In Australia, we’re blessed with some of the best healthcare in the world (first among OECD countries and fifth overall). Our trusty green Medicare cards give us access to free healthcare without the need to crowdfund our medical bills. America could never.
So in a country where we already have access to largely free healthcare, is taking out private health insurance worth it?
Public vs private healthcare: What’s the difference?
In Australia, the public healthcare system is mostly funded by the government through Medicare, a universal health insurance scheme introduced in 1984. Medicare provides free or subsidised treatment by health professionals such as doctors, specialists, and optometrists, and covers hospital treatment in public hospitals.
Patients in the public system often face longer waiting times for elective surgeries and specialist appointments due to high demand and limited resources. However, emergency care and essential medical treatments are generally provided quickly. Visits to the general practitioner (GP) are partially covered by Medicare if you are enrolled, and if your GP chooses to bulk bill - which is becoming rarer these days - you’re in luck as Medicare covers the full cost.
In comparison, the private healthcare system operates alongside the public system and is funded through private health insurance and out-of-pocket payments. Australians can purchase private health insurance to cover services that aren’t covered by Medicare: private hospital care, dental services, physiotherapy, and elective surgeries. The government incentivises private health insurance through the Private Health Insurance Rebate and the Medicare Levy Surcharge, which encourages higher-income earners to take out private coverage.
Private healthcare offers advantages such as reduced waiting times, a choice of doctors, and access to private hospital rooms. Patients in the private system have greater flexibility and convenience, with the ability to choose their healthcare providers and facilities. However, this comes at a higher cost, both in terms of insurance premiums and out-of-pocket expenses.
Private health insurance is generally divided into three categories of coverage: hospital cover, general treatment (or extras) cover, and depending on which state or territory you live, ambulance cover. You can also opt for a combined hospital and extras policy.
Certain healthcare costs are not covered by Medicare, which is where private health insurance can fill the gaps. Medicare does not cover most dental services, glasses and contact lenses, hearing devices, elective and cosmetic surgery, services not listed on the Medicare Benefits Schedule (MBS), services provided through the private health system, and ambulance services. Additionally, Medicare does not cover healthcare costs overseas, although countries with a Reciprocal Health Care Agreement may cover some expenses.
What are the benefits of having private health insurance?
There are a number of benefits to having private insurance and, depending on your circumstances, you may find some more appealing than others.
Skip the waiting list
One major benefit of private insurance is you can often skip the public waiting lists for certain treatments, like elective surgery. The public waiting list for surgeries like hip or knee replacements can be years, and you don't have much say in when it happens or who performs the surgery. With private health insurance, you can often decide when you're scheduled, which surgeon performs the surgery, and even where you'll stay afterwards (we'll get to that in a second).
Another bonus of going private is you get to lock in your date. When going through the public system, priority patient order can mean your surgery is pushed back so that the surgeon can operate on a more critical patient. Since your doctor is in private practice, this won't generally happen.
Choose your doctor
As we mentioned, you can pick which doctor or surgeon carries out your operation. If it's someone you have a preexisting relationship with, this may make you feel more comfortable going into your surgery. When going public, whichever doctor or surgeon is working at the time is the one who will perform the operation.
Private hospital rooms
If you're in for a hospital stay, with private health insurance, you can usually opt for a private room. With public hospital stays, you generally end up stuck with other people in the room with you, which can be uncomfortable or even disturbing (what if they snore?). While it's not always a guarantee, you usually have a much better chance than a public patient.
Avoid the Medicare Levy Surcharge
Private health insurance holders with a sufficient level of hospital cover are exempt from paying the Medicare Levy Surcharge. Most Australians pay the Medicare Levy of 2% of their taxable income to help fund the public healthcare system, but if you are on an income of over $97,000 as a single or $194,000 for families, you may be subject to a surcharge of at least 1% of your income on top of the basic Medicare Levy if you don’t take out private health insurance. So if you are on a higher income, it’s often cheaper to take out private health insurance than it is to pay the additional surcharge.
MLS income thresholds and rates for 2024–25
|
Threshold |
Base tier |
Tier 1 |
Tier 2 |
Tier 3 |
|---|---|---|---|---|
|
Single threshold |
$97,000 or less |
$97,001 – $113,000 |
$113,001 – $151,000 |
$151,001 or more |
|
Family threshold |
$194,000 or less |
$194,001 – $226,000 |
$226,001 – $302,000 |
$302,001 or more |
|
Medicare levy surcharge |
0% |
1% |
1.25% |
1.5% |
Source: ATO
Dental work can be covered by extras cover
Unfortunately, even the most basic dental work (like a checkup or general clean) isn't covered by Medicare. With private health insurance, you can be partly or fully covered for some dental work. So if you end up needing some fillings, it won't also burn a hole in your pocket.
While there are state-run dental clinics, access to them is usually strictly limited and eligibility criteria applies. Waiting lists can also be very lengthy.
Claim money back on non-Medicare health services
There are also a number of other health services not covered by Medicare. For example, while some optical services are covered, some aren't. Getting your annual eye checkup is covered, but the cost of glasses or other products isn't. You could also add pregnancy (obstetrics) to your hospital or extras cover, which can mean having access to certain pregnancy-related services that wouldn’t otherwise be available through Medicare.
What are the drawbacks of private health insurance?
While there are a lot of benefits to consider, you should also weigh up the potential disadvantages of private health insurance.
The cost
The biggest drawback of private health insurance is that it can be expensive. Depending on your policy, you could be forking out thousands of dollars in premiums each year. The costs will also generally rise annually.
