A layperson’s intro to paying for healthcare in Australia

I wanted to write a comparison post to Valerie’s The practical reality of contraception: A guide for men about the Australian equivalents. However, I realised a background in the Australian healthcare system might be needed. Hence this post.

Caution: I am not a medical professional or health administrator. There are plenty of details of healthcare payment in Australia I am blissfully unaware of. This is a guide to what it is like to pay for healthcare in Australia as a relatively healthy younger woman.

Summary

In Australia, many people in cities can see doctors mostly for free, and get free hospital treatment and pretty cheap pharmaceuticals. Yay. It isn’t the magical land of totally free though. Boo.

Medicare

Australia has government funded healthcare, called Medicare. Medicare is available to all Australian citizens and permanent residents living in the country. It is funded through the Medicare levy, a federal tax applied to people on moderate incomes and up.

To prove your eligibility for Medicare you have a Medicare card listing your name (often families are combined onto one card of which each adult gets a copy). In the absense of this card Medicare can verify coverage directly to health care services, I believe, but that’s more hassle. Most people carry their Medicare card in their wallet.

Further reading: overview of Medicare, tax guide to the Medicare levy.

Medicare pays for medical services: that is, (a fixed amount of) doctors’ fees and, for public hospitals, other costs associated with hospitalisation. That is, in Australia, you can for most conditions go to a public hospital, be admitted, and be operated on, x-rayed, diagnosed, etc, for free. Hooray!

The Pharmaceutical Benefits Scheme (PBS)

The PBS provides government subsidised pharmaceuticals to Medicare card holders. Basically, almost all common drugs are bought in huge numbers by the government at agreed prices and then sold in pharmacies to patients. No matter what the government paid, the patient will pay something in the order of $20 to $50 for PBS medication. Low income people can obtain a health care card entitling them to medication prices on the order of $5 or so.

Private health insurers (see below) may provide partial reimbursements for some non-PBS drugs.

People who have unusual drug needs (for example, some types of chemotherapy and painkillers, or a drug for which there are several PBS alternatives that for some reason you personally can’t take) can still end up paying huge amounts for medications.

Further reading: About the PBS, Health Care Card

Bulk billing, private billing, and gaps

Doctors’ fees are an important thing to understand here. A doctor in a public hosptial will bill the government for their fixed fee only (or rather, the hospital will bill the government, and pay the doctor a salary). A doctor working outside a public hospital has a choice, they can bulk bill, which is the jargon for billing the government directly, and which from the point of view of the patient is a free consultation. Or they can privately bill, and they can bill any fee they like. The patient can claim the fixed government contribution from Medicare. The difference between the doctor’s bill and the government scheduled fee is called a gap (not a “co-pay”, that’s American jargon) and it is often paid by the patient themselves, especially if the doctor was seen in their own clinic rather than in a private hospital.

The same can be true of other medical services like X-Rays and scans, or blood tests. There are some practitioners or clinics that bulk bill and some that don’t.

There are also some procedures that Medicare flat-out doesn’t cover. I mostly encounter this with unusual blood tests.

Availability of bulk billing

As above, public hospitals do it, and there are a lot of public hospitals. For non-emergency treatment or care for which there is contention, such as childbirth, the hospital usually has a defined catchment area, and will only treat in-area patients. So you have an assigned hospital, essentially, that will admit you and treat you under Medicare.

Outside hospitals, in major metropolitan areas it is often possible to find bulk-billing general practitioners, and, in some specialties, even bulk-billing specialists with their own practice. (This can have downsides such as shorter appointments or high practitioner turnover, but some private billing clinics have these problems too!) In smaller cities and regional and rural areas on the other hand, there is usually a shortage of medical practitioners and private billing can be near-universal. And underserved specialties often have near-universal enormous gap fees for out-of-hospital consultations.

There is some protection against enormous gaps. Some private insurers (below) have some coverage, and the Medicare Safety Net starts paying part of many gaps after you spend about $500 in a year on gaps.

