What does Medicare cover and how does it work?

Medicare gives Australians access to a range of health care services for free or at a lower cost. Here’s our guide to Medicare and how it works.

In this article:

What is Medicare?

Medicare is Australia’s public health insurance scheme. Through the scheme, Australian citizens and permanent residents can access free or subsidised health care. Medicare helps cover the cost of treatment in public hospitals, visiting doctors, some specialists and other health professionals and buying prescription medicines.

How does Medicare work?

Medicare can help reduce your out-of-pocket costs for certain medical treatments. You will generally only have to pay the gap between any medical fees you incur and the amount Medicare (plus private health insurance if you have it) will pay towards those fees. In some cases, Medicare will cover all of your medical fees. For example, if your doctor bulk bills.

The amount Medicare contributes to your medical costs is called the Medicare rebate. You have a few options when it comes to receiving your rebate: you can have it processed on the spot at many GPs, hospitals and clinics after making your payment, or you can submit a Medicare claim online through myGov, in person at a service centre or by mail.

If you need to see a doctor or get tests regularly, you may be able to reduce your out-of-pocket expenses through the Medicare Safety Net. The safety net increases the amount you can get back if you have spent over a certain amount in a calendar year.

How is Medicare funded?

Medicare is funded by the Federal Government through revenue from taxpayers, including via the Medicare levy and Medicare levy surcharge. The Medicare levy is 2% of your taxable income and applies in addition to the income tax you also pay. You’ll have to pay this if you earn above a certain income, unless an exemption or reduction applies.

Taxpayers who earn over $90,000 as a single or $180,000 as a family and do not have an appropriate level of private hospital insurance pay an additional Medicare levy surcharge, which can be 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.

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What does Medicare cover?

Medicare provides benefit payments for three broad categories of medical treatment: hospital, medical and pharmaceutical.

What Medicare covers: hospital

Medicare generally covers 100% of your medical expenses if you are admitted as a public patient in a public hospital. As a public patient, you generally won’t be able to choose your own doctor or choose the day that you are admitted to hospital.

If you want to choose a specific doctor or want to stay in a private room, you will likely need to be admitted as a private patient rather than a public patient. Medicare generally covers 75% of the fees for treatment as a private patient in a public or private hospital. The remaining 25% of the fee will need to be paid either out of pocket by you or your health insurer, or a combination of the two depending on your policy.

Medicare does not cover all hospital-related costs you may incur. Some examples of what won’t be covered include:

  • 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)
  • emergency department administration or facility fees

What Medicare covers: medical

Medicare can also help cover the cost of getting medical treatment outside of a hospital, such as from a doctor or health practitioner in a medical practice like a clinic or a GP office. Below are some examples of the treatments carried out outside of hospital that Medicare will pay a benefit for, as listed in the Medicare Benefits Schedule (MBS):

  • consultation fees for doctors, including specialists
  • tests and examinations, like x-rays and pathology tests, carried out by doctors
  • eye tests by optometrists
  • 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) so you don’t have to pay anything. However, some doctors will charge more than the MBS fee, meaning there would be 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 may vary. If a patient is admitted to hospital as a private patient, 75% of the Medicare Schedule Fee will be covered for eligible services by a medical practitioner.

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 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 covers part of the cost of prescription medicines listed in the Pharmaceutical Benefits Scheme (PBS) that you can buy at pharmacies. Patients who have an eligible concession card (such as an Australian Seniors Health Card or a Pensioner 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.

Although Medicare provides some hospital, medical and pharmaceutical cover, it doesn’t cover everything. So, you may wish to consider taking out a private health insurance policy to cover you for a wider range of health care treatments and services.

Can I be treated in a public hospital 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.

Cover image source: Robyn Mackenzie/Shutterstock.com

Additional reporting by TJ Ryan and James Hurwood.

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This content was reviewed by Sub Editor Jacqueline Belesky and Finance and Lifestyle Editor Shay Waraker as part of our fact-checking process.

Tamika covers personal finance for Canstar, specialising in banking and general insurance. She joined the team after completing a Bachelor of Journalism and Bachelor of Laws (Honours) at QUT. She has previously written for a range of news, music and arts publications.

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