for full benefits.
Limits Ancillary or extras health insurance will have benefit limits on different types of services or items. A limit is a maximum annual pay out for a particular service or group of services. The higher the limit the more you can claim and of course, the cost of your cover will be higher.




What is the gap and gap cover?

The gap is the difference between the fee charged by the hospital or the amount the doctor charges for services in hospital and the amount covered by Medicare and your private health insurer.

The gap occurs for 3 reasons 

  • You have chosen hospital insurance with an excess, co-payments, exclusions or other benefit limitations 
  • You have chosen hospital accommodation that is not included in your health insurance or a hospital that does not have an agreement with your private health insurer
  • Your doctor’s fee is more than the MBS fee, this is called the medical gap

The medical gap occurs because Medicare pays 75% of the MBS fee for in-hospital doctor’s services, a private health insurer will cover 25% of the MBS fee, but the doctor's fee is more than the MBS fee. Most private health insure roffer gap cover schemes to provide benefits to cover some or all of the gap between the MBS fee and the fee charged by the doctor.

These gap cover schemes vary, inquire about how they work and assess their fit to your needs and expectations.

A gap scheme may 

  • require doctors to register with the fund for you to be able to claim benefits for the services they provide to you. This may restrict your choice of doctor to those registered with the fund, or you may have to persuade your doctor to register and accept any conditions the fund requires them to meet for you to be able to claim your benefits
  • depend on the doctor’s willingness to participate in the fund’s gap scheme for you to be paid benefits. The doctor may be able to decide on a case by case basis whether to participate
  • allow you complete freedom to choose your doctor and always pay a benefit but only provide cover up to a market rate or customary amount charged by doctors

To claim benefits under a gap scheme it is most efficient for you or your doctor to submit your medical claims directly to the health fund.



Tax and other government health cover initiatives

30% rebate on private health insurance contributions 

  • You must be eligible for a Medicare card to claim this rebate
  • When you buy private health cover, the government will pay 30% of the cost of your contributions
  • People aged from 65 years to 69 years are eligible for a 35% rebate and for those people over 70 years of age the rebate available is 40%
  • You can claim the rebate by 
    • health cover contribution reduction through your private health insurance fund
    • direct payment from Medicare offices
    • tax rebate in your annual tax return

High income earners Medicare Levy surcharge 

  • Are you single and earning more than $73,000 taxable income per year or a couple or family earning over $146,000 combined taxable income per year? 
  • When a family has more than one child their combined income can be an additional $1,500 for the second child and each child thereafter before they incur the Medicare Levy surcharge 
  • If your income is above the threshold, and you don’t have hospital cover - or your hospital excess is high – you will pay an extra 1% Medicare Levy surcharge at tax time. That is at least an extra $730 in tax
  • Choose hospital cover with an excess of $500 or less if you are single, or $1000 or less for couples and families and you won’t pay this surcharge

Lifetime health cover 

  • Applies to private hospital cover only 
  • It is applied to everyone born after 1 July 1934 who is over 30 and taking out hospital cover for the first time after 1 July 2000
  • For each year you are over 30 when you first take hospital cover you will be charged an extra 2% in contributions
  • For example, if you were 35 when you first took hospital cover you would pay 10% more in contributions than someone who had cover since they were 30
  • The maximum loading a person can be required to pay is 70%, payable by people who first take out hospital cover at age 65 or older
  • People who have paid a lifetime health cover loading on their private health insurance for 10 continuous years, are entitled to have the loading removed. It is expected that the loading will first be removed in 2010 for people currently paying the loading
  • click through to use the government Lifetime Healthcover calculator 



Other things you need to know

Waiting periods 

  • Waiting periods before you are entitled to benefits can be imposed when you first join a health fund or when you increase your level of cover. Maximum waiting periods for hospital cover are 
    • 12 months for pre-existing ailments 
    • 12 months for obstetrics
    • 2 months for all other circumstances 
    • There is usually no waiting period for accidents 
  • Waiting periods for ancillary or extras cover are not regulated
  • If you want your new born child to be insured from the time of birth you need to transfer to family cover at least 2 months before the child is born
  • When you transfer from one fund to another your new fund must give you credit for the waiting periods you have already served. The new fund may ask you to serve waiting periods where the benefits are greater than your previous cover

Pre-existing conditions 

  • A pre-existing ailment, illness or condition, the signs of which in the opinion of a medical practitioner appointed by the health fund, is one that existed at any time during the 6 months prior to the member joining a health fund or upgrading their cover. A waiting period of 12 months can apply to payment of benefits for the treatment of a pre-existing condition

Portability or transferring from one fund to another 

  • A clearance certificate from your current fund will allow you to have continuity of cover when transferring to another fund. You may authorize your new fund to obtain the clearance certificate or you can request it from your old fund
  • When transferring you will get credit for waiting periods you have already served. Where you have greater benefits on specific services you may have to serve waiting periods for those services. However, funds are not obliged by law to recognize waiting periods served for ancillary or extras services, but many do
  • Your new fund may also take into account benefits paid by the previous fund in determining your annual benefit limits

Continuity of membership 

  • You can suspend your fund membership while you are overseas, and suspension may be allowed under other circumstances. During suspension claims cannot be made and time towards waiting periods is not counted
  • It is important to keep your contributions up to date. When you are more than 2 months behind in paying your insurance it will lapse. Some funds may not accept payments in arrears after 2 months and waiting periods may be imposed when you resume contributing

Claiming benefits

  • Claims must be lodged within two years of the date of the service
  • When you cannot claim 
    • If you will be paid compensation by a third party 
    • If you provide false or inaccurate information on your claim form
    • If you are more than 2 months behind with your contributions 
    • If the service was provided while your membership was suspended 
    • If the service provider is directly related to you 
    • If the service provider is not qualified under the fund rules 
    • If the claim is made more than 2 years after the date of the service

Community rating 

  • Private health insurance is ‘community rated’ unlike other types of insurance which are ‘risk rated’. Under community rating factors such as age, gender, your state of health or size of your family cannot be used to vary the amount charged to individuals for the same health cover product

Acute care patients 

  • If you are in hospital for more than 35 days in succession, unless your doctor specifies you are an acute care patient, you can expect to pay part of the cost of your hospital accommodation. Private health insurers are not allowed to cover the costs of non-acute nursing home type care.

The information on this page has been prepared from a number of sources including the documents listed below. Other sources informing this material include the Commonwealth Dept of Health & Ageing website www.health.gov.au, the Private Health Insurance Administration Council materials www.phiac.gov.au, the Private Health Insurance Ombudsman materials www.phio.org.au, The Key Features Guide and product information from a number of health funds.

Insure? Not Insure? - from PHIAC
Doctors Bills – from PHIO