Private insurance

Now, there is private health insurance, which you take out in addition to (not instead of) Medicare. What this gets you is:

  1. coverage of many expenses associated with choosing a private hospital (accommodation, operating theatre fees) and so on, and on some policies partial coverage of the gap amount on the doctors who treated you at the hospital
  2. coverage of some non- or partly-Medicare covered expenses, like dental, optical and physiotherapy fees (for example, Medicare covers eye exams to prescribe glasses, but not the actual glasses themselves), the jargon for that here is extras cover
  3. coverage of ambulance expenses in states where the state government doesn’t pay for them (NSW is one of the states where you pay for your own ambulance)
  4. coverage of a (usually pretty limited) range of non-PBS drugs

You can usually buy pieces of this too: eg, just hospital, or just ambulance.

As an indication as regards cost, private premiums presently start at about $150 for a family for a month, and a super-kickarse policy with huge yearly limits on extras and private obstetric care (this, psychiatric care and dialysis are often excluded from cheap policies) included starts around $350 a month for a family with adults my age. They actually have to get the federal government to approve their rate of premium rises.

Employers sometimes, but by no means always, offer private health cover. It’s usually a benefit associated with US-owned companies. (Google presently pays for my family’s private cover.) It’s not a tax-exempt benefit.

Why use the private system?

Here, the private system is anything where the patient may be billed. This includes:

  1. being admitted to a public hospital as a private patient, which is a choice they offer you, and the hospital bills you/your private insurer rather than Medicare
  2. being admitted to a privately funded hospital
  3. seeing a doctor or visiting a clinic that does not bulk bill

One major reason is that, as above, out of a hospital you simply may not have a local bulk billing practitioner. Or, if you are wealthy, you might, but you may have a personal preference for a particular practitioner who doesn’t bulk bill.

The other is to avoid the downsides of the public system:

  1. for some treatments, especially elective surgery (tangent, in Australian medical jargon, that means all surgery that isn’t urgent, it does not only mean “surgery for which there isn’t a medical need”) public hospitals may have long waiting lists, whereas you could get your treatment more swiftly in the private system, which may be considerably more pleasant for you!
  2. in the public system, you are not entitled to a choice of doctor. You get treated by the rostered doctor (often a registrar, ie, specialist-in-training in the appropriate specialty). In the private system (including a privately-paying patient in a public hospital) you appoint your doctor.
  3. public hospitals tend to have a lower standard of accommodation than private ones, ie, shared rooms, less light in rooms and similar. So, a class thing.
  4. quite a number of public hosptials are actually Catholic, and refuse proscribed services like abortion, tubal ligation, and prescribing or supplying contraception (whether publicly funded hospitals should be allowed to do this is an interesting question, but not really live, politically). Mind you, so are a lot of private ones, but since you can go to a private hospital of your choice, you can choose a non-Catholic one, and you may not be able to in the public system.

Nevertheless, as you can imagine, Medicare coverage suffices for many Australians even if they can afford private premiums. There are a couple of financial carrots and sticks used to encourage taking it up and, in theory, reduce the cost burden on Medicare.

Further reading: the Medicare levy surcharge tax on wealthy people who don’t take up private insurance, and lifetime health cover premiums in which your premium is locked to the age that you first bought private insurance at.

Comparisons with the US system

Improvements on the US system, based on my (very imperfect!) understanding of that system:

  1. the most obvious one is that when you lose your job you do not lose Medicare coverage if you are unemployed, or earn too much money, or earn it the wrong way, or are too old, too young, too healthy or too sick.
  2. likewise, you cannot end up with a health history that makes it impossible for you to be insured: private insurers cannot, by law, discriminate on anything other than age (higher age is higher premiums) or medical history, and the only permissable medical history discrimination is that they can (and always do) refuse to pay for treatment related to a “pre-existing condition” for the first 12 months of cover. Medicare does not discriminate other than on nationality and visa status.
  3. insurers don’t get involved in the details of your medical decisions. It’s fairly plain when something is covered and when it isn’t. There seems to be far fewer problems with “and then I presented my script in a month with a blue moon and it turns out that clause 197c2 subsection b means that I now pay for my medication myself this year”. Generally you and your treating professional make a decision, stuff happens, and Medicare, PBS and you collectively pay the same amount for it no matter who billed what when and who sacrificed which mammal to the gods.
  4. even privately billed stuff seems cheaper, probably because the giant single-payer forces all the prices down, and the fact that for things that Medicare doesn’t cover, you tend to see the entire bill, which seems to be more price transparency than the US has.

    As a price difference example, Valerie states that she had a USD 40 co-pay on Nuvaring. Nuvaring is not a PBS medication here and my private insurer didn’t cover it either. But I paid AUD 30 a month for it and that was the entire cost, not just a portion of it.

