What is hospital cover?

NICOLA FIELD
Personal Finance Writer · 10 September 2021
Private health insurance has been through some big changes in recent years. While over half the Australian population – about 13.6 million people – have health cover in place, the federal government’s Health website says many people don’t fully understand what they are getting for their money. We shine a spotlight on hospital cover so you can see what’s involved.

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The Australian Medical Association says private health insurance is one of the single largest and most complex purchases Australian households can make each year. But it’s an outlay that can also directly impact you – and your family’s, personal health and well-being. So, health insurance is something you want to get right. However, health cover can be confusing. So let’s start with the basics by taking a look at what hospital cover is and how it works.

What does hospital cover mean?

As the name suggests, hospital cover is designed to help with the cost of treatment if you need to go to hospital. As a 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.

According to Medibank, having hospital cover may also give you more choice around when you’re admitted to hospital. In fact, according to PeopleCare, one of the biggest drivers of Aussies taking up private hospital cover is the wait times for elective (planned) surgery.

In the public hospital system, the median wait time for elective surgery is 39 days. Yet Police Health says this can be 4.5 times longer than private hospitals.

That said, you should check that the services you need are included in your cover. 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 comes down to weighing up the costs against the benefits for you and your family.

AHM Health Insurance says taking out hospital cover gives you greater choice over your health care. 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 wait periods).

How hospital cover can save on the Medicare Levy Surcharge

Hospital cover can offer pluses that go beyond choices around health care. Without hospital cover in place, you could face the Medicare Levy Surcharge (MLS). It’s an extra impost that applies if you earn over $90,000 as a single or $180,000 as a single parent, couple or family and you don’t have hospital insurance in place.

The MLS can be levied at 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 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 tax office says 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 items 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 hospital cover benefit?

The hospital cover benefit can give you choice when it comes to which hospital you are 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 wear, taking out cover before you turn 31 years old can let you take advantage of Lifetime Health Cover. This is a government initiative that lets you avoid paying higher premiums for private hospital cover if you buy into hospital cover at a later age.

Ultimately, deciding if you want to take out, or hold onto, hospital cover, can come down to your budget and your views around managing personal health care.  Compare private health insurance with Canstar.

Main image source: Rocket Clips, Inc (Shutterstock.com)


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The table below displays some of our referral partners’ hospital policies for a 30-year-old single female seeking cover in NSW without pregnancy cover. The table is sorted by Star Rating (highest to lowest) followed by provider name (alphabetical). Use Canstar’s health insurance comparison selector to view a wider range of products. Canstar may earn a fee for referrals.


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This content was reviewed by Milan Cuk as part of our fact-checking process.


Nicola is a personal finance writer with nearly two decades of industry experience. A former chartered accountant, who holds a Bachelor of Commerce and a Master of Education degree, Nicola has contributed to several popular magazines including the Australian Women’s Weekly, Money and Real Living.

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