It doesn't always cover everything
Often, private health insurance policies will only cover part of the cost of your treatment or procedure. Meaning, you may still be left with a bill at the end - albeit less than you would have paid if you didn't have insurance. This is called an out-of-pocket expense, or gap. Depending on how much you're left to cover and the cost of your insurance premium each year, you may not be that much better off.
Excluded treatments
Some treatments may not be included in your policy by your health insurance provider. Sometimes even the most comprehensive policy won't cover every type of treatment or procedure.
Complex products
The variety and complexity of products on offer can be overwhelming for some people to understand, which is why the government recently introduced the Private Health Insurance reforms to simplify the products on offer. This includes a tiered rating system, with bronze, silver, and gold-tiered ratings aimed at taking the complexity out of choosing a policy.
Should you take out private health insurance?
The old adage goes 'insurance is the one thing you buy, hoping you'll never have to use it'.
Private health insurance isn't compulsory for Australians, which is why figuring out whether taking out private health insurance is right for you can be tricky. Whether or not you choose to take out private health insurance will mostly depend on your personal situation and budget.
If you're young and otherwise fit and healthy, it's unlikely you would benefit much from private health cover. It may also make sense to hold off on private health insurance if you're happy with the public health system or if you wouldn't end up receiving much money back for the occasional physiotherapy appointment.
However, if you're older, have chronic health problems, or simply want the peace of mind, private health insurance may be worth considering.
Should I get private health insurance at 31?
While it's not mandatory to get private health insurance once you're no longer a dependent, it's worth considering due to the Lifetime Health Cover (LHC) loading. The LHC loading is a government initiative aimed at encouraging Australians to take out private hospital insurance earlier in life. If you don't have private health insurance by July 1 following your 31st birthday, a 2% loading will be added to your premiums for every year you delay, up to a maximum of 70%. This loading will remain in place for 10 years once you eventually take out a policy.
For example, if you decide to wait until age 35 to get private health insurance, you will face an 8% loading on your premiums for the next decade. This additional cost can make private health insurance significantly more expensive over time. However, there are immediate financial savings to consider as well. By delaying health insurance until age 35, you save on premiums from age 31 to 35, which can amount to around $8,000, assuming an average premium cost.
If you’re an Australian citizen or permanent resident who was living overseas on the 31 July following your 31st birthday, and you return to Australia and purchase hospital cover by the first anniversary of the day of your return to Australia, then you will be exempt from paying the LHC loading. But if you purchase hospital cover after the end of the first anniversary of the date of your return to Australia, LHC loading will be applied based on your age at the date of joining.
When is private health insurance is worth considering?
To help sift through the potential reasons to be for or against getting private health insurance, we've listed a few potential situations when it may end up being worth it for you.
You're planning on getting pregnant
You can have a baby through the public system – it’s free and you’re well looked after. But going through the private system definitely has its benefits; namely the fact you have access to a private room and you can choose your own obstetrician. You may also get a longer stay in the hospital to recover.
You have a chronic illness
If you're living with a chronic illness like diabetes or heart disease, private health insurance may be worth it as you're probably in and out of hospital quite a bit.
You're a senior
It's a sad fact, but the older you are, the more health problems and complications you're likely to develop. Taking out private health insurance in your later years can be a sensible decision, especially considering there are government rebates for those over the age of 65 to keep cover an affordable option.
You need help with dental bills
If you know you've got major dental work that needs doing (like wisdom teeth removal or a root canal), Medicare won't cover the cost. Dental bills can be a big source of financial pain for families, so extras cover can be a wise investment. Just make sure major dental and orthodontic work is included in your policy.
You want to avoid long waiting lists for elective surgery
If you have elective surgery coming up (like a hip replacement), waiting times in the public system are often much longer than for patients with private health insurance.
You want to choose your own doctor
Picky about who cuts you open? Fair enough. With private health cover, you can choose your own doctor and the hospital.
You want to receive a possible tax rebate
If your income is over $97,000 and you're without private health cover, you'll be hit with the Medicare Levy Surcharge. Depending on your income, you could be made to pay up to an extra 1.5% of your annual earnings to the ATO every year for not being covered.
You want ambulance cover
If you're lucky enough to live in Queensland or Tasmania, ambulance services are free. For everyone else, it's an out of pocket cost, and it ain't cheap. Thankfully, many health insurers include ambulance cover with their policies.
When might private health insurance be worth skipping?
While there are definitely situations when private health insurance can be worth it, there are also some instances when it may not be worth its weight in gold.
You're young and healthy
If you’re young and generally healthy, private health insurance is probably not worth your while just yet. Having said that, there may be some instances where private health insurance is worth considering.
You're comfortable relying on the public system
If you’re pretty happy with the level of care you’re already receiving through the public health system, private health insurance may be an unnecessary expense.
The cost of extras cover outweighs the annual benefits you receive
Forking out over $500 a year for extras cover but you’re barely claiming any more than $100 in benefits? Removing extras from your policy could be a wise move.
If you're feeling pressured into taking out cover you don't need
You should never take out cover "just because" - remember you will receive excellent care for free in your nearest hospital if an emergency does happen.
Need somewhere to store cash and earn interest? The table below features savings accounts with some of the highest interest rates on the market.
Savings.com.au's two cents
So, is taking out private health insurance worth it or not? The short answer is: it depends. It's not easy to answer because it depends on what you need and want. It's also hard to compare the public and private health systems because they do different things.
Some people can certainly benefit from taking out private cover, while others may not need it for a while. If you do decide to take out private health insurance, don't forget to review your policy every year to make sure it's still suitable for your personal situation, chat with your health insurance fund about your changing needs, and read on for ways to save money on your health insurance.
Harry O'Sullivan
Harrison Astbury
Emma Duffy
Brooke Cooper