11 thoughts on “A layperson’s intro to paying for healthcare in Australia

  1. Danielle

    seeing a doctor or visiting a clinic that does not bulk bill

    I am not aware of any private insurers that will pay the gap on private consultations outside of hospital.

    It’s worth noting that in a private hospital, Medicare still pays the same portion of doctors consultation fees that it would in the public system. You have to submit your bills either Medicare or your insurer along with a “2-way form” in order to receive the rest of the money.

    discriminate on anything other than age (higher age is higher premiums)

    I thought they could not discriminate on age, as far as I’m aware the only cost indicator for premiums is breadth of cover.

    The other advantage to using the private system is that you don’t have to wait. Many consulting doctors will both see patients at the hospital, bulk billed and privately where there’s a gap. Unsurprisingly the lead time to get a bulk billed appointment is much longer. Similarly elective surgery in the public system has a waiting list that is usually not present in the private system (assuming the public system even performs that procedure).

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  3. Mary Post author

    Danni:

    Re discriminating on age, see the Lifetime Health Cover loadings, which add up to 70% to premiums for the first 10 years of cover: http://www.privatehealth.gov.au/healthinsurance/incentivessurcharges/lifetimehealthcover.htm

    Re seeing a doctor or visiting a clinic that does not bulk bill, I didn’t intend to claim that it was privately covered, I intended to say it’s privately billed, which it pretty much is by definition. The purpose of that section is to explain why, given the existence of bulk billing, you’d ever visit a privately billing service.

  4. Danielle

    Ok, I see what you’re saying. You’re coerced into joining before you might otherwise feel the need to, and your premium now is paying forward your costs in the future.

    ~

    Ok right. That makes sense.

  5. Anthony

    “Australia has government funded healthcare, called Medicare. … It is funded through the Medicare levy, a federal tax applied to people on moderate incomes and up.”

    Pretty sure that’s not true — health expenditures were $121B in 09/10 of which 70% was paid by government, and 43% federal government (http://www.aihw.gov.au/publication-detail/?id=10737420435), which presumably makes for about $52B which in turn is about 20% of the $269B in total federal taxation revenue, ie income tax and GST (http://www.budget.gov.au/2009-10/content/fbo/html/part_2.htm)

    The medicare levy is 1.5% for everyone who can claim medicare, earns more than $19k-$22k, and can’t get an exemption; and 2.5% for anyone who earns over $77k and doesn’t have private health cover. (http://www.ato.gov.au/content/00250854.htm) So that just makes the tax system slightly more progressive (an extra 1.5% for everyone over $20k) and encourages people to spend up to $2k/year on individual private health once they start hitting the upper tax brackets.

  6. Martin

    A few more things:

    - there’s another safety net “20% tax offset on net medical expenses over the threshold amount”(not including insurance premiums) per tax year per family; if you have elective surgery or lots of gaps you could easily go over this

    -for treatment as a private patient (not necessarily in a private hospital), medicare will always pay 75% of the scheduled fee, and private insurance, if you have it, will always pay 25%. You can easily still end up with a gap.

    - the extras that are most worth having generally have fairly low ceilings, eg ~$2k/pa for major dental, when really major dental work could easily go over that

    - you don’t always pay for an ambulance in NSW – eg for motor accidents I think it’s somehow paid out of motor vehicle tax/insurance

    - I was told that for the restricted items, like obstetrics or dialysis, all private insurance policies will still cover you as a private patient in a public hospital. So, the same rebate on the doctor, just probably in a shared room.

    I think the bottom line in Australia is that private insurance pays for no more than 25% of the cost of the doctor (and often less), plus it gives you the option of a nicer hospital room, plus some fripperies.

    Paying for predictable expenses like dental checkups, glasses or gym membership out of insurance seems to me like pointless churn.

    My impression now is that all the private insurers are legally constrained to offer almost exactly the same product, so you might as well just choose whichever is cheapest. You can’t pay more to get one that will cover more of the gap (or equivalently, pay for “better” surgeons); you can’t pay less in premiums to get a higher excess/co-pay.

    The tax situation is very strange: above a certain income level you’re nearly required to have it. If it’s a good thing to have, why make it relatively attractive to the affluent? On the other hand, if it’s just a kind of tax, why have benefits attached?

