What Does Medicare Cover And How Does It Work?

Originally written by TJ Ryan. 

What is Medicare?

Medicare is the public health system by which the federal government provides subsidised and, in some cases, free healthcare to Australian residents and other eligible individuals. It pays a certain amount towards the cost of Medicare cardholders receiving medical treatments such as visiting a doctor or specialist, going to hospital, buying prescription medication and more.

How does Medicare work?

If you do not have private health insurance, Medicare can help you to reduce the out-of-pocket cost of certain medical treatments. If you have private health insurance and are eligible for Medicare, you will generally only have to pay the gap between any medical fees you incur and how much either Medicare or your insurance (or both in some circumstances) will pay towards those fees.

The amount Medicare contributes to your medical costs is called the Medicare rebate. You have a few options when it comes to receiving your Medicare rebate: you can have it processed on the spot at many GPs, hospitals, and clinics after making your gap payment, or you can take your receipt to a myGov storefront later on and receive the rebate then. You can also lodge and have your claim processed by mail or online through the myGov system. 

Additionally, the Medicare Safety Net increases the payable benefit for patients who have already paid more in out-of-pocket payments than the relevant threshold for a particular calendar year.

However, Medicare rebates typically only cover a portion of your medical expenses and don’t necessarily extend to all services or treatments, so if you want to ensure you’re further covered for the medical costs you may incur, taking out private health insurance is one option.      

How is Medicare funded?

Medicare is funded by the Federal Government, which in turn receives its revenue from taxpayers. According to the Australian Tax Office (ATO), all taxpayers who earn above a certain amount per year pay a Medicare Levy – currently 2% of their taxable income – to help fund the benefits provided by Medicare to those in the public system.

Furthermore, the ATO explains that, at the time of writing, taxpayers who earn at least $90,000 as a single or $180,000 as a couple or family and do not have private health insurance pay a Medicare Levy Surcharge, which is an additional Medicare-related tax of up to 1.5%. The Medicare Levy Surcharge is designed to incentivise people who can afford to take out private health insurance to do so, rather than rely on the public health system.

If you’re comparing health insurance policies, the table below displays a snapshot of a hospital and extras policies currently available on Canstar’s database for a single female born in 1985 seeking cover in NSW without pregnancy cover. Please note the table is sorted by Star Rating (highest to lowest), followed by monthly premium (lowest to highest) and features links direct to the provider’s website. Use Canstar’s health insurance comparison selector to view a wide range of policies.

What does Medicare cover?

Medicare provides benefit payments for three broad categories of medical treatment: hospital (emergencies and surgeries), medical (doctors and treatments), and pharmaceutical (medicines). 

What Medicare covers: hospital

Medicare will generally cover the cost of staying as a public patient in a public hospital, and being treated by a doctor appointed by the hospital. As a public patient, you generally won’t be able to choose your own doctor or choose the day that you undergo examinations, treatment, or surgery.

According to health.gov.au, Medicare will pay 100% of the fee listed in the Medicare Benefits Schedule (MBS) for medical services provided to public patients which are clinically necessary –  this can include: 

• Treatment by doctors, specialists, and nurses
• Tests and examinations including x-rays and blood tests (pathology)
• Eye tests carried out by an optometrist
• Surgeries and other therapeutic procedures performed by doctors
• Certain necessary dental surgeries
• Cleft Lip and Cleft Palate Scheme treatment
• Some allied health services (e.g. psychologists, psychiatrists, chronic disease management)

Additionally, if you want to choose a specific doctor or want to stay in a private room, you will need to be admitted as a private patient rather than a public patient. According to health.gov.au, Medicare will cover up to 75% of the fees for treatment as a private patient in a public or private hospital, but will not cover fees for accommodation, surgery theatre fees, or medicines. The remaining 25% of the fee will need to be paid either out of pocket by you, your health insurer, or a combination of the two. 

Medicare does not cover all hospital-related costs you may incur. Some examples of the things it generally won’t cover are:

• Private patient hospital costs such as surgery theatre fees for private patients, or accommodation for a private room
• Surgeries or treatments that are not medically necessary to maintain your health, such as elective cosmetic surgery
• Medical and hospital costs you paid while you were travelling or living overseas
• Ambulance services (although depending on where you live, your state government may cover these costs instead).

What Medicare covers: medical

In many cases, Medicare also pays a benefit for visits to a doctor or health practitioner in a medical practice like a clinic or a GP office (not in a hospital). Below are some examples of the treatments carried out outside of hospital that Medicare will pay a benefit for, as listed in the MBS:

• Consultation fees
• Tests and examinations, like x-rays and blood tests, carried out by doctors 
• Eye tests by an optometrist
• Most surgeries and therapeutic procedures performed by doctors
• Some surgeries performed by approved dentists

Medicare will generally pay the following amounts:

• For a general practitioner (GP): 100% of the fee listed on the MBS. Some doctors will bulk-bill (bill Medicare directly) their patients so that the patient does not have to pay anything. However, some will charge more than the MBS fee which would mean having a gap to pay.
• For a specialist: 85% of the fee listed on the MBS. Some specialists may charge fees that are higher than the MBS fee, so the gap payment you have to make may vary.

Medicare does not cover:

• Medical exams required when applying for a job, life insurance, superannuation, memberships, or government bodies
• Most dental examinations and treatment
• Most physiotherapy, occupational therapy, speech therapy, eye therapy, chiropractic services, podiatry, acupuncture, and psychology services
• Glasses and/or contact lenses (optical)
• Hearing aids and other health aid appliances
• Home nursing
• Ambulance services

You would pay the full fee for such services, either on your own or through private health insurance.

What Medicare covers: pharmaceutical

Medicare subsidises part of the cost of all prescription medicines available at pharmacies that are listed in the Pharmaceutical Benefits Scheme (PBS). As a result, the patient pays a smaller out-of-pocket cost for the medicine. Patients who have an eligible concession card may pay even less for these medicines depending on the nature of the concession they’re entitled to. Not all prescription medicines are on the PBS, though, so you may want to check with your doctor if you’re unsure. 

Can I still use a public hospital and Medicare if I have private health insurance?

Yes, you can be treated for free as a public patient in a public hospital through Medicare even if you have private health insurance.

There are several potential benefits and drawbacks to having private health insurance on top of the cover provided by Medicare. Whether or not it’s right for you will depend on your own personal and medical circumstances and whether you can find a policy that offers the cover you need at a price you’re willing to pay. 

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