What is hospital cover?

Although Australia has universal healthcare through Medicare, many Australians choose to have private health insurance, often with hospital cover. So what is hospital cover?

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Although Australia has universal healthcare through Medicare, many Australians choose to have private health insurance, often with hospital cover. So what is hospital cover?

What’s the difference between Medicare and private health insurance?

Medicare is the system that provides Australians with access to a range of health care services for free or at a reduced cost. This can include medical services from doctors, specialists and other relevant health professionals. Medicare also allows Australians to be treated as public patients in public hospitals, often by doctors appointed by said hospital.

Private health insurance, on the other hand, allows policy holders to be treated as private patients at both public and private hospitals. This allows policy holders to choose their preferred hospital and doctor, as well as sometimes avoid long public health waiting lists. Private health insurance, depending on the policy, will often cover extras, such as physiotherapy and dental treatment, and ambulance and other emergency transport usage.

What does hospital cover mean?

Hospital cover is designed to help with the cost of treatment if you’re a private patient in hospital. As a general rule, when you have private hospital cover in place, you can choose to be treated as a private patient in either a private or public hospital.

Having hospital cover may also give you more choice around when you’re admitted to hospital, as well as which doctor provides your treatment. When it comes to the decision to take out private hospital cover, wait times for elective (planned) surgeries are one of the most significant factors for Australians, according to private health insurance provider HCF. According to the Australian Institute of Health and Welfare (AIHW), 50% of Australians waited at least 49 days for admission for elective surgery. Hospital cover can often help minimise this waiting period.

That being said, it’s important to check what services are included in your cover and if they meet your specific needs. You’ll also need to serve the waiting periods set out by your health fund. This is the length of time you need to pay premiums for before you can make a claim, and it differs from fund to fund.

Is hospital cover worth getting?

Taking out insurance is always a personal choice. The question of whether hospital cover is worth getting often comes down to weighing up the costs against the benefits for you and/or your family.

Taking out hospital cover often gives you greater choice over your healthcare. In particular, if you go to a private hospital, you should be able to choose your specialist, and be treated as soon as you and your specialists are ready (assuming you’ve served your hospital cover waiting periods). If you’re interested in taking out health insurance, it’s often worth comparing your options to help find the best hospital cover for your needs.

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How can hospital cover help you save on the Medicare Levy Surcharge?

Hospital cover can also offer tax benefits. Without hospital cover in place, you could be charged the Medicare Levy Surcharge (MLS). It’s a tax surcharge that applies if you earn over $97,000 as a single or $194,000 as a family (plus $1,500 for each dependent child after your first one) and don’t have an appropriate private health insurance policy in place.

The MLS can be levied between 1% and 1.5% of your taxable income depending on your personal situation. It comes on top of the 2% Medicare levy, and it doesn’t buy you any extra health services. The Australian Taxation Office (ATO) even goes as far as saying the MLS is designed to “encourage people to take out private patient hospital cover and use the private hospital system to reduce demand on the public system.”

The ATO states that if you want to avoid paying the MLS, you should consider taking out the appropriate level of private hospital cover for yourself, your spouse and your dependents.

What is the difference between hospital cover and extras cover?

General cover, also known as ‘extras’, is not the same as hospital cover. It can help you meet the cost of extra health services such as optical, dental, physiotherapy or chiropractic treatment. With some health cover funds, extras cover can also help with the cost of healthy lifestyle programs such as gym memberships.

What is the benefit of hospital cover?

The hospital cover benefit can give you choice when it comes to which hospital you’re treated in, and even your choice of doctor or specialist. It can also mean bypassing the lengthy queues that can apply to elective surgery in the public health system.

While hospital cover may be an extra household cost to bear, taking out cover before you turn 31 years old may also be advantageous due to Australia’s Lifetime Health Cover. Lifetime Health Cover loading exists to encourage Aussies to take out private hospital insurance at a younger age. For each year after you turn 30 that you don’t take out private hospital insurance, premiums become more expensive, up to a set level – the rationale behind this is that if young, healthy people take up private health insurance, it will reduce some of the financial burden on the public hospital system.

Ultimately, deciding if you want to take out or hold onto hospital cover, can come down to your budget and your views around managing your personal healthcare.

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