    I wish we could have the option of health savings accounts plus catastrophe insurance. But it could be worse.

  7. lauredhel

    I think the bottom line in Australia is that private insurance pays for no more than 25% of the cost of the doctor (and often less), plus it gives you the option of a nicer hospital room, plus some fripperies.

    I don’t think that choice of doctor and a dramatic difference in waiting list are things most people would consider “fripperies”. You might get your arthroscopy or carpal tunnel surgery next week if privately insured, whereas you could be waiting years – potentially disabled enough to become unable to work, or to parent/care effectively – in the public system. Even with life-threatening (cancer, heart surgery) the wait can be quite different, sometimes in clinically significant ways.

    Paying for predictable expenses like dental checkups, glasses or gym membership out of insurance seems to me like pointless churn.

    On an individual level, it depends whether you typically use more than you pay. With a family full of dental issues, expensive private prescriptions, two myopic folks, and lots of sports injury related physio, we get our money’s worth. A lot of people wouldn’t, though. And I’m grateful to those people for subsidising my family’s healthcare.

  8. Mary Post author

    Edit: I made this comment before seeing Lauredhel’s waiting in mod.

    I think the bottom line in Australia is that private insurance pays for no more than 25% of the cost of the doctor (and often less), plus it gives you the option of a nicer hospital room, plus some fripperies.

    I don’t really disagree with you, I think, but this is a little understating it.

    For people with chronic illnesses, the ability to choose your doctor is really important to maintain consistent treatment, and for people who need elective surgery that affects quality of life, the waiting list jumping is useful. (Obviously, you can self-insure for everything we’ve collectively listed here, if you like, although apparently convincing private hospitals that you will actually pay their bills is an interesting argument.)

  9. Martin

    that is that private health insurance does not contribute when the consultation is outside a hospital.

    That’s my understanding too. What I should have said is it covers you whether you are in a private hospital or a public hospital (but not otherwise).

    To me that’s a very arbitrary distinction and typical of the distortions in the current system. You can have pretty serious and expensive medical issues that never have you admitted to hospital, and private insurance won’t help you.

    By ‘fripperies’ I mean things like gym membership, optical rebates, alternative therapies – all the window dressing with which funds promote themselves because they’re not allowed to actually offer a substantially different core product.

    We recently had a small-medium hospital visit, of which private insurance paid about 10% of the doctors’ fees and there was a multi-thousand dollar gap. My ability to have the surgeon we wanted when we wanted had much more to do with being able to cover that gap out of pocket than having private insurance. I was not impressed.

    I can see how being able to choose your doctor and pay to jump the list is useful. I think it’s very weird we’ve set things up so that it’s cheaper and nearly-mandatory for affluent people to have this (and vice versa), especially when you consider folks with chronic illness are likely to end up on lower incomes.

    Whatever level of care we think is a decent baseline ought to be funded out of general revenue; maybe the public hospitals are currently falling short. If people want something better than that, they ought to be able to choose to pay, or not, either through insurance or self-insurance.

  10. Magni

    Thanks for this good overview of the .au health system. It seems rather similar to the .no system, except we don’t have a private insruance system along all of it. There are insurances that will make sure you get surgery or treatment for any minor or major thing within a month’s time, they are mostly bought by employers. The waiting time within the public system may be up to two years for more minor issues, although sometimes also life threatening things (cancer) have too long waiting times. On the other hand the private insurance won’t cover bigger things you have to go to a university hospital for, so neither my back surgery (not the emergency one, but the removal of implants) or a colleagues invalidating back issues were covered.
    I wanted to comment on Val’s entry, but comments were closed. My comment would be about the last line in your entry, so it feels appropriate to mention it here in stead: in .no contraceptives are not paid by the government, and health insurances don’t cover medicines. The cost of a NuvaRing is NOK 125, or about $21 (about $220 for 12 of them, rebated). A visit to the doctor about once a year comes in addition, that’ll be about NOK 200 (rounded up, included a pap smear that no doctor will force you to do), or about $35. For the doctor that’s the 1/3 copay we have to cover (up to about $350 a year), but for contraceptives that’s the price in a free market, decided by Organon’s representative here.
    I must say I was slightly chocked (and sad) to see the prices Val quoted for contraceptives “over there”. Compared to the general price level it should have been the other way round